Roche shares pop 5% on $5.3 billion obesity drug deal with Zealand Pharma

Swiss pharmaceutical giant Roche said Wednesday that it had struck a deal worth up to $5.3 billion to develop Danish biotech Zealand Pharma's obesity drug candidate, as the two firms seek to compete in the burgeoning weight loss drug market.

The deal will see the two companies co-develop and co-commercialize petrelintide, Zealand Pharma's amylin analog as a standalone therapy, as well as a fixed-dose combination with Roche's lead incretin asset CT-388. 

Under the agreement, Zealand Pharma will receive upfront cash payments of $1.65 billion, with the potential of milestone payments taking the total to up to $5.3 billion, depending on phase-3 trials and sales development, Roche said in a statement.

Shares of Zealand Pharma jumped 29% shortly after the announcement, and were trading up 27% by 11:25 a.m. London time, while Roche added 5.4%.

Shares of obesity drug giant Novo Nordisk, meanwhile, slipped 3.9% during Wednesday's session as Eli Lilly dipped 1.5% in pre-market trade.

Zealand Pharma CEO and President Adam Steensberg told CNBC that the deal showed the two companies' "strong commitment to lead in the obesity space in the future."

Steensberg said the company had received a "high degree of interest" since launching partnership discussions last year. However, he noted that Roche was "by far the most desirable," citing the Swiss firm's prior developments in the obesity drug market, including its acquisition of GLP-1 maker Carmot Therapeutics.

"Roche has convinced us that they have ambition to take leadership in this therapeutic space," Steensberg told CNBC via video call Wednesday.

He added that the firm was unlikely to partner with market leaders Novo or Lilly given their focus on existing GLP-1 obesity drug franchises Wegovy