Alkermes (NASDAQ:ALKS) shares climbed about 13% Tuesday after Eli Lilly (NYSE:LLY) announced an agreement to acquire Centessa Pharmaceuticals (NASDAQ:CNTA). The deal terms specify an immediate cash payment of $38.00 per Centessa share plus one non-transferrable contingent value right - a CVR - that could deliver up to an additional $9.00, for maximum potential consideration of $47.00 per share.
The upfront cash component equates to an aggregate equity value for Centessa of approximately $6.3 billion. The CVR, contingent on future regulatory milestones, represents an additional potential aggregate equity value of roughly $1.5 billion.
Centessa’s clinical focus is a portfolio of orexin receptor 2 - OX2R - agonists aimed at modulating the neurobiological system that governs the sleep-wake cycle. Its lead investigational therapy, cleminorexton, has produced results in Phase 2a studies across narcolepsy type 1, narcolepsy type 2, and idiopathic hypersomnia.
The structure and timing of the CVR payments are explicitly linked to U.S. Food and Drug Administration approvals. There are three possible milestone payments per CVR:
- $2.00 if cleminorexton or ORX142 receives U.S. FDA approval for narcolepsy type 2 treatment prior to the fifth anniversary of the transaction closing;
- $5.00 if a U.S. FDA approval is obtained for idiopathic hypersomnia within that same five-year post-closing period; and
- $2.00 upon the first U.S. FDA approval for any indication occurring prior to January 1, 2030.
Beyond cleminorexton, Centessa’s OX2R agonist program includes additional assets that are in clinical and preclinical stages. The company notes potential applicability of these assets across a range of conditions, specifically neurological, neurodegenerative, and neuropsychiatric disorders.
The market reaction that lifted Alkermes shares followed Lilly’s disclosure of the acquisition terms and the contingent payment schedule tied to regulatory milestones. The transaction values and the CVR mechanics were provided as part of Lilly’s announcement of the agreement to acquire all issued and to be issued share capital of Centessa.