Eli Lilly Lifts Sales Guidance, Enters Gene Therapy Field With Prevail Acquisition

Eli Lilly And Co LLY announced Tuesday a big-ticket acquisition that would mark its foray into gene therapy research.

What Happened: Lilly said it has agreed to buy gene therapy company Prevail Therapeutics Inc PRVL for $22.50 per share in cash payable at closing, and a non-tradable contingent value right, or CVR, worth up to $4 per share in cash.

The total consideration taking into account the cash component and the CVR is about $26.50 per share in cash, or an aggregate value of about $1.040 billion. The per-share value represents a 112% premium over the $12.50 at which Prevail shares closed Monday.

The CVR is payable upon the first regulatory approval of a product from Prevail's pipeline, and the full value of the CVR will be paid only if the regulatory approval occurs by Dec. 31, 2024. If the approval comes through after the date, the value of the CVR will be reduced by about 8.3 cents per month until Dec. 1, 2028, after which the CVR will expire.

The transaction is expected to close in the first quarter of 2021.

Prevail's board has unanimously recommended that shareholders tender their shares in the tender offer by Lilly.

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Why It's Important: Prevail develops AAV9-based gene therapies for patients with neurodegenerative diseases.

The company's lead gene therapies in clinical development are PR001 for patients with Parkinson's disease with GBA1 mutations and neuronopathic Gaucher disease and PR006 for patients with frontotemporal dementia with GRN mutations.

"The acquisition of Prevail will bring critical technology and highly skilled teams to complement our existing expertise at Lilly, as we build a new gene therapy program anchored by well-researched assets. We look forward to completing the proposed acquisition and working with Prevail to advance their groundbreaking work through clinical development," said Mark Mintun, vice president of pain and neurodegeneration research at Lilly.

Lilly's clinical pipeline boasts of a neurodegeneration franchise, and the company is evaluating multiple candidates for Alzheimer's and dementia.

Lilly Guides FY21 Above Consensus: Separately, Lilly said, buoyed by volume-based revenue growth, operating margin expansion, pipeline advancements and solid cash flow, it looks ahead to delivering strong performance, both financially and operationally, in 2021.

The company expects 2021 revenues at $26.5 billion to $28 billion and earnings per share in the range of $7.75-$8.40 on an adjusted basis.

Analysts, on average, estimate revenues of $26.47 billion on EPS of $8.07.

The company raised its 2020 revenue guidance from $23.7 billion-$24.2 billion to $24.2 billion-$24.7 billion and non-GAAP EPS guidance from $7.20-$7.40 to $7.45-$7.65.

Lilly shares were rising 3% to $163 at publication time.

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