Shares of Prevail Therapeutics (PRVL) and Eli Lily (LLY) has surged on the announcement of a buyout deal between these two companies. Prevail shareholders will also receive a “contingent value right” worth up to $4 per share subject to future regulatory approvals of Prevail drugs.
Separately, Eli Lilly increased its quarterly dividend to 85 cents per share from 74 cents, a 15% increase. Lilly also raised its full-year earnings forecast. Prevail jumped 86% in premarket trading as of 7:38 a.m. ET. Eli Lilly shares gained 2%.
Prevail’s gene therapy programs offer a new pathway for drug discovery and development to Eli Lilly, the pharma company said. The leading programs target patients with Parkinson’s disease, neuronopathic Gaucher disease, and frontotemporal dementia. Its preclinical pipeline includes therapies for Alzheimer’s disease, amyotrophic lateral sclerosis, and other neurodegenerative diseases.
Eli Lilly also revealed improved guidance for the full year and 2021. Strong demand for its products is expected to drive annual sales between $24.2 billion and $24.7 billion, according to a regulatory filing. Revenue is expected to land between $26.5 billion and $28 billion in 2021. Earnings per share are projected to be between $6.28 and $6.48 this year, and between $7.25 and $7.90 in 2021.
The extra payment to shareholders of PRVL stock will only be paid if once Prevail Therapeutics gets its first regulatory approval of a product from its pipeline. This requires approval for the commercial sale of the product in the United States, Japan, United Kingdom, Germany, France, Italy, or Spain.
There’s also another stipulation to the additional payment that PRVL shareholders will want to know about. The full $4 per share is only payable if the above requirement is met by Dec. 31, 2024. After this, the value drops by 8.3 cents per month until it expires on Dec. 1, 2028.
Prevail Therapeutics points out that the deal has the unanimous support of its Board of Directors. Adding to that, shareholders representing roughly 51% of outstanding shares have agreed to tender their shares in the tender offer.
Eli Lilly and Prevail Therapeutics are expecting the deal to close in the first quarter of 2021. LLY says that it won’t require a change to its 2021 non-GAAP earnings per share guidance or research and development expense outlook.
PRVL stock was up 83.3% and LLY stock was up 2.2% as of Tuesday morning.