Eli Lilly Splashes $8 Billion To Acquire Loxo Oncology

Eli Lilly and Company announced that it has agreed to acquire Loxo Oncology for $8 billion, as it seeks to strengthen its presence in oncology.

The deal means Eli Lilly will pay $235 per share in cash for Loxo, a biopharmaceutical company focused on the development and commercialization of highly selective medicines for patients with genomically defined cancers.

“Under the terms of the agreement, Lilly will commence a tender offer to acquire all outstanding shares of Loxo Oncology for a purchase price of $235 per share in cash, or approximately $8 billion.The transaction is not subject to any financing condition and is expected to close by the end of the first quarter of 2019, subject to customary closing conditions, including receipt of required regulatory approvals and the tender of a majority of the outstanding shares of Loxo Oncology’s common stock.

“Following the successful closing of the tender offer, Lilly will acquire any shares of Loxo Oncology that are not tendered into the tender offer through a second-step merger at the tender offer price,” a statement announcing the acquisition said.

Lilly said it will provide an update to its 2019 financial outlook, including the expected impact from the acquisition of Loxo Oncology, as part of its fourth-quarter and full-year 2018 financial results announcement on February 13, 2019.

Lilly focused on expanding oncology program

Lilly Chief Executive Officer David Ricks told CNBC that the company was focused on growing its oncology program with the purchase. “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.”

Anne White, the president of Lilly Oncology, said they were committed to developing “innovative, breakthrough medicines that will make a meaningful difference for people with cancer and help them live longer, healthier lives.”

Loxo Oncology Chief Executive Officer Josh Bilenker said they were “gratified that Lilly has recognized our contributions to the field of precision medicine and are excited to see our pipeline benefit from the resources and global reach of the Lilly organization. Tumor genomic profiling is becoming standard-of-care, and it will be critical to continue innovating against new targets, while anticipating mechanisms of resistance to available therapies, so that patients with advanced cancer have the chance to live longer and better lives.”

Lilly hunts for first- and best-in-class therapies

Lilly described the acquisition as the “largest and latest in a series of transactions” it has conducted to broaden its cancer treatment efforts with externally sourced opportunities for first-in-class and best-in-class therapies.

The $120 billion worth of Lilly’s interest in Loxo has been triggered by the latter’s “startling success” figuring out why rare cancerous mutations occur, rather than focusing on where they happen,” Reuters reported.

Loxo’s first drug, Vitrakvi was recently approved by the U.S. Food and Drug Administration and is sold in partnership with Bayer. It has been proven to be effective against a wide variety of cancers driven by a single, rare genetic mutation.

Reuters reported that the acquisition of Loxo was a massive bet for Lilly, which was paying at least 45 times more than the former’s estimated 2020 revenue. For the gamble to pay off, the news agency said, it will require multiple drug approvals, finding sufficient patients with these rare mutations, and the ability to charge sufferers – or their insurers – $30,000 or so per month.

Lilly is convinced that the gamble will pay off because of what it describes as Loxo’s “promising portfolio of approved and investigational medicines.”

The medicines include LOXO-292, a first-in-class oral RET inhibitor that has been granted Breakthrough Therapy designation by the FDA for three indications, which is likely to be launched in 2020. The company also has LOXO-305, an oral BTK inhibitor currently in Phase 1/2, which “targets cancers with alterations to the Bruton’s tyrosine kinase (BTK), and is designed to address acquired resistance to currently available BTK inhibitors. BTK is a validated molecular target found across numerous B-cell leukemias and lymphomas.”

Together with Bayer, Loxo Oncology, which was established in 2013, is working on LOXO-195, a follow-on TRK inhibitor for acquired resistance to TRK inhibition, with a potential launch in 2022.

Bloomberg estimated that Loxo will generate $1.14 billion in drug sales in 2023. This year, the drugmaker expects turnover of $200 million.

This is the second major deal that is expected to go through this year after Bristol-Myers Squibb announced its acquisition of Celgene for $74 billion.