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In a Precision Step, Bayer Writes Loxo $400M Check for Two Cancer Drugs

Xconomy New York — 

The latest evidence of the progress of targeted cancer drugs came this morning in the form of a $400 million check. That’s what Bayer will pay, up front, to Loxo Oncology, a company that has the chance to be the second, following Merck, to win approval of a drug for tumors with a specific genetic signature—regardless of what body part they originated in.

The deal gives Bayer partial rights to two drugs. The first is Loxo’s (NASDAQ: LOXO) larotrectinib, an experimental cancer drug that is soon headed for a regulatory review, and the second is a drug candidate called LOXO-195 that is in early stage testing. Loxo, of Stamford, CT, and South San Francisco, CA, expects to file for approval of larotrectinib in the U.S. in late 2017 or early 2018, and in Europe next year.

Loxo and Bayer will split U.S. rights to both drugs in the deal. Loxo will get royalties on sales outside the U.S., as well as potentially up to $475 million in sales milestones. In total, Loxo could see up to $1.1 billion in cash beyond the initial $400 million check, though those payments are tied to various developmental, regulatory, and sales targets. Loxo had $405.3 million in cash at the end of September.

While Loxo shares fell about six percent in pre-market trading, the deal is noteworthy as an investment in the progress of targeted cancer therapies. At the American Society of Clinical Oncology’s (ASCO) annual meeting in June, Loxo reported that 78 percent of the 55 total patients in three separate clinical trials of larotrectinib responded to treatment, meaning their tumors at least partially shrunk. What makes those numbers particularly significant is Loxo enrolled patients with 17 different types of cancer—among them kidney, bladder, stomach, and lung—and found consistent results. These studies, called “basket” trials, took on patients with different cancers that share one important commonality: a genetic alteration known as a TRK fusion that Loxo’s drug is designed to target. The abnormality is present in 0.5 percent to 1 percent of solid tumors. LOXO-195 is being developed for patients whose tumors begin to resist larotrectinib.

The results followed a watershed moment for oncology. Just weeks before Loxo’s data, Merck’s (NYSE: MRK) pembrolizumab (Keytruda) was approved by the FDA to treat a cancerous mutation, regardless of where a tumor originated. The idea of targeted cancer therapies isn’t new—drugs like imatinib (Gleevec), trastuzumab (Herceptin) and crizotinib (Xalkori) were approved years ago for patients with a particular type of cancer and a specific molecular marker. But cheaper, better sequencing technologies, more insight into tumor genetics, and creative clinical trial designs are leading to more efforts to try to see if these and other molecular signatures can impact many cancers, not just a few. Loxo, and San Diego, CA-based rival Ignyta (NASDAQ: RXDX), whose drug entrectinib targets both TRK fusions and other mutations, are two of the companies aiming for a tissue-agnostic approval of a drug. Larger studies are also underway, among them the 30-arm NCI-Match trial that began in 2015 that includes patients with lymphomas, solid tumors, and myelomas.

Cancer experts at the ASCO meeting noted that the progress of these efforts may help spur the adoption of broad, expensive cancer genetic tests, which have struggled to gain traction amid payer pushback, resistance from community oncologists, and questions about their utility.

An important decision on that front is coming soon. The FDA could soon decide whether to approve FoundationOne, the cancer DNA test from Foundation Medicine (NASDAQ: FMI), which has spent years fighting for insurance coverage. It’s no guarantee that approval will lead to broader adoption and reimbursement from payers—that will take more validated molecular markers, and approved drugs based on genetic alterations, like a TRK fusion. But Bayer’s investment in larotrectinib represents the pharma firm’s belief that broad cancer DNA testing will become more commonplace.

“In the medium / long-term, there is a high likelihood that many patients with advanced cancer types will have their tumors comprehensively profiled and we are working to ensure that TRK fusions can be detected as part of this routine process,” said Bayer spokesperson Sasha Damouni, in an e-mail to Xconomy.