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Lilly seeking out more ‘Dermira-like’ deals

Eli Lilly expects to sign one deal worth between $1 billion and $5 billion per quarter in 2020, company chief financial officer Josh Smiley told Reuters, laying out an acquisitive strategy following its $1.1 billion takeover last week of dermatology specialist Dermira.The pharma’s focus will be on clinical-stage or “late preclinical” drugs that can round out its five core therapeutic business, which include oncology, immunology and diabetes, CEO David Ricks told investors Tuesday at the J.P. Morgan Healthcare Conference.Larger M&A, however, is not likely, according to Ricks. “We’re certainly less interested in scaled companies,” he said.

Lilly has kicked off proceedings at the JPM conference with billion-dollar deals the past two years, with its $8 billion buyout of Loxo Oncology in 2019 its largest ever.

But its appetite for bolt-on deals doesn’t appear to be satisfied yet, as executives signaled interest in stocking the pipeline with more drug candidates. The tempo sketched out by Smiley to Reuters would be somewhat out of character for Lilly, which historically has been a more sporadic dealmaker.

Lilly’s research also encompasses neurodegeneration and pain medicine. But in a session at JPM, Ricks acknowledged that cancer drugs were the biggest targets.

“Where are the assets? More than half are in oncology. A good portion are in immunology,” he said. “While we love diabetes and neuroscience, there are just fewer venture-backed ideas in that space. Most, probably all of them, would come talk to us anyway.”

In spite of the high valuations of many clinical-stage cancer companies, Lilly may be willing to pay what appears to be a high price in order to secure a promising experimental drug.

“In oncology it may be slightly different from other fields because of the way oncology development works and the difficulty of comparative development,” Rick said. “Speed and execution, and the opportunity to move and be first, has a premium when valuing those assets.”

In Loxo, Lilly appears to have made a good decision. The Food and Drug Administration approved its first drug, Viktravi, in 2018, and selpercatinib has impressed with data in a certain type of non-small cell lung cancer. (Bayer licensed the rights to Viktravi from Loxo.)

Lilly liked Loxo so much that it reorganized all of its oncology development under its former management team, headed by previous CEO Josh Bilenker. The trick for Lilly will be whether it can make the Loxo lightning strike twice as its M&A strategy unfolds.