Eli Lilly has agreed to splash out $8bn on smaller rival Loxo Oncology, the latest in a series of multibillion-dollar pharmaceutical deals as traditional drugmakers buttress cancer treatment portfolios with novel therapies that have been proven effective in treating the disease.
The deal comes just days after Bristol-Myers Squibb announced one of the largest healthcare deals of all time, as companies spend billions to restock their pipelines before existing blockbuster oncology medicines lose patent protection.
Bristol-Myers Squibb last week agreed to a $90bn deal to buy Celgene, a biotech company with a deep portfolio of cancer-focused assets. That deal followed GlaxoSmithKline’s $5.1bn takeover of oncology-focused Tesaro in December.
The contest for supremacy in oncology has been long running among the biggest pharmaceutical groups, with acquisitions and research and development dollars centred on new gene therapies that harness the body’s immune system to fight the disease.
AstraZeneca on Monday announced the appointment of José Baselga, a controversial but prominent cancer doctor, to lead its oncology R&D unit as part of its new strategic plan to “double down” on the field.
Cancer treatments are seen as relatively immune to pricing pressures, especially in the US where pharma companies have been under attack by President Donald Trump for raising drug prices.
Lilly’s $8bn cash transaction was announced on Monday, ahead of the JPMorgan Healthcare conference in San Francisco, an industry summit where many deals are hatched at the start of every year.
It is the largest deal Eli Lilly has ever completed, and comes months after it floated its animal health business to focus itself around its human pharmaceutical business, according to data provider Dealogic.
“Using tailored medicines to target key tumour dependencies offers an increasingly robust approach to cancer treatment,” said Daniel Skovronsky, Lilly’s chief scientific officer.
He added: “Loxo Oncology’s portfolio of . . . inhibitors targeted specifically to patients with mutations or fusions in these genes, in combination with advanced diagnostics that allow us to know exactly which patients may benefit, creates new opportunities to improve the lives of people with advanced cancer.”
The Loxo portfolio includes several drugs that are in trial as well as at least one that has been approved for use in patients, known as Vitrakvi. Lilly’s oncology portfolio includes lung-cancer treatment Alimta and Erbitux, a therapy for certain colorectal cancers. The company last year spent $1.6bn to buy Armo BioSciences to bolster its cancer treatment pipeline.
Under the terms of the agreement, Loxo’s shareholders will receive $235 per share in cash, a 68 per cent premium to Loxo’s closing stock price on January 4. The companies expect to complete the acquisition in the first quarter of 2019.
Shares of Loxo surged 65 per cent in pre-market trading on Monday to $231.25, while Lilly stock declined 3 per cent to $111.33.
Deutsche Bank was the sole financial adviser to Lily, while Weil, Gotshal & Manges acted as its legal counsel. Goldman Sachs and law firm Fenwick & West advised Loxo.
