Roche: Raising Our Fair Value Estimate as Carmot Acquisition Brings Potential Obesity Runway

Roche has announced that it will acquire private biotech Carmot Therapeutics for $2.7 billion upfront and an additional $400 million if certain milestones are reached in the firm’s obesity pipeline. Carmot has three clinical-stage obesity programs for patients with and without type 1 or type 2 diabetes, including GLP-1/GIP weekly injectable CT-388 (ready to begin phase 2) and daily oral GLP-1 CT-996 (phase 1). We’re slightly raising our Roche fair value estimate to CHF 414/$59 from CHF 387/$56, as we’re including peak sales above the value of the transaction. Further data updates could lead us to increase our market share assumptions and give wide-moat Roche a chance to become a significant player in this rapidly growing market.