Eli Lilly Drops $1.6 Billion for Armo BioSciences and its Phase III Immuno-Oncology Drug

Eli Lilly

Shares of ARMO BioSciences have soared more than 67 percent in premarket trading after Eli Lilly announced it had struck a deal to acquire the Redwood City, Calif,-based company for $1.6 billion in an all cash deal.

This morning Lilly said the acquisition of Armo and its lead product candidate pegilodecakin will bolster the company’s immuno-oncology programs. Pegilodecakin, a PEGylated IL-10 (Interleukin-10), is in a Phase III clinical trial in pancreatic cancer, as well as in earlier trials for lung and renal cell cancer, melanoma and other solid tumor types. The Phase III trial is testing pegilodecakin combined with the chemo treatment Folfox against Folfox alone.

Pegilodecakin is designed to activate tumor-reactive cytotoxic CD8+ T cells in patients. CD8+ T cells mediate the tumor clearing effect of this immuno-oncology agent. The first patients in the Phase III trial were dosed last year. Pancreatic cancer has the highest mortality rate of all major cancers.

The Armo product has demonstrated clinical benefit as a single agent, and in combination with both chemotherapy and checkpoint inhibitor therapy, across several tumor types, Lilly said.

"At Lilly Oncology, we are dedicated to developing cancer medicines that will make a meaningful difference for patients," Sue Mahony, president of Lilly Oncology said in a statement. "The acquisition of Armo BioSciences adds a promising next-generation clinical immunotherapy asset to Lilly's portfolio of innovative oncology medicines."

Levi Garraway, Lilly Oncology’s head of global development and medical affairs, said the company believes pegilodecakin has a unique immunologic mechanism of action that could eventually allow physicians to offer new hope for many cancer patients. The Armo drug candidate is the type of immuno-oncology product the company is interested in adding to its pipeline, Garraway added. Whether or not that signals Lilly is eying additional acquisitions or collaborative deals remains to be seen. In April Lilly struck a collaborative deal with Sigilon Therapeutics to develop diabetes treatments.

Under terms of the agreement, Lilly will acquire outstanding shares of Armo BioSciences at $50 per share, about $1.6 billion. The morning’s announcement mobilized investors who began snapping up shares of the stock, which closed at $29.82 on Wednesday. During premarket trading, the flurry of activity drove the price of the stock up to as high as $49.90. The transaction is expected to close at the end of the second quarter of this year.

It was just this year that Armo became a publicly traded company. The company raised $128 million in its January IPO.

Armo Chief Executive Officer Peter Van Vlasselaer said the company is proud of the work that’s been done with immunotherapies and particularly the development of pegilodecakin. With the resources of Eli Lilly and its dedication to immuno-oncology, Van Vlasselaer said Lilly has the best opportunity to “maximize the value of pegilodecakin and the rest of the Armo pipeline.”

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