Eli Lilly to Buy Skin-Drug Maker Dermira for $1.1 Billion

(Bloomberg) -- Eli Lilly & Co. agreed to acquire Dermira Inc. for $1.1 billion, snapping up the maker of an experimental treatment for skin disorder dermatitis that was recently placed on a fast track to approval by U.S. regulators.

Under the terms of the proposed transaction, Eli Lilly will pay $18.75 in cash for each Dermira share, the companies said in a statement Friday. That’s 2.2% higher than Thursday’s closing price. Dermira shares rose as much as 4.4% in trading Friday.

Shares of Menlo Park-based Dermira have surged 90% in the past month. In December, the Food and Drug Administration granted fast-track designation for the company’s lebrikizumab, a treatment for atopic dermatitis that’s in late-stage clinical trials. Wall Street analysts think the medication could be a challenger to Dupixent, a skin drug made by Regeneron Pharmaceuticals Inc. and Sanofi that is expected to peak at more than $11 billion in annual sales.

Drugmakers have been increasingly interested in medications for chronic skin conditions such as eczema and psoriasis that could produce reliable income streams from patients who in most cases require lifelong treatment. In August, Amgen Inc. said it would pay $13 billion to acquire psoriasis drug Otezla from Celgene, as part of that company’s merger with Bristol-Myers Squibb Co.

The acquisition of Dermira will provide Lilly with treatments for dermatitis and excessive underarm sweating and bulk up its roster of medications for skin disorders. The Indianapolis company’s Taltz, a treatment for plaque psoriasis, is expected to have 2019 sales of more than $1.3 billion, according to Bloomberg data.

“Since Dermira’s inception, we have been focused on applying strong science to medical dermatology with the goal of finding new ways to treat some of the most common skin conditions that affect millions of people every year,” Dermira Chief Executive Officer Tom Wiggans said in the statement.

The agreement comes just days ahead of the annual JPMorgan Healthcare Conference in San Francisco, a marquee event for the health industry that tends to be a favorite stage for companies to reveal significant deals and strategic shifts. The gathering begins on Monday.

Read more: The year’s biggest health event promises drug news, possible deals

The companies said in the statement that they expect the deal to close by the end of the first quarter. Dermira would have to pay Lilly a termination fee of $40 million if it accepts a higher offer from another bidder, according to Dermira securities filing.

Evercore acted as exclusive adviser to Eli Lilly on the deal, and Weil, Gotshal & Manges was its legal counsel. For Dermira, Citi was lead financial adviser, with SVB Leerink acting as financial adviser and Fenwick & West LLP acting as legal adviser.

To contact the reporters on this story: Timothy Annett in New York at tannett@bloomberg.net;Thomas Mulier in Geneva at tmulier@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net;Drew Armstrong at darmstrong17@bloomberg.net

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