Bayer pays $400M upfront to buy into Loxo cancer drugs

Bayer has paid $400 million (€340 million) and committed to more than $1 billion more to buy into Loxo Oncology’s tropomyosin receptor kinase (TRK) inhibitor franchise. The agreement puts Bayer in charge of global commercialization of a drug that chalked up a 75% response rate in a midphase trial.  

Loxo will quickly earn a sizable sum in return for relinquishing rights and control over TRK inhibitor larotrectinib and follow-on compound LOXO-195. In addition to the $400 million upfront, Bayer will pay $450 million in milestones once larotrectinib is approved and achieves its first sales in certain major markets.

With filings for approval in the U.S. and Europe already in the works, Loxo has been emboldened to predict the deal will generate $1 billion over the next few years. 

That figure reflects the industry’s appetite for cancer drugs and strength of the data generated by larotrectinib. The drug is designed to work in the subset of cancer patients with TRK fusions. When given to 55 patients with 17 types of TRK fusion-positive cancer, the pan-TRK inhibitor achieved an objective response rate of 75%. Loxo plans to build on that success with LOXO-195, an early-phase asset aimed at patients who develop resistance to larotrectinib. 

The deal features a further $475 million in milestones, plus tiered double-digit royalties, tied to the sales Bayer racks up outside of the U.S., where it is fully responsible for commercialization. In the U.S., Loxo and Bayer will co-promote, splitting the costs and profits equally. The partners will also share the cost of further development. Loxo will take the lead on these activities, reflecting its wish to leverage the experience it has gained with TRK inhibitors. 

All told, Loxo could receive $1.55 billion, almost half of which is due to land in its bank account by the end of next year. The numbers proved compelling enough for Loxo to drop its go-solo plans. 

Loxo was approached by large biopharma companies after posting data on larotrectinib earlier this year, CEO Joshua Bilenker, M.D., said on a call with investors. This led Loxo to evaluate the various deal models proposed by potential partners against its existing go it alone plans, before homing in Bayer’s offer as the best fit.

That decision was partly based on a belief the Bayer deal would position Loxo to bring its drugs to more patients more quickly. The co-promotion agreement is one part of this equation. Bayer and Loxo will divvy up responsibilities for promoting larotrectinib, with the former taking oncologists and the latter talking to the laboratory community.

Bayer had a similar division of labor when co-promoting Xofigo with Algeta. Faced with the task of promoting a complex product to two different groups, Loxo has decided the model can work for it, too.  

"We see it as one and one is more than two," Loxo CBO Jacob Van Naarden said.

The next step is to file for approval of larotrectinib in the U.S., something Loxo is still on track to do around the turn of the year. Beyond that lie the filing for approval in Europe and first commercial sales, milestones that will advance the amount Loxo earns from the deal up toward $1 billion. Van Naarden expects to pull in $250 million this year, with $425 million to follow in 2018. 

Shares in Loxo dipped 6% in premarket trading. On a conference call with investors, multiple analysts questioned the wisdom of giving up the U.S. rights to larotrectinib, which was expected to spearhead Loxo’s evolution into a commercial-stage biotech.