Lilly bags late-phase Dupixent rival in $1.1B Dermira buyout

Eli Lilly has struck a $1.1 billion deal to acquire Dermira, landing it a late-phase rival to Regeneron and Sanofi’s blockbuster atopic dermatitis drug Dupixent. The takeover, which values Dermira at just a whisker above its closing price yesterday, comes months after the biotech posted phase 2b data.

Dermira established lebrikizumab as a legitimate challenger for the moderate-to-severe atopic dermatitis market in March when it posted phase 2b data linking the anti-IL-13 antibody to symptom improvements comparable to those achieved by Dupixent. The data triggered a spike in Dermira’s share price and set it up to begin testing lebrikizumab in a phase 3 trial.

Now, Lilly has decided it likes the data enough to place a $1.1 billion bet on Dermira. In return for the outlay, Lilly will acquire lebrikizumab and an approved medicated cloth sold as Qbrexza.

Lilly is paying $18.75 a share for Dermira, just cents above the biotech’s closing price yesterday. The equivalence between the closing and takeover prices reflects the recent sharp rise in Dermira shares, which traded for less than $8 apiece just last month. The deal represents an 86% premium over the 60-day volume-weighted average trading price of Dermira's stock.

Dermira traded well above those figures at points during its time on Nasdaq but suffered a big, value-eliminating setback in 2018 when its lead drug flunked a phase 3 acne test. By then, Dermira had already sowed the seeds of its own recovery, paying Roche $80 million upfront for lebrikizumab. Roche could receive more than $1 billion more from the deal if lebrikizumab is a success.

Responsibility for making that happen will fall on Lilly, which will use its immunology experience to try to get lebrikizumab to market and then win market share from Dupixent. There are no guarantees that will happen even if lebrikizumab succeeds in phase 3. Dupixent is a well-established incumbent, and a clutch of other companies including Pfizer hope to challenge for the market.