Eli Lilly hasn’t been a major player in genetic medicines but a new acquisition gives the pharmaceutical giant the opportunity to develop the first gene therapy for hearing loss. Lilly has agreed to acquire Akouos in a $487 million deal that comes a month after the FDA cleared the biotech’s application to begin a clinical trial for a therapy that corrects a mutation leading to an inherited hearing loss disorder.
According to financial terms announced Tuesday, Indianapolis-based Lilly will acquire all outstanding shares of Akouos for $12.50 each, which is a 121% premium to the stock’s average trading price for the past 30 days. The purchase price is still shy of the $17 per share that Akouos was able to fetch when it priced its 2020 IPO. However, Akouos shareholders could receive more. The deal includes payments tied to the achievement of clinical trial enrollment goals. These contingent value rights could pay out up to $3 more per Akouos share, which amounts to another $123 million.
The boards of directors of both Lilly and Akouos have approved the transaction, which is expected to close later this quarter. After the deal was announced, shares of Boston-based Akouos opened Tuesday at $13.11 apiece, an 87% increase over Monday’s closing stock price.
Akouos’s lead program addresses patients whose hearing loss stems from mutations to the OTOF gene, which encodes a protein that enables the ear’s sensory cells to release tiny neurotransmitter vesicles that activate auditory neurons. People who have OTOF mutations are typically born with severe-to-profound hearing loss. There are no FDA-approved therapies for this form of hearing loss, which Akouos said affects an estimated 20,000 people in the U.S. and Europe.
The Akouos gene therapy, AK-OTOF, employs an adeno-associated virus (AAV) to deliver a functioning version of the OTOF gene that encodes otoferlin. AAV has limited capacity for a genetic payload. Akouos employs a dual AAV comprised of two engineered viruses, each one carrying a fragment of the OTOF gene. Injected into the ear, the Akouos gene therapy is intended to enable the ear’s cells to produce functioning otoferlin. The underlying technology was developed in the lab of Luk Vandenbergh, Akouos’s scientific co-founder. Vandenbergh is also the director of the Grossbeck Gene Therapy Center, a professor at Harvard Medical School, and an associate member of the Broad Institute of Harvard and MIT.
“The physiologic defect resulting from OTOF mutations is localized, and only synaptic transmission between the hair cell and the auditory nerve is impaired,” Akouos said in its 2021 annual report. “In young individuals, the rest of the cochlea appears to be functional as determined by [otoacoustic emission] testing, suggesting that restoration of otoferlin has the potential to restore hearing.”
Akouos said it expects that the first two trial participants in the dose-escalation portion of the planned Phase 1/2 study will be as young as 7. As the trial continues, the company expects to enroll children as young as 2. Patient enrollment is key to the contingent value rights tied to the acquisition. The first $1 per share payment will be triggered upon the fifth patient dosed prior to Dec. 31, 2024. Additional payments are tied to clinical trial enrollments for other forms of hearing loss. Akouos’s pipeline also includes AK-CLRN1 for Usher syndrome type 3A, an inherited disorder that leads to hearing and vision loss in a person’s teen years; GJB2 for a common form of inherited deafness and hearing loss; and AK-antiVEGF for vestibular schwannoma.
Akouos’s main competition in OTOF mutations is Decibel Therapeutics. Similar to Akouos’s therapeutic candidate, the Decibel gene therapy, DB-OTO, is delivered by a dual-AAV vector. Decibel is developing this gene therapy under a partnership with Regeneron Pharmaceuticals. On Monday, the FDA cleared the Boston-based biotech’s application to begin a Phase 1/2 study in children born with hearing loss due to otoferlin deficiency.
Akouos marks Lilly’s second gene therapy acquisition. In 2021, the pharma giant completed its $880 million buyout of Prevail Therapeutics, a biotech whose most advanced gene therapy program is in early-stage clinical development for Parkinson’s disease.
Public domain photo by Flickr user Internet Archive Book Images
Eli Lilly and Company logo. (PRNewsFoto, Eli Lilly and Company)
Proposed acquisition will accelerate gene therapies that aim to restore, improve, and preserve hearing for patients living with disabling hearing loss worldwideTransaction valued at approximately $487 million plus a contingent value right for an aggregate amount up to approximately $610 million
INDIANAPOLIS and BOSTON, Oct. 18, 2022 /PRNewswire/ -- Eli Lilly and Company (NYSE: LLY) and Akouos, Inc. (NASDAQ: AKUS) today announced a definitive agreement for Lilly to acquire Akouos, a precision genetic medicine company that is developing a portfolio of first-in-class adeno-associated viral gene therapies for the treatment of inner ear conditions, including sensorineural hearing loss.
