Are Loxo Shareholders Getting Enough in the Buyout?

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Loxo Oncology Inc. (NASDAQ: LOXO) shares made a massive gain on Monday after it was announced that the firm would be acquired by Eli Lilly and Co. (NYSE: LLY). The transaction is not subject to any financing conditions and is expected to close by the end of the first quarter of 2019.

Under the terms of the deal, Eli Lilly to acquire Loxo Oncology for $235 per share in cash, or roughly $8.0 billion in total. This transaction represents a premium of 58% from the 50-day moving average of $148.38.

Note that this acquisition would be the largest and latest in a series of transactions Eli Lilly has conducted to broaden its cancer treatment efforts with externally sourced opportunities for first-in-class and best-in-class therapies.

For some quick background: Loxo Oncology is developing a pipeline of targeted medicines focused on cancers that are uniquely dependent on single gene abnormalities that can be detected by genomic testing. For patients with cancers that harbor these genomic alterations, a targeted medicine could have the potential to treat the cancer with dramatic effect.

Anne White, president of Lilly Oncology, commented:

The acquisition of Loxo Oncology represents an exciting and immediate opportunity to expand the breadth of our portfolio into precision medicines and target cancers that are caused by specific gene abnormalities. The ability to target tumor dependencies in these populations is a key part of our Lilly Oncology strategy. We look forward to continuing to advance the pioneering scientific innovation begun by Loxo Oncology.

Shares of Loxo were last seen up about 66% at $232.07, in a 52-week range of $82.74 to $233.76. The stock has a consensus analyst price target of $203.40.

Eli Lilly was down 1% at $113.50 a share, with a consensus price target of $117.88. The 52-week trading range is $73.69 to $119.84.