Centessa Pharmaceuticals PLC (NASDAQ:CNTA) agreed to be acquired by Eli Lilly and Co (NYSE:LLY) for a total value of around $8 billion, but Needham analyst Ami Fadia downgraded CNTA from Buy to Hold.
The Centessa Pharmaceuticals Analyst: Fadia explained that, while the deal offers a roughly 40% premium and flexible contingent value rights (CVRs), the upside may be limited.
The Centessa Pharmaceuticals Thesis: The deal comprises around $6.3 billion in upfront cash and CVR (contingent value right) of up to about $1.5 billion, based on three milestones.
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The three milestones entitle Centessa Pharmaceuticals to receive up to $9 per share, Fadia added.
The analyst further stated that the three milestones involve FDA approvals of cleminorexton (ORX750) or ORX142:
- $2 per CVR in cash upon approval for NT2 (narcolepsy type 2) within 5 years of transaction closing.
- $5 per CVR in cash upon approval for IH (idiopathic hypersomnia) within 5 years of transaction closing.
- $2 per CVR in cash upon approval for any other indication prior to January 1, 2030.
"The deal values CNTA at an ~40% premium over its last one-month average price, which is in-line with the recent transactions, although the CVR is an attractive upside opportunity whose terms are quite flexible and achievable," Fadia wrote.
CNTA Price Action: Shares of Centessa Pharmaceuticals had risen by 0.33% to $39.85 at the time of publication on Wednesday.
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