Why Beam and Verve Therapeutics Shares Soared While Eli Lilly Soured

 A multimillion-dollar deal in the healthcare industry announced on Tuesday led to share price pops for two of the three parties involved. Shares of Beam Therapeutics (BEAM 10.62%) and Verve Therapeutics (VERV 27.95%) shot up 11% and 28%, respectively, on the day.

On the downside, their counterparty in the deal, Eli Lilly (LLY -2.08%), saw its share price slump by 2%.

Verve sold its gene therapy programs to Eli Lilly

This morning, Beam and Verve announced in separate press releases that the former had sold to Eli Lilly the product rights to three of Verve's cardiovascular gene-editing programs.

The deal is potentially worth up to $600 million; one-third of this takes the form of an up-front payment, while Lilly is also ponying up a $50 million equity investment in Beam.

Beam also stands to earn as much as $350 million if and when it hits certain clinical, regulatory, and other milestones.

In Beam's press release, CEO John Evans said that the deal "provides meaningful up-front capital to advance our portfolio of clinical- and research-stage programs, with significant additional value achievable as the Verve programs advance through development."

Although a total initial payout of $250 million isn't cheap, even for a major healthcare business with significant resources like Eli Lilly, it clearly believes it's money very well spent.

In Beam's press release, Eli Lilly's group president for diabetes, obesity, and cardiometabolic research, Ruth Gimeno, was quoted as saying that the new arrangement "expands the scope of Lilly's ongoing relationship with Verve and gives us exposure to the full breadth of potential with Beam's base editing platform."

She added that the single-course gene-editing solutions involved in the deal could end up being compelling new treatment options for people facing the risk of cardiovascular disease.

A cash infusion when it's needed most

Eli Lilly was apparently quite determined to make this deal. Industry website Fierce Biotech reported Evans' claim that the equity component of the agreement was the pharmaceutical giant's idea. He intimated that Lilly's ownership stake could grow the relationship between the two companies in the future.

Beam can definitely put the funds from the deal to good use. Earlier in October, the company announced that it would cut its employee head count by roughly 20%. The clinical-stage biotech continues to lose money, and as of the end of its second quarter, it carried a debt load of over $177 million.

https://www.fool.com/investing/2023/10/31/why-beam-and-verve-therapeutics-stock-soared-while/