(Adds Bayer executive comment, adds details on how the drugs work)
Nov 14 (Reuters) - Germany's Bayer has bought the rights to jointly develop and commercialize two of Loxo Oncology's targeted cancer therapies in a deal that could earn the U.S. drug developer up to $1.55 billion in the next few years.
With the deal, Bayer is betting on a new field of oncology in which cancers originating from different organs are screened for common genetic mechanisms that cause cancer cells to grow and that may offer a point of attack for treatment.
Loxo will receive $400 million up front from Bayer and the two companies will split development costs and U.S. profits equally. Loxo is also eligible to receive $450 million and $200 million for each of the two drugs in milestone payments once the treatments are approved and sold.
Despite the news, shares of Stamford, Connecticut-based Loxo, which have risen 159 percent so far this year, were down more than 6 percent to $77.91 on Tuesday.
The Loxo drugs, larotrectinib and follow-on compound LOXO-195, belong to a class of medicines called TRK inhibitors, which directly target certain genetic mutations that have been shown to fuel cancer growth in 17 different solid tumor types in the lungs, bowels, thyroid and several other organs.
"What is unique is that the response rates have been remarkably consistent, which tells us that the mutation is the driver of the disease regardless of what tumor type you have," said Robert LaCaze, Bayer's head of oncology.
The deal also comes as Bayer, which is buying U.S. seeds giant Monsanto, struggles to develop new drugs that could offset an expected slump in sales when its bestselling anti-clotting drug Xarelto loses patent protection in 2024.
It is part of a strategy to expand its so-called signal transduction activities within oncology, trying to interfere with the way cancer cells send and receive a cascade of hormones or other messenger molecules.
Merck & Co's immunotherapy treatment Keytruda in May became the first cancer drug ever approved in the United States based on a patient's specific genetic traits, regardless of where in the body the disease originated.
Loxo will lead development of the drugs and file for their U.S. approvals, while Bayer will file for regulatory approvals and lead commercialization outside the United States.
Loxo said it expects to apply for U.S. marketing approval of larotrectinib later this year or early next year. (Reporting by Tamara Mathias in Bengaluru; and Ludwig Burger in Frankfurt; Editing by Sai Sachin Ravikumar and Hugh Lawson)