Lilly signs $3.2 billion Morphic deal to take on Takeda in inflammatory bowel disease

Eli Lilly has agreed to buy Morphic for $3.2 billion, giving Big Pharma control of a mid-stage oral competitor to Takeda’s blockbuster injectable inflammatory bowel disease drug Entyvio.

Morphic’s pipeline is led by MORF-057. This oral small molecule inhibits α4β7, an integrin expressed on certain white blood cells. Takeda has shown that targeting the integrin can control intestinal inflammation and improve outcomes in ulcerative colitis and Crohn’s disease. The data made Entyvio an important product for Takeda, but its injectable delivery format left the door open to more convenient oral competitors.

Lilly stormed out the door. By buying Morphic, Lilly will own an oral Entyvio candidate that is in Phase 2 development for ulcerative colitis and Crohn’s disease. Morphic advanced MORF-057 to Phase 2 in 2022, giving it more than a year’s head start on Gilead Sciences’ oral α4β7 candidate. Lilly had already acquired an oral α4β7 preclinical program in its $2.4 billion acquisition of Dice Therapeutics.

Ensho Therapeutics, which recently bought a Phase 2-ready oral α4β7 drug candidate from Eisai’s gastrointestinal subsidiary EA Pharma, is the other frontrunner in the race to replace Entyvio. The data released so far have both raised and dashed hopes that orals pose a threat to Takeda’s flagship product.

Protagonist Therapeutics abandoned its first oral α4β7 antagonist peptide after seeing Phase 2b results in 2018. The biotech company rallied behind a second-generation perspective, said it was pleased with the Phase 2 data, then quickly abandoned the asset rather than launch a planned pivotal trial.

Morphic fared better initially, with a clinical remission rate suggesting that MORF-057 could match Entyvio’s efficacy and sparking a buying frenzy among investors. But the candidate’s failure to elicit the expected level of endoscopic improvement sent Morphic’s stock tumbling when the biotech company shared a more comprehensive look at the data a few months later.

At $57 per share, Lilly’s buyout values ​​Morphic at roughly the price the stock commanded following the release of topline Phase 2a data in April 2023. Morphic’s stock price never recovered from the release of new data, allowing Lilly to offer an 87% premium to Morphic’s 30-day volume-weighted average share price while keeping the buyout price at $3.2 billion.

Results from a phase 2b trial in ulcerative colitis should help determine whether Lilly has a good deal in the first half of next year. Morphic began its mid-stage trial in Crohn’s disease in April and plans to complete the primary trial in 2026.