Pharma giant Eli Lilly just made an $8 billion bet on a cutting-edge scientific approach that uses DNA to treat cancer

Pharma giant Eli Lilly just made an $8 billion bet on a cutting-edge scientific approach that uses DNA to treat cancer

  • Drug giant Eli Lilly announced on Monday that it 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.”

Pharma giant Eli Lilly & Co. said on Monday it plans to buy the biotech Loxo Oncology for $8 billion deal 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, like breast cancer or lung cancer, but Loxo’s medicines target gene mutations in cancers instead.

As a result, each of its drugs are intended to treat more than one type of cancer — like Loxo’s Vitrakvi, which was first approved in the USin late November, and has been tested in individuals with cancers like 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, Stifel analyst Stephen Willey said. Drugmakers likePfizer, 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.

Read more:The FDA just approved a drug that targets cancers based on DNA, rather than where the tumor is in your body

The deal values Loxo at $235 per share, or an about 68% premium to the company’s closing price on Friday, Eli Lilly said. It’s expected to close in the first quarter of 2019.

All in all, the acquisition is “bigger than what we’ve done before,” but Loxo also notably has four in-development or recently-approved medicines, Lilly CEO David Ricks said on a Monday morning conference call. “I would say going forward it isn’t out of range to do again.”

The roughly $8 billion deal is Eli Lilly’s largest acquisition by far since at least 2015, according to financial filings.

Eli Lilly will keep looking for other deals in cancer and other areas, he said, but there are “many more opportunities” in cancer because of all the exciting science, Ricks added.

See:Here’s why Bristol-Myers Squibb’s record-breaking $74 billion biotech deal is facing investor backlash

Loxo already has an FDA-approved drug, Vitrakvi, which came out of a partnership with drugmaker Bayer.

Eli Lilly noted that in its explanation of the deal, but 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 could start being sold as early as 2020.

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Loxo Oncology

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