Lilly acquires Morphic for $3.2B to rival Takeda's IBD drug

Eli Lilly has announced its agreement to acquire Morphic Therapeutic for $3.2 billion, aiming to gain control over an innovative oral therapy in development for inflammatory bowel diseases, including ulcerative colitis and Crohn's disease. This move is seen as a strategic effort to compete with Takeda's established injectable treatment, Entyvio, for these conditions.

Morphic's leading product candidate, MORF-057, is an oral small molecule that inhibits α4β7 integrin, a protein found on certain white blood cells. Takeda's success with Entyvio demonstrated that targeting this integrin can effectively control intestinal inflammation and improve patient outcomes in ulcerative colitis and Crohn's disease. However, Entyvio's injectable delivery system has left an opening for more convenient oral alternatives.

Eli Lilly's acquisition of Morphic positions the company to enter this competitive space with an oral solution. MORF-057 is currently in phase 2 clinical development for both ulcerative colitis and Crohn's disease. Morphic initiated the phase 2 trials for MORF-057 in 2022, placing it ahead of Gilead Sciences' competing oral α4β7 candidate. Lilly had earlier expanded its portfolio by acquiring a preclinical oral α4β7 program through its $2.4 billion takeover of Dice Therapeutics.

Among those vying to replace Entyvio is Ensho Therapeutics, which recently acquired a phase 2-ready oral α4β7 prospect from Eisai’s gastrointestinal subsidiary, EA Pharma. The journey of oral α4β7 inhibitors has been challenging, with mixed results from various clinical trials. Protagonist Therapeutics had to abandon its initial oral α4β7 antagonist peptide following disappointing phase 2b results in 2018, despite initial optimism about a second-generation candidate which was ultimately also dropped.

Morphic has shown more promise with MORF-057, initially reporting promising clinical remission rates that indicated it could potentially match the efficacy of Entyvio. This news caused a surge in investor interest. However, the excitement waned when the candidate did not achieve the expected level of endoscopic improvement, leading to a decline in Morphic's stock value.

Lilly's acquisition offer at $57 per share values Morphic around the same level as its stock was valued following the release of top-line phase 2a data in April 2023. The share price had not recovered from the subsequent data release, enabling Lilly to offer an 87% premium to the 30-day volume-weighted average trading price of Morphic's shares, bringing the total buyout price to $3.2 billion.

The true value of Lilly's purchase will become clearer next year when data from a phase 2b trial in ulcerative colitis is expected. Morphic's midphase trial for Crohn's disease, which started in April, aims for primary completion by 2026.

This acquisition highlights Eli Lilly's strategic investments in diversifying and strengthening its pipeline of treatments for autoimmune and inflammatory diseases. If successful, MORF-057 could provide a more convenient oral alternative to injectable treatments, potentially offering enhanced patient adherence and outcomes in managing conditions like ulcerative colitis and Crohn's disease.