Eli Lilly to expand cancer portfolio with $8bn Loxo Oncology acquisition

Eli Lilly has agreed to buy Loxo Oncology for approximately $8bn (£6.2bn) in cash, broadening its portfolio of cancer treatments.

The Indianapolis-headquartered global pharmaceutical company’s offer of $235 per share in cash represents a premium of about 68% to Loxo’s closing share price on Friday and is the largest in a series of recent transactions it has conducted to develop a pipeline of medicines to treat cancers that are uniquely dependent on single gene abnormalities.

Anne White, president of Lilly Oncology, said: "The acquisition of Loxo Oncology represents an exciting and immediate opportunity to expand the breadth of our portfolio into precision medicines and target cancers that are caused by specific gene abnormalities. The ability to target tumor dependencies in these populations is a key part of our Lilly Oncology strategy."

Loxo’s first commercial medicine, a treatment named Vitrakvi that is effective against a wide variety of cancers driven by a single, rare genetic mutation, was approved by US regulators last year.

Other treatments included in Loxo’s portfolio of approved and investigational medicines include LOXO-292, which is aimed at lung and thyroid cancers as well as a subset of other cancers, LOXO-305, designed to treat leukemias and lymphomas, and LOXO-195, a TRK-inhibitor with a potential launch in 2022.

Jacob Van Naarden, chief operating officer of Loxo Oncology, said: "We are confident that the work we have started, which includes an FDA approved drug, and a pipeline spanning from Phase 2 to discovery, will continue to thrive in Lilly's hands."

The deal is expected to close by the end of the first quarter, subject to regulatory approvals.

Olivetree Financial said: "While Eli Lilly does maintain a strong oncology franchise, the Loxo acquisition bolsters their portfolio with a unique and lucrative portfolio of groundbreaking drugs for genomically defined cancers. Given the high premium paid and the fact that Lilly is paying well above Loxo's all-time high in the low $190s it would seem Lilly is attempting to scurry any potential competing offers.

"That being said, the uniqueness of the asset will certainly give rise to speculation of counter-bids from pharma giants with oncology businesses including Aztrazeneca, Novartis, Merck, Roche, Abbvie, and Pfizer. Given the distinctiveness of Loxo's portfolio we do not anticipate any antitrust concerns and we believe the company’s guidance of closing the tender by the end of the first quarter is conservatively achievable."

Eli Lilly’s shares were up 3.01% at $114.67 and Loxo Oncology’s shares were up 6.75% at $139.87 at 1254 GMT.