Eli Lilly is ponying up about $1.6 billion to get its hands on Armo Biosciences and its lead asset, pegilodecakin, which has shown promise both as a single agent and in combination treatments for multiple tumor types.

The all-cash deal is slated to close by the end of the second quarter, Lilly said in a statement. Armo, which filed in January to raise up to $86 million in its Nasdaq IPO, came on the scene in 2013 with $20 million and a discarded Merck drug. Pegilodecakin, a PEGylated form of the anti-inflammatory cytokine IL-10, is currently in a phase 3 trial in pancreatic cancer. It’s also in the clinic for lung and renal cell cancer, melanoma and other solid tumor types.

"As we develop our immuno-oncology portfolio, Lilly will pursue medicines that use the body's immune system in new ways to treat cancer," added Levi Garraway, M.D., Ph.D., senior vice president of global development and medical affairs at Lilly Oncology, "We believe that pegilodecakin has a unique immunologic mechanism of action that could eventually allow physicians to offer new hope for many cancer patients."

Armo has tested pegilodecakin in combination with Merck’s Keytruda and Bristol-Myers’ Opdivo, but could combine it with its own anti-PD-1 antibody in the long term. The biotech bagged $67 million in August to bankroll the pegilodecakin program, and to move its anti-PD-1 antibody into the clinic. It also has IL-12 and IL-15 drugs in the pipeline that it thinks might bolster the antitumor effect of pegilodecakin.

Smart move by $LLY. If you are a company that has missed the immunotherapy boat, these technologies have potential to be a game changing backbone to PD-1s and get you in the game.

— Brad Loncar (@bradloncar) May 10, 2018

Lilly had an R&D shakeup last summer, announcing it was on the hunt for partners for two-thirds of its midphase oncology compounds so it could focus its R&D budget on seven early to midstage assets. These include a PD-L1 antibody and PI3K/mTOR dual inhibitor Lilly is developing for use in combinations.

"Lilly will pursue new standard-of-care changing therapies that target tumor dependencies in molecularly enriched populations, build rational combinations that overcome resistance and develop next-generation immunotherapies," the company said at the time.

And just last week, the Big Pharma recruited Leena Gandhi, M.D., Ph.D., a thoracic oncologist, from NYU Perlmutter Cancer Center, to head up a team tasked with overseeing the development of Lilly’s immuno-oncology prospects.

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