The deal will see Eli Lilly pay $235 for each Loxo share, a price that represents a 68% premium to the stocks' Friday closing price of $139.87. The transaction is not subject to any financing condition and is expected to close by the end of the first quarter of 2019, the companies said. The takeover comes just days after Bristol-Myers Squibb Co. (BMY) - Get Report agreed to buy Celgene Corp. (CELG) - Get Report in a deal that values the group at $74 billion.
"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," said Jacob Van Naarden, chief operating officer of Loxo Oncology. "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."
Eli Lilly shares rose 0.7% on Monday, while Loxo Oncology shares surged 65.9% to $232.06 following news of the deal to take the Stamford, Conn.-based biotech's market value past $7.1 billion.
"Loxo Oncology is developing a pipeline of targeted medicines focused on cancers that are uniquely dependent on single gene abnormalities that can be detected by genomic testing," Eli Lilly said. "For patients with cancers that harbor these genomic alterations, a targeted medicine could have the potential to treat the cancer with dramatic effect."
The company said the Loxo transaction will impact its recently announced 2019 earnings guidance and will update investors when it publishes fourth quarter and full year earnings on February 13.
Eli Lilly boosted its quarterly dividend and issued stronger-than-expected 2019 profits forecasts last month thanks to stronger demand for new medicines and its existing diabetes drug franchise.
Eli Lilly said it sees full year 2019 earnings of between $5.90 and $6.10 per share, firmly ahead of the $5.82 Street forecast and some 9% higher than the top end of its current year forecast, which is reaffirmed at $5.55 to $5.60 per share on a non-GAAP basis.
Eli Lilly also sees 2019 revenues in the region of $25.3 billion to $25.8 billion, a year-on-year increase of "mid-single-digits" driven by new medicines such as its type-2 diabetes treatment Trulicity. Eli Lilly added that its next quarter dividend payout will rise by 15% to 64.5 cents per share.
Eli Lilly posted stronger-than-expected third-quarter earnings last month thanks in part to Trulicity sales of $816.2 million, which rose 55% from the same period last year and were $46.2 million ahead of the second quarter pace.
Eli Lilly said earnings for the three months ended in September came in at $1.39 per share, topping the consensus forecast of $1.35 and rising 32.4% from the same period last year. Group revenues, Eli Lilly said, rose 7.1% to $6.06 billion, again beating Street forecasts.
The company had earlier said the drug was found to reduce the risk of major adverse cardiac events in patients with the disease following its key REWIND trials, which it will detail to the American Diabetes Association in June of next year.
The group's erectile dysfunction drug Cialis, however, saw sales fall 17% to $467 million, taking its year-to-date total to $1.5 billion, as it continues to face increased competition from generic rivals such as Teva Pharmaceutical's Sildenafil, which has been available since December 2017.