Novo Nordisk swooped in on Inversago before the Canadian biotech could test the IPO waters

Before Wegovy drugmaker Novo Nordisk swept in to buy Inversago Pharma for up to $1.075 billion earlier this month, the small Canadian biotech had been working toward a potential initial public offering for next year.

But Big Pharma’s interest in Inversago surged, which came as no surprise with Novo and Eli Lilly’s pockets growing deeper thanks to the overnight spike in demand for their weight loss and diabetes drugs that have populated headlines everywhere. Lilly itself bought an obesity and metabolic biotech earlier this summer, scooping up Versanis Bio, a startup looking to resurrect a Novartis asset.

François Ravenelle

“When you have an asset in obesity these days and you go around and speak to bankers and investors, there is a lot of interest,” Inversago CEO François Ravenelle told Endpoints News. The 22-employee company had intended on doing a crossover round after its approximately $70 million Series C last year, and then an IPO next year, he noted. Its CFO, Glenn Vraniak, had taken two other companies public: Evaxion Biotech and electroCore.

Inversago and Versanis highlight what could be the next tide of obesity drugs, likely to be paired up with their acquirers’ existing treatments, for a burgeoning class of medical interventions that is expected to bring in tens of billions of dollars in the coming years.

The acquisitions mark another step in the competition between the Danish and Indianapolis pharma giants, which sell the two leading drugs in the field: semaglutide and tirzepatide. While Lilly and Novo Nordisk are already racing on solid ground, their manufacturing teams are currently testing different running shoes to catch up to demand. With the acquisitions, their business development groups are working to ensure the companies have more options to stay in the lead long-term.

“Novo and Lilly have kicked the tires on a lot of the biology that regulates weight,” Michael Nedelcovych, a VP of pharmaceuticals equity research at TD Cowen, said in an interview. “So far, a bunch of targets have failed to impress, so there’s not a ton left to explore, and so it might be tough for a company to find a differentiated molecule.”

Lilly and Novo Nordisk are placing bets at different stages of the race. Novo beat Lilly to market on the weight loss front — Lilly’s tirzepatide is only approved for diabetes as Mounjaro, although off-label prescriptions appear to be flying off doctor’s Rx pads. But in the M&A game, the European pharma is bagging an earlier-stage asset than its American rival. Through Versanis, Lilly snagged an asset already tested across multiple indications (which ended in some big clinical failures) and has completed enrollment in a Phase IIb for obesity, with a data readout anticipated for the middle of next year.

The drugmakers, which have recently vaulted to the upper echelons of healthcare companies by market capitalization, are also betting on different paths to treating various forms of diabetes and helping people shed more pounds.

Through its up to $1.9 billion acquisition of Versanis and its IV-administered antibody, Lilly hopes to block activin and myostatin signaling to help curb weight but not reduce muscle mass, unlike the current appetite-suppressing drugs. Meanwhile, Novo Nordisk is betting that Inversago’s oral inverse agonist of cannabinoid receptor 1, or CB1, can replicate Phase Ib results showing weight loss potential.

‘Bit bold’ to bring back CB1 

CB1-targeting drugs were poised to bring in billions of dollars in the 2000s. Sanofi won clearance in Europe for its drug, rimonabant or Acomplia, but it failed to gain support from FDA’s outside advisors and was pulled from the bloc in 2008 over safety concerns. After getting into the brain, the drug spurred concerns about depression and suicidality.

Merck, Pfizer, Solvay and other drug developers wound up sidelining similar assets. The pullback spooked Big Pharma and spoiled the chance for projected total revenue of $14.4 billion from 2007 to 2012, per Evaluate Pharma.

Steven Heymsfield

“Merck really had cold feet when it came to CB1 drugs getting into the brain,” said Steven Heymsfield, former president of The Obesity Society and a physician who worked on weight loss drugs at Merck in the mid- to-late 2000s, including its CB1 asset taranabant.

Other startups and researchers came to Merck saying they had non-brain-penetrant inverse agonists.

