Eli Lilly to buy Loxo Oncology for $8 billion
Jan 7, 2019 11:47:31 GMT
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Post by stcks on Jan 7, 2019 11:47:31 GMT
Eli Lilly, the Indianapolis-based drug giant, said Monday that it will purchase Loxo Oncology, a tiny startup, for $8 billion in cash to gain access to the company’s cancer medicines, one of which is on the market.
The deal price of $235 per share represents an 85 percent premium to Loxo’s closing price on Friday, and a rich gain for Loxo shareholders. Shares in the Stamford, Conn., company had already risen 975 percent since its September 2014 initial public offering. The reason: two experimental cancer pills that worked fantastically well in very small numbers of patients.
“We’re excited,” Daniel M. Skovronsky, M.D., Ph.D., Lilly’s senior vice president and chief scientific officer, said in an interview. “As we went through the process … every single person on our team who looked at this and touched it had this feeling that these are the kind of medicines I want to be associated with, that I want to spend my career working on, because of the impact for patients.”
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The acquisition will be expensive, but maybe lucrative. Loxo’s first medicine, Viktrakvi, 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 Viktrakvi, sold in partnership with Bayer, has a very high price: $32,800 a month, or $393,600 annually.
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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.
Loxo was founded in 2013 by Joshua Bilenker, who was then an investor at Aisling Capital, a New York-based firm that made both stock and venture capital bets. Bilenker, an oncologist by training, had spent two years as a medical reviewer at the FDA. He’d become fascinated by drugs that target what are known as fusion genes. In these cases, one gene becomes fused to another, turning it on permanently and resulting in cancer. Drugs that target fusions, such as Novartis’ Gleevec and, later Pfizer’s Xalkori, were among the most effective cancer medicines. The challenge was that fusions are rare, and that meant that so too would be the cancers Loxo would treat.’
Bilenker hired Array Biopharma, another biotech, to make molecules for Loxo and moved quickly into clinical trials. He described his strategy in a 2017 interview: “Hit the target really hard, define your patients, and just work like heck on the clinical-regulatory side.” Finding patients was difficult, and Loxo would often actually fly them in to get them to its clinical trials and put them up. “We’ll run through a cinder block wall to get to a patient,” Bilenker said in another interview.
One big question for Lilly will be whether either Bilenker or his chief operating officer, Jacob Naarden, will stay on, and, if they leave, how much of Loxo’s research capacity will remain. Skovronsky, the Lilly research chief, noted that he was the chief executive of Avid Radiopharmaceuticals, a company Lilly acquired in 2010, but that he stayed on because of the outsized impact he felt he could have at a large pharmaceutical firm, which has annual revenue of $22 billion.
Bilenker and Van Naarden declined to be interviewed for this story. Instead, they sent along a brief statement: “We are proud to be recognized for the innovative work we have done on behalf of cancer patients. We are excited by the prospect of our pipeline benefitting from the resources and global reach of the Lilly organization.”
Related: On the cusp of the ‘JPM,’ here’s a cheat sheet for what to watch in biotech in 2019
Even if Loxo never starts work on another drug, the deal already means two more for Lilly: a follow-up to Viktrakvi, for patients who become resistant to that drug; and a new molecule for patients who have become resistant to AbbVie’s Imbruvica or similar medicines used to treat some leukemias and lymphomas. That could be a substantial market. Many patients become resistant to gene-targeted medicines, and Imbruvica generates $2.6 billion in sales annually for AbbVie.
The deal could herald that large pharmaceutical companies are opening their purse strings for smaller biotech firms. It also, along with GlaxoSmithKline’s $5 billion purchase of Tesaro last month, shows that large pharmaceutical firms are continuing to see potential in medicines that target the genetic chinks of cancer, despite the waves of hype that have surrounded using drugs to boost patients’ immune systems to attack tumors. And it means that, for medicines that are extremely effective, Lilly still believes it will be able to charge a profitable price.
