Eli Lilly has agreed to pay up to $7.8 billion to acquire Centessa Pharmaceuticals and its experimental drug for excessive daytime sleepiness, the company said Tuesday.
Centessa is one of several companies working on a new class of drugs to treat narcolepsy, a condition that makes it difficult for people to stay awake during the day. The medications may also be used to treat other neurological conditions that are accompanied by drowsiness, such as Alzheimer's disease and depression, and possibly even more generally.
Other possibilities include another serious sleep disorder called idiosyncratic hypersomnia, as well as other conditions in which people experience drowsiness or executive function problems during the day and poor sleep at night, Lilly CEO Dave Ricks said in an interview with CNBC.
“We see broader potential for this pathway, maybe a little bit of an analogy to GLP-1, in a way that, you know, sleep and wakefulness are central to our functioning, and when sleep or wakefulness is disrupted, it causes a lot of other problems,” Ricks said. “So I think you can count on Lilly to explore broad use for [the orexins] and this new path, and we are very excited about it.
Under the terms of the deal, Lilly will pay $38 per share up front, or $6.3 billion for Centessa, a 38% premium over Monday's closing price. If Centessa's drugs win approval from the U.S. Food and Drug Administration within certain deadlines, Lilly will pay up to another $1.5 billion.
The transaction is expected to close in the third quarter, pending regulatory approval.
Lilly shares rose about 3% on Tuesday, while Centessa shares rose 45%.
Orexin agonists used to treat narcolepsy and another serious sleep condition called idiopathic hypersomnia could represent a $15 billion to $20 billion market if just a quarter of patients sought treatment, according to an estimate by Oppenheimer analyst Kostas Biliouris. Sales could rise even further if the drugs are used more widely.
Centessa will not be the first to market its orexin agonist. A rival drug Takeda It is under review with the FDA and could be approved later this year.
Biliouris said he doesn't expect Centessa's drug to be approved until 2028, but he sees signs in the mid-stage trial data that Centessa's treatment could become the best in its class.
Lilly, for her part, is a long-time leader in neuroscience. The company's antidepressant Prozac catapulted Lilly to the top of the pharmaceutical industry after its approval in 1987.
More recently, Lilly introduced a drug called Kisunla for the early stages of Alzheimer's disease with another trial on the horizon to see if the treatment can prevent this memory-robbing disease.
Lilly has openly expressed its intention to use money from its best-selling obesity and diabetes drugs, Zepbound and Mounjaro, to make more bets. Already this year, Lilly announced its intention to acquire cell therapy company Orna Therapeutics and inflammation-focused Ventyx Biosciences.
Of the deal with Centessa, Ricks said, “It's the kind of thing we should do to really impact millions and millions of people, potentially, who suffer from neuroscience conditions like wakefulness and sleep.”
