Eli Lilly is buying ARMO BioSciences in a deal valued at around $1.6 billion, to ramp up its immune-oncology pipeline.

Under the deal, Lilly will pay $50 per share for ARMO in an all-cash transaction, securing itself access to the firm’s lead immuno-oncology asset, pegilodecakin, which is being studied in multiple tumour types.

The drug is a PEGylated IL-10 which has shown clinical benefit as a single agent, and in combination with both chemotherapy and checkpoint inhibitor therapy, across several tumor types.

Pegilodecakin is currently being studied in a Phase III clinical trial in pancreatic cancer, as well as earlier-Phase trials in lung and renal cell cancer, melanoