Key Points
Centessa possesses a promising sleep medicine pipeline.
The clinical-stage company's experimental therapies have blockbuster potential.
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Shares of Centessa Pharmaceuticals (NASDAQ: CNTA) surged on Tuesday after the drugmaker struck a deal to be acquired by Eli Lilly (NYSE: LLY) for as much as $7.8 billion.
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An enticing offer for Centessa's investors
Under the terms of the deal, Lilly would purchase Centessa for $38 per share in cash. That's a premium of nearly 38% to the healthcare stock's closing price on Monday.
Centessa's shareholders would also receive a non-transferrable contingent value right, which could be valued at up to $9 per share if the pharmaceutical company's investigational drugs achieve certain regulatory milestones.
The transaction is projected to close in the third quarter, subject to shareholder and regulatory approval.
Advancing neuroscience
Centessa is developing a novel class of drugs, known as orexin receptor 2 (OX2R) agonists, to treat daytime sleepiness and other neurological conditions. Its most promising experimental drug, cleminorexton, showed best-in-class potential in Phase 2 clinical studies for severe sleep disorders, including narcolepsy and idiopathic hypersomnia.
"Orexin receptor biology represents one of the most compelling mechanistic opportunities in neuroscience as a direct intervention on the master switch of the sleep-wake cycle," Lilly executive Carole Ho said. "Centessa has assembled a portfolio with the breadth and depth to improve wakefulness across a broad array of indications."
Blockbuster potential
Lilly is wisely using the windfall from its highly successful GLP-1 drugs Mounjaro and Zepbound to diversify its development pipeline. Centessa's experimental therapies could become top sellers in a potential $20 billion market for treatments for severe sleep conditions, according to investment bank Oppenheimer.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Centessa Pharmaceuticals Plc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
