Eli Lilly said on Tuesday it would buy Centessa Pharmaceuticals in a deal valued at up to $7.8 billion as the U.S. drugmaker looks to diversify beyond its metabolic portfolio and expand into treatments for sleep disorders.
UK-based Centessa is developing a new class of treatments designed to target orexin, a molecule in the brain that regulates the sleep-wake cycle. Its lead drug, cleminorexton, is in mid-stage studies for narcolepsy and idiopathic hypersomnia, disorders that cause excessive daytime sleepiness.
Sales of narcolepsy drugs are currently worth about $2.5 billion and can significantly expand following the entry of orexin agonists, Oppenheimer analyst Kostas Biliouris said in a note.
About 50 million to 70 million Americans have a sleep disorder, according to the U.S. National Institutes of Health.
Lilly has offered $38 per share in cash, a premium of 37.8% to the last close of Centessa’s U.S.-listed stock. Its U.S.-listed shares jumped 45% in morning trading. Shares of Lilly were up 3.1% at $914.29.
The U.S. company has also offered one non-transferable contingent value right (CVR) of about $9 per share, or worth about $1.5 billion.
The deal is expected to close in the third quarter.
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This marks Lilly’s biggest deal since its buyout of Loxo Oncology for about $8 billion in 2019.
Eli Lilly, which hit a trillion-dollar valuation last year on the blockbuster success of its weight-loss treatments, has been ramping up investments to strengthen other parts of its pipeline.
This year, it snapped up Orna Therapeutics for $2.4 billion to expand its next-generation cell therapy capabilities, and paid more than $1 billion to buy autoimmune drug developer Ventyx Biosciences.
Still, several analysts said the premium was modest and left the door open for rival bids, given Centessa’s promising pipeline.
“Johnson & Johnson has also recently expressed desire to expand its neuroscience franchise and could make sense as rival bidder,” Biliouris said.
Other companies developing drugs that target orexin include Alkermes and Takeda.
Lilly’s deal is favorable for Alkermes, said RBC Capital Markets analyst Leonid Timashev, as it highlights large pharma interest in the sleep space and underscores what could be a large indication.
It would not be surprising if Alkermes could be a takeout target as well, he said.
Source: Reuters.com