Shares of Therapeutic Prevail ( PRVL ) were skyrocketing 83.6% higher at 11:05 a.m. EST on Tuesday. The huge leap came after Eli Lily (THERE IS 1.06% ) announced its intention to acquire Prevail in a deal totaling $1.04 billion.
Lilly offered $22.50 per share in cash to buy Prevail. The major drugmaker also added a non-tradable contingent value right (CVR) worth up to $4 per share. This CVR will be paid in full if Prevail obtains regulatory approval for a product in the United States, Japan, United Kingdom, Germany, France, Italy or Spain by December 31, 2024. After this date, the value of the CVR will be reduced by approximately $0.083 per month until December 1, 2028, when the CVR will expire.
The proposed acquisition price reflects a premium of approximately 117% to the 60-day volume-weighted average price of Prevail. It is also 112% higher than the closing price of the biotech stocks Monday, December 14, 2020.
Why did Lilly choose to pay so much for Prevail? The big drugmaker really liked Prevail’s gene therapy program. Prevail’s lead gene therapy candidates target the neurological disorders of Parkinson’s disease, neuropathic Gaucher disease (nGD) and dementia.
Mark Mintun, Vice President of Pain and Neurodegeneration Research at Lilly, said: “The acquisition of Prevail will bring essential technology and highly skilled teams to complement our existing expertise at Lilly, as we build a new gene therapy program anchored by well-documented assets. “
The next step is for Prevail shareholders to agree to tender their shares to Lilly’s tender offer which will be extended in the near future. Certain Prevail shareholders who together own approximately 51% of the outstanding shares of Prevail have already agreed to tender their shares.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.