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Eli Lilly makes US$8b bet on drugs for rare cancers with Loxo Oncology buy
PHARMACEUTICAL giant Eli Lilly said on Monday it will buy Loxo Oncology Inc for US$8 billion, an expensive bet on a pipeline of cancer drugs that target rare genetic mutations and the biggest acquisition in the drugmaker's 143-year history.
The price represents a 68 per cent premium to Loxo's Friday share price close, which some Wall Street analysts said was high for a company with only one drug on the market that it shares with a partner.
Loxo shares surged 66 per cent to US$232.65, close to the offer price of US$235 per share, and prompted stock price rises for other small developers of targeted cancer therapies, including Array BioPharma, Blueprint Medicines Corp and Clovis Oncology Inc. Lilly shares rose 0.5 per cent to US$115.28.
The cash deal comes on the heels of Bristol-Myers Squibb Co's agreement last week to buy Celgene Corp for US$74 billion in the largest pharmaceutical deal ever, spurring investors' hopes of a new wave of large healthcare acquisitions.
Loxo gained prominence in 2017 - just three years after going public - with impressive clinical trial results showing its drug to be highly effective on cancers driven by a single gene mutation known as TRK fusion, regardless of where in the body the tumours originated.
These patients, with more than 17 different types of advanced cancer but all with the same genetic mutation, had run out of other treatment options. Yet some 80 per cent who received Loxo's first drug, a pill called Larotrectinib, experienced dramatic, often long-term improvement.
The Connecticut-based company won US approval in November for the treatment under the brand name Vitrakvi, which is sold in partnership with Bayer AG. Lilly said it "very much" wants to continue the agreement with Bayer, which sells Vitrakvi outside the US and shares US commercial costs and profits with Loxo.
Loxo is also developing LOXO-292 targeting a different rare gene mutation, and analysts have forecast eventual annual sales of over US$1 billion. Lilly would gain full control of that drug as it is not part of Loxo's Bayer collaboration.
Lilly chief executive David Ricks said that drug targeting a mutation known as RET, seen in thyroid, lung and other cancers, was a major driver of the deal. It received breakthrough therapy designation from US regulators, which could speed its path to approval.
Loxo was quick to take advantage of new technologies that can isolate genetic drivers of tumour growth, and the willingness of regulators to approve treatments across tumour types when a specific defect is present, Mr Ricks said at the annual JPMorgan Healthcare Conference in San Francisco on Monday.
He said Lilly was also interested in expanding in immuno-oncology through its own research and possible deals.
Targeted therapies offer the promise of potentially dramatic results if patients most likely to benefit are correctly identified, and are seen as a potential alternative to chemotherapy and its many adverse side effects.
"The acquisition of Loxo, along with last week's acquisition of Celgene, may represent the cream of the crop in biotech being harvested by big pharma," IFS Securities analyst David Bouchey said. "The size of the deal may indicate Lilly's willingness to pay up to out-bid the competition."
Lilly has typically eschewed large deals, preferring to develop its own drugs. But last year it paid US$1.6 billion for Armo Biosciences, a developer of immunotherapy cancer drugs, and said in November it was open to more deals.
Lilly's oncology portfolio includes lung cancer chemotherapy Alimta, which had third-quarter sales of US$520.5 million.
Vitrakvi, priced at US$32,800 per month, and experimental follow-up drug LOXO-195, on which Bayer is also a partner, together could generate annual sales of about US$750 million, according to Piper Jaffray & Co.
Bayer said it does not expect the Lilly deal to impact its contract with Loxo for the time being. REUTERS