Drug manufacturer Eli Lilly and Co (NYSE: LLY) is acquiring a gene therapy company, Prevail Therapeutics Inc, as per an agreement likely valued at $1.04 billion. The deal is expected to pave the way for widening the presence of Eli Lilly in gene therapy for people affected by neurodegenerative ailments.
Furthermore, Eli Lilly upwardly raised its quarterly dividend while lifting its FY 2020 earnings and revenue outlook. Following the news of the acquisition, the stock of Eli Lilly closed at $167.43, up to $9.52 or 6.03% from the previous close. Prevail’s stock ended Tuesday’s trading session at $22.75, reflecting a gain of 82% or $10.25 in 24 hours.
Indianapolis, the Indiana-based company, stated that it would pay $880 million, reflecting a price of $22.50 per share of Prevail on a fully liquidated basis. Also, the acquisition agreement includes a “contingent value right (CVR),” allowing a maximum payment of $4 per share upon receipt of first regulatory clearance of a drug developed by the New York-based Prevail, which is specialized in the creation of AAV (adeno-associated virus) based gene treatments.
Notably, many pills of Prevail have received “fast track” and “orphan drug” status from the European Commission and the US FDA (Food and Drug Administration).
Currently, Prevail is in the process of developing gene therapies for Parkinson’s disease that carry a particular kind of mutation, dementia, and neuronopathic Gaucher disease. Furthermore, Prevail’s range of products at the preclinical stage includes gene treatments for Alzheimer’s, amyotrophic lateral sclerosis (ALS), and several neurodegenerative diseases.
Lilly believes that Prevail’s gene therapies, intended to treat Parkinson’s and other kinds of dementia, will pave the way for many drug developments. The takeover reflects a pattern followed by large pharmaceutical companies. Last weekend, AstraZeneca Plc acquired Alexion Pharmaceuticals Inc in a $39 billion deal.
Gene therapies intend to rectify ailments by substituting the altered or missing gene in a patient. However, the treatment is cumbersome as it involves the creation of living material.
In the future, Lilly expects FY 2020 sales in the range of $24.20 billion to $24.70 billion, up from the earlier range of between $23.70 billion and $24.20 billion. The company also upwardly revised its earnings forecasts by $0.08 per share to a range of $6.28 to $6.48 per share.
For FY 2021, the company anticipates between $26.50 billion and $28 billion, including sales of roughly $1 billion to $2 billion from treatments related to COVID-19. On average, analysts surveyed by Refinitiv anticipate the company to report revenues of $26.47 billion for FY 2021. Likewise, for FY 2021, Eli Lilly forecasts earnings of between $7.25 and $7.90 per share.
Eli Lilly also upwardly revised its quarterly dividend by 15%, i.e., from $0.74 to $0.85 per share.
The takeover news is expected to keep the stock range-bound with a slight bullish bias in the short-term.
The historical price chart shows that the Eli Lilly stock has broken the ascending triangle at 145. The MACD indicator reading has turned positive. Therefore, we are expecting the stock to stay in an uptrend in the coming days.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
