Lilly Acquires Morphic for $3.2B to Expand Immunology, Gastro Portfolio

Eli Lilly has revealed plans to acquire Morphic Holding, a biotech firm based in Massachusetts, for approximately $3.2 billion in cash. This strategic move aims to bolster Lilly’s immunology offerings, particularly in the autoimmune disease sector.

According to the acquisition agreement, Lilly will pay $57 per share for Morphic, which marks a 79% premium over the biotech’s closing price from the previous Friday. Following the announcement, Morphic's stock surged by around 77% in premarket trading on Monday, as reported by SeekingAlpha.

The boards of both companies have approved the transaction. The acquisition is anticipated to conclude in the third quarter of 2024, pending regulatory and antitrust approvals, along with other customary conditions such as the tender of a majority of Morphic’s outstanding common stock.

Central to this acquisition is Morphic’s main drug candidate, MORF-057. This small molecule inhibitor targets the α4β7 integrin and is being developed to treat inflammatory bowel diseases (IBD). According to Morphic, this mechanism significantly reduces the migration of lymphocytes from the bloodstream to the intestines, addressing the root causes of IBD. Currently, Morphic is conducting two Phase II trials of MORF-057 for ulcerative colitis (UC) and one mid-stage trial for Crohn’s disease.

Analysts at BMO Capital Markets commented on the acquisition, stating that it complements Lilly’s existing efforts in treating UC and Crohn’s disease. They noted that Lilly continues to make strategic acquisitions to enhance its Immunology and Inflammation (I&I) business. The analysts described the acquisition of Morphic as a logical step in Lilly's plan to expand its portfolio in this sector.

Morphic’s CEO, Praveen Tipirneni, highlighted the potential of MORF-057 to significantly benefit patients with IBD. He expressed confidence that Lilly, with its extensive resources and dedication to the field of inflammation and immunology, is the ideal partner to realize this potential.

The acquisition also provides Lilly access to Morphic’s diverse range of investigational oral integrin therapies, although the majority of these are still in preclinical stages. Morphic is also developing next-generation α4β7 inhibitors for other gastrointestinal conditions such as eosinophilic gastrointestinal disease and pouchitis. Additionally, Morphic's pipeline includes treatments for various cancers and pulmonary hypertensive diseases.

This acquisition marks Lilly’s first biotech purchase of 2024, following a series of acquisitions the previous year. In June 2023, Lilly acquired DICE Therapeutics for $2.4 billion, gaining a proprietary platform for small-molecule drugs that disrupt protein-protein interactions. In July 2023, Lilly bought Versanis for $1.93 billion, followed by the acquisition of Point Biopharma for $1.4 billion in October 2023.

Recently, Lilly has achieved several significant milestones, including the FDA approval of its Alzheimer’s disease therapy Kisunla (donanemab) last week. Additionally, the company’s Phase III success with Zepbound last month bolsters its case for a label expansion in treating obstructive sleep apnea.

In summary, Eli Lilly’s acquisition of Morphic Holding signifies a strategic effort to enhance its immunology portfolio, particularly in autoimmune diseases, while continuing its trend of acquiring promising biotech firms to bolster its research and development capabilities.