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Pharma Stock Roundup: Lilly to Buy Loxo for $8B, M&A in Focus at JP Morgan Meet

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The top story this week was Eli Lilly’s (LLY - Free Report) offer to buy small cancer biotech Loxo Oncology for $8 billion in cash. At the prestigious J.P. Morgan Healthcare Conference held in San Francisco, CA, the key topic of discussion was the possible rise in pharma and biotech M&A activity this year.

Recap of the Week’s Most Important Headlines

Lilly to Buy Loxo Oncology to Broaden Cancer Portfolio: Lilly announced a definitive deal to acquire small cancer biotech, Loxo Oncology, Inc., for $8 billion in cash. The offer price of $235 represented a premium of 68% of Loxo’s closing price on Jan 4. The deal will broaden Lilly’s cancer portfolio into targeted medicines by adding Loxo’s newly approved marketed drug Vitrakvi as well as three precision medicines to its pipeline developed for multiple tumor types. Vitrakvi, an oral TRK inhibitor, which Loxo markets in partnership with Bayer, was approved by the FDA in November last year.

Targeted medicines or precision medicines work by targeting a specific genetic abnormality and represent a robust approach to cancer treatment. In patients whose cancers harbor these genomic alterations, targeted therapies can show significant benefits. Lilly management expects the deal to be accretive on a cash basis for the next several years and add to revenues and margins going forward. After the acquisition announcement by Lilly, which comes on the heels of the Bristol-Myers-Celgene mega merger deal, it is speculated that more M&A activity, including mega-mergers, could be seen among pharmaceutical companies.

M&A Activity in Focus at JP Morgan Healthcare Conference: Several pharma and biotech companies participated in this prestigious annual healthcare conference.  After two big M&A deals announcement early in the New Year, a key topic of discussion at the meeting was a possible increase in M&A activity this year.

Albert Bourla, Pfizer’s (PFE - Free Report) new chief executive officer (CEO) said that the company will continue to take the inorganic growth route though it will stay away from any “destructive deals.” Bourla showed interest in adding mid- and late-stage assets into its pipeline in the six therapeutic areas it focuses on. Merck (MRK - Free Report) CEO Ken Frazier said there were possibilities of more M&A activity as valuations were coming down. Frazier said that though the company tried to consummate some deals, none worked out due to the lack of a willing seller or owing to the fact that a late-stage asset was too robustly competitive.

Lilly CEO David Ricks said that the company will continue to evaluate other potential deal targets to enhance its position in core therapeutic areas like cancer, immunology and neuroscience. Glaxo's (GSK - Free Report) CEO Emma Walmsley said that the company will look for early-stage assets that it can develop and partner with companies.

AbbVie’s (ABBV - Free Report) vice chairman and president, Mike Severino showed interest in strengthening the company’s pipeline through “strategic licensing, acquisition and partnering activity”. (Read more: Big Pharma CEOs Indicate More M&A Deals at JP Morgan Meeting)

Allergan Presents Positive Data from Second Study on Glaucoma Candidate: Allergan (AGN - Free Report) announced positive top-line data from the second phase III study on its pipeline candidate Bimatoprost SR, an investigational implant developed as the first sustained-release drop-free treatment option for lowering intraocular pressure (IOP) in patients with open-angle glaucoma or ocular hypertension.

Three-month data from the study showed that Bimatoprost SR reduced IOP by approximately 30% over the 12-week primary efficacy period, thereby demonstrating non-inferiority to the study comparator, timolol eye drops. Well received by the patients, Bimatoprost SR showed potential for patients staying on treatment free for more than a year after the last implant was inserted, similar to that demonstrated in the first study.

Top-line data from the first pivotal study were announced in June last year. Allergan plans to file a new drug application (NDA) to the FDA for Bimatoprost SR in the second half of 2019.

Novartis’ Sickle Cell Pain Crises Candidate Gets Breakthrough Therapy Tag: Novartis’ (NVS - Free Report) pipeline candidate, crizanlizumab (SEG101) received Breakthrough Therapy designation from the FDA to prevent pain crises (also called vaso-occlusive crises, or VOCs) in patients with sickle cell disease. Novartis anticipates filing a NDA for crizanlizumab in the first half of 2019.

The NYSE ARCA Pharmaceutical Index rose 3% in the last five trading sessions.

Large Cap Pharmaceuticals Industry 5YR % Return

Large Cap Pharmaceuticals Industry 5YR % Return

Here is how the seven major stocks performed in the last five trading sessions:

All the stocks except AstraZeneca (AZN) were in the green in the last five trading sessions with Bristol-Myers recorded the maximum gain (5.7%). AstraZeneca declined 0.2% in the same period.

In the past six months, Lilly (LLY - Free Report) has been the biggest gainer (30.4%) while Bristol-Myers declined the most (16.0%).

(See the last pharma stock roundup here: BMY to Buy CELG for $74B, MRK Gets Rights to NASH Candidate)

What's Next in the Pharma World?

Watch out for pipeline and regulatory updates next week.

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