As the first week of the New Year begins, Eli Lilly & Co announced its plan to acquire cancer drug specialist Loxo Oncology for $8 billion in cash. In this particular deal, Eli Lilly & Co will pay $235 for each share of Loxo Oncology stock. This price represents a premium of 68 percent by the stock’s $139.87 closing price as of Friday. Fortunately, this transaction is not subject to any financing conditions and the two companies expect the deal will close by the end of Q1.
This already marks the second major pharmaceutical deal of 2019. Just a few days ago, Bristo-Myers Squibb Co announced their agreement to buy Celgene Corporation in a merger that would value the new group at nearly $75 billion.
In a statement, Loxo Oncology chief operating officer Jacob Van Naarden commented, “We are excited to have reached this agreement with a team that shares our commitment to ensuring that emerging translational science reaches patients in need. We are confident that the work we have started, which includes an FDA approved drug, and a pipeline spanning from Phase 2 to discovery, will continue to thrive in Lilly’s hands.”
After announcing the deal, Eli Lilly shares pointed down 2.67 percent in pre-market trading. This would indicate a price at opening bell of $111.60 per share. More importantly, this move would drag the stock to a three-month decline of roughly 1.23 percent. On the other hand, Loxo Oncology shares improved more than 64 percent to $229.56 each.
Eli Lilly also commented on the merger. The company noted that Loxo Oncology is in the process of developing several targeted medicines aimed at treating cancers that are “uniquely dependent on single gene abnormalities that can be detected by genomic testing.” For patients who have these genome-based cancers, targeted medicines have the best potential for treating these cancers with the most profound effects.
With that Eli Lilly boosted its quarterly dividend and then improved its 2019 profits expectation last month to reflect results stronger than they had originally expected. Now the company says its full year 2019 earnings will ring out between $5.90 and $6.10 per share.