Skip to Content
Stock Analyst Update

Loxo Purchase Fills Eli Lilly's Cancer Pipeline

We don't expect any major changes to our fair value estimate based on the deal, with the expected revenue from acquired cancer drugs offsetting the purchase price and increased R&D expenditures.


 Eli Lilly (LLY) announced the acquisition of Loxo Oncology for $8 billion, and we don't expect any major changes to our fair value estimate based on the deal, with the expected revenue from acquired cancer drugs offsetting the purchase price and increased R&D expenditures. Strategically, the deal brings Lilly targeted cancer drugs focusing on tumors with mutations in TRK, RET, and BTK, which should fit well with Lilly's strong position in oncology with already approved cancer drugs. Further, the deal helps fill Lilly's late-stage cancer pipeline. The deal also reinforces Lilly's strong competitive advantage and wide moat by strengthening its portfolio with drugs that carry strong pricing power. Loxo's only approved drug Vitrakvi is priced at close to $400,000 per annual course of treatment.

The Loxo acquisition gives Lilly focused cancer drugs targeting smaller patient groups, but the strong efficacy of the drugs should support continued pricing power and robust sales. Vitrakvi (and follow-on drug Loxo-195) are partnered with Bayer with close to a 50-50 split in profits. These drugs target TRK positive cancers (0.5%-1% of solid tumors) and we expect peak annual sales of close to $1 billion. Loxo's late-stage drug LOXO-292 targets cancers with RET fusions (2%-3% of lung cancer and higher rates in thyroid cancer). The drug has already shown strong data in non-small cell lung cancer with a response rate of 68% in a refractory patient population that had already taken three other therapies on average. We project the drug can reach peak sales of over $500 million annually and with potentially registrational Phase II data likely in late 2019, the drug could reach the market by 2020. Additionally, Loxo's last later stage drug LOXO-350 targets cancers with BTK mutations, but we don't ascribe any sales potential for this drug, as early-stage data is not expected until later in 2019.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Damien Conover does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.