Morphic Therapeutic, Inc.

The weather is getting cooler, but biotech’s recovery is heating up. After a years-long wait-and-see game exhausted many industry insiders, recent signals indicate a mostly promising direction for drug developers. The third quarter, which ended Monday, was up and down, with the Yen carry trade fiasco and the typical August lull. But then came a long-awaited interest rate cut, and a mini IPO revival began. Two more rate cuts are expected by the end of the year, and more are anticipated in 2025. Nine months into the year, biotech is on track to surpass the total amount of private financing from 2023, according to a new quarterly analysis from investment bank William Blair. There have been at least 10 crossover rounds each quarter for three consecutive quarters, the first stretch of its kind since the heydays of 2021. And the proportion of extension rounds dropped in the third quarter, which “potentially” means “we have passed the peak of the financing overhang in the private markets,” according to the William Blair bankers. There were five IPOs in the third quarter, and three more are now in line, including Septerna, a Phase 1 biotech that filed Wednesday . The number of follow-on offerings and private investments in public equity slowed last quarter, but they picked up after Labor Day. The first nine months of 2024 already surpassed 2023’s totals by 34%. Biopharmas have done 189 secondary offerings, raising $33.9 billion in total proceeds year-to-date, according to William Blair. Last year’s count was 186 offerings and $25.3 billion raised. Private megarounds held steady throughout the year, as well, with 23 such financings in the first quarter, 27 in the second and 23 in the third, according to an Endpoints News tally. “Combined with improving sentiment, lower rates, and better financing window (record levels of follow-ons) — Q3’s event scoreboard was supportive for XBI and biotech funds,” Jefferies analyst Michael Yee wrote in an Oct. 1 note. For the firms funding new drugs and the next generation of startups, the money was flowing, too. In recent weeks, multiple venture capital funds announced some of the biggest biotech VC hauls ever. Bain Capital Life Sciences raised $3 billion, as did ARCH Venture Partners . Flagship Pioneering kicked off the third quarter with its own $3.6 billion pool of capital. Others included TPG ‘s $580 million, venBio’s $528 million, DCVC Bio’s $400 million and Asabys’ $200 million. One sore spot was European pharma stocks , with dips in share price at Roche (down about 6.5%), Novo Nordisk (down about 1.5%) and AstraZeneca (down about 1.5%). “Obesity remains an important theme for the sector considering the outsized moves in large caps,” the Jefferies analysts wrote Tuesday evening, citing updates from Roche’s GLP-1 pill and GLP-1/GIP injectable , and Novo’s Phase 2a CB1 program . “We think excitement and enthusiasm remain high, but performance could be more data-driven with more winners and losers as the landscape continues to evolve and mature over the coming months.” Another pain point was M&A and partnerships, which William Blair bankers characterized as “anemic” in the third quarter. Eli Lilly’s $3.2 billion purchase of Morphic Therapeutic in July was the only public company buyout of more than $1 billion during that period. There were a few other deals that could eclipse $1 billion in total value, but those are contingent on the acquirees — Jnana , Nerio and Dermavant — reaching certain milestones. Also driving M&A activity were first-generation AI biotechs and multiple commercial-stage drugmakers, including Valinor Pharma, Ironshore Therapeutics , G1 Therapeutics , Revance and Dermavant. Most of the deals have not yet closed. “We expect some pause into the election,” Yee wrote Tuesday, “but lower rates and [continued] financing (funds putting money to work) support a higher XBI as we seek to hopefully break the key $100 level.” The XBI closed on Monday, Sept. 30, at $98.80, though it had crossed the $100.00 threshold in mid-July and a few times since.

