Eli Lilly to Acquire Morphic for $3.2 Billion

Lilly to Acquire Morphic, Expanding Immunology Pipeline

Eli Lilly and Company (NYSE: LLY) has announced its definitive agreement to acquire Morphic Holding, Inc. (NASDAQ: MORF) in a deal valued at approximately $3.2 billion. This acquisition is expected to enhance Lilly's immunology pipeline with oral integrin therapies, particularly for the treatment of inflammatory bowel disease (IBD).

Morphic's lead program, a selective oral small molecule inhibitor of α4b7 integrin known as morf-057, is currently being evaluated in two phase 2 studies in ulcerative colitis and one phase 2 study in Crohn’s disease. The company is also developing a preclinical pipeline of other molecules for the treatment of autoimmune diseases, pulmonary hypertensive diseases, fibrotic diseases, and cancer.

The terms of the agreement stipulate that Lilly will commence a tender offer to acquire all outstanding shares of Morphic for a purchase price of $57 per share in cash. This represents a premium of approximately 79.0% to the closing stock price on July 5, 2024, and 87.2% to the 30-day volume-weighted average trading price of Morphic’s common stock ended on July 5, 2024.

Upon closing, Lilly will determine the accounting treatment of this transaction as a business combination or an asset acquisition, including any related acquired in-process research and development charges, according to generally accepted accounting principles (GAAP). The transaction is expected to close in the third quarter of 2024, subject to customary closing conditions.

Lilly's Chief Scientific Officer, Daniel Skovronsky, M.D., Ph.D., expressed enthusiasm about the potential of oral therapies to open up new possibilities for earlier intervention in diseases like ulcerative colitis and provide the potential for combination therapy to help patients with more severe disease. Morphic's CEO, Praveen Tipirneni, M.D., also commented on the immense potential of morf-057 to benefit patients suffering from IBD, emphasizing that Lilly's resources and commitment to the inflammation and immunology field will enable them to realize the vast opportunity of integrin therapeutics.

The acquisition of Morphic is in line with Lilly's commitment to developing new therapies in the field of gastroenterology, where the company has made significant investments to deliver first-in-class molecules for the benefit of patients. This strategic transaction is poised to reinforce Lilly's position in the immunology space and advance its efforts in delivering innovative treatments for serious chronic diseases.

The transaction will be reflected in Lilly’s financial results and financial guidance, and for this deal, Citi is acting as exclusive financial advisor and Kirkland & Ellis LLP is acting as legal counsel. On the other hand, Centerview Partners LLC is acting as exclusive financial advisor to Morphic, while Fenwick & West LLP is acting as legal counsel.

This acquisition marks a significant step for Lilly as it seeks to expand its portfolio and address unmet medical needs for patients with inflammatory bowel disease and other serious chronic conditions. Following these announcements, the company's shares moved 0.0%, and are now trading at a price of $31.84. For the full picture, make sure to review Morphic's 8-K report.

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