Eli Lilly (LLY) said Monday it would acquire Morphic Holding (MORF) for $3.2 billion. Morphic stock skyrocketed to a 10-month high.
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The deal values Morphic stock at a 79% premium to its closing price on Friday and focuses on the company’s ingretin therapies. Ingretins are receptors involved in a wide range of biological activities. Morphic’s lead asset would block a specific ingretin to treat ulcerative colitis and Crohn’s disease.
Morphic also has drugs in preclinical testing for autoimmune, pulmonary hypertensive and fibrotic disease, as well as cancer.
RBC Capital Markets analyst Gregory Renza says Lilly is a “sensible acquirer” for Morphic given the company’s recent approval of ulcerative colitis treatment Omvoh. Eli Lilly is also testing Omvoh in patients with Crohn’s disease. These are the two forms of inflammatory bowel disease, or IBD.
“This (acquisition) deal underscores Morphic’s robust IBD-focused pipeline, and the importance of oral-based therapeutics for IBD,” he said in a report. Renza rates Morphic stock an outperform.
Just after the stock market opened, Morphic stock soared 75.2% to 55.78. Eli Lilly stock was relatively flat at 914.34. Shares are sitting atop an 11-week rally, and closed on Friday with a year-to-date gain of 57%.
Eli Lilly Eyes New Options For Ulcerative Colitis
The deal values Morphic stock at $57 per share, about 79% above where shares closed Friday.
Oral therapies could open up new options for patients with diseases like ulcerative colitis, Lilly’s chief scientific officer, Daniel Skovronsky, said in a statement. Eli Lilly’s new drug, Omvoh, for example, is an under-the-skin injection that treats ulcerative colitis.
Both companies’ boards approved the move, Lilly said in its news release. It aims to close the transaction in the third quarter.
The news also gave Pliant Therapeutics (PLRX) stock a lift. The biotech company is developing an ingretin-based treatment for a lung disease and a bile duct disease, as well as earlier-stage treatments for cancer and muscular dystrophies. Pliant stock jumped 7.5% to 11.31 on the news.
“We see positive indirect read-throughs to Pliant from this morning’s announced acquisition of Morphic, validating the promise of — and pharma interest in — the general ingretin pathway and valuation disconnect in Pliant shares,” RBC analyst Brian Abrahams said in a report.
He has an outperform rating on Pliant stock.
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