(Bloomberg) -- Roche Holding AG agreed to pay as much as $3.1 billion for Carmot Therapeutics Inc., a developer of the new type of weight-loss treatment that’s sparked a pharma industry gold rush.

The deal for three experimental medicines in obesity and diabetes could push the Swiss drugmaker into competition with European rival Novo Nordisk A/S, whose drug Wegovy has fueled the Danish pharma player’s growth into the most valuable company in Europe.

Roche, which has come under pressure to improve its pipeline with new medicines, agreed to pay $2.7 billion at first for closely held Carmot and up to $400 million in milestones, it said in a statement on Monday.

Though Carmot’s drugs are still in early stages of development, the deal could lead to a competitor to the likes of Wegovy and Eli Lilly & Co.’s Zepbound, which are fueling the growth of a weight-loss market estimated to reach $100 billion by the end of the decade. 

Roche was among the first drugmakers to work on a treatment in the GLP-1 class — a category that could fuel some of the biggest-ever blockbusters — but it halted the experimental medicine’s development more than a decade ago after patients dropped out of a study due to side effects like nausea. 

Crowded Field

The field is more crowded now, with Pfizer Inc. working on a weight-loss pill and AstraZeneca Plc signing a licensing deal with Chinese drug developer Eccogene for another. 

Roche rose as much as 2.2% in Zurich trading. The stock is one of the worst performers among European peers this year. 

Eli Lilly’s market value now exceeds half a trillion dollars on hopes for its drug, while Novo Nordisk is close behind. Roche’s stock has dropped more than 15% this year, giving it a value of about $228 billion.

Carmot’s lead experimental medicine is a weekly injection that’s ready to enter the second of three stages of clinical tests, meaning it’s still a few years away from reaching patients. But existing data “suggests a best-in-class potential to achieve and maintain weight loss with differentiated efficacy,” according to Roche.

Muscle Mass

One of the other two treatments is a pill, which drugmakers see as the next frontier for obesity treatments because it will be easier to take. The assets could combine with another experimental Roche drug that preserves muscle mass, solving one of the fallouts of existing treatments. The trio could also have potential in other indications such as heart disease, Roche said.

Carmot had been exploring an initial public offering, people with knowledge of the matter said in September. 

Read more: Weight-Loss Drugmaker Carmot Therapeutics Is Said to Weigh IPO

Carmot’s financial backers include Horizons Ventures, the private investment arm of tycoon Li Ka-shing, Hong Kong’s richest person, according to the Bloomberg Billionaires Index. The firm co-led a $15 million financing round for Carmot in 2018 with health-care venture capital fund the Column Group.

Roche has been seeking to shore up its pipeline as a windfall from treatments and testing equipment during the pandemic comes to an end. The deal follows Roche’s agreement to pay $7.1 billion for Telavant Holdings Inc., a developer of a promising therapy for inflammatory bowel disease. 

Upon closing, Roche will obtain all of Berkeley, California-based Carmot’s clinical and pre-clinical assets. The transaction is currently expected to close in the first quarter of 2024.

--With assistance from Shirley Zhao.

(Updates with Roche’s prior efforts to develop a GLP-1 drug in fifth paragraph)

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