On Tuesday, Eli Lilly (LLY 2.35%) agreed to pay $2.4 billion for the autoimmune disease specialist Dice Therapeutics (DICE). Through this deal, Lilly will gain two experimental immunology medicines: the mid-stage psoriasis candidate DC-806 and its early-stage follower DC-853. 

In addition, Dice's pipeline is home to a handful of discovery-stage small molecules for inflammatory bowel disease, fibrosis, and immuno-oncology. The drugmaker's plan for these pre-clinical compounds wasn't announced in Tuesday's press release.

Lilly's shares gained 0.93% over the course of Tuesday's trading session, suggesting that investors view the drugmaker's latest acquisition in a positive light. But was this acquisition a savvy business development move by Lilly? Let's dig deeper to find out.

Immunology: An underappreciated growth driver

With a market cap of $429 billion, Lilly is easily the largest pure-play pharma company in the world. The drugmaker's market cap has swelled over the past three years, thanks to its game-changing diabetes medication Mounjaro and its closely watched Alzheimer's disease candidate donanemab. 

LLY Market Cap Chart

LLY market cap; data by YCharts.

Amid all the hullabaloo surrounding Mounjaro and donanemab, however, investors might have missed the impact of another important set of growth drivers for the company. Specifically, Lilly's top-selling immunology meds Olumiant and Taltz.

In the first quarter of 2023, Olumiant brought in $228.9 million, while Taltz generated a whopping $527 million in sales. Taken together, these two immunology drugs could account for approximately 10% of the company's annual revenue in 2023.

Over the past few years, Lilly has also been steadily advancing several other immunology meds in the clinic. The company is currently waiting to hear back from the Food and Drug Administration about its atopic dermatitis candidate lebrikizumab, and it is working through some regulatory feedback from the agency for its late-stage ulcerative colitis therapy mirikizumab. Behind these late-stage assets, Lilly is also developing multiple early and mid-stage immunology compounds. 

Immunology should thus play an important role in Lilly's growth trajectory in the years ahead. This Dice Therapeutics acquisition, in turn, seems to dovetail nicely with the drugmaker's ever-evolving business model, as it progressively scales into immunology. 

Is this deal a needle-moving event?

That $2.4 billion price tag equates to a little over four months of free cash flow for the pharma giant. Hence, this smallish deal is highly unlikely to negatively affect either Lilly's balance sheet or its shareholder rewards programs. On the plus side, though, Lilly might be getting a major new drug to treat psoriasis, depending on late-stage results. That's a big deal, and one the market might have missed in yesterday's initial reaction. 

Turning to the specifics, Dice's psoriasis candidates are targeting a market currently worth an estimated $40 billion. Competition in this space is stiff, to be sure. But strong late-stage results for either DC-806 or DC-853 could net Lilly its next blockbuster drug. As a result, investors will definitely want to keep tabs on these newly acquired immunology assets.

All told, Lilly's buyout of Dice Therapeutics looks like an ultra-savvy move by the drugmaker. While a mid-stage drug is an inherently risky asset, the potential financial reward from this transaction could far exceed the initial cash outlay.