Eli Lilly Expands Drug Pipeline with $2.4 Billion Orna Therapeutics Acquisition

Eli Lilly announced a $2.4 billion acquisition of Orna Therapeutics, which is developing innovative drugs that can manipulate a patient's genes and/or cells to fight diseases inside a patient's body, not in a lab. If the drug with the current working name of ORN-252 makes it to market, it could be the next blockbuster.

Just before the Orna announcement, Lilly announced it was paying $350 million upfront to collaborate with a Chinese biotechnology company to develop treatments for immune disorders and cancer. In January, it announced another billion-dollar deal with a German company to develop hearing loss gene therapies.

Lilly has already been crowned the winner of the massive GLP-1 drug category, the class of medications that have proven extremely effective in lowering blood sugar levels and promoting weight loss. The company currently sells tirzepatide, the world's best-selling drug on the planet. Last year it knocked Keytruda, the cancer immunotherapy drug made by Merck, off the throne. Tirzepatide is sold as Mounjaro for treating type 2 diabetes and as Zepbound for weight loss.

The pharmaceutical industry presents investment challenges due to lengthy development timelines and patent limitations. It takes more than 10 years to develop a new drug and costs, on average, $2.6 billion. The success rate of new drug development, from conception to FDA approval, is about 8%. A drug patent is typically 20 years, but because drug development takes so long, often more than 10 years, much of a patent is used up before the drug comes to market. So, the effective market exclusivity is often just 10 to 12 years.

All drug companies face patent expirations when competitors can launch cheaper generic versions and steal market share. Pfizer's stock price shot from around $33 in February 2020 to nearly $60 by December due to its rapid production and approval of a COVID-19 vaccine. Since then, demand for that vaccine has waned, and the stock has been on a downward ride. After plummeting in 2023, the price has moved sideways since early 2024. It now sits at around $28, lower than its pre-COVID price.

Lilly shares are up more than 400% over the past five years, which trounces the broader market. The S&P 500 index has climbed about 73% over that period. With a market cap of about $936 billion, the company is fast approaching the elite $1 trillion club, which currently holds only 12 public companies.