Eli Lilly is making a splash in the fast-moving, highly competitive field of cancer immunotherapy. With a $1.6 billion cash deal to acquire Armo BioSciences, the Indianapolis company has placed one of the boldest bets yet that cytokine drugs could be critical in expanding immunotherapy’s reach.
This morning, Lilly (NYSE: LLY) agreed to pay $50 per share, which is a nearly 68 percent premium to Armo’s closing price Wednesday. Redwood City, CA-based Armo (NASDAQ: ARMO) just went public in January at $17 per share. Its lead drug is in late-stage testing for pancreatic cancer.
With the deal, Lilly is betting that engineered cytokines, substances secreted by immune cells during an immune response, can help more people respond to immunotherapy. Cytokine drugs have been approved as treatments for melanoma and Kaposi sarcoma, but they have recently become hot commodities for their potential in combination cancer treatments.
Armo’s lead drug, pegilodecakin, is among them. It is an engineered form of the cytokine interluekin-10 (IL-10), which activates a cancer-fighting white blood cell, CD8+T. Armo’s version is in late-stage testing for pancreatic cancer.
Armo has tested pegilodecakin on its own and in combination with chemotherapies. But the company has said the drug might also be useful in combination with a different type of immunotherapy called a checkpoint inhibitor, which has become the backbone of a wave of new cancer-fighting regimens.
Checkpoint inhibitors from Merck (NYSE: MRK), Bristol-Myers Squibb (NYSE: BMS), Roche/Genentech and others have won approvals in cancers of the skin, lung, kidney, and more, and in some cases provide stunning, long-lasting results. But they don’t work on most people, leading pharmaceutical companies to look for drug combinations that could broaden their use and help the non-responders respond. A slew of combination regimens are in clinical testing and the race is on to find the best possible pairing, often times through buyouts and alliances.
It’s still not known what combinations will work best. Up until recently, for instance, drugs known as IDO inhibitors were seen as some of the most promising combination candidates. But in a highly anticipated study, the Merck checkpoint inhibitor pembrolizumab (Keytruda), paired with the Incyte (NASDAQ: INCY) IDO blocker epacadostat, failed a Phase 3 study in melanoma. That set off a cascade of activity as other companies testing IDO inhibitors halted or curtailed their studies.
Cytokines are now in the mix. They represent a safer bet for Lilly than, say, IDO inhibitors, because these drugs have been around for decades and the way they work is well understood, according to Brad Loncar, CEO of Loncar Investments, who manages the Loncar Cancer Immunotherapy Index. By comparison, IDO inhibitors had yet to prove that they might boost an immune response in cancer. “That’s why Lilly felt comfortable spending the money it did today,” he says.
The problem with cytokines is that the side effects they cause have limited their use. Patients treated with these drugs can experience flu-like symptoms, severe allergic reactions, lower blood counts, and even organ damage, according to the National Cancer Institute. A number of companies are trying to make cytokines work better, and they’re drawing interest from biopharma companies and investors. In February, Bristol-Myers Squibb (NYSE: BMS) committed nearly $2 billion to Nektar Therapeutics (NASDAQ: NKTR for partial rights to the San Francisco company’s cytokine treatment, an interleukin-2 (IL-2) drug. Last week, San Diego-based Synthorx raised $63 million in financing to advance work on its own engineered form of IL-2.
For Lilly, cytokines could provide a way catch up to Merck and Bristol, which have established themselves as leaders in cancer immunotherapy, Loncar says. If Armo’s drugs can help checkpoint inhibitors work better, “it would be a path for a company like Lilly to go from being third tier to being a competitive player in this space one day,” he says.
It’s not yet clear whether Armo’s pegilodecakin will have a better side effect profile compared to other cytokine drugs. In early-stage studies testing the Armo drug paired with chemotherapy in pancreatic cancer patients, severe or life-threatening side effects that were observed in some patients included anemia, low platelet counts, and low counts of neutrophils, a white blood cell important in fighting infections. The agreement to acquire Armo follows the March release of interim results from a Phase 3 study in pancreatic cancer. After reviewing data on the first 60 patients, an independent committee monitoring the study recommended that the clinical trial continue without changes. A second interim analysis is expected in 2020.
Besides pancreatic cancer, Armo plans to test its drug in non-small cell cancer and renal cell carcinoma. The company has begun enrolling patients in two Phase 2 studies in lung cancer. The company expects preliminary response data from both studies by the end of this year. Armo could be part of Lilly by then. The companies expect to close the transaction by the end of next month.
Pancreatic cancer cells image by the National Cancer Institute