Eli Lilly and Company (NYSE: LLY) and Morphic Holding, Inc. (NASDAQ: MORF)  announced a definitive agreement for Lilly to acquire Morphic, a biopharmaceutical company developing oral integrin therapies for treatment of serious chronic diseases.

Morphic's lead program is a selective oral small molecule inhibitor of α4β7 integrin for the treatment of inflammatory bowel disease (IBD) that has the potential to improve outcomes and expand treatment options for patients. This molecule (known as MORF-057) 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.

"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," said Daniel Skovronsky, M.D., Ph.D., chief scientific officer of Lilly and president, Lilly Research Laboratories, president, Lilly Immunology. "We are eager to welcome Morphiccolleagues 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."

"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," commented Praveen Tipirneni, M.D., CEO of Morphic Therapeutic. "We built the Morphic Integrin Technology platform to realize the vast opportunity of integrin therapeutics. MORF-057 is a tremendous example of those efforts, an oral small molecule α4β7 inhibitor with the potential to be well tolerated and efficacious, attributes that could unlock new possibilities in IBD treatment. 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."

Terms of the Agreement
Lilly will commence a tender offer to acquire all outstanding shares of Morphic for a purchase price of $57 per share in cash (an aggregate of approximately $3.2 billion) 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 79.0% to the closing stock price on July 5, 2024, and 87.2% to the 30-day volume-weighted average trading price of Morphic's common stock ended on July 5, 2024, 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 Generally Accepted Accounting Principles (GAAP) upon closing. This transaction will thereafter be reflected in Lilly's financial results and financial guidance.

For Lilly, Citi is acting as exclusive financial advisor and Kirkland & Ellis LLP is acting as legal counsel. For Morphic, Centerview Partners LLC is acting as exclusive financial advisor. Evercore Group L.L.C. also provided advice to Morphic. Fenwick & West LLPis acting as legal counsel.