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Constellation Pharma Shares Sparkle on $1.7 Billion Buyout Offer

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Shares of Constellation Pharmaceuticals Inc. traded 65% higher after the company reported it entered into an agreement to be acquired by MorphoSys AG in an all-cash transaction for $34 per share.

Clinical-stage biopharmaceutical company Constellation Pharmaceuticals Inc. (CNST:NASDAQ), which is focused on the development of novel therapeutics that selectively modulate gene expression for treatment of cancer patients, today announced that it has entered into a definitive agreement to be acquired by MorphoSys AG (MOR:NASDAQ; MOR:GSE).

The firms indicated that under the terms of the agreement, "MorphoSys will acquire Constellation for $34.00 per share in cash, which represents a total equity value of $1.7 billion." The report advised that both MorphoSys' Management and Supervisory Boards along with Constellation's Board of Directors have already approved the transaction. The acquisition is expected to close in Q3/21 subject to Constellation shareholder and regulatory approvals.

Constellation stated that it utilizes its expertise in epigenetics to discover and develop new therapeutics to treat cancer patients with serious unmet medical needs. The report listed that that Constellation's leading product candidates include pelabresib (CPI-0610), a BET inhibitor currently in Phase 3 clinical trials for myelofibrosis, a bone marrow cancer, and CPI-0209, a second-generation EZH2 inhibitor that is now being studied is a Phase 2 trial in treating hematological and solid tumors.

MorphoSys' CEO Jean-Paul Kress, M.D., stated, "This transformational acquisition represents a major step forward for MorphoSys as we bolster our position in hematology-oncology…Both pelabresib and CPI-0209 have broad potential and we look forward to unlocking their full benefits for cancer patients. Our existing clinical and commercial expertise is ideally suited to accelerate Constellation’s programs, enabling us to maximize Constellation’s potential and bring these novel therapies to market. With Constellation’s high-potential product candidates, complementary R&D capabilities, and outstanding team, we can further advance our mission in the fight against cancer."

Jigar Raythatha, president and CEO of Constellation Pharmaceuticals, remarked, "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…Becoming part of MorphoSys creates an industry leader with commercial capabilities, a deep R&D pipeline and complementary small molecule and biologics discovery and translational capabilities, as well as the financial strength to compete to win. Our shareholders will receive attractive, immediate and certain cash value for their shares, the employees of the combined entity will have a broader platform and greater opportunities, and patients will potentially benefit from innovative new therapies that address serious unmet needs."

As part of MorphoSys business and funding strategy, MorphoSys also announced it entered into a long-term partnership with Royalty Pharma Plc. (RPRX:NASDAQ), which will coincide with the closing of the transaction with Constellation. The arrangement is set to include an upfront royalty payment of $1.425 billion from Royalty Pharma to MorphoSys that will support the financing of the Constellation purchase and the newly combined firm's drug pipeline development and overall growth strategy.

In addition, Royalty Pharma will provide MorphoSys with access to up to $350 million in development funding and upon reaching clinical, regulatory and commercial milestones for otilimab, gantenerumab and pelabresib, will make additional payments of up to $150 million to MorphoSys.

In return, "Royalty Pharma will have the rights to 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% on future net sales of Constellation’s clinical stage assets (pelabresib and CPI-0209)."

Furthermore, subject to corporate and regulatory approvals, Royalty Pharma is expected to invest $100 million in a cash capital increase of MorphoSys.

Royalty Pharma's CEO Pablo Legorreta commented, "In acquiring Constellation, MorphoSys has a significant opportunity to drive clinical and commercial success…We are excited to join forces to further advance the combined company's pipeline and positively impact patients."

MorphoSys is based in Munich, Germany, and is a commercial-stage biopharmaceutical firm that concentrates its efforts on developing and commercializing treatments for cancer and autoimmune diseases. The company is advancing a pipeline of new drug candidates and has created antibodies which have been previously developed by partners in to meet unmet medical needs. The firm noted, "In 2017, Tremfya® (guselkumab) – developed by Janssen Research & Development, LLC and marketed by Janssen Biotech, Inc., for the treatment of plaque psoriasis – became the first drug based on MorphoSys' antibody technology to receive regulatory approval."

The company added that, in July 2020, "the U.S. Food and Drug Administration (FDA) granted accelerated approval of the company's proprietary product Monjuvi® (tafasitamab-cxix) in combination with lenalidomide in patients with a certain type of lymphoma."

Constellation Pharma is a clinical-stage biopharmaceutical company based in Cambridge, Mass., that is engaged in creating novel therapeutics that selectively modulate gene expression in treating cancer patients. The firm stated that "it has a deep understanding of how epigenetic and chromatin modifications in cancer cells and in the tumor and immune microenvironment play a fundamental role in driving disease progression and drug resistance."

Constellation Pharmaceuticals began the day with a market capitalization of around $969.8 million with approximately 47.92 million shares outstanding and a short interest of about 16.0%. CNST shares opened nearly 67% higher today at $33.71 (+$13.47, +67.19%) over yesterday’s $20.24 closing price. The stock has traded today between $33.695 and $33.87 per share and closed at $33.57 (+$13.33, +65.86%).


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