MorphoSys’ Double Deal: Buys Constellation and Enters Partnership with Royalty Pharma
MorphoSys is acquiring Constellation Pharmaceuticals for about $1.7 billion. It is a stock deal at $34 per share in cash. Morphosys also announced a partnership with Royalty Pharma, with Royalty paying MorphoSys $1.425 billion up front.
MorphoSys AG is a commercial-stage biopharma company focused on cancer and autoimmune diseases. Its drugs include Tremfya (guselkumab), developed by Janssen Research & Development and marketed by Janssen Biotech for plaque psoriasis, and its Monjuvi (tafasitamab-cxix) approved in combination with lenalidomide for certain types of lymphoma. It is headquartered near Munich, Germany.
Constellation Pharmaceuticals focuses on epigenetics to develop therapies for cancer. Its two lead product candidates are pelabresib, a BET inhibitor, and CPI-0209, a second-generation EZH2 inhibitor. They are in Phase II and III trials for various hematological and solid tumors. Pelabresib is in Phase III for myelofibrosis. CPI-0209 is in Phase II for hematological and solid tumors.
The deal with Royalty is a long-term strategic funding partnership. Royalty, as mentioned before, is making a $1.425 billion upfront payment to MorphoSys. Royalty is also offering MorphoSys up to $350 million in Development Funding Bonds that it can draw over a one-year period. MorphoSys will also be eligible for up to $150 million for clinical, regulatory, and commercial milestones for otilimab, gantenerumab and pelbresib.
Royalty will receive 100% of MorphoSys’ royalties on net sales of Tremfya, 80% of future royalties and 100% of future milestone payments on otilimab, 60% of future royalties on gantenerumab, and 3% of future net sales of Constellation’s pelabresib and CPI-0209. In addition, Royalty will invest $100 million in a cash capital increase of MorphoSys “under an authorization to exclude subscription rights of existing shareholders. The new MorphoSys shares will be listed on the Frankfurt Stock Exchange.”
The overall Morphosys-Royalty deal clocks in at $2.025 billion. The key part of it is Royalty picking up future royalties to Janssen’s Tremfya, an anti-interleukin (IL)-23 for moderate to severe plaque psoriasis and active psoriatic arthritis. It is also in clinical development for ulcerative colitis and Crohn’s disease. Last year, Temfya brought in $1.347 billion.
“We are excited to partner with MorphoSys on this important transaction, which demonstrates the breadth of our funding capabilities, and the unique role Royalty Pharma can play in M&A,” said Pablo Legorreta, founder and chief executive officer of Royalty Pharma.
“By partnering on this important transaction, MorphoSys and Royalty Pharma have created a true win-win situation with the potential to improve the lives of cancer patients worldwide. In addition, the transaction adds one blockbuster drug and four attractive development-stage therapies to our pipeline, further diversifies our portfolio and significantly enhances our long-term expected growth.”
Royalty said it is funding the deal with existing cash and is contingent on closing MorphoSys’ acquisition of Constellation, which is planned for the third quarter of this year.
Jean-Paul Kress, chief executive officer of MorphoSys, said, “This transformational acquisition of Constellation represents a major step forward for MorphoSys as we bolster our position in hematology-oncology. We are thrilled to announce this partnership with Royalty Pharma, which is providing more than $2 billion to fuel our proprietary drug development and commercialization. We are confident they will be a strong financial partner for years to come, enabling us to fund our growth and — with the addition of Constellation’s innovative pipeline — bring our attractive new candidates to patients.”