Eli Lilly to buy Loxo Oncology for $8 billion

Eli Lilly agreed to acquire Loxo Oncology for $235 per share in cash, or approximately $8 billion, boosting its oncology portfolio with drugs for patients with genomically defined cancers, the companies reported Monday. The deal, which is expected to close by the end of the first quarter, represents a premium of around 68 percent to Loxo's closing stock price on January 4.

"We'd like to grow our presence in oncology. We have a good set of medicines there but we'd like to expand that because there's so much exciting science for patients emerging in oncology to invest in," Eli Lilly CEO David Ricks remarked. Ricks added that "replenishing Lilly's pipeline is a key focus in upcoming years," indicating that areas of focus include cancer, neuroscience and immunology.

Loxo currently markets the oral TRK inhibitor Vitrakvi (larotrectinib), which was developed with Bayer, while the company's pipeline includes the oral RET inhibitor LOXO-292 and the oral BTK inhibitor LOXO-305. Loxo and Bayer are also developing LOXO-195, a follow-on TRK inhibitor for acquired resistance to TRK inhibition, which Eli Lilly indicated could be launched in 2022.

Anne White, president of Lilly Oncology, suggested that the company will continue Loxo's collaboration with Bayer, adding "we believe that Lilly will bring a great deal of strength to this partnership in addition to what Loxo has already done." White said the purchase "represents an exciting and immediate opportunity to expand the breadth of our portfolio into precision medicines and target cancers that are caused by specific gene abnormalities," continuing "the ability to target tumour dependencies in these populations is a key part of our…strategy."

Vitrakvi gained FDA approval last November to treat adult and paediatric patients with tumours harbouring an NTRK gene fusion, while a marketing application for the drug was submitted to the European Medicines Agency in August. Analysts expect Loxo to generate $1.1 billion in sales in 2023, with revenue of about $200 million this year.

Eli Lilly noted that Loxo's board recommended that shareholders tender their shares in the offer, while an investor owning approximately 6.6 percent of Loxo's outstanding common stock has agreed to the deal. For further analysis, see ViewPoints: Eli Lilly embraces precision medicine with Loxo acquisition.

The deal comes shortly after two other large oncology-focused acquisitions, with Bristol-Myers Squibb agreeing to buy Celgene for $74 billion and GlaxoSmithKline reaching an accord to acquire Tesaro for $5.1 billion. Cantor Fitzgerald analyst Louise Chen said the Eli Lilly and Loxo agreement "underscores enthusiasm on the part of large-cap pharma companies to do deals," adding "this could lift valuations of small- to mid-cap names in our space given potential bids for some companies long thought to be takeout candidates."

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