Lilly to Acquire Morphic for Better Inflammatory Bowel Disease Outcomes

Eli Lilly and Company and Morphic Holding, Inc. have announced a definitive agreement for Eli Lilly to acquire Morphic, a company focused on developing oral integrin therapies for serious chronic diseases. This strategic acquisition aims to bolster Lilly's immunology pipeline with promising new treatments.

Morphic's leading program features a selective oral small molecule inhibitor, MORF-057, targeting the α4β7 integrin to treat inflammatory bowel disease (IBD). MORF-057 is currently undergoing evaluation through two Phase 2 clinical trials for ulcerative colitis and one Phase 2 trial for Crohn's disease. Beyond MORF-057, Morphic is advancing a preclinical pipeline targeting various conditions including autoimmune diseases, fibrotic diseases, pulmonary hypertensive diseases, and cancer.

Daniel Skovronsky, Chief Scientific Officer of Lilly, expressed enthusiasm about the acquisition, emphasizing the potential of oral therapies to enable earlier intervention and combination treatments for severe diseases such as ulcerative colitis. Skovronsky highlighted that the addition of Morphic aligns with Lilly’s goal of pioneering new treatments in gastroenterology and enhancing their therapeutic offerings for patients.

Praveen Tipirneni, CEO of Morphic, remarked on the immense potential of MORF-057 and expressed confidence that Lilly’s extensive resources and commitment to inflammation and immunology would maximize the drug's benefits for IBD patients. Tipirneni thanked the Morphic team for their efforts and expressed optimism for future advancements under Lilly's leadership.

As per the terms of the agreement, Lilly will initiate a tender offer to purchase all outstanding shares of Morphic at $57 per share in cash, totaling approximately $3.2 billion. This transaction, approved by both companies' boards of directors, is expected to close in the third quarter of 2024, pending customary closing conditions, including the tender of a majority of Morphic’s outstanding shares.

The agreed purchase price represents a premium of around 79% over Morphic’s closing stock price on July 5, 2024, and an 87.2% premium over the 30-day volume-weighted average trading price ending on the same date. Morphic’s board of directors has recommended that its stockholders tender their shares in the offer.

Upon completion of the tender offer, Lilly will acquire any remaining untendered shares through a second-step merger at the same price. Lilly plans to determine the accounting treatment of this acquisition post-closing, in accordance with Generally Accepted Accounting Principles (GAAP), and will reflect the transaction in its financial results and guidance.

For this transaction, Citi is serving as exclusive financial advisor to Lilly, with Kirkland & Ellis LLP as legal counsel. Morphic's financial advisory comes from Centerview Partners LLC, with additional advice from Evercore Group L.L.C., and legal counsel from Fenwick & West LLP.

Morphic is known for developing a range of oral integrin therapies aimed at treating chronic diseases such as autoimmune, cardiovascular, metabolic diseases, fibrosis, and cancer. The company leverages its proprietary Morphic Integrin Technology (MInT) platform to advance its pipeline in collaboration with Schrödinger, benefiting from its unique understanding of integrin structure and biology.

Lilly, with a long history of pioneering medical discoveries, is dedicated to transforming science into therapies that improve global health. Lilly’s current focus includes redefining diabetes care, combating obesity, advancing Alzheimer’s treatment, addressing immune system disorders, and developing novel cancer therapies. The company remains committed to innovative clinical trials and ensuring accessibility and affordability of its medicines.