(Bloomberg) — Eli Lilly & Co. will acquire Loxo Oncology Inc. for about $8 billion in cash, the second multibillion-dollar cancer deal of the year by a major U.S. pharmaceutical company.
The purchase is Indianapolis-based Lilly’s biggest takeover ever, according to data compiled by Bloomberg. Loxo will get $235 per share in cash, the companies said in a statement Monday, The Stamford, Connecticut-based biotechnology company is developing cancer treatments that target a tumors’ genetic markers regardless of where in the body they’re located.
Lilly is offering a rich premium — 68 percent above Loxo’s closing stock price Friday and far above Loxo’s previous all-time high of $189.96, reached in July 2018. It’s another sign that drugmakers are willing to pay rich prices for assets after Bristol-Myers Squibb Co. and Celgene Corp. announced a $74 billion cash-and-stock deal last week.
Loxo shares rose 64 percent to $230.05 before the market opened in New York. Lilly shares dropped 3.2 percent to $111.
Cancer has become a major area of focus for Lilly. Long a stalwart in diabetes, the company suffered a series of costly setbacks in efforts to develop what would have been the first treatment for Alzheimer’s disease. Under Chief Executive Officer Dave Ricks, the company also spun off its animal-health unit, focusing the company further on human drugs.
Unlike some past high-profile deals in cancer — like Celgene’s 2018 takeover of Juno Therapeutics and Gilead Sciences Inc.’s 2017 acquisition of Kite Pharma — Celgene and Loxo have approved products already on the market. While that might sound mundane by the standards of other industries, biotechnology companies can research their therapies for years before their first product begins bringing in sales.
Loxo’s one marketed drug, Vitrakvi, or larotrectinib, is the leader in the field of TRK inhibitors, medicines that aim to shrink tumors by targeting a rare genetic anomaly. Partnered with German drugmaker Bayer AG, it won U.S. Food and Drug Administration approval last year.
Analysts expect Loxo to generate $1.14 billion in sales in 2023, according to estimates compiled by Bloomberg. They expect about $200 million in revenues this year.
The deal is expected to close by the end of March, the companies said in the statement. Deutsche Bank AG served as Lilly’s financial adviser, with Weil, Gotshal & Manges LLP as its legal adviser. Loxo was advised by Goldman Sachs Group Inc. and the law firm Fenwick & West LLP.
–With assistance from Marthe Fourcade.
To contact the reporter on this story: Rebecca Spalding in Boston at [email protected]
To contact the editor responsible for this story: Drew Armstrong at [email protected]
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