IP Group Poised for Potential Royalty Windfall from Metsera’s Obesity Drug Pipeline

IP Group's (LSE: IPO) stock price rallied more than 8% early on Monday following an update regarding potential future royalty income tied to Metsera, Inc.'s obesity drug candidates.

The update highlights the potential for significant financial upside for IP Group stemming from Metsera's promising therapeutic programs.

Pfizer's planned acquisition of Metsera, which has an initial enterprise value of $4.9 billion, underscores the immense value of Metsera's next-generation obesity portfolio.

Metsera currently has four programs in clinical development and several more in IND-enabling studies.

These programs aim to address critical unmet needs in obesity treatment, focusing on reducing injection frequency while enhancing efficacy and tolerability.

IP Group's financial stake in Metsera's obesity drug programs originates from Metsera's 2023 acquisition of Zihipp, a former IP Group portfolio company.

IP Group retains ownership and exclusive licensing rights to key intellectual property related to Metsera's programs, including lead product MET-097i, as well as MET-233, MET-034, and MET-067.

As a result, IP Group is entitled to future revenue through milestone payments and tiered, low-single-digit percentage royalties on net sales of the licensed products. A 50% revenue share arrangement exists with Imperial College London.

Metsera recently announced positive Phase 2b results for MET-097i, its most advanced GLP-1 therapeutic candidate. The company plans to initiate a global Phase 3 program in late 2025. MET-097i has the potential to be a best-in-class, next-generation injectable GLP-1 drug, administered just once a month.

Greg Smith, Chief Executive of IP Group, commented, “We are encouraged by Metsera's Phase 2b results for MET-097i and its plans to initiate Phase 3 in 2025. Obesity is a global health challenge, and Metsera's next-generation programmes could ease pressure on healthcare systems with fewer injections and better tolerability.

“As Metsera advances its portfolio, IP Group's shareholders are positioned to benefit, primarily through sustainable royalty income, should these therapies achieve approval and commercial momentum.”

Zihipp, the drug candidate that would later become MET-097i, was originally invented by Professor Steve Bloom of Imperial College London. His work in 1996 identifying GLP-1's effect on appetite proved pivotal in the revolution of GLP-1 based obesity treatments.

IP Group, in its capacity as Imperial College London's commercialization partner, played a key role in refining Professor Bloom's research prior to spinning it out into Zihipp.

IP Group held a 31% shareholding in Zihipp at the time of its acquisition by Metsera. Under the share purchase agreement with Metsera, IP Group is entitled to upfront, deferred, and contingent payments.

Milestone payments, annual fees, patent cost reimbursement, and royalties are also part of the agreement. All proceeds are subject to a 50/50 revenue-sharing arrangement with Imperial College London after deducting third-party shares and relevant costs.