"We are honored to work with the talented team at Akouos who are breaking new ground in the science of treating hearing loss," said Andrew C. Adams, Ph.D., senior vice president of genetic medicine and co-director of the Institute for Genetic Medicine, Lilly. "We believe that with Lilly's resources, global reach, and growing capabilities in gene therapy, we can help Akouos fulfill their mission of making healthy hearing available to all."
Akouos has integrated expertise across otology, inner ear drug delivery, and gene therapy with the goal of addressing the needs of people living with disabling hearing loss worldwide. Akouos's lead product candidate, AK-OTOF, is a gene therapy for the treatment of hearing loss due to mutations in the otoferlin gene (OTOF). Additional pipeline programs span across multiple inner ear conditions, and include AK-CLRN1 for Usher Type 3A, an autosomal recessive disorder characterized by progressive loss of both hearing and vision; GJB2 (which encodes connexin 26) for a common form of monogenic deafness and hearing loss; and AK-antiVEGF for the treatment of vestibular schwannoma.
"I am proud of the commitment and passion of our team, which has established Akouos as a pioneer in inner ear genetic medicine, as demonstrated by our work to advance the first investigational therapy for a genetic form of hearing loss into clinical development," said Emmanuel Simons, Ph.D., M.B.A., co-founder, president, and chief executive officer of Akouos. "Joining Lilly – a company that shares our purpose to make life better for people around the world – will help us accelerate the development of a broad pipeline of inner ear genetic medicines."
Under the terms of the transaction, Lilly will acquire all of the outstanding shares of Akouos for $12.50 per share in cash, plus one contingent value right (CVR) of up to $3.00 per share. The deal has been approved by the boards of directors of both companies.
"Gene therapy offers tremendous opportunity to provide durable treatments for patients with genetically defined disease; this is our second acquisition in gene therapy, following the 2021 acquisition of Prevail Therapeutics," added Daniel Skovronsky, M.D., Ph.D., Lilly's chief scientific and medical officer, and president of Lilly Research Laboratories. "With Akouos, we are optimistic that we can make a difference for people with hearing loss and other inner ear conditions."
Terms of the Agreement
Lilly will commence a tender offer to acquire all outstanding shares of Akouos for a purchase price of $12.50 per share in cash (an aggregate of approximately $487 million) payable at closing plus one non-tradeable contingent value right per share ("CVR") that entitles the holder to receive up to an additional $3.00 in cash, for a total consideration of up to $15.50 per share in cash without interest (an aggregate of up to approximately $610 million).
CVR holders would become entitled to receive contingent payments as follows: (i) $1.00 in cash, upon the fifth (5th) participant being administered with AK-OTOF in a Phase 1 or Phase 1/2 trial on or prior to Dec. 31, 2024; (ii) $1.00 in cash, upon the fifth (5th) participant being administered with an Akouos gene therapy product for a second monogenic form of sensorineural hearing loss (excluding AK-OTOF and AK-antiVEGF) on or prior to Dec. 31, 2026; and (iii) $1.00 in cash, upon (a) the first (1st) participant being administered with an Akouos gene therapy product (excluding AK-antiVEGF) for a monogenic form of sensorineural hearing loss in a Phase 3 trial, or (b) receipt of FDA approval in the U.S. for such Akouos product, whichever occurs first, on or prior to Dec. 31, 2026, or its value will be reduced by approximately 4.2 cents per month until Dec. 1, 2028 (at which point the CVR will expire).
There can be no assurance that any payments will be made with respect to the CVR. The transaction is not subject to any financing condition and is expected to close in the fourth quarter of 2022, subject to customary closing conditions, including receipt of required antitrust clearance and the tender of a majority of the outstanding shares of Akouos's common stock. Following the successful closing of the tender offer, Lilly will acquire any shares of Akouos that are not tendered in the tender offer through a second-step merger at the same consideration as paid in the tender offer.
The purchase price payable at closing represents a premium of approximately 121% to the 30-day volume-weighted average trading price of Akouos's common stock ended on Oct. 17, 2022, the last trading day before the announcement of the transaction. Akouos's Board of Directors unanimously recommends that Akouos's stockholders tender their shares in the tender offer. Additionally, certain Akouos stockholders, beneficially owning approximately 26% of Akouos's outstanding common stock, have (subject to certain terms and conditions) agreed to tender their shares in the tender offer.
