Eli Lilly announced on Tuesday that it plans to acquire Centessa Pharmaceuticals in a deal valued at up to $7.8 billion. The acquisition reflects Lilly’s strategy to diversify beyond its metabolic-focused portfolio and expand into therapies for sleep disorders.
Based in the U.K., Centessa is developing a new class of treatments targeting orexin, a brain molecule that regulates the sleep-wake cycle. Its lead candidate, cleminorexton, is currently in mid-stage clinical trials for narcolepsy and idiopathic hypersomnia, conditions characterized by excessive daytime sleepiness.
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Sales of narcolepsy drugs are currently worth about $2.5 billion and can significantly expand following the entry of orexin agonists, Oppenheimer analyst Kostas Biliouris said in a note.
Lilly has proposed a cash offer of $38 per share for Centessa, representing a 37.8% premium over the company’s last closing price on the U.S. stock market.
Following the announcement, Centessa’s U.S.-listed shares surged 45% in morning trading. Shares of Lilly also rose, gaining 3.1% to $914.29.
In addition to the cash offer, Lilly is providing one non-transferable contingent value right (CVR) per share, valued at approximately $9 each, bringing the total additional consideration to around $1.5 billion.
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This deal represents Lilly’s largest acquisition since its $8 billion purchase of Loxo Oncology in 2019.
Eli Lilly, which reached a trillion-dollar valuation last year thanks to the blockbuster success of its weight-loss therapies, has been actively investing to diversify and strengthen other areas of its drug pipeline.
Earlier this year, the company acquired Orna Therapeutics for $2.4 billion to expand its next-generation cell therapy capabilities and spent over $1 billion to purchase autoimmune drug developer Ventyx Biosciences.
Despite the scale of the acquisition, several analysts noted that the premium offered for Centessa was relatively modest, leaving room for potential rival bids given the promise of Centessa’s drug pipeline.
“Johnson & Johnson has also recently expressed desire to expand its neuroscience franchise and could make sense as rival bidder,” Biliouris said.
