Novo Nordisk Is Buying Akero Therapeutics. It’s More Good News for Biotech Stocks.

Novo Nordisk appointed CEO Mike Doustdar earlier this year, after ousting former CEO Lars Fruergaard Jørgensen after an eight-year tenure. (Photo by SERGEI GAPON/AFP via Getty Images)

Novo Nordisk announced one of the biggest biotech takeouts of the year on Thursday morning, a deal that will open a new front in its competition with archrival Eli Lilly .

Novo, which makes the weight loss drug Wegovy, said it would pay $54 per share for biotech Akero Therapeutics , whose stock closed Wednesday at $46.49, for a total upfront payment of $4.7 billion. Akero shareholders will get another $6 per share if the Food and Drug Administration approves its lead drug, the liver-disease treatment efruxifermin.

Akero shares were up 16.4% to $54.12 early Thursday. Efruxifermin is currently is Phase 3 trials, and the drug would not launch for a number of years.

The deal is yet another bullish sign for the biotech sector, which is on its best run in years. The SPDR S&P Biotech exchange-traded fund, which tracks smaller and midsized biotech stocks, is up more than 17% since the start of September and is now beating the S&P 500 on the year. On Thursday morning, the ETF was up 2.4%.

As the political and economic environment has improved for biotechs, that has cleared the way for hopes of big acquisitions to lure investors back to the sector. With pharma companies desperate to fill up uninspiring drug pipelines, there’s been no lack of deals in recent weeks, including a $4.9 billion obesity acquisition by Pfizer in late September.

For Novo, the Akero deal is the biggest acquisition since a complex transaction early last year in which it acquired a handful of manufacturing facilities. The stock has been lagging since the middle of 2024, when investors began to sour on the obesity trade and Lilly took a decisive lead in the weight-loss drug market.

A new CEO, Mike Doustdar, took the reins two months ago, and the tone from Novo appears to be growing more aggressive. The company has been trumpeting the impending launch of a pill form of Wegovy, a program it had previously slow-walked amid manufacturing capacity concerns.

The Akero deal, which Doustdar indicated on an investor call on Thursday had been in the works before he became CEO, fits into that new, more aggressive mold.

Akero’s lead drug, efruxifermin, is being developed as a treatment for the liver condition now known as metabolic dysfunction-associated steatohepatitis, or MASH, which in some patients can lead to cirrhosis, and eventually liver failure. MASH is associated with obesity and diabetes, and is relatively common in the U.S.

Drugmakers have long sought to develop treatments for MASH, attracted by the large number of potential patients affected, but they have been stymied by trial failures and skepticism from regulators.

The latest major setback came in early 2024, when Lilly released data showing that the GLP-1 drug it sells under the brand names Mounjaro and Zepbound had stopped progression of MASH in most patients. That news lopped more than 10% off the valuations of many of the companies still developing standalone MASH drugs at the time, on the theory that the mega-blockbuster GLP-1 drugs from Lilly and Novo would erase the market for specialized MASH treatments.

Early this year, though, Akero struck back with startling data on efruxifermin. In a small trial of patients in whom MASH had led to compensated cirrhosis—meaning their livers were very damaged but still functioning—39% of patients treated with efruxifermin experienced a reversal of cirrhosis after 96 weeks.

That was an unprecedented result. No other drug has been able to improve liver scarring significantly in a Phase 2 trial in patients who have already progressed to cirrhosis, according to Novo.

Akero soared on that data, which made efruxifermin look eminently competitive with Lilly’s drug as a MASH treatment**.**

In the months since, drugs of efruxifermin’s class, known as FGF21 analogues, have become hot commodities. Last month, Roche Holding announced a $3.5 billion acquisition of 89bio, which is developing an FGF21 analogue called pegozafermin. In May, GSK announced it would pay $1.2 billion up front to buy an FGF21 analogue under development by Boston Pharmaceuticals called efimosfermin.

Earlier attempts at launching FGF21 analogues have failed. Novo had an earlier one of its own, called zalfermin, which it stopped developing earlier this year. Bristol Myers Squibb was testing an FGF21 analogue called pegbelfermin, which it dropped in 2021.

On an investor call early Thursday, Novo’s Chief Scientific Officer Martin Holst Lange said the company thought that efruxifermin could be the best FGF21 analogue on the market and also the first to launch.

The acquisition gives Novo a shot at dominance in the market for treating patients with advanced MASH. The company’s American depositary receipt was down 0.9% on Thursday.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com