Eli Lilly (LLY -3.38%) will soon add a new asset to its portfolio. The veteran pharmaceutical company announced on Tuesday that it has signed a definitive agreement to acquire gene therapy specialist Prevail Therapeutics (PRVL).

The price is $22.50 per share in cash, which will be paid at the deal's closing. This values the deal at roughly $880 million. Prevail stockholders will also receive one nontradeable contingent value right (CVR) worth up to $4 per share, if and when their company receives its first regulatory approval in either the U.S., Japan, the U.K., Germany, France, Italy, or Spain.

A researcher studying a sample in a petri dish.

Image source: Getty Images.

In order to earn the full CVR, Prevail will have to win that approval by Dec. 31, 2024. Following this date, the payout will be reduced by slightly over $0.08 per month until Dec. 1, 2028. The CVR expires after that.

In its press release touting the acquisition, Eli Lilly wrote that it "will establish a new modality for drug discovery and development at Lilly, extending Lilly's research efforts through the creation of a gene therapy program that will be anchored by Prevail's portfolio of clinical-stage and preclinical neuroscience assets."

Prevail currently has three drugs in development. All are aimed at combating neurodegenerative disorders such as Parkinson's and neuronopathic Gaucher disease. Two are currently being tested in clinical trials.

Considering that the $22.50 per share up-front payment alone is nearly double Prevail's closing price the day before the deal was announced, it's clear that Eli Lilly has very high hopes for the company specifically and gene therapy more generally.

Investors seem to share this ambition. In midafternoon trading on Tuesday, Eli Lilly's stock was up by 5.4%, trouncing the gains of the S&P 500 index.