Key Takeaways
- Eli Lilly is selling bonds to fund the acquisition of drug developer Morphic. The sale is reportedly worth $5 billion.
- The company’s stock was upgraded by Deutsche Bank analysts following its quarterly results last week.
- Lilly shares jumped early in the day but closed in the red.
Eli Lilly (LLY) shares finished Monday lower after a back-and-forth session in which an analyst upgrade sent them higher before news of $5 billion in bond sales pulled them into the red.
Deutsche Bank analysts called the drugmaker a “high growth unicorn” and upgraded its shares to a buy rating. The bump was based in part on sales of the weight-loss drug Mounjaro, which more than tripled to $3.09 billion when the company reported earnings last week
The firm upgraded its price target to $1,025 from $725, a nearly 15% premium to Lilly’s Friday closing price. Shares rose above $904 Monday morning.
Bonds Help Fund Morphic Acquisition
The stock gave back its early gains after Bloomberg in a report said the company would sell $5 billion in bonds to help pay for its $3.2 billion acquisition of Morphic (MORF). Lilly in a regulatory filing confirmed the sale but offered fewer details.
The deal, announced last month, adds Morphic’s flagship developmental drug for inflammatory bowel disease to Lilly’s portfolio. The company is also developing molecules intended to treat autoimmune diseases, pulmonary hypertensive diseases, fibrotic diseases, and cancer.
Lilly will sell bonds in five chunks, including a 40-year note with a 1% higher yield than a U.S. Treasury note, according to the report. Corporate bonds are typically seen as riskier than U.S. government bonds, so they usually have higher interest rates to compensate.
An Eli Lilly spokesperson declined to comment. Shares of the company closed Monday’s session down less than 1%,