Science2 publishers2 min readPublished
Jury awards Nektar less than a tenth of the $1 billion it sought from Lilly
Jurors found Eli Lilly broke good faith in ending its rezpeg deal with Nektar Therapeutics and awarded Nektar $90 million plus interest. Nektar's shares still fell about 4% on Friday as investors set the award against a far larger ask.
The Scientist · Science desk
What happened
- The three-year-old dispute concerned Lilly's termination of an up-to-$400 million agreement to co-develop rezpeg, initially for autoimmune and chronic inflammatory conditions.
- Pre-market buying lifted Nektar about 4.9% early Friday before the stock slid from a $60 open to $57.22 by 9:48 a.m.
- A Lilly spokesperson had not responded to GEN's request for comment on the verdict by the publication's deadline.
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Why it matters
- decision Canaccord will add the sum to its Nektar model only when and if it is paid, so for now the verdict leaves that valuation where it was.
- constraint If Lilly appeals, Nash says payment could be months or years away, and until then the award cannot be counted as cash Nektar has in hand.
- precedent The case shows a licensor can win on an implied good-faith theory after a partner ends a deal, but one verdict still open to appeal is a thin basis for pricing other pharma exits.
Measured against Nektar's own ask, the award is 9% [1]. Measured against the collaboration's headline value it is 22.5% [2], and the $1 billion Nektar sought was 2.5 times that headline [3]. The deal was worth "up to" $400 million. That is a ceiling on payments, so neither ratio is a valuation of rezpeg [2]. The sources do not say how Nektar built its damages figure or how the jury reached $90 million.
Canaccord Genuity analyst Edward Nash worked out the per-share value. Nash said a $90 million judgment represents $2.64 in cash per share and would imply a 4.4% move upward in the stock from Thursday's closing price of $59.38 [8]. That puts the implied price near $62.02 [5]. The stock closed Friday at $57.06 [5]. With 34.14 million shares outstanding [7], the close-to-close drop took about $79 million off Nektar's market value, a little less than the award itself [4].
One day's price change cannot isolate the effect of one verdict, because it includes whatever else traders weighed that Friday. GEN puts the drop down to the size of the ask, writing that the win "was ultimately viewed as anything but by investors, since Nektar had sought a verdict of $1 billion" [16]. Nash pointed to the balance sheet instead. "Importantly, the company also did not require any monies from the case in order to continue developing their pipeline assets," he said [11].
The drug data have moved the stock much further than the verdict did [19][5]. Rezpeg is designed to target the CD25 sub-receptor of the interleukin-2 receptor complex and expand regulatory T cells. Nektar reasons that activating those cells could restore their balance with effector T cells in autoimmune disease [17]. The Lancet published results in August from the 16-week induction period of the 52-week REZOLVE-AD trial in moderate-to-severe atopic dermatitis. At the top dose given every two weeks, mean EASI scores fell 61% from baseline, against 31% on placebo [18]. The shares nearly doubled in February, after Nektar reported data from the trial's 36-week blinded maintenance period [19].
The legal finding rests on a term implied through the license agreement: the covenant of good faith and fair dealing [1]. Nektar said it was "pleased with the jury's verdict" [9]. The court has yet to set interest [1]. GEN reports that the verdict still faces post-trial proceedings and an appeals process it describes as all but expected [15].
What to watch
- The court's interest ruling and post-trial motions, since together they set what Lilly owes if the verdict stands.
- Whether Lilly appeals, and whether its grounds attack the good-faith finding itself or only the $90 million in damages.