Lilly will determine the accounting treatment of this transaction as a business combination or an asset acquisition, including any related acquired in-process research and development charges, according to Generally Accepted Accounting Principles (GAAP) upon closing, which is expected to occur in the fourth quarter of 2022. This transaction will thereafter be reflected in Lilly's financial results and financial guidance.
For Lilly, Kirkland & Ellis LLP is acting as legal counsel. For Akouos, Wilmer Cutler Pickering Hale and Dorr LLP is acting as legal counsel and Centerview Partners LLC as sole financial advisor.
Akouos is a precision genetic medicine company dedicated to developing gene therapies with the potential to restore, improve and preserve high-acuity physiologic hearing for individuals living with disabling hearing loss worldwide. Leveraging its precision genetic medicine platform that incorporates a proprietary adeno-associated viral (AAV) vector library and a novel delivery approach, Akouos is focused on developing precision therapies for forms of sensorineural hearing loss. Headquartered in Boston, Akouos was founded in 2016 by leaders in the fields of neurotology, genetics, inner ear drug delivery, and AAV gene therapy.
Lilly unites caring with discovery to create medicines that make life better for people around the world. We've been pioneering life-changing discoveries for nearly 150 years, and today our medicines help more than 47 million people across the globe. Harnessing the power of biotechnology, chemistry and genetic medicine, our scientists are urgently advancing new discoveries to solve some of the world's most significant health challenges, redefining diabetes care, treating obesity and curtailing its most devastating long-term effects, advancing the fight against Alzheimer's disease, providing solutions to some of the most debilitating immune system disorders, and transforming the most difficult-to-treat cancers into manageable diseases. With each step toward a healthier world, we're motivated by one thing: making life better for millions more people. That includes delivering innovative clinical trials that reflect the diversity of our world and working to ensure our medicines are accessible and affordable. To learn more, visit Lilly.com and Lilly.com/newsroom or follow us on Facebook, Instagram, Twitter and LinkedIn. C-LLY
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements regarding Lilly's proposed acquisition of Akouos, regarding prospective benefits of the proposed acquisition, regarding potential contingent consideration amounts and terms, regarding the anticipated occurrence, manner and timing of the proposed tender offer and the closing of the proposed acquisition, regarding Akouos's product candidates and ongoing clinical and preclinical development, regarding Lilly's development of a gene therapy program for inner ear conditions and existing genetic medicine programs, and regarding the accounting treatment of the potential acquisition under GAAP and its potential impact on Lilly's financial results and financial guidance. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements reflect current beliefs and expectations; however, these statements involve inherent risks and uncertainties, including with respect to consummating the proposed acquisition and any competing offers or acquisition proposals for Akouos, drug research, development and commercialization, Lilly's evaluation of the accounting treatment of the potential acquisition and its potential impact on its financial results and financial guidance, uncertainties as to how many of Akouos's stockholders will tender their stock in the tender offer, the effects of the proposed acquisition (or the announcement thereof) on Akouos's stock price, relationships with key third parties or governmental entities, transaction costs, risks that the proposed acquisition disrupts current plans and operations or adversely affects employee retention, potentially diverting management's attention from Akouos's ongoing business operations, changes in Akouos's business during the period between announcement and closing of the proposed acquisition, and any legal proceedings that may be instituted related to the proposed acquisition. Actual results could differ materially due to various factors, risks and uncertainties. Among other things, there can be no guarantee that the proposed acquisition will be completed in the anticipated timeframe or at all, that the conditions required to complete the proposed acquisition will be met, that any event, change or other circumstance that could give rise to the termination of the definitive agreement for the proposed acquisition will not occur, that Lilly will realize the expected benefits of the proposed acquisition, that product candidates will be approved on anticipated timelines or at all, that Lilly will be successful in building a gene therapy program for inner ear conditions, that any products, if approved, will be commercially successful, that all or any of the contingent consideration will become payable on the terms described herein or at all, that Lilly's financial results will be consistent with its expected 2022 guidance or that Lilly can reliably predict the impact of the proposed acquisition on its financial results or financial guidance. For further discussion of these and other risks and uncertainties, see Lilly's and Akouos's most recent Form 10-K and Form 10-Q filings with the United States Securities and Exchange Commission (the "SEC"). Except as required by law, neither Lilly nor Akouos undertakes any duty to update forward-looking statements to reflect events after the date of this press release.
