Pfizer has outmaneuvered Novo Nordisk with a substantial $10 billion bid for weight-loss drug developer Metsera, a company that presents the potential for groundbreaking obesity medications. This competitive bidding war not only underscores the urgent race among pharmaceutical giants to capture the obesity treatment market but also highlights the intricate legal and regulatory challenges that accompany such high-stakes acquisitions.

Novo Nordisk’s CEO, Mike Doustdar, initially incited the bidding war by challenging Pfizer to increase its offer if it had a genuine interest in acquiring Metsera. This prompt encouraged Pfizer to respond robustly, resulting in an offer that exceeded what Novo Nordisk had been willing to pay. Consequently, Metsera’s board of directors determined that Pfizer’s enhanced proposal was in the best interest of its shareholders, both in terms of financial value and the likelihood of closing the deal—a crucial decision given the backdrop of potential legal challenges and regulatory concerns surrounding Novo’s bid.

Metsera’s acceptance of Pfizer’s revised offer came after the Federal Trade Commission (FTC) had already greenlit the buyout, though the acquisition is still subject to approval from Metsera’s shareholders. A scheduled special meeting will allow shareholders to vote on the merger, with a swift closure anticipated soon thereafter.

As it stands, Novo Nordisk is no stranger to the weight management drug arena, having successfully marketed the weekly injectable GLP-1 drug Wegovy, alongside Eli Lilly’s Zepbound, which currently dominate the market. In contrast, Pfizer’s foray into this space has been less auspicious; although it possesses a pipeline of prospective treatments, none have successfully transitioned through clinical trials to reach market viability.

The competition to develop next-generation obesity medications—with advantages such as less frequent dosing and lower manufacturing costs—has intensified. Metsera, which launched on the public market earlier this year at $18 per share, provides a platform that aligns with these objectives, making it particularly attractive to potential buyers.

Pfizer’s winning offer encompasses a total valuation of up to $10 billion, translating to about $86.25 per share—an attractive proposition for Metsera’s shareholders. The deal’s financial structure is noteworthy, highlighting an upfront cash payment of $65.60 per share, supplemented by a contingent value right (CVR) that could yield an additional $20.65 upon meeting specific milestones.

The bidding war escalated as Novo Nordisk attempted to regain the upper hand with an unsolicited, higher bid that triggered a lawsuit from Pfizer over alleged breaches of contract. This prompted both pharmaceutical giants to reconsider and enhance their respective offers, with Novo’s improved proposal amounting to an equivalent of approximately $10 billion.

Novo’s bid involved a more complex structure, proposing to pay $62.20 in cash for each Metsera share in addition to a special dividend. Such arrangements introduced concerns of legal violations, sparking lawsuits from Pfizer that questioned the legitimacy of Novo’s offer under Delaware state law and potential antitrust ramifications.

With the FTC seemingly swaying in Pfizer’s direction, Metsera identified significant legal and regulatory risks associated with proceeding with Novo’s offer. The board pointed out that the initial dividend promise may be fraught with uncertainty, potentially jeopardizing shareholder interests.