“The reason Merck never went forward with any of those compounds is because every one they tested ended up getting in the brain,” even if just in small amounts, Heymsfield said in an interview. He left Merck in 2010 and is a professor at Pennington Biomedical Research Center in Baton Rouge, LA. He’s an investigator on Versanis’ Phase IIb trial of bimagrumab, the monoclonal antibody that caught Lilly’s attention.

Inversago is part of a new generation of biotechs with CB1-targeted drugs that are expected to avert concerning activity in the brain.

“We’re taking a new approach, a more profound approach on the biology, and we’re staying out of the brain so that we don’t cause the depressive mood disorders that came with the other ones,” Ravenelle, the CEO, said.

In late 2022, Inversago executives found out their asset, INV-202, performed better than they anticipated in a Phase Ib trial. They waited to present the data until this summer’s American Diabetes Association conference, but in the meantime had shared it under strict confidentiality with pharma companies that came to the table, Ravenelle said.

“Really, all pharma companies were curious. Most of them thinking that we were a little bit bold to bring this biology back,” he said. “If we went to the clinic, they all agreed they would like to follow the story. I was constantly reaching out and contacted by pharma companies, all the big names.”

Sanofi, though, was “probably less interested,” he said. “They had been burned in the past with rimonabant.”

INV-202 is being tested in a Phase II trial for diabetic kidney disease. It’s also been cleared for a Phase II in obesity, but Inversago awaits the closing of the acquisition to kick off that trial, the CEO said, with topline results from both studies anticipated in the beginning of the second half of 2024.

A Novo Nordisk spokesperson said they plan for Inversago to operate as an “independent unit” and there’s “opportunity to leverage INV-202 in combination with our internal assets, but we have not announced any plans in that regard.”

“The acquisition of Inversago is a good example of how we are complementing our internal research and development pipeline with promising external innovation. We continue to look for external innovation to complement our in-house R&D, both in obesity and our other core areas,” the spokesperson said in an emailed statement.

Other biotechs hope for ‘same status as Inversago’

CB1 has picked up steam this summer, and Inversago’s exit is giving hope to other biotechs going after the target.

Yossi Tam

“We hope that we will be in the same status as Inversago very soon,” Yossi Tam, a professor at the Hebrew University of Jerusalem, said in an interview. His lab licensed peripherally-restricted CB1 antagonist compounds to the Israeli biotech BioNanoSim, where he sits on the scientific advisory board. The startup is nearing Phase I trials after showing weight reduction in mice.

Tam said he hopes BioNanoSim’s CB1 candidates will also be purchased by Big Pharma. He was a postdoc fellow in George Kunos’ lab at the National Institutes of Health. Kunos, one of the leaders in the CB1 space, is on Inversago’s scientific advisory board.

CB1 also piqued the interest of a small biotech named Skye Bioscience, which on Monday acquired Bird Rock Bio, a Versant- and 5AM Ventures-financed startup that said little to nothing in the three years since announcing a Phase II IND application for renal diseases. Johnson & Johnson’s Janssen had the option to buy Bird Rock after getting Phase I data, per a 2016 agreement, but the drugmaker “decided not to exercise the option to purchase the company,” a spokesperson told Endpoints last week.

Skye, though, saw promise in Bird Rock’s antibody nimacimab, which it will test in a Phase IIa trial in chronic kidney disease next year. Skye was already working on a CB1 agonist/activator, for which it anticipates Phase IIa data in glaucoma next year.

Other drug developers working on CB1-targeted treatments hope to enter the clinic as well. Corbus Pharmaceuticals has tagged its oral inverse agonist CRB-913 as a “partnership project” and sees potential for the compound being combined with GLP1s.

Like BioNanoSim, it also hopes to follow in Inversago’s footsteps. On Aug. 14, Corbus said Novo’s deal “provides BD validation.”

“The big players want to replenish their pipeline,” Ravenelle said. “They want to see new modalities.”

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