MorphoSys to buy Constellation Pharmaceuticals for $1.7 billion

MorphoSys agreed to acquire Constellation Pharmaceuticals for $34 per share in cash, representing a total equity value of $1.7 billion, the companies announced Wednesday, adding to the former's position in haematology and allowing it to expand into solid tumours. MorphoSys noted that it also entered into a funding deal with Royalty Pharma providing it with an upfront payment of over $1.4 billion that will be used, in part, to finance the Constellation purchase.

Jean-Paul Kress, CEO of MorphoSys, called the acquisition of Constellation "transformational," with it bolstering the company's position in haematology and oncology. Despite the executive's upbeat tone, shares in the company fell as much as 15% on the news. Constellation's lead product candidates include pelabresib, a BET inhibitor currently in Phase III studies for myelofibrosis, and the second-generation EZH2 inhibitor CPI-0209, which is in mid-stage development for treating haematological and solid tumours.

The purchase price represents a premium of approximately 68% to Constellation's closing share price on June 1. The transaction has been unanimously approved by the boards of both companies and is expected to close in the third quarter.

Over $2 billion in potential funding

Meanwhile, Royalty Pharma noted that as part of its funding partnership with MorphoSys, which is potentially worth more than $2 billion, it will gain the latter's rights to receive future royalties on Johnson & Johnson's anti-IL-23 Tremfya (guselkumab). Royalty Pharma will also acquire MorphoSys' rights to receive royalties and certain milestone payments on Roche's anti-amyloid-beta monoclonal antibody gantenerumab, GlaxoSmithKline's GMCSF targeting monoclonal antibody otilimab, along with pelabresib and CPI-0209.

MorphSys noted that it is eligible to receive payments of up to $150 million from Royalty Pharma related to milestones for the four drugs, as well as having access to $350 million in development funding bonds that can be drawn over a one-year period. Royalty Pharma will also purchase $100 million of ordinary shares of MorphoSys.

Roche passed on acquisition

In 2015, Roche's Genentech unit declined to exercise its option to acquire Constellation, having inked a deal three years earlier to develop treatments for cancer and other serious diseases based on the science of epigenetics and chromatin biology. Constellation subsequently listed on the Nasdaq via an initial public offering that raised $60 million through the sale of 4 million shares priced at $15 a piece.

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