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Eli Lilly's $1.04 Billion Buyout Offer Sends Prevail Therapeutics' Shares 82% Higher

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Shares of Prevail Therapeutics reached a new 52-week high after the company reported it has signed a definitive agreement to be acquired by Ely Lilly in a deal valued up to $1.04 billion.

Neurodegenerative disease gene therapy company Prevail Therapeutics Inc. (PRVL:NASDAQ) and global healthcare company Eli Lilly and Co. (LLY:NYSE) today announced that they have entered into a definitive agreement whereby Eli Lilly will acquire Prevail Therapeutics for $22.50 per share in cash for a total purchase price of approximately $880 million.

The report outlined that in addition to the $22.50 per share cash price, Prevail shareholders at closing will also receive one non-tradable contingent value right (CVR) that is worth up to an additional $4.00 per share in cash, or around $160 million in aggregate, which raises the total consideration up to as high as $26.50 per share in cash, or about $1.04 billion altogether.

The companies explained that "the CVR is payable (subject to certain terms and conditions) upon the first regulatory approval of a product from Prevail's pipeline." The firm elaborated that in order to achieve the full value of the CVR, the first regulatory approval must occur by December 31, 2024, and that this applies to the commercial sale of a Prevail product in any one of the following countries: U.S., France, Germany, Italy, Japan, Spain or the U.K. In the event that regulatory approval occurs subsequent to December 31, 2024, the firms noted that the value of the CVR's will be reduced each month by approximately $0.083 per month until they ultimately reach a value of $0.00 and expire on December 1, 2028, if no such approval is obtained.

The companies reported that the acquisition will serve to establish and expand Lilly's research efforts in creating a gene therapy program built upon Prevail's portfolio of clinical-stage and preclinical neuroscience assets. "Prevail's lead gene therapies in clinical development include PR001 for patients with Parkinson's disease with GBA1 mutations (PD-GBA) and neuronopathic Gaucher disease (nGD) and PR006 for patients with frontotemporal dementia with GRN mutations (FTD-GRN)." Prevail indicated that its preclinical pipeline includes gene therapy candidates to treat specific synucleinopathies, Alzheimer's and Parkinson's diseases, amyotrophic lateral sclerosis and several other neurodegenerative disorders.

Mark Mintun, M.D., V.P. of Pain and Neurodegeneration Research at Eli Lilly, stated, "Gene therapy is a promising approach with the potential to deliver transformative treatments for patients with neurodegenerative diseases such as Parkinson's, Gaucher and dementia...The acquisition of Prevail will bring critical technology and highly skilled teams to complement our existing expertise at Lilly, as we build a new gene therapy program anchored by well-researched assets. We look forward to completing the proposed acquisition and working with Prevail to advance their groundbreaking work through clinical development."

Prevail Therapeutics' Founder and CEO Asa Abeliovich, M.D., Ph.D., commented, "Lilly is an established leader in neuroscience drug development and commercialization who shares our commitment to patients with neurodegenerative diseases...In just over three years, Prevail has advanced two first-in-class gene therapy programs into clinical development for PD-GBA, nGD, and FTD-GRN, established two manufacturing platforms, and developed a broad pipeline with great potential to impact patients in need of disease-modifying treatment options. With its global scale and resources, Lilly will be the ideal organization to maximize the potential of our pipeline and accelerate our ability to bring these therapies to as many patients as possible."

The company's stated that the transaction is expected to close in Q1/21 subject to approval by Prevail's shareholders along with customary closing conditions and required regulatory approvals. Prevail's Board of Directors has recommended unanimously that Prevail's shareholders tender their shares in the tender offer.

Prevail Therapeutics is headquartered in New York and describes its business as "a gene therapy company leveraging breakthroughs in human genetics with the goal of developing and commercializing disease-modifying AAV-based gene therapies for patients with neurodegenerative diseases." The company is currently developing its PR001 candidate use in treating Parkinson's disease with GBA1 mutations and neuronopathic Gaucher disease. The firm is additionally researching and developing gene therapies for patients with frontotemporal dementia with GRN mutations and certain synucleinopathies.

Eli Lilly is a global pharmaceutical and healthcare company headquartered in Indianapolis, Ind. The company has a large portfolio of medicines for use in treatment in the areas of bone muscle joint, cancer, cardiovascular, diabetes, endocrine, immunology, neurodegeneration, neuroscience and pain.

Prevail Therapeutics started off the day with a market capitalization of around $428.1 million with approximately 34.25 million shares outstanding and a short interest of about 6.1%. PRVL shares opened 84% higher today on the news at $23.01 (+$10.51, +84.08%) over yesterday's $12.50 closing price and reached a new 52-week high this morning of $23.08. The stock has traded today between $22.61 and $23.08 per share and is currently trading at $22.84 (+$10.34, +82.72%).

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