Finance & Investment, Market Updates

Eli Lilly & Company to Acquire 100% Stake in Loxo Oncology, Inc.

Introduction

Eli Lilly and Company (NYSE:LLY) entered into a definitive agreement to acquire Loxo Oncology, Inc. (NasdaqGM:LOXO) from Aisling Capital III, L.P., a fund managed by Aisling Capital LLC and others for $7.2 billion on January 5, 2019.

Business Description

Seller is a biopharmaceutical company that develops and sells medicines for patients with genetically defined cancers in the United States. It had a LTM November 2018 revenue of $144.8m with an EBITDA margin of -0.5% while buyer is a company that discovers, develops, manufactures, and markets pharmaceutical products worldwide. The company operates through two segments, Human Pharmaceutical Products and Animal Health Products. It had a LTM November 2018 revenue of $24.2bn with an EBITDA margin of 29%.

Transaction Consideration

Seller company was valued at $7.3bn with an equity value of $7.2bn resulting in a per share valuation of $235 with a premium of 68%. The deal was at an EV/Revenue multiple of 51.0x and an Equity value to book value multiple of 19.1x.

Deal Structure

As part of the agreement, Eli Lilly and Company will commence a cash tender offer (the “Offer”) to purchase all of the outstanding shares of Loxo Oncology at a price of $235 per share (the “Offer Price”), net to the seller in cash, without interest, and subject to withholding taxes. Following consummation of the offer, Loxo Oncology will operate as a wholly owned subsidiary of Eli Lilly and Company. If Loxo Oncology terminates the merger agreement under specified circumstances, Loxo Oncology may be required to pay Eli Lilly and Company a termination fee of $265 million.

Conclusion

Deutsche Bank Securities Inc. and Goldman Sachs & Co. LLC served as buy side and sell side financial advisors respectively. As on January 7, 2019, the transaction is expected to close in first quarter of 2019.

 

Written by : John Oyadougha

 

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