Lilly to Acquire Private Biotech for Boosting Pain Portfolio

Eli Lilly and Company LLY announced that it has entered into an agreement to acquire Cambridge, MA-based privately held biotech Disarm Therapeutics for an upfront payment of $135 million. The company is looking to expand its pain and neurological diseases portfolio by adding Disarm's promising preclinical SARM1 programs, which are being developed for axonal degeneration.

Lilly plans to advance the SARM1 inhibitors in the pipeline and develop the same into potential medicines for peripheral neuropathy and neurological diseases, such as amyotrophic lateral sclerosis (ALS) and multiple sclerosis (MS).

Per the press release, axonal degeneration is a pathology revolving around a broad range of neurological diseases, known to cause severe sensory, motor and cognitive symptoms. Disarm's novel way of treating axonal degeneration carries immense prospects in addressing a hugely unmet area of neurological diseases.

Per the agreement, along with an upfront payment, Disarm’s equityholders may also be eligible to receive up to $1.225 billion as future milestone fees, if Lilly is able to successfully develop and commercialize potential new medicines.

Shares of Lilly have rallied 11.7% so far this year against the industry’s decrease of 0.8%.

We note that Lilly has been working on building its pipeline and has a wide range of compounds in different stages of development. The company is actively pursuing in-licensing deals and acquisitions to drive near-to-medium term growth. Lilly’s key areas of focus are diabetes, oncology, immunology and neurodegeneration.

A notable pipeline candidate in Lily’s portfolio for the pain indication is tanezumab. It is being developed in a late-stage study for osteoarthritis pain and is currently under review in the United States and Europe for the given indication. It is also being evaluated in a phase III study for treating cancer pain.

Lilly is jointly developing tanezumab in collaboration with Pfizer PFE.

Zacks Rank & Stocks to Consider

Lilly currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the biotech/drug sector include Vertex Pharmaceuticals Incorporated VRTX and IntraCellular Therapies Inc. ITCI, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Vertex’s earnings estimates have been revised 1.5% upward for 2020 and 2.3% for 2021 over the past 60 days.

IntraCellular’s loss per share estimates have narrowed 4.5% for 2020 and 13.3% for 2021 over the past 60 days.

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