Rare Daily Staff
German biopharma MorphoSys and Constellation Pharmaceuticals said they have entered into a definitive agreement whereby MorphoSys will acquire Constellation for $34 per share in cash, which represents a total equity value of $1.7 billion.
The transaction has been unanimously approved by the management board and the supervisory board of MorphoSys, as well as the board of directors of Constellation and is expected to close in the third quarter of 2021.
Constellation uses its expertise in epigenetics to discover and develop novel therapeutics that address serious unmet medical needs in patients with various forms of cancer. Its lead candidate pelabresib, a BET inhibitor, is currently in phase 3 clinical trials for myelofibrosis, a rare bone marrow cancer that disrupts the body’s normal production of blood cells.
A second clinical stage compound, CPI-0209, is a second-generation EZH2 inhibitor, currently in phase 2 studies for treating hematological and solid tumors. Constellation’s pipeline also includes numerous preclinical compounds.
“This transformational acquisition represents a major step forward for MorphoSys as we bolster our position in hematology-oncology,” said Jean-Paul Kress, CEO of MorphoSys. “Both pelabresib and CPI-0209 have broad potential and we look forward to unlocking their full benefits for cancer patients.”
Under the terms of the merger agreement, an indirect wholly owned subsidiary of MorphoSys will promptly commence a tender offer to acquire all outstanding shares of Constellation’s common stock at a price of $34 per share in cash. Following successful completion of the tender offer, MorphoSys will acquire all remaining shares not tendered in the offer through a second step merger at the same price as in the tender offer.
The purchase price represents a premium of approximately 70 percent to Constellation’s volume-weighted average price for the last five trading days.
“We are proud that MorphoSys has recognized the strength of our team, our expertise in epigenetics, and our high-potential oncology development pipeline and discovery programs,” said Jigar Raythatha, president and CEO of Constellation.
In order to fund the buyout, MorphoSys said it has entered into a long-term strategic funding partnership with Royalty Pharma predicated on closing the merger. Under their agreement, Royalty Pharma will pay MorphoSys $1.425 billion upfront, up to $150 million in milestones for Morphosys compounds otilimab, gantererumab, and pelabresib, and an equity investment of $100 million in the combined company. Royalty Pharma will also provide MorphoSys with access to up to $350 million in Development Funding Bonds with the flexibility to draw over a one-year period.
In return, Royalty Pharma will have the rights to receive 100 percent of MorphoSys’ royalties on net sales of Tremfya, 80 percent of future royalties and 100 percent of future milestone payments on otilimab, 60 percent of future royalties on gantenerumab, and 3 percent on future net sales of Constellation’s clinical stage assets elabresib and CPI-0209.
MorphoSys says the transaction leverages its expertise in biologics and Constellation’s expertise in epigenetics and small molecule discovery platforms to develop a broad range of oncology therapies, and will accelerate its strategy to grow through proprietary drug development and commercialization.
Photo: Jigar Raythatha, president and CEO of Constellation