Eli Lilly and Co. (NYSE: LLY) has announced plans to acquire Loxo Oncology Inc. (NASDAQ: LOXO) in a deal valued at about $8 billion. The deal would be the biggest acquisition in the drugmaker’s 143-year history. According to reports, Deutsche Bank is Lilly’s financial adviser, while Goldman Sachs is the financial adviser to Loxo. Lilly has retained Weil, Gotshal & Manges as its legal adviser in the matter, while Fenwick & West is representing Loxo.
The offer of $235 per share in cash represents a premium of roughly 68 percent to Loxo’s close at the end of last week. Some Wall Street analysts expressed concerns that premium was high for a company with only one drug on the market that it shares with a partner. Wall Street does not expect Loxo revenue to reach $1 billion until 2023.
Loxo Oncology focuses on developing targeted medicines for cancers that can be detected by genomic testing. The Connecticut-based company is seen as an innovator of new technologies that can isolate genetic drivers of tumor growth. Loxo’s shares surged 66.2 percent after the announcement of the deal, while Lilly dropped 1.50 percent. Other small developers of targeted cancer therapies also saw stock price rises, including Array BioPharma, Blueprint Medicines Corp., and Clovis Oncology Inc.
Loxo’s first commercial medicine, Vitrakvi (larotrectinib), was approved by U.S. regulators last year. The drug was shown to be effective against a wide variety of cancers driven by a single, rare genetic mutation known as TRK fusion. Vitrakvi is sold in partnership with Bayer AG, which sells the drug outside the United States and shares U.S. commercial costs and profits with Loxo.
Loxo is also developing a drug targeting a different rare gene mutation that it is calling LOXO-292. Analysts believe that drug will eventually have annual sales of over $1 billion. The currently proposed deal would give Lilly full control of that drug as it is not part of Loxo’s collaboration with Bayer.