(Reuters) - Eli Lilly and Co (LLY.N) will buy CoLucid Pharmaceuticals Inc CLCD.O for about $960 million, bringing back into its fold a promising therapy for migraine and positioning itself to capture a bigger slice of the largely under-treated market.
CoLucid's lasmiditan, which has already succeeded in one late-stage trial for acute migraine relief, was licensed to the company by Lilly in 2005.
Lilly, whose migraine-prevention therapy is in late-stage development, has offered $46.50 per CoLucid share in cash, a rich premium of about 33 percent to CoLucid's Tuesday close.
CoLucid's shares hit a record high of $46.30 in early trading on Wednesday.
About 40 million Americans suffer from migraines, and the disease costs the United States roughly $36 billion annually in terms of healthcare and lost productivity, according to the Migraine Research Foundation.
However, few effective treatments to manage these episodes of throbbing pain are currently available.
Patients are treated with triptans, a class of drugs that hit the market in the 1990s. These drugs work by constricting blood vessels in the brain, and cannot be used in up to 35 percent of patients due to heightened cardiovascular risk.
A host of other drugs are also used - including anti-depressants, medicines for hypertension and even botox - with little success.
Key late-stage study results on lasmiditan are expected in the second half of 2017, and available data has shown it does not pose the safety risk seen with triptans.
The potential returns of the deal will ultimately rely on how insurers position lasmiditan given its projected $1,748 per patient per year price, while generic sumatriptan costs about $150 to $400, Barclays analysts said on Wednesday.
If approved, lasmiditan will generate peak sales of over $700 million, the analysts said last month.
Lilly's migraine-prevention drug, galcanezumab, is among three others racing to capture the 13 million patient population afflicted with a severe form of the condition.
Like rival biologics from Amgen Inc (AMGN.O), Teva Pharmaceutical Industries Ltd (TEVA.TA) and Alder Biopharmaceuticals Inc (ALDR.O), galcanezumab targets a protein associated with pain signaling called CGRP. (reut.rs/2j99QxT)
Severe patients will eventually graduate to using as-needed relief, such as CoLucid's drug, as they benefit from preventative CGRP therapies, analysts have said.
Lilly expects the deal to close in the first quarter, and if completed, the company will take a $850 million charge in the quarter.
Goldman Sachs is Lilly's financial adviser, while Weil, Gotshal & Manges LLP is its legal counsel. MTS Health Partners is CoLucid's financial adviser, while Faegre Baker Daniels LLP is its legal counsel.
Reporting by Natalie Grover in Bengaluru; Editing by Sriraj Kalluvila