(Bloomberg) -- Eli Lilly & Co. tapped the US investment-grade bond market on Monday to help finance its roughly $2.5 billion purchase of a cancer drug from Scorpion Therapeutics Inc.
The pharmaceutical company sold $6.5 billion of bonds in six parts, according to a person familiar with the matter. The longest portion of the deal, a 40-year note, yields 0.9 percentage point over Treasuries, said the person, who asked not to be identified as the details are private. Initial price talk was in the area of 1.15 percentage points over Treasuries.
The bond sale comes a few weeks after Eli Lilly said it will pay as much as $2.5 billion in cash to acquire a cancer drug that Scorpion Therapeutics is testing in early and mid-stage trials. Scorpion’s drug, called STX-478, targets a type of mutation known as PI3Kα that drives the growth of some solid tumors.
The bond sale proceeds are expected to go toward the pending purchase of Scorpion’s PI3Kα inhibitor program, the person said. Any remaining proceeds may be used for general corporate purposes, which could include repaying outstanding commercial paper.
A representative for Eli Lilly declined to comment.
Eli Lilly released its fourth-quarter earnings last Thursday. Its full-year earnings forecast was in line with analysts’ estimates, as the company works to fix inventory problems with its new blockbuster obesity and diabetes drugs that weighed on sales in recent quarters.
Barclays Plc, Bank of America Corp., Citigroup Inc., Deutsche Bank AG and Goldman Sachs Group Inc. led Eli Lilly’s bond sale.
Only three issuers brought deals to the US high-grade primary market on Monday, after dealers early this morning said six potential issuers were looking to raise fresh capital. Dealers’ forecasts have investment-grade issuance this week landing between $35 billion and $40 billion.
--With assistance from Ethan M Steinberg.
(Updates to reflect deal priced.)
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