Skip to Main Content

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 a 68 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.

Unlock this article by subscribing to STAT+ and enjoy your first 30 days free!

  • On the face of it, this looks much better than Lilly’s past acquisitions. Upon closer look, I wonder if it is repeating the mistake it made when it bought Imclone, i.e., grossly overpaying for a handful of compounds that are mostly in early development or preclinical. Since Bayer already has the rights to Vitrakvi and Loxo-195, Lilly is basically paying $8 billion for 1 (promising) molecule in late development (Loxo-292), one in early development (Loxo-305), and two preclinical programs. This looks awfully expensive, although an aggressive sales forecast for Loxo-292 could help justify it. Time will tell if this pans out. Ironically, even if it does not, it might still be a good deal if Loxo can teach Lilly how to develop drugs on the cheap. Since it creation in 2013, Loxo’s cumulative R&D spend has been a paltry $400 million. So, $8 billion plus $1.5 billion it reportedly got from Bayer is not a bad payday for 5 years of labor. For Lilly’s board though, the question is why can’t such great ideas germinate inside? What did Loxo have that Lilly lacked? It’s certainly not money.

Comments are closed.