AstraZeneca makes $10 billion offer for obesity drugmaker Rhythm, WSJ reports

The roughly 13% gap between Rhythm’s close and the reported offer price leaves room for a further move if talks are confirmed, but also reflects the risk that no deal materialises. The report is likely to lift interest in other mid-sized obesity and rare disease biotechs as potential targets, given the appetite large drugmakers are showing for the space. For AstraZeneca, a deal of this size is unlikely to move its shares materially but would signal it is willing to buy growth to hit its 2030 target. Chinese drug developers that have licensed obesity assets to Western groups may also draw attention as part of the same deal flow.- AstraZeneca is reaching for a niche corner of the obesity boom, and paying a premium to get there.Summary:AstraZeneca made an offer of around $10 billion, or $124 a share, for Rhythm Pharmaceuticals last month, the WSJ reported, citing people familiar with the matterRhythm shares jumped 28% to just over $110, valuing the company at about $7.6 billionRhythm develops treatments for rare forms of obesity, including an approved drug for acquired hypothalamic obesityA deal would add to AstraZeneca’s obesity pipeline and its rare disease business built on the Alexion acquisitionAstraZeneca targets $80 billion in sales by 2030, up from about $59 billion last year AstraZeneca has made an offer of around $10 billion for Rhythm Pharmaceuticals, The Wall Street Journal reported, citing people familiar with the matter, in a move that would deepen the British drugmaker’s push into both obesity and rare disease treatments.According to the report, AstraZeneca offered $124 a share for the US biotech last month, having previously expressed interest in the company. Rhythm’s shares were trading at around $95 on Wednesday afternoon before the report, implying a premium of roughly 30%. They closed up 28% at just over $110, valuing Rhythm at about $7.6 billion. The report did not include comment from either company, and the offer has not been confirmed.The gap between Rhythm’s closing price and the reported offer, at roughly 13%, suggests investors see some uncertainty over whether a deal will be agreed on those terms.Rhythm develops treatments for rare forms of obesity linked to the MC4R pathway, which regulates feelings of hunger. When the pathway malfunctions, it can trigger extreme, persistent hunger that leads to severe obesity. The company’s medicines include a treatment approved for acquired hypothalamic obesity, a rare condition.The fit with AstraZeneca is twofold. The company has been building an obesity pipeline as it seeks a foothold in one of the fastest-growing areas of the drug market. It is developing several GLP-1 treatments, including one licensed from China’s Eccogene for about $185 million in 2023, and in January licensed a set of obesity and diabetes programmes from CSPC Pharmaceuticals, also based in China, for $1.2 billion upfront.Rhythm would also add to AstraZeneca’s rare disease portfolio, which it built into a leading position through its $39 billion acquisition of Alexion in 2021.The approach fits a broader strategy. AstraZeneca, valued at close to $300 billion and best known as a cancer drug powerhouse under Chief Executive Pascal Soriot, is targeting $80 billion in annual sales by 2030, up from about $59 billion last year. Analysts say deals will be needed to supplement its pipeline if it is to reach that goal.A deal of around $10 billion would be modest relative to AstraZeneca’s size, but meaningful for a specialist obesity player, and would underline how large drugmakers are turning to acquisitions to secure growth.  This article was written by Eamonn Sheridan at investinglive.com.