Pharma giant Eli Lilly & Co’s (NYSE:LLY) acquisition of Loxo Oncology Inc (NASDAQ:LOXO) for $8 billion in cash represents a positive bet on a cutting-edge scientific approach that uses DNA to treat cancer, said biotech company chief executives and industry experts.
Most cancer drugs treat a specific type of the disease, such as breast cancer or lung cancer, but Loxo Oncology’s medicines target gene mutations in cancers. In other words, Loxo first pinpoints underlying genomic vulnerabilities that lead to cancer, and then builds the right medicines to inhibit the target.
Last year, US regulators approved Loxo’s first commercial medicine, Vitrakvi, which was shown to be effective against a wide variety of cancers driven by a single, rare genetic mutation. It has been tested in people with cancers of the lung, colon, breast, and thyroid.
Advances in gene therapy
Rodney Varner, CEO of Genprex Inc (NASDAQ:GNPX), a clinical-stage gene therapy company with a focus on cancer, said the deal was a strong vote of confidence for new scientific approaches that use DNA to treat cancer.
“I think this is further validation of the promise of cancer therapies that target specific cancer-causing genetic abnormalities. Many smaller companies are developing gene therapies and other drugs targeting specific genetic abnormalities. With the leadership of companies like Eli Lilly, I believe that we will see other major pharma companies move into this field bringing vast resources,” Varner told Proactive Investors.
“This will likely lead to additional acquisitions of smaller biotech companies developing these technologies, in turn attracting still more capital into this space,” he added.
The CEO also noted that Genprex should “benefit” from these developments, as “our gene therapies are also based on treating specific genetic mutations that cause cancer.”
Boosting drug pipeline
Eli Lilly already has a presence in oncology. Notably, the chemotherapy Alimta is one of its most valuable products, bringing in more than $2 billion in revenue in 2017, but the drug has been losing patent protection in other countries and could also lose it in the US soon.
“We’d like to grow our presence in oncology. We have a good set of medicines there but we’d like to expand that because there’s so much exciting science for patients emerging in oncology to invest in,” Lilly CEO David Ricks told CNBC’s Jim Cramer on “Squawk on the Street.”
“Bristol-Myers Squibb was under pressure to beef up its cancer drug portfolio given that the company’s drug Opdivo has been struggling to keep up with Merck’s competing drug Keytruda. In a nutshell, I believe Bristol-Myer’s purchase of Celgene is an attempt to deepen its drug pipeline in one fell swoop,” said Bob Byrne, a Proactive contributor and private investor.
“Eli Lilly’s transaction for Loxo, on the other hand, appears to be more targeted and strategic. In buying Loxo, Eli Lilly will acquire the drug Larotrectinib (Loxo-101) marketed under the name Vitrakvi. It's been reported that a year’s supply of Vitrakvi will cost over $393,000! In buying Loxo, Eli Lilly must believe that high price tag has staying power,” added Byrne.
Big Pharma eyes acquisitions
Byrne also said Eli Lilly’s purchase of Loxo, which has a “relatively small, but very promising pipeline” is an indication that larger pharma companies are ready to start buying smaller biotech firms to beef up their drug offerings.
“I view Eli Lilly purchase of Loxo as bullish for the entire small to mid-cap biotech sector while Bristol-Myers purchase of Celgene seems more like a one-off purchase (and less likely to affect other stocks in the biotech space).”
Lilly said it will update its financial outlook to include the full purchase price of the acquisition when it announces its fourth-quarter earnings in February. The cost of cash was already worked into its guidance for fiscal year 2019.
Stifel analyst Stephen Willey said the buyout “made sense” for Eli Lilly as it has an existing commercial presence in non-small cell lung cancer.
Contact Uttara Choudhury at [email protected]