Johnson & Johnson kicked off the J.P. Morgan Healthcare Conference on Monday with the $14.6 billion acquisition of Intra-Cellular Therapies.
The news confirms a recent whirlwind of reports suggesting J&J could take out the neuropsych-focused biotech company. Shares of Intra-Cellular skyrocketed 34.1% to 127.19, while J&J stock rose 1.7% to 144.47. The deal values the biotech stock at $132 per share, representing a 39% premium to last week's closing price.
Intra-Cellular is well-established in the schizophrenia and bipolar disease space with its drug, Caplyta. Further, Caplyta has shown promise as a treatment for depression and, last week, the company settled a patent dispute that delays a generic rival until 2040.
"JNJ had been widely viewed by many as the most likely acquirer for ITCI given the complementarity but not necessarily completely directly overlaps, and an expected more flexible FTC (Federal Trade Commission) could potentially be more amenable to that level of overlap," RBC Capital Markets analyst Brian Abrahams said in a report.
J&J Deepens Its Biopharma Portfolio
The deal makes sense given that Johnson & Johnson has several products in the neuropsychiatry space, RBC's Abrahams said. J&J sells Invega Sustenna, an antipsychotic that treats schizophrenia, and a depression treatment called Spravato. J&J is also developing a depression-treating pill.
Further, Intra-Cellular Therapies has done a good job against bigger rival AbbVie in reaching patients with schizophrenia. But Caplyta's potential approval in depression treatment will likely require a bigger commercial presence, Abrahams said.
"Today's $14.6B acquisition of ITCI by JNJ makes a lot of sense to us, with lead drug Caplyta, which is already approved and selling well in schizophrenia and BPD, likely on its way to getting expanded into MDD, and well on its way to a ~$3.5B (opportunity) already — and in the hands of a larger partner like JNJ with preexisting experience and commercial presence in neuropsych, potentially to $5B," he said.
Evercore ISI analyst Umer Raffat notes Caplyta has a cleaner safety profile than its rivals. It's already annualizing $700 million in sales and will likely hit $1 billion-plus in 2025. That's before the Food and Drug Administration likely approves it as a depression treatment. He expects the deal to be accretive to earnings in the first year.
"From JNJ perspective, it builds on their commitment to neuropsych, it is accretive immediately with a very good line of sight to $5B peak, and even if IP beyond early 2030s isn't airtight, long-acting formulations, etc. helps majorly," he said in a report.
Eli Lilly Buys A Cancer Drug
In other acquisition news, Eli Lilly announced its plan to buy a drug called STX-478 from privately held Scorpion Therapeutics. The drug blocks PI3Ka, a kinase involved in cancer cell growth. The acquisition is timely given Lilly terminated its own PI3Ka program in August.
The up-front payment plus future milestone payments could total up to $2.5 billion.
Scorpion has been developing the drug as a treatment for breast cancer and other advanced solid tumors.
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