Lilly’s oncology pipeline gets fresh boost with AurKa buyout

In a deal aimed at expanding its oncology portfolio further, Eli Lilly and Company (LLY) will acquire cancer drug maker AurKa Pharma. The decision comes a few days after the pharma giant agreed to buy late-stage immune-oncology company ARMO Biosciences (ARMO).

The deal with Montreal-headquartered AurKa accentuates an earlier association between the two companies, wherein the former developed the cancer drug AK-01 that was originally discovered by Lilly. The compound is currently undergoing preliminary clinical trials to evaluate its efficacy in treating multiple types of solid tumors. Lilly is apparently betting on the outstanding cancer-fighting capabilities of AK-01, which is AurKa’s lead oncology compound.

Under the terms of the agreement, the Indianapolis-based company will make an upfront payment of $110 million for AurKa’s shares. The agreement also calls for further payments of up to $465 million on condition that AK-01 obtains regulatory approval and achieves certain sales milestones in leading markets, which takes the total purchase consideration to about $565 million.

The deal accentuates an earlier association, wherein AurKa developed the cancer drug AK-01 that was originally discovered by Lilly

Though the transaction will reflect in Lilly’s next quarterly results, it will not affect its earnings per share guidance for fiscal 2018.

“The work done by AurKa will allow Lilly to leverage emerging data about cancers in which this molecule might be effective, and determine if it can be beneficial to people living with various forms of cancer,” said Levi Garraway who overseas Lilly’s oncology research.

Lilly’s recent acquisitions are in line with its renewed strategy to associate with pharmaceutical firms and venture capital companies in the field of life science to promote innovation in therapeutic areas that need special attention to make them capable of producing the desired results.

The acquisition of ARMO has added AM0010, a pancreatic cancer candidate that is also being developed for the treatment of solid tumors, to Lilly’s fold.

To the company’s advantage, various immune-oncology products developed by ARMO are currently in various stages of clinical trial. Shares of Lilly, which lost more than 2% since the beginning of the year, gained modestly in the initial trading hours on Monday.