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Eli Lilly (LLY) to Buy AurKa Pharma, Expand Cancer Pipeline

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Eli Lilly & Company LLY announced a deal to buy an early-phase oncology asset, AK-01, from AurKa Pharma, Inc, a venture capital firm established by TVM Capital Life Science.

AK-01 is an Aurora kinase A inhibitor being studied in phase I studies in multiple types of solid tumors. Lilly will make an upfront payment of $110 million and acquire all shares of AurKa Pharma. In addition, AurKa Pharma shareholders will be entitled to potential regulatory and sales milestones worth $465 million.

AK-01 was originally discovered at Lilly and later sold to TVM Capital as part of the former’s strategic review done in 2016. TVM Capital later formed AurKa as part of the TVM Life Science Ventures VII fund – an investment model that seeks to develop early-stage pharmaceutical assets.

Year-to-date, Lilly’s shares have declined 1.6% compared with the industry’s decline of 3.4%.

Lilly has a well laid out oncology strategy, which involves building on key cancer treatments like Cyramza, Lartruvo and Verzenio as foundational agents while focusing on developing new standard-of-care changing therapies and combination regimens, including immuno-therapies.

Meanwhile, Lilly is constantly on the lookout for external innovation to bolster growth in its Oncology franchise The AurKa Pharma acquisition, which adds a promising cancer compound targeting a distinct cell cycle pathway, further expands Lilly’s oncology pipeline.

Lilly’s latest acquisition deal comes less than a week after it announced an all-cash deal tobuy California-based immuno-oncology biotech, ARMO Biosciences, Inc. ARMO for $50 per share or approximately $1.6 billion. The acquisition will add ARMO's lead product candidate, pegilodecakin to Lilly’s cancer pipeline. Pegilodecakin, a PEGylated IL-10, is being studied in a late-stage study in pancreatic cancer as well as early-stage studies in lung and renal cell cancer, melanoma and other solid tumor types. ARMO BioSciences went public in January this year. The transaction is expected to close by the end of the second quarter of 2018

The ARMO BioSciences acquisition, which adds a promising next generation immunotherapy pipeline asset to Lilly’s portfolio, is also in line with Lilly’s oncology strategy.

Lilly currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks to Consider

Other top-ranked pharma/biotech stocks include Ligand Pharmaceuticals Incorporated LGND and Merck MRK. While Ligand has a Zacks Rank #1, Merck is a #2 Ranked stock.

Ligand’s earnings estimates for 2018 and 2019 rose 0.5% over the past 30 days. The stock has gone up by 32.4% this year so far.

While Merck’s shares have risen 6% this year so far, its earnings estimates for 2018 and 2019 increased 1.4% and 3.6%, respectively over the past 30 days.

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