Sigilon stock skyrockets 650% on buyout deal with Eli Lilly

Maksim Labkouski

Shares of Sigilon Therapeutics (NASDAQ:SGTX) surged over 650% pre-market Thursday after Eli Lilly (NYSE:LLY) agreed to acquire the nano-cap biotech for $14.92 per share in cash, implying a total value of ~$35M.

Before the deal, Eli Lilly (LLY) had partnered with Sigilon (SGTX) to develop cell therapies for the treatment of type 1 diabetes.

Sigilon’s (SGTX) lead asset SIG-002 developed with LLY is expected to undergo IND-enabling activities in H2 2023 ahead of a potential clinical trial application in 2024.

Under the terms, Sigilon (SGTX) shareholders will get one non-tradeable contingent value right (CVR) in addition to upfront cash.

The CVR will entitle them to receive up to an additional $111.64 per share in cash, and with its value, the LLY’s total consideration for SGTX stands at $126.56 per share, or ~$310M.

The transaction is expected to close in Q3 2023, after which Eli Lilly (LLY) will recognize it in its financials as a business combination or an asset acquisition. LLY shares gained ~1% pre-market in reaction.

More on Sagilon

• Sigilon Therapeutics to effect 1-for-13 reverse stock split
• IPO Update: Sigilon Therapeutics Aims For $101 Million IPO

Comments

[LBMC]

The share price is currently around $21. If I buy now, does it means I'll lose money as Lilly will buy the rest of the shares for $14.92?

[joezapp]

@LBMC It will mean the remaining $6 per share of your cash will be invested in the CVR. It's a matter of whether you want the CVR at that price.

[LBMC]

@joezapp cool! but this CVR will be non-tradeable, therefore how that work? will IBKR simply keep the shares as some kind of certificate on the account?

[Hudson Investments]

@LBMC This is a very tricky investment which is wrought with risk. You may lose money as the shares are traded in a marketplace where anything can happen. If Lilly has specific plans for the patents and personnel perhaps they were valuing the company more than they paid for it, and the shares will continue to climb. If it turns out that Eli Lilly made a bad investment, the shares will fall.

[culleraa]

Getting my share of the PGNX CVR ... which was of the 100 m, makes this kind of interesting to me. Since, by buying the stock right now, you get something like a 15x return if it all works out. Hard to find that kind of stock to invest in! And this is with no corresponding company costs or dilution at all. Reading the SEC doc, my issue is with the pretty short time frame of 5 yrs to get FDA or other approval for the big payout. Anyone else thought this through?

[Anthony Cataldo]

Best to "trade" CVRs.

[Queen Anne Investor]

@Anthony Cataldo CVR is non-tradeable

[Anthony Cataldo]

@Houman Tamaddon Hmmm...I have traded them before. Thanks!

[Queen Anne Investor]

@Anthony Cataldo
"Under the terms, Sigilon (SGTX) shareholders will get one non-tradeable contingent value right (CVR) in addition to upfront cash."
They said "non-tradeable".

[Hudson Investments]

Sigilon was a great early hold. I believe that MRNA has the potential to be looked as a buy with well capitalized big pharma. Who’s searching for what Moderna has, I do not know. I am holding my long shares just in case.

[Hammel]

Anyone buying above 14.00 is crazy.

[TheTennisGuy]

@Hammel Please, explain yourself. We would like to benefit from your perspective.

[Hudson Investments]

@Hammel perhaps there is hidden further value still locked up in their technology.

[David Kincaid]

The two companies have a long history, and Sigilon is being bought for a bit above its net cash. Seems smart to buy the company, instead of letting it go bankrupt. The CVRs are exactly that, very contingent.

[Stock Scanner]

Good to see LLY management start blowing some of their Mounjaro profits, just like PFE has frittered away their entire Covid windfall. Maybe try offering a 50% premium? Can't see shareholders turning that down.

[joezapp]

@Stock Scanner The stock was once 600. If it would have taken less, they would have offered less.

[rambler1]

Anyone: Any recall of CVR's that did pay out? Never followed them. This one seems completely absurd.

[culleraa]

@rambler1 Progenics... from LNTH

[joezapp]

@rambler1 It's not absurd, but it IS a gamble. Do you feel lucky?

[MANHATTAN RICH]

@rambler1 yes

[SilverD19]

The buyout was for $14, so why is it trading over $31 in premarket?

[culleraa]

@SilverD19 The CVR value has jumped 10 fold in an hour...

[joezapp]

@SilverD19 The potential value of the CVR.

[OldConservationist]

I am an older guy. Now is the first time in a very very long time nano cap/micro cap equities have become extremely attractive. Today, there are $20m companies , $50m , $100m that are investable and viable companies. Many of which are highly shorted. This 2023 bull market is just getting started. What a time to be alive if you are a millionaire/buyer. Valuations for nano/micro cap are out of touch with reality and the slightest bit of success will send many of these stocks soaring

[m.i.right]

@OldConservationist If it makes you feel better, or worse perhaps, in January 2021 the SP for $SGTX was briefly over $600/sh. Long slide down from that point, until today.

[joezapp]

@OldConservationist You still have to pick the right ones. In general, investing in nano/microcaps on your own will separate you from your money over time.

[gbfraser]

@OldConservationist Do you have a few names that look very appealing to you in the nano cap/micro cap? If so, thanks for sharing!

[culleraa]

A CVR worth 8x equity! Never seen that before. Also CVR trading at 3 pc of its potential value..

[culleraa]

@culleraa sorry, mkt pricing it at 3 pc....