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Lilly beefs up bowel disease drug portfolio with $3.2 billion Morphic deal

Eli Lilly logo is shown on one of their offices in San Diego

By Sriparna Roy

(Reuters) -Eli Lilly agreed to buy Morphic Holding for $3.2 billion in cash, the companies said on Monday, beefing up its portfolio of inflammatory bowel disease (IBD) drugs and expanding its footprint in the multi-billion dollar market.

Shares of Waltham, Massachusetts-based Morphic surged nearly 75% to $55.62 in morning trading on Lilly's offer of $57 per share, which represents a 79% premium to the stock's last closing price.

Through the deal, Lilly will procure an experimental oral IBD treatment that offers patients a more convenient dosing option compared to other injectable therapies, including its IBD drug Omvoh that was approved last year.

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Along with Lilly, other drugmakers such as Abbvie Inc, Pfizer and Johnson & Johnson are also jostling for a share of the bowel disease market.

IBD collectively refers to two conditions - Crohn's disease and ulcerative colitis- that are characterized by chronic inflammation of the gastrointestinal tract and are caused by abnormal reactions of the immune system.

Lilly counts its IBD drug, Omvoh, among its future growth drivers, besides its blockbuster weight loss treatment Zepbound and diabetes drug Mounjaro.

Morphic's lead drug MORF-057 is being tested in three mid-stage studies to treat two bowel conditions called ulcerative colitis and Crohn's disease.

Morphic is also developing other drugs, which are being tested in animals or test tube experiments, for autoimmune diseases, pulmonary hypertensive diseases, fibrotic diseases and cancer.

The companies expect the acquisition to close in the third quarter of 2024.

The deal fits into Lilly's plans to diversify beyond obesity and adds to its string of recent "bolt-on" deals, said BMO analyst Evan Seigerman, referring to acquisitions below the $10 billion range.

The Morphic deal comes after a spate of acquisitions by Lilly last year such as its $2.4 billion buyout of Dice Therapeutics and $1.4 billion agreement for Point Biopharma Global.

(Reporting by Sriparna Roy in Bengaluru; Editing by Shinjini Ganguli)