Eli Lilly has agreed to acquire Morphic Therapeutic for approximately $3.2 billion, the companies said today, in a deal designed to bolster the buyer’s pipeline with chronic disease candidates led by MORF-057, a Phase II treatment for inflammatory bowel disease (IBD).
MORF-057 is a selective oral small molecule inhibitor of α4β7 integrin developed using the company’s Morphic Integrin Technology (MInT) platform. MORF-057 is now under study in two Phase II trials in ulcerative colitis (UC), and a third in Crohn’s disease.
In releasing first quarter results in April, Morphic said it was enrolling patients in the Phase IIb EMERALD-2 trial (NCT05611671) assessing MORF-057 in ulcerative colitis, and anticipated dosing its first patient during the second quarter in the Phase II GARNET trial (NCT06226883) evaluating MORF-057 in patients with moderate-to-severe Crohn’s disease.
Morphic is expected to disclose additional details on the studies when it releases second quarter results later this summer. The company had not announced a release date at deadline.
Should MORF-057 generate positive data and win approvals, it could potentially challenge Takeda Pharmaceutical’s already-marketed intravenous, subcutaneous, and injector pen versions of its injectable drug Entyvio® (vedolizumab), an integrin receptor agonist indicated for moderately and severely active UC and Crohn’s. For the fiscal year ending March 31, Entyvio generated blockbuster sales of ¥800.9 billion ($4.986 billion), up 14% from ¥702.7 billion ($4.375 billion) a year earlier.
Another α4β7 integrin receptor antagonist, Biogen’s Tysabri (natalizumab), carries indications in Crohn’s disease as well as muscular sclerosis. Tysabri generated $464.7 million last year, down nearly 5% from $488.4 million in 2022.
“Morphic has always believed that the immense potential of MORF-057 to benefit patients suffering from IBD could be optimized by the ideal strategic partner. Lilly brings unparalleled resources and commitment to the inflammation and immunology field,” Morphic CEO Praveen Tipirneni, MD, said in a statement.
Added Daniel Skovronsky, MD, PhD, Lilly’s chief scientific officer: “Oral therapies could open up new possibilities for earlier intervention in diseases like ulcerative colitis, and also provide the potential for combination therapy to help patients with more severe disease.”
“We are eager to welcome Morphic colleagues to Lilly as this strategic transaction reinforces our commitment to developing new therapies in the field of gastroenterology, where Lilly has made significant investments to deliver first-in-class molecules for the benefit of patients,” added Skovronsky, who is also president, Lilly Research Laboratories and president, Lilly Immunology.
Investors and at least one analyst shared Lilly’s enthusiasm for the deal. Morphic shares traded on Nasdaq zoomed 75% today, to $55.74, while Lilly shares barely budged, inching up 0.4% to $918.00.
“A good outcome”
Michael Yee, an equity analyst with Jefferies, wrote today in a research note that he viewed the deal favorably since Morphic won’t have Phase IIb data to read out on MORF-057 till the first half of next year, and would need “significant” additional capital to run costlier Phase III studies and commercialize the drug worldwide.
“We see this as a good outcome for holders as it provides nearly full value of the Phase IIB data ahead of having to go through the up/down risk of data in H1:25,” Yee wrote. “MORF has prev[iously] spoken about a global partnership or strategic options. We think this is a good outcome and would have been where the stock probably would have traded up to if data were positive in H1/25 (approx[imately] up 50–100%).
In such a scenario, Yee explained, Morphic’s shares would be consistent with Jefferies’ 12-month price target of $60 and “Buy” rating on the stock: “Overall we think it’s a good deal for MORF shareholders.”
Yee added that because Morphic’s pipeline showed little overlap with that of Lilly, he did not foresee a challenge to the deal from the U.S. Federal Trade Commission (FTC), which has opposed some recent biotech merger and acquisition (M&A) deals on antitrust grounds.
Morphic’s pipeline also includes four preclinical programs:
- MORF-088, a family of small molecule αVβ8 integrin inhibitors being developed for myelofibrosis and a combination immuno-oncology approach to treat solid tumor indications.
- A family of small molecule α5β1 inhibitors with potential indications in severe pulmonary hypertensive disease, including pulmonary arterial hypertension, based on research showing that fibronectin integrin inhibition suppresses pulmonary arterial smooth muscle cell proliferation.
- A family of small molecule candidates targeting non-integrins including TL1-A and IL-23, which according to Morphic have potential as treatments for IBD through monotherapy and possibly in combination with other IBD treatment mechanisms including α4β7.
- A family of next generation α4β7 inhibitors for gastrointestinal indications using the MInT platform. The next-gen candidates have enhanced selectivity, potency, and pharmacokinetic profiles compared with first-generation inhibitors like MORF-057.
Lilly immunology pipeline
Lilly’s immunology pipeline is headed by mirikizumab (LY3074828), an interleukin 23 (IL-23) inhibitor under regulatory review as a treatment for Crohn’s disease. Mirikizumab is now marketed under the name Omvoh™ (mirikizumab-mrkz) as a treatment for moderately to severely active ulcerative colitis in adults, after winning FDA approval last October.
Lilly has not furnished sales figures for Omvoh, instead lumping the drug with four other products in a “New Products” category that nearly quadrupled its combined sales during Q1, from $600 million to $2.39 billion—a jump driven by its tirzepatide-based diabetes and weight loss drugs Mounjaro® and Zepbound®.
Also in Lilly’s immunology pipeline are seven Phase II candidates in five key indications (atopic dermatitis, hidradenitis suppurativa, multiple sclerosis, psoriasis, and rheumatoid arthritis), as well as three Phase I candidates for undisclosed autoimmune diseases.
Lilly plans to acquire via tender offer all outstanding shares of Morphic at $57 a share, a 79% premium over Morphic’s closing stock price Friday of $31.84 a share—and an 87% premium to the 30-day volume-weighted average trading price of Morphic’s common stock ending Friday.
The boards of Lilly and Morphic have approved the transaction, which is expected to close in the third quarter subject to customary closing conditions, including the tender of a majority of outstanding shares of Morphic’s common stock.
Lilly said it would reflect the Morphic acquisition in upcoming financial results and financial guidance after it determines whether to account for the deal as a business combination or an asset acquisition, including any related acquired in-process research and development charges, according to Generally Accepted Accounting Principles (GAAP) upon closing.
“My deepest thanks go to the entire Morphic Team for their expertise, creativity and tenacity. We are also grateful to the investigators and patients who have contributed to the success of MORF-057 thus far, and we eagerly anticipate the path forward for MORF-057 and other integrin medicines under Lilly’s stewardship,” Tipirneni added.
