Did Pfizer Just Say "Checkmate" to Novo Nordisk?

The words "Ozempic" and "Wegovy" almost have become household names as these products have changed the lives of many – from our own friends and family to celebrities. These drugs, prescribed for weight loss, have been in high demand, and this has driven revenue of drugmaker Novo Nordisk (NYSE: NVO) higher over time.

But in recent quarters, Novo has lost some ground to rival Eli Lilly, the maker of Mounjaro and Zepbound -- and the company also faces potential competition down the road from others. Though Novo and Lilly dominate the market today, fellow pharma companies and biotech players have set their sights on joining.

And one of them is pharmaceutical giant Pfizer (NYSE: PFE). Now, with a major step along the path to entering this billion-dollar market, did Pfizer just say "checkmate" to Novo Nordisk? Let's find out.

Image source: Getty Images.

Weight loss drug ambitions

Pfizer has excelled in many therapeutic areas over the years, from coronavirus prevention and treatment to oncology, but one area that's continued to elude the big pharma player is weight management. And the weight loss drug market is a significant one, forecast to reach nearly $100 billion by the end of the decade.

Pfizer earlier this year ended development of its weight loss pill candidate, danuglipron, after a clinical trial participant experienced a liver problem. Though the patient quickly recovered, Pfizer made the decision after considering all available clinical data as well as comments from regulators.

But this didn't end Pfizer's ambitions. The pharma giant has a solid track record of acquiring assets that may supercharge one of its portfolios -- the company's 2023 purchase of oncology company, Seagen, comes to mind -- and it's now taking this route in the area of weight loss drugs.

A couple of months ago, Pfizer announced it would buy Metsera, a biotech developing weight loss candidates, for an initial enterprise value of $4.9 billion and the potential for as much as $22.50 per share in additional payments depending on the achievement of certain milestones. Several weeks later, Novo surprised the market by launching its own offer for Metsera -- at $6.5 billion initially, along with payments linked to milestones that slightly topped the Pfizer offer.

Pfizer then launched an antitrust suit against Metsera and Novo, saying the Novo bid was a move "to protect its dominant market position." Meanwhile, Pfizer also increased its bid for Metsera to a $7 billion initial payment and the potential for additional payments of $20.65 per share if milestones are met. The result? Pfizer won the bidding war and recently completed the acquisition of Metsera.

Novo's double-digit growth

With this move, did Pfizer just say "checkmate" to Novo? Not necessarily. It's important to keep in mind that though Novo has lost some momentum due to the strength of Lilly's drugs in the market, Novo still generates double-digit growth from its obesity portfolio -- obesity care sales rose 37% in the first nine months of this year. It's also key to note that Metsera's candidates remain years away from commercialization, so a successful acquisition wouldn't have resulted in overnight growth for Novo.

Finally, Novo has its own pipeline of weight loss drug candidates, spanning phase 1 through phase 3, and the company submitted for regulatory approval of an oral weight loss candidate this year.

After Pfizer won the Metsera deal, a person close to Novo told Reuters that the potential addition of Metsera was always viewed as a "bolt-on acquisition" and not a necessity.

So, Pfizer's purchase of Metsera shouldn't be seen as a blow to Novo or a potential threat to revenue any time soon. That said, Novo still faces headwinds in the weight loss market, and I see the biggest challenge coming from well-established rival Eli Lilly. The U.S. pharma company is generating blockbuster revenue from its weight loss portfolio and may launch a weight loss pill months after Novo -- if all goes smoothly for both companies during regulatory review.

All of this means that Pfizer hasn't said "checkmate" to Novo, but the Danish pharma giant still may struggle to stay ahead of the fast-advancing Lilly.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.