Bayer steps up with $1.55B deal to take a lead role in commercializing Loxo’s cancer drugs

Bayer is buying into the closely-watched pivotal cancer program underway at Loxo Oncology $LOXO. And they are paying big to partner on Loxo’s pipeline of genetically defined cancer therapies.

Bagging commercialization rights on larotrectinib, its follow-up drug LOXO-195 and the whole pipeline at Loxo, Bayer is handing over a $400 million upfront, $450 million in milestones for the development and first sale of larotrectinib, with another $200 million on the table for LOXO-195. There’s also $500 million on the books for commercial goals.

Both of the lead drugs target rare cases of TRK fusion, but LOXO-195 — which has begun to produce the first set of positive data — is for patients who develop resistance to a TRK inhibitor. Rather than develop a drug for a specific organ type, Loxo’s drugs are designed to be used wherever genetically defined cases develop.

Loxo and Bayer will split the costs and the profits in the US in the deal, with Bayer taking the lead role on the regulatory side outside of the US.

Loxo’s shares, though, have been swelling as a large group of investors began betting on a buyout, with a big upside for shareholders. Now that Loxo is signaling that it’s going commercial with a partner, though, its shares reacted by dropping 8%.

Robert LaCaze

For a small company with just a few dozen staffers, Loxo has enormous ambitions that include shooting at some groundbreaking advances in drug development. At ASCO last summer, the biotech boasted a 76% tumor response rate for larotrectinib among patients with multitude of different tumor types. Unlike a typical cancer drug focused on the anatomy, Loxo is going after a biomarker — tropomyosin receptor kinase (TRK) fusions — and at ASCO it cobbled together response data from three early-stage trials.

Like others in the field, Loxo — helmed by CEO Josh Bilenker — has been able to vault from early to late-stage development in a blur of recent activity.

Loxo has been saying for months now that it’s planning to file for an approval on larotrectinib either late this year or early next. In a recent call with analysts, Chief Business Officer Jacob van Naarden said:

Internally, we’re preparing for a mid-2018 approval and launch. But again, that’s more from a preparedness perspective not a sort of guidance of when we think the drug will actually get approved.

Bayer, meanwhile, has had mixed results this year. Looking to assure the markets that its pharma business wouldn’t languish as it pursued Monsanto, Bayer had predicted that its pipeline included 6 drugs — vericiguat, finerenone, vilaprisan, BAY-1841788, the cancer drug anetumab ravtansine and copanlisib — with 6 billion euros in peak sales.

Anetumab was Exhibit A in that case, but it recently failed a Phase II study. Copanlisib, though, was approved.

Bayer’s willingness to pay big to jump into a lead role here underscores just how high valuations are running and also how hot the whole oncology field is right now.

“We see great potential in larotrectinib and moreover the follow-on compound LOXO-195 which may provide additional benefit for patients who might progress on an initial TRK inhibition therapy. These agents have the potential to fulfill the promise of precision medicine, where tumor genetics rather than tumor site of origin define the treatment approach for patients”, said Robert LaCaze, executive vice president and head of the Oncology Strategic Business Unit at Bayer.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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