“This is truly breakthrough innovation,” said White. “It’s different than when were entering into pricing conversations where the benefit is incremental.” That is the bet that the pharmaceutical industry is built on.
The deal price of $235 per share represents an 85 percent premium to Loxo’s closing price on Friday, and a rich gain for Loxo shareholders. Shares in the Stamford, Conn., company had already risen 975 percent since its September 2014 initial public offering. The reason: two experimental cancer pills that worked fantastically well in very small numbers of patients.
“We’re excited,” Daniel M. Skovronsky, M.D., Ph.D., Lilly’s senior vice president and chief scientific officer, said in an interview. “As we went through the process … every single person on our team who looked at this and touched it had this feeling that these are the kind of medicines I want to be associated with, that I want to spend my career working on, because of the impact for patients.”
ADVERTISEMENT
The acquisition will be expensive, but maybe lucrative. Loxo’s first medicine, Viktrakvi, 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 Viktrakvi, sold in partnership with Bayer, has a very high price: $32,800 a month, or $393,600 annually.
NEWSLETTERS
Sign up for our Daily Recap newsletter
Privacy Policy
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.
Loxo was founded in 2013 by Joshua Bilenker, who was then an investor at Aisling Capital, a New York-based firm that made both stock and venture capital bets. Bilenker, an oncologist by training, had spent two years as a medical reviewer at the FDA. He’d become fascinated by drugs that target what are known as fusion genes. In these cases, one gene becomes fused to another, turning it on permanently and resulting in cancer. Drugs that target fusions, such as Novartis’ Gleevec and, later Pfizer’s Xalkori, were among the most effective cancer medicines. The challenge was that fusions are rare, and that meant that so too would be the cancers Loxo would treat.’
Bilenker hired Array Biopharma, another biotech, to make molecules for Loxo and moved quickly into clinical trials. He described his strategy in a 2017 interview: “Hit the target really hard, define your patients, and just work like heck on the clinical-regulatory side.” Finding patients was difficult, and Loxo would often actually fly them in to get them to its clinical trials and put them up. “We’ll run through a cinder block wall to get to a patient,” Bilenker said in another interview.
One big question for Lilly will be whether either Bilenker or his chief operating officer, Jacob Naarden, will stay on, and, if they leave, how much of Loxo’s research capacity will remain. Skovronsky, the Lilly research chief, noted that he was the chief executive of Avid Radiopharmaceuticals, a company Lilly acquired in 2010, but that he stayed on because of the outsized impact he felt he could have at a large pharmaceutical firm, which has annual revenue of $22 billion.
Bilenker and Van Naarden declined to be interviewed for this story. Instead, they sent along a brief statement: “We are proud to be recognized for the innovative work we have done on behalf of cancer patients. We are excited by the prospect of our pipeline benefitting from the resources and global reach of the Lilly organization.”
Related: On the cusp of the ‘JPM,’ here’s a cheat sheet for what to watch in biotech in 2019
Even if Loxo never starts work on another drug, the deal already means two more for Lilly: a follow-up to Viktrakvi, for patients who become resistant to that drug; and a new molecule for patients who have become resistant to AbbVie’s Imbruvica or similar medicines used to treat some leukemias and lymphomas. That could be a substantial market. Many patients become resistant to gene-targeted medicines, and Imbruvica generates $2.6 billion in sales annually for AbbVie.
The deal could herald that large pharmaceutical companies are opening their purse strings for smaller biotech firms. It also, along with GlaxoSmithKline’s $5 billion purchase of Tesaro last month, shows that large pharmaceutical firms are continuing to see potential in medicines that target the genetic chinks of cancer, despite the waves of hype that have surrounded using drugs to boost patients’ immune systems to attack tumors. And it means that, for medicines that are extremely effective, Lilly still believes it will be able to charge a profitable price.
“This is truly breakthrough innovation,” said White. “It’s different than when were entering into pricing conversations where the benefit is incremental.” That is the bet that the pharmaceutical industry is built on.
