Eli Lilly to acquire Centessa and sleep disorder drugs

Eli Lilly The company agreed to pay up to $7.8 billion to acquire Centessa Pharmaceuticals and its experimental drug that eliminates excessive daytime sleepiness. Tuesday said.

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 drugs may also be used to treat other neurological disorders accompanied by drowsiness, such as Alzheimer’s disease and depression, and possibly more broadly.

Lilly Neuroscience president Dr. “Orexin receptor biology represents one of the most intriguing mechanistic opportunities in neuroscience as a direct intervention in the master switch of the sleep-wake cycle,” Carole Ho said in a statement. “Centessa has built a portfolio with the breadth and depth to drive alertness across a wide range of indicators.”

Under the terms of the deal, Lilly will pay $38 per share upfront or $6.3 billion for Centessa, a 38% premium to Monday’s closing price. Lilly will pay up to $1.5 billion more if Centessa’s drugs are approved by the U.S. Food and Drug Administration by certain deadlines.

The transaction is expected to be completed in the third quarter, subject to regulatory approval.

Lilly’s shares rose nearly 3% on Tuesday, while Centessa’s shares rose 45%.

Orexin agonists, used to treat narcolepsy and another serious sleep condition called idiopathic hypersomnia, could reach a $15 billion to $20 billion market if about a quarter of patients receive treatment, according to an estimate from Oppenheimer analyst Kostas Biliouris. Sales could increase further if the drugs are used more widely.

Centessa won’t be the first company to come to market with an orexin agonist. A rival drug takeda It is being reviewed by the FDA and could be approved later this year.

Bilioris said he doesn’t expect Centessa’s drug to be approved until 2028, but he sees signs from mid-stage trial data that Centessa’s treatment could be best-in-class.

Lilly has long been a leader in neuroscience. The company’s antidepressant, Prozac, catapulted Lilly to the top ranks of the pharmaceutical industry after it was approved in 1987.

More recently, Lilly launched a drug called Kisunla for the early stages of Alzheimer’s disease, and another trial is on the horizon to see if the treatment can prevent the memory-robbing disease.

Lilly has been voicing its intention to use the money from its best-selling obesity and diabetes drugs Zepbound and Mounjaro to make more bets.

Lilly this year has already announced its intention to acquire cell therapy company Orna Therapeutics and inflammation-focused Ventyx Biosciences.