- The drug giant Eli Lilly announced on Monday that it was acquiring the cancer-focused biotech Loxo Oncology for about $8 billion.
- Loxo focuses on gene mutations in treating cancers, which is a unique approach.
- The deal is “bigger than what we’ve done before,” Lilly CEO David Ricks said, but “isn’t out of range to do again.”
The pharma giant Eli Lilly & Co. on Monday said it planned to buy the biotech Loxo Oncology for $8 billion in cash.
It’s an unusually large acquisition for Eli Lilly that also represents a massive bet on Loxo’s genetically based approach to treating cancer.
Most cancer drugs treat a specific type of the disease, such as breast cancer or lung cancer, but Loxo’s medicines target gene mutations in cancers instead.
As a result, its drugs are intended to treat more than one type of cancer – like Loxo’s Vitrakvi, which was first approved in the US in late November and has been tested in people with cancers of the lung, colon, breast, and thyroid.
Eli Lilly already has a presence in oncology. Notably, the chemotherapy Alimta is one of its most valuable products, bringing in more than $2 billion in revenue in 2017, but the drug has been losing patent protection in other countries and could also lose it in the US soon.
That said, the drugmaker’s cancer focus hasn’t been in this type of “targeted” oncology before, the Stifel analyst Stephen Willey said. Drugmakers including Pfizer, Novartis, and AstraZeneca would appear more obvious acquirers for Loxo, he said.
“The emergence of LLY is a little surprising, but LLY’s existing commercial presence in [non-small cell lung cancer] and expiring Alimta exclusivity makes sense,” Willey said.
The deal values Loxo at $235 a share, a premium of roughly 68% over the company’s Friday closing price, Eli Lilly said. The deal is expected to close in the first quarter of 2019. If it doesn’t go through, Loxo could owe Eli Lilly a breakup fee of $265 million, according to a new financial filing.
The roughly $8 billion deal is Eli Lilly’s largest acquisition by far since at least 2015, according to financial filings.
On a Monday-morning conference call, Lilly CEO David Ricks said that the acquisition was “bigger than what we’ve done before” but that Loxo also notably had four in-development or recently approved medicines. “I would say going forward it isn’t out of range to do again,” Ricks added.
Eli Lilly will keep looking for other deals in cancer and other areas, Ricks said, adding that there were “many more opportunities” in cancer because of recent scientific advances.
Loxo already has a Food and Drug Administration-approved drug, Vitrakvi, which came out of a partnership with the drugmaker Bayer.
Eli Lilly noted that in its explanation of the deal, but it especially emphasized the company’s experimental drug Loxo-292, along with two other drugs in development.
Termed a “RET inhibitor” for the types of genetic alterations that it focuses on, Loxo-292 has promise in multiple cancer types.
The medication has received a special “breakthrough therapy” designation from the FDA for lung cancer and two types of thyroid cancer, and it could start being sold as early as 2020.
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