Behind the Scenes at Lilly and Loxo's Whirlwind Wedding
Eli Lilly and Company announced it was acquiring Loxo Oncology for $8 billion on January 5, 2019, just days ahead of the JP Morgan Healthcare Conference. Now, regulatory filings give a glimpse of the behind-the-scenes action for what was a whirlwind marriage.
The two companies inked a non-disclosure agreement on December 22, 2018, and amended it a day later. One of the things apparent is that the companies wanted to make a splash at the JPM conference. In an unusual note, the deal came together in a surprisingly short two weeks. The filing indicates Lilly’s team wanted to “expeditiously” perform due diligence and then make a big splash at the JPM.
In that regard, they were successful, with other companies working on targeted oncology therapies like Agios Pharmaceuticals, Blueprint Medicines and Clovis Oncology, showing a stock pop at the news.
On January 7, Andrew Berens, an analyst with Leerink, wrote in a note to investors, “Today’s acquisition marks the third deal for targeted oncology companies since the beginning of December, and we believe the resurgence in M&A is likely to benefit the other late development-stage and early-commercial stage companies in our coverage universe.”
The two companies had been in contact since April 2018, but acquisition talks only began in December. The deal was announced on December 20.
Loxo has one FDA-approved drug on the market, Vitrakvi (larotrectinib), which was only recently approved. It is an oral TRK inhibitor developed and commercialized in collaboration with Bayer.
Regulatory documents suggest that Lilly was most interested in one of Loxo’s pipeline products, LOXO-292, which has “positive interim data” in early-stage clinical trials and had been granted breakthrough status by the FDA in September. LOXO-292 is an oral RET inhibitor being evaluated across multiple cancer types. Investment bank Raymond James projects almost $500 million in annual revenue for the drug by 2023.
Loxo also has LOXO-305, an oral BTK inhibitor currently in Phase I/II, being evaluated in several B-cell leukemias and lymphomas. It also has LOXO-195, a follow-on TRK inhibitor being studied by Loxo and Bayer.
Loxo didn’t hunt for competing bids and Lilly apparently revised its offer only a single time, going from the initial $230 per share to $235 per share. This was a 68 percent premium on Loxo’s January 4 closing share price.
Loxo’s chief executive officer Josh Bilenker and his team are big winners as well. Bilenker’s stock options are worth $240 million, with an $86 million golden parachute, $2 million in salary and severance, for a total of $326 million.
Jacob Van Naarden, Loxo’s chief operating officer, raked in $92 million in stock and $41 million for the golden parachute. Jennifer Burstein, senior vice president of Finance gained $25 million in stock and $13 million for the golden parachute. And Nisha Nanda, Loxo’s chief development officer, received $37 million in stock.
Lilly has been trying to build its oncology presence. The Loxo acquisition will go a long ways toward that goal, even though the company took a hit today. Its ANNOUNCE Phase III clinical trial of Lartruvo (olaratumab) in advanced or metastatic soft tissue sarcoma (STS) failed to meet the primary endpoints of overall survival (OS).
Lartruvo, a platelet-derived growth factor receptor alpha blocking antibody, was being studied in combination with doxorubicin in patients with STS compared to doxorubicin alone, a standard of care. It didn’t meet OS in the full study population or in a sub-population of patients with leiomyosarcoma. There was no difference in survival between the study arms.
In a Phase II trial of 133 patients, the combination had shown an OS benefit, which resulted in the U.S. Food and Drug Administration (FDA) granting the drug accelerated approval and conditional marketing authorization by the European Medicines Agency (EMA).
Soft tissue sarcoma is a complex disease marked by multiple subtypes, which complicates diagnosis and treatment. Sarcomas are described as “relatively rare” and typically develop in connective tissue, which includes fat, blood vessels, nerves, bones, muscles, deep skin tissues and cartilage. The American Cancer Society estimated 13,040 newly diagnosed cases in 2018, with about 5,000 of those people likely to die from it.
“Lilly was surprised and disappointed that Lartruvo did not improve survival for patients with advanced soft tissue sarcoma in this study,” stated Anne White, president of Lilly Oncology. “Lilly is committed to helping people who have soft tissue sarcoma and we will carefully study the detailed data in an effort to better understand the different results between the two trials. We are thankful for the patients and physicians who have participated in the ANNOUNCE study.”