Coverage: Eli Lilly makes $8 billion bet on cancer drugs

Eli Lilly said Monday it will buy Loxo Oncology Inc. for $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.

Tamara Mathias and Ankur Banerjee of Reuters had the news:

The price represents a 68 percent 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 percent to $232.65, close to the offer price of $235 per share, and prompted stock price rises for a other small developers of targeted cancer therapies, including Array BioPharma, Blueprint Medicines Corp and Clovis Oncology Inc. Lilly shares rose 0.5 percent to $115.28.

The cash deal comes on the heels of Bristol-Myers Squibb Co’s agreement last week to buy Celgene Corp for $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 tumors originated.

Emma Court of Business Insider reported that Loxo’s medicines target gene mutations instead of 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.

Matthew Herper of STAT reported that Loxo’s drugs have a very high price:

The acquisition will be expensive, but maybe lucrative. Loxo’s first medicine, Vitrakvi, was approved by the Food and Drug Administration in November based on evidence that it can shrink tumors in 75 percent of patients whose cancer tests positive for a particular kind of genetic mutation. For 39 percent of those who respond, the tumor stays shrunk for a year or more. But this mutation, called a TRK fusion, only exists in about 3 percent of cancer patients. That means Vitrakvi, sold in partnership with Bayer, has a very high price: $32,800 a month, or $393,600 annually.

Finding these patients could be like looking for a needle in a haystack. But Anne White, president of Lilly Oncology, said the company is eager to partner with Bayer to find them. “When you have a medicine that offers answers to patients like these medicines do or will, that’s what will change the paradigm,” she said.

Loxo’s second drug, LOXO-292, targets patients with lung or thyroid cancer whose tumors test positive for another type of mutation, related to a gene called RET. In data presented last year at the annual meeting of the American Society of Clinical Oncology in Chicago, 77 percent of patients in a study of 37 patients with a particular type of RET mutation in either non-small-cell lung cancer, thyroid cancer, or pancreatic cancer saw their tumor shrink enough to have a response. In another group — 22 patients with medullary thyroid cancer — tumors shrank in 44 percent.