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Eli Lilly to acquire Morphic for $57 per share

Eli Lilly (LLY) and Morphic (MORF) announced a definitive agreement for Lilly to acquire Morphic. Morphic’s lead program is a selective oral small molecule inhibitor of a4ss7 integrin for the treatment of inflammatory bowel disease, or IBD, that has the potential to improve outcomes and expand treatment options for patients. This molecule is being evaluated in two Phase 2 studies in ulcerative colitis and one Phase 2 study in Crohn’s disease. Additionally, Morphic is developing a preclinical pipeline of other molecules for the treatment of autoimmune diseases, pulmonary hypertensive diseases, fibrotic diseases and cancer. Lilly will commence a tender offer to acquire all outstanding shares of Morphic for a purchase price of $57 per share in cash payable at closing. The transaction has been approved by the boards of directors of both companies. The transaction is not subject to any financing condition and is expected to close in the third quarter of 2024, subject to customary closing conditions, including the tender of a majority of the outstanding shares of Morphic’s common stock. Following the successful closing of the tender offer, Lilly will acquire any shares of Morphic that are not tendered in the tender offer through a second-step merger at the same consideration as paid in the tender offer. The purchase price payable at closing represents a premium of approximately 79% to the closing stock price on July 5 and 87.2% to the 30-day volume-weighted average trading price of Morphic’s common stock ended on July 5, the last trading day before the announcement of the transaction. Morphic’s board of directors recommends that Morphic’s stockholders tender their shares in the tender offer. 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 GAAP upon closing. This transaction will thereafter be reflected in Lilly’s financial results and financial guidance.

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