Eli Lilly agreed to pay up to $7.8 billion for the acquisition centessa pharmaceutical The company announced Tuesday its experimental drug for excessive daytime sleepiness.
Centessa is one of several companies developing a new class of drugs to treat narcolepsy, which makes it difficult to stay awake during the day. The drug may also be used to treat other neurological disorders that cause drowsiness, such as Alzheimer’s disease and depression, and may also be used more broadly.
Lilly CEO Dave Ricks said in an interview with CNBC that other possibilities include another severe sleep disorder called idiosyncratic hypersomnia, or other conditions in which people experience sleepiness and executive function problems during the day and lack of sleep at night.
“While it may be a bit similar to GLP-1, we think this pathway has broader potential in that sleep and wakefulness are kind of core to our functioning, and when sleep is disrupted or wakefulness is disrupted, it causes a lot of other problems,” Ricks said. “So I think you can expect that Lilly is exploring broad applications[of orexin]and this new pathway. We’re very excited about that.”
Under the terms of the deal, Lilly will pay Centessa $38 per share, or $6.3 billion upfront, a 38% premium over Monday’s closing price. Lilly will pay up to an additional $1.5 billion if Centessa’s drug wins U.S. Food and Drug Administration approval by a certain deadline.
The transaction is expected to close in the third quarter, pending regulatory approval.
On Tuesday, Lilly’s stock rose about 3% and Centessa’s stock rose 45%.
Oppenheimer analyst Kostas Viliolis estimates that orexin agonists, used to treat narcolepsy and another severe sleep condition called idiopathic hypersomnia, could grow into a $15 billion to $20 billion market if only about a quarter of patients seek treatment. Sales could increase further if the drug becomes more widely used.
Centessa is not the first to bring an orexin agonist to market. rival drug of Takeda It is currently under review by the FDA and could be approved later this year.
Viliolis said he does not expect Centessa’s treatment to be approved until 2028, but he sees signs from mid-stage trial data that Centessa’s treatment could be best-in-class.
Lily, on the other hand, is a long-time leader in neuroscience. The company’s antidepressant Prozac propelled Lilly to the top ranks of the pharmaceutical industry after it was approved in 1987.
Most recently, Lilly introduced a drug called Kisunla to treat early stages of Alzheimer’s disease, and another trial is planned to see if the treatment can prevent the memory-robbing disease.
Lilly has been vocal about its intention to use the money from its best-selling obesity and diabetes drugs Zepbound and Munjaro to make more bets. Already this year, Lilly announced its intention to acquire cell therapy company Orna Therapeutics and inflammation-focused Ventyx Biosciences.
Ricks said the deal with Centessa is “something we need to do to really impact the millions of people who can suffer from neurochemical conditions like wakefulness and sleep.”
