Lilly to buy Loxo Oncology for $8B
- Eli Lilly will buy Loxo Oncology for roughly $8 billion, announcing a cash tender offer Monday that would pay a 68% premium on the start-up's shares and make the Indianapolis-based drugmaker the latest big pharma to strike a significant, cancer-focused deal.
- Loxo rapidly grew in value since going public in 2014, from a company worth approximately $200 million to this $8 billion deal. The Stamford, Connecticut-based biopharma gained its first U.S. approval in November 2018 for its cancer drug Vitrakvi, which was developed alongside its partner Bayer.
- Lilly will buy all outstanding shares at $235 apiece in its tender offer, which Loxo's board of directors recommended shareholders accept. The deal is expected to close by the end of March, the companies stated.
This $8 billion buyout comes in the shadow of Bristol-Myers Squibb's $74 billion oncology deal last week to buy Celgene, as well as last month's $5.1 billion sale of Tesaro to GlaxoSmithKline.
Last year, Lilly paid $1.6 billion for the immuno-oncology company Armo BioSciences, adding the immunotherapy pegilodecakin to its pipeline, which has ongoing Phase 2 and 3 studies in non-small cell lung cancer and pancreatic cancer, respectively.
The Loxo deal will further define Lilly as an oncology company, with a clearer path to revenue growth whenever the company's best-selling cancer drug, Alimta (pemetrexed) faces generic competition. A key Alimta patent will expire in May 2022, and the company faces legal challenges in the meantime over generic entry.
Loxo will give a commercial and pipeline infusion to Lilly's oncology ambitions. Vitrakvi (larotrectinib) gained an accelerated approval from the Food and Drug Administration in November for patients with advanced solid tumors who harbor a rare genetic alteration. With a tiny pool of patients — estimated to be a few thousand in the U.S. — the company set a list price as high as $32,800 for treatment per month.
Beyond Vitrakvi, Lilly will add to its pipeline LOXO-292, an oral RET inhibitor that could launch in 2020 as a first-in-class therapy, LOXO-305, an oral BTK inhibitor in Phase 1/2 testing, and LOXO-195, a follow-on TRK inhibitor being developed with Bayer.
"Using tailored medicines to target key tumor dependencies offers an increasingly robust approach to cancer treatment," said Lilly's chief scientific officer Daniel Skovronsky in a Jan. 7 statement.
As a pharma historically known for its insulin business, Lilly laid out five R&D focus areas last month, listing oncology first followed by pain, neurodegeneration, immunology and diabetes.
With the deal, which has an effective purchase price of about $7.2 billion accounting for Loxo's cash and investments, Lilly stated it would likely limit share buybacks to $3.5 billion in the first half of 2019.
For Loxo, the buyout with a healthy 68% premium represents a bright final chapter to four years of sizable growth on the stock market, growing from shares valued at $13 apiece in 2014 to this $235 buyout.
As for the broader oncology market, Leerink analyst Andrew Berens expected shares of other cancer companies to benefit from the news, namely Blueprint Medicines, Clovis Oncology, Epizyme and Agios Pharmaceuticals.
"Specifically, we see the most direct read-through to [Blueprint Medicines], as a company with multiple late-stage, near-commercial precision oncology assets, as well as a novel kinase inhibitor library and drug discovery engine capable of generating new pipeline candidates," Berens wrote in a Jan. 7 note to investors.