Zealand Pharma, Generate strike AI obesity drug deal worth up to $1.2 billion

Oct 13 (Reuters) - Danish obesity-drug developer Zealand Pharma has partnered with US biotechnology company Generate Biomedicines to develop protein-based treatments for obesity and other metabolic diseases using AI, in a deal worth up to $1.2 billion.

Generate will receive $30 million upfront and up to $35 million in early preclinical milestones, and is eligible for total milestone payments of nearly $1.2 billion, the companies said on Tuesday. Generate's shares were up about 5% in extended trading.

The deal comes as drugmakers race to develop new obesity treatments beyond the blockbuster GLP-1 weight-loss drugs sold by Novo Nordisk and Eli Lilly. The success of those medicines has fueled investment across the obesity market, with companies testing new approaches aimed at improving effectiveness, convenience or side-effect profiles.

Generate, a Flagship Pioneering-backed biotechnology company that went public earlier this year, uses AI-driven technology to develop protein-based medicines. Under the agreement, Generate will lead research through candidate selection, while Zealand will handle clinical development, regulatory submissions and worldwide commercialization.

The collaboration will focus on multispecific protein therapies, medicines designed to act on more than one biological target at a time. Zealand said those treatments could target several disease pathways linked to obesity within a single medicine, an approach drugmakers are increasingly exploring as they seek more effective treatments.

Zealand, which has traditionally focused on peptide-based medicines, is jointly developing obesity drug petrelintide with Roche as part of an up to $5.3 billion agreement signed last year.

Earlier this month, Zealand reported positive mid-stage trial results showing the treatment helped overweight and obese patients with type 2 diabetes lose up to 9.2% of their body weight.

(Reporting by Sahil Pandey in Bengaluru; Editing by Diti Pujara and Shilpi Majumdar)