M&A

Playing catch-up, Eli Lilly swoops in with $1.6B cash deal for Armo Bio and its promising PhIII cancer drug

Eli Lilly’s BD team is on the march, and as promised they’re staying carefully focused on oncology.

This morning Lilly $LLY announced that it has acquired Armo BioSciences $ARMO for $1.6 billion in cash — just a few months after their successful IPO debut on Nasdaq. This is a biotech that independent investor Brad Loncar recently dubbed as the “next Nektar,” comparing Armo to one of the darlings in immuno-oncology which also has a strategy involving cytokine immuno-stimulatory therapies.

Levi Garraway

Lilly is paying $50 a share, which immediately triggered a 67% spike on the stock this morning as investors rushed in to take advantage of the latest bolt-on deal.

The jewel in the crown for Lilly here is pegilodecakin, a PEGylated IL-10 that is now in a pivotal study after demonstrating early-stage success in several tumor types. The Phase III is for pancreatic cancer, with trials underway for lung and renal cell cancer, melanoma and other solid tumor types. Lilly also highlighted some preclinical candidates it’s picking up.

The big idea here falls right in the sweet spot of the current I/O rave. The lead drug is designed to spur the proliferation of CD8+ T cells in patients, improving prognosis and lengthening the survival of cancer patients. 

Analysts following Lilly have been tracking the executive team’s keen interest in plunging directly into I/O after getting left behind by leaders like Merck and Bristol-Myers Squibb. Just a few days ago the company added to the growing evidence of a breakout move by recruiting Leena Gandhi, an investigator at the Perlmutter Cancer Center at NYU Langone Health and a Dana-Farber vet, to head up its immuno-oncology research work. Gandhi played a big role in one recent Keytruda program and she’ll now be putting her know-how to use for Lilly.

Lilly could easily afford a string of these bolt-on deals, adding to a string of M&A pacts topped by Takeda’s $62 billion Shire buyout. After a lengthy drought of deals, big players are clearly willing to fork over major premiums to beef up their pipelines and add catalysts to their calendars.

And Lilly signaled it’s only begun to wheel and deal.

“As we develop our immuno-oncology portfolio, Lilly will pursue medicines that use the body’s immune system in new ways to treat cancer,” added Levi Garraway, senior vice president, global development and medical affairs, Lilly Oncology. “We believe that pegilodecakin has a unique immunologic mechanism of action that could eventually allow physicians to offer new hope for many cancer patients.”


Image: SHUTTERSTOCK


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