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Lilly to Buy Dermira for $1.1B, Add Phase III Eczema Candidate

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Eli Lilly & Company (LLY - Free Report) announced a definitive deal to buy dermatology company, Dermira, Inc. (DERM - Free Report) for $18.75 per share in cash or approximately $1.1 billion. The deal will add Dermira’s promising interleukin inhibitor for atopic dermatitis/eczema, lebrikizumab, thereby expanding Lilly’s immunology pipeline. The purchase price represents a premium of 2.2% to Dermira's closing price on Thursday

While Lilly’s shares were up 1.5% on Friday on the deal, Dermira’s shares were up almost 5%. Lilly’s shares have outperformed the large-cap pharma industry in the past year. The stock has returned 20.3% in the said timeframe compared with the industry’s increase of 14.7%.

Lebrikizumab, a monoclonal antibody that targets IL-13, is being developed in phase III studies for moderate-to-severe atopic dermatitis in adolescent and adult patients, aged 12 years and older. It also enjoys Fast Track designation from the FDA that was granted last month. The deal will also add Dermira’s marketed medicated cloth, Qbrexza for the topical treatment of primary axillary hyperhidrosis to Lilly’s immunology portfolio, which includes drugs like Taltz for psoriasis and Olumiant for rheumatoid arthritis. The transaction is expected to close by the end of the first quarter of 2020

Sanofi (SNY - Free Report) and Regeneron (REGN - Free Report) also market interleukin inhibitor, Dupixent for atopic dermatitis as well as for asthma. Dupixent is now annualizing at around €2 billion in sales after just around two years in the market. If approved, lebrikizumab would compete with Dupixent.

Lilly added promising pipeline assets through business development deals in 2019 as well. At the beginning of 2019, the company bought small cancer biotech, Loxo Oncology, Inc., for $8 billion in cash, which broadened the scope of its oncology portfolio into precision medicines. It also formed small immunology collaborations with small, private biotechs Avidity Biosciences and ImmuNext.

Lilly currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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