Eli Lilly and HAYA Therapeutics have entered into a multi-year agreement worth up $1bn to discover regulatory genome targets for obesity and related metabolic conditions. The collaboration centres around HAYA’s proprietary regulatory genome discovery platform, which the partners will use to identify, characterise and validate multiple long non-coding RNA (lncRNA) targets for the potential development of new treatments. In exchange, HAYA will receive an undisclosed upfront payment, including an equity investment, and will be eligible for up to an aggregate $1bn in pre-clinical, clinical and commercial milestone payments, as well as royalties on potential product sales. Approximately 98% of the human genome is composed of non-protein coding regions. According to HAYA, this portion of the genome, known as the ‘dark genome’, is dynamically active, generating thousands of therapeutically unexplored lncRNAs. The company’s discovery platform enables the identification of tissue-, disease- and cell-specific lncRNA targets and the development of RNA-targeting therapies with “potentially better efficacy and less toxicity than current treatments”. Samir Ounzain, HAYA’s chief executive officer, said: “This partnership with Lilly demonstrates the significant advances we have made with our revolutionary regulatory genome RNA-guided platform and validates the potential of targeting lncRNA for chronic conditions. “We look forward to working closely with Lilly… to help bring patients novel disease-modifying therapeutics that could offer greater efficacy, safety and accessibility than currently available treatments.” The alliance marks HAYA’s first with a big biopharma group. The Swiss biotech is already developing a pipeline of lncRNA-targeting precision therapies for the cell-specific treatment of a range of diseases, with its lead therapeutic candidate, HTX-001, in development for heart failure. Lilly has made a series of deals this year, including its acquisition of Morphic Therapeutics for approximately $3.2bn. The agreement, which closed last month, gave Lilly access to Morphic’s lead programme, MORF-057, a selective oral small molecule inhibitor of α4β7 integrin for inflammatory bowel disease. The company also recently agreed to pay Radionetics Oncology $140m upfront to partner on the biotech’s G protein-coupled receptor-targeting small-molecule radiopharmaceuticals, and entered into a strategic multi-target discovery collaboration agreement with Aktis Oncology to develop novel anticancer radiopharmaceuticals.

The acquisition will aid Lilly in enhancing treatment options for individuals suffering from IBD. Credit: Tada Images/Shutterstock. Eli Lilly and Company has concluded the acquisition of biopharmaceutical company Morphic Holding at $57 per share, a strategic move aimed at bolstering its inflammatory bowel disease (IBD) portfolio. The $3.2bn deal, initially agreed upon in July 2024 , has now reached completion and will aid Lilly in enhancing treatment options for individuals suffering from IBD. Morphic has been at the forefront of developing oral integrin treatments for serious chronic ailments. Its asset, MORF-057, is a selective oral small molecule inhibitor of α4β7 integrin to treat IBD. In October 2023, the US Food and Drug Administration (FDA) approved Lilly’s Omvoh (mirikizumab-mrkz) infusion (300 mg/15 mL)/injection (100 mg/mL), to treat moderately to severely active ulcerative colitis in adults. See Also: Licensing agreements for innovator GLP1R drugs weigh in with over $6.2bn in 2024 Top 20 biopharmas’ market cap up 4.3% in Q2 2024 as GLP-1 drug innovators hold top spots This asset is the first treatment approved for a type of IBD. Citi served as the exclusive financial advisor to Lilly, with legal counsel provided by Kirkland & Ellis. On Morphic’s side, Centerview Partners acted as the exclusive financial advisor, with additional advice from Evercore Group, and Fenwick & West served as legal counsel. Lilly chief scientific officer Daniel Skovronsky stated: “We are committed to exploring innovative approaches for immunologic diseases and believe Morphic’s pipeline holds promise in improving outcomes and expanding treatment options for people with devastating conditions like IBD. “Acquiring Morphic reinforces our growing capabilities in gastroenterology, building on the strong foundation of Omvoh, our first-in-class molecule already approved and launched around the world for ulcerative colitis and under regulatory review for Crohn’s disease. Further, the acquisition allows Lilly to research potential combination treatments that could better serve people beyond what is possible with currently available medicines.” This acquisition is a follow-up to Eli Lilly’s recent establishment of the Lilly Seaport Innovation Center (LSC) in Boston’s Seaport district, a hub dedicated to research and development in the pharmaceutical sector .