Additional Information about the Acquisition and Where to Find It
The tender offer for the outstanding shares of Akouos described in this communication has not yet commenced. This communication is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell any securities, nor is it a substitute for the tender offer materials that Lilly and its acquisition subsidiary will file with the SEC upon commencement of the tender offer. A solicitation and offer to buy outstanding shares of Akouos will only be made pursuant to the tender offer materials that Lilly and its acquisition subsidiary intend to file with the SEC. At the time the tender offer is commenced, Lilly and its acquisition subsidiary will file tender offer materials on Schedule TO, and Akouos will file a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC with respect to the tender offer. THE TENDER OFFER MATERIALS (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER TENDER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION STATEMENT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE PARTIES THERETO. INVESTORS AND STOCKHOLDERS OF AKOUOS ARE URGED TO READ THESE DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE (AND EACH AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME) BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION THAT INVESTORS AND STOCKHOLDERS OF AKOUOS SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING TENDERING THEIR SHARES OF COMMON STOCK IN THE TENDER OFFER. The tender offer materials (including the Offer to Purchase and the related Letter of Transmittal), as well as the Solicitation/Recommendation Statement, will be made available to all stockholders of Akouos at no expense to them at Lilly's website at investor.lilly.com and (once they become available) will be mailed to the stockholders of Akouos free of charge. The information contained in, or that can be accessed through, Lilly's website is not a part of, or incorporated by reference herein. The tender offer materials (including the Offer to Purchase and the related Letter of Transmittal), as well as the Solicitation/Recommendation Statement, will also be made available for free on the SEC's website at . In addition to the Offer to Purchase, the related Letter of Transmittal and certain other tender offer documents, as well as the Solicitation/Recommendation Statement, Lilly and Akouos file annual, quarterly, and current reports, proxy statements and other information with the SEC. You may read any reports, statements or other information filed by Lilly and Akouos with the SEC for free on the SEC's website at .
SOURCE Eli Lilly and Company
Eli Lilly is acquiring precision medicine biotech Akouos for $487 million in cash in a deal focused on developing gene therapies for hearing loss, the companies announced Tuesday.
Under the terms of the agreement, Lilly will buy all outstanding shares of Akouos at a per-share price of $12.50. This represents a premium of around 121% to Akouos' 30-day volume-weighted average trading price.
The deal also includes a contingent value right that entitles shareholders to receive up to $3.00 more in cash per share. This brings the total acquisition value to $610 million. The buyout is expected to close before the year ends.
In exchange, Lilly gains access to Akouos' lead program AK-OTOF, a gene therapy designed to treat hearing loss by delivering a functional copy of the otoferlin gene. Delivered using an adeno-associated viral vector, AK-OTOF seeks to restore the normal function of hair cells in the cochlea, allowing them to release neurotransmitters in response to sound stimulus.
The candidate is currently in the late pre-clinical stage.
In May, Akouos presented early data showing that cells treated with AK-OTOF can produce a full-length and functional otoferlin mRNA and protein. Last month, the FDA cleared AK-OTOF's investigational new drug application, making it the first therapy for genetic hearing loss to receive this regulatory nod. The company is preparing for a Phase I/II trial of AK-OTOF.
Akouos' pipeline also contains an anti-VEGF candidate for vestibular schwannoma and AK-CLRN1, a gene therapy for Usher Syndrome type 3A.
Aside from pipeline candidates, Lilly will also gain access to Akouos' cutting-edge, targeted delivery platform, which uses a novel AAV technology to efficiently inject its gene therapy payloads into inner-ear cells.
The buyout will also transfer the Sing Registry over to the Big Pharma. Sing is a longitudinal and observational study that interrogates how a person's genes affect their hearing changes over time.
Lilly's $487 million investment will also onboard Akouos' team of experts highly experienced in the field of hereditary hearing loss. Aside from gene delivery, the Akouos team can also deploy genomic technologies to design precision therapeutics and edit out mutated gene sequences responsible for toxic or faulty proteins.
In a statement, Daniel Skovronsky, M.D., Ph.D., Lilly's chief scientific and medical officer and president of Lilly Research Laboratories, said Akouos' deep expertise, combined with Lilly's resources and reach, could lead to innovative and potentially transformative treatments in the hearing loss space.
"With Akouos, we are optimistic that we can make a difference for people with hearing loss and other inner ear conditions," he said.
Akouos is Lilly's second gene therapy investment. In 2021, the industry heavy-hitter dropped some $1.04 billion to buy Prevail Therapeutics. The acquisition also marked the beginning of Lilly's gene therapy program, which counted Prevail's neuroscience pipeline as its first asset.
Prevail focused on disease-modifying gene therapies for neurodegenerative diseases. Its lead candidates were PR001 for Parkinson's disease with GBA1 mutations and neuronopathic Gaucher disease and PR006 for frontotemporal dementia with GRN mutations.