Morphic’s pipeline is led by MORF-057. The oral small molecule inhibits α4β7, an integrin expressed on some white blood cells. Takeda showed targeting the integrin can control intestinal inflammation and improve outcomes in ulcerative colitis and Crohn’s disease. The data turned Entyvio into a big product for Takeda, but its injectable delivery format left the door open for more convenient oral challengers.
Lilly has come crashing through the door. Buying Morphic will give Lilly ownership of an oral challenger to Entyvio that is in phase 2 development in ulcerative colitis and Crohn’s. Morphic took MORF-057 into phase 2 in 2022, putting it more than a year ahead of Gilead Sciences' rival oral α4β7 candidate. Lilly previously acquired a preclinical oral α4β7 program in its $2.4 billion takeover of Dice Therapeutics.
Ensho Therapeutics, which recently bought a phase 2-ready oral α4β7 prospect from Eisai’s GI subsidiary EA Pharma, is the other front-runner in the race to displace Entyvio. Data drops to date have both raised and dashed hopes that oral molecules are a threat to Takeda’s blockbuster.
Protagonist Therapeutics scrapped its first oral α4β7 antagonist peptide after seeing phase 2b results in 2018. The biotech regrouped behind a second-generation prospect, claimed to be delighted by the phase 2 data and then promptly dropped the asset rather than start a planned pivotal trial.
Morphic fared better initially, reporting a clinical remission rate that suggested MORF-057 may match the efficacy of Entyvio and sending investors into a buying frenzy. But the candidate's failure to trigger the expected level of endoscopic improvement sent Morphic’s stock back down when the biotech shared a fuller look at the data months later.
At $57 a share, Lilly’s takeover values Morphic at around the price the stock commanded in the wake of the release of top-line phase 2a data in April 2023. Morphic’s share price never recovered from the publication of more data, allowing Lilly to offer an 87% premium to the 30-day volume-weighted average trading price of Morphic's share price and still keep the buyout price down to $3.2 billion.
Evidence of whether Lilly got a good deal should emerge in the first half of next year when a phase 2b trial in ulcerative colitis is scheduled to report data. Morphic began its midphase Crohn’s trial in April and expects to reach primary completion in 2026.