Prevail Ablaze On Eli Lilly's $1.04 Billion Takeover

 Eli Lilly (LLY) agreed to buy gene therapy company Prevail Therapeutics (PRVL) for $1.04 billion on Tuesday, sending PRVL stock to a record high.

The deal "checks the boxes" for Lilly, Mizuho Securities analyst Vamil Divan said in a report to clients. He noted that Lilly Chief Financial Officer Joshua Smiley has said in the past that the drug giant was looking to acquire a gene therapy player in the neuroscience space. Prevail's lead programs are in Parkinson's disease and dementia.

Lilly will pay $880 million upfront, valuing PRVL stock at $22.50 per share. Shareholders will also receive a contingent value right, or CVR, worth up to $4 per share for a total of $160 million. The CVR is payable when the first Prevail product gains regulatory approval.

On today's stock market, PRVL stock charged up 82% to 22.75. Lilly stock popped 6% to 167.43.

Piper Sandler analyst Christopher Raymond downgraded PRVL stock to a neutral rating on the takeover news. The deal is "not so surprising in retrospect," he said in his note to clients.

"With neuro a core therapeutic area for Lilly and with management commentary foreshadowing interest in gene therapy partnerships and acquisitions as recently as September, this move makes sense and we expect the deal to close on time in the first quarter," he said.

The news is also likely to spark other gene therapy stocks, not just PRVL stock, he said. To that point, shares of Uniqure (QURE) lifted 3.1% to 47.86.

"While there had been a spate of gene therapy deals, the last year has seen the space take a bit of a pause coincident with some gene therapy setbacks," he said. "Today's news indicates that strategic interest in the technology has not waned."

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