Eli Lilly has agreed to pay up to $7.8 billion for the acquisition Centessa Pharmaceuticals and its experimental drug for excessive daytime sleepiness, the company said Tuesday.
Centessa is one of several companies working on a new class of drugs to treat narcolepsy, a condition that makes it difficult for people to stay awake during the day. The drugs may also be used to treat other neurological diseases that involve sleepiness, such as Alzheimer’s disease and depression, and possibly even more broadly.
Other possibilities include another serious sleep disorder called idiosyncratic hypersomnia, as well as other conditions in which people experience sleepiness or problems with executive function during the day and sleep poorly at night, Lilly CEO Dave Ricks said in an interview with CNBC.
“We see a broader potential for this pathway, perhaps a little analogy to GLP-1, in a way that, you know, sleep and wakefulness are kind of the core of our functioning, and when your sleep or wakefulness is disrupted, that causes a lot of other problems,” Ricks said. “I think you can count on Lilly to explore broad application [the orexins] and this new path, and we’re pretty excited about it.
Under the terms of the deal, Lilly will pay $38 per share, or $6.3 billion, upfront for Centessa, a 38% premium to Monday’s closing price. If Centessa’s drugs receive U.S. Food and Drug Administration approval within certain deadlines, Lilly will pay up to an additional $1.5 billion.
The transaction is expected to close in the third quarter, subject to regulatory approval.
Shares of Lilly rose about 3% on Tuesday, while shares of Centessa rose 45%.
Orexin agonists, used to treat narcolepsy and another serious sleep disorder called idiopathic hypersomnia, could represent a $15 billion to $20 billion market if only about a quarter of patients seek treatment, according to an estimate by Oppenheimer analyst Kostas Biliouris. Sales could even increase if the drugs were used more widely.
Centessa won’t be the first to bring its orexin agonist to market. A competitor drug Takeda is currently under review by the FDA and could be approved later this year.
Biliouris said he doesn’t expect Centessa’s drug to be approved until 2028, but sees signs from mid-stage trial data that Centessa’s treatment could become best-in-class.
For her part, Lilly is a long-time leader in neuroscience. The company’s antidepressant Prozac catapulted Lilly to the top of the pharmaceutical industry after its approval in 1987.
Recently, Lilly launched a drug called Kisunla for the early stages of Alzheimer’s disease. Another study is planned to find out whether the treatment can prevent the memory-robbing disease.
Lilly has been vocal about its intention to use cash from its top-selling obesity and diabetes drugs Zepbound and Mounjaro to make more bets. Earlier this year, Lilly announced its intention to acquire cell therapy company Orna Therapeutics and inflammation-focused company Ventyx Biosciences.
Of the Centessa deal, Ricks said, “This is something we should be doing to impact potentially millions and millions of people who suffer from neuroscience conditions like wakefulness and sleep.”
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