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Eli Lilly Agrees To Buy Loxo For $8B In Bid To Expand Oncology Franchise

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Eli Lilly Agrees To Buy Loxo For $8B In Bid To Expand Oncology Franchise

Achieving excellence in oncology franchises is driving large-cap companies to make astute buys of relatively smaller-sized companies with breakthrough pipeline assets in the field. Eli Lilly And Co (NYSE: LLY) has become the latest company to have made a move in this direction.

What Happened

Less than e week after Bristol-Myers Squibb Co (NYSE: BMY) clinched an agreement to buy Celgene Corporation (NASDAQ: CELG), Eli Lilly agreed to acquire Loxo Oncology Inc (NASDAQ: LOXO) for $235 per share in cash, or about $8 billion in total. The deal values Loxo at a hefty premium of 68 percent to its closing price Friday.

"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," Anne White, president of Lilly Oncology said in press release.

Why It's Important

The acquisition is expected to broaden Lilly's to include a marketed therapy as well as a pipeline of highly-selective potential medicines targeting genomically-defined cancers.

Loxo received FDA approval for its Vitrakvi, which it co-developed with Bayer AG (OTC: BAYRY), in November. The drug is intended to treat solid tumors with a specific type of gene mutation.

Among Loxo's pipeline assets is LOXO-292, an oral RET inhibitor being evaluated for multiple tumor types, with a potential launch timeframe of 2020. Other product candidates are LOXO-305 and LOXO-195.

What's Next

The deal is expected to be completed by the end of March, subject to customary closing conditions including the tender of a majority of Loxo shares and the receipt of regulatory approvals.

Lilly said it will issue an update to its 2019 guidance, including the impact of the proposed deal, along with its Q4 results to be released Feb. 13.

Loxo shares were skyrocketing 65.48 percent to $231.45 in pre-market trading, while Lilly was sliding 2.9 percent to $111.33.

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