Novo Nordisk’s Acquisition of Emisphere Could Embolden Diabetics to Cut Back on Needles
On November 6th, Novo Nordisk, the maker of diabetes drugs, announced that it had agreed to a $1.8 billion deal to acquire Emisphere Technologies. This deal gives it control of a pill technology that it hopes will broaden sales of diabetics drugs to patients with an aversion to shots.
Novo Nordisk and Emisphere have collaborated since 2007 on the latter’s proprietary drug delivery technology, Eligen, that enhances oral absorption of molecules without altering their pharmacological properties. The platform provides increases in bioavailability with its library of ~4000 carriers and is especially useful for oral delivery of peptides, proteins, oligonucleotides, and oligosaccharides, as well as the formulation of tablets, suppositories, and inhaled drugs. The technology utilizes “carriers” to enable the transport of therapeutic molecules across biological membranes such as those of the gastrointestinal tract. Once the drug and paired carrier leave the gastrointestinal lumen and reach the intracellular space, they disassociate and leave the drug free to pass directly to the circulation and exercise its intended pharmacological action. The carrier is later excreted with gastrointestinal cell membranes being maintained.
Novo Nordisk is currently utilizing Emisphere’s carrier technology under an existing license agreement in its oral formulation of a GLP-1 receptor agonist semaglutide, which is marketed and sold under the brand name Rybelsus®. The drug has been approved by regulators in the United States, Europe, and several Asian countries.
“I don’t think we will ever completely get rid of the needles,” Chief Scientific Officer Mads Krogsgaard Thomsen said in an interview. “We have been making injection drugs for a hundred years, but we just have to admit that if we want patients to get treatment quickly in order to optimize the long-term course of the illness, then it requires tablets if possible,” he said.
That being said, the world’s biggest producer of diabetes drugs aims to offer more of its current and future treatments in a tablet form. Novo said it would make “substantial investments” into the platform and already has approximately 100 scientists at its headquarters in Copenhagen working on the tablet technology.
As part of their initial investment, Novo has agreed to buy all outstanding shares in the US-based Emisphere for $1.35 billion, on a cash-free, debt-free basis. This will also involve taking over royalty obligations to the firm’s biggest shareholder (affiliates of MHR Fund Management LLC) worth $450 million.
The consideration to be paid per share will depend on the amount of cash and debt at closing, but the company currently estimates it to be approximately $7.82 per share based on approximately 170.9 million fully diluted shares outstanding. This price represents a premium of approximately 17% over the volume-weighted five-day average, ending November 5th, the share price for Emisphere.
“By further developing the technology, we hope in the future to produce the medicine cheaper than we do now, thus allowing us to penetrate more markets and give broader access to diabetes drugs,” Thomsen said.
Injecting oneself with diabetic drugs regularly is quite cumbersome. Producing a drug to manage Type 2 diabetes without the need for needles would attract a large number of customers and would be a convenience many diabetics would be willing to pay for. Currently, the price for a 30 day supply of 3mg Rybelsus tablets is $ 863, and a 1% market capture in the US would lead to a $2.6 billion annual revenue for Novo Nordisk. In order to recoup the investment in a reasonable time, it will require either a 7% US market capture over 10 years or including sales in other countries as well.
The merger is subject to customary closing conditions like the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Emisphere is getting legal advice from Wachtell, Lipton, Rosen & Katz, and has Jefferies LLC is acting as the Emisphere Special Committee’s financial advisor, and Wilmer Cutler Pickering Hale and Dorr LLP is acting as its legal advisor.
By Eduardo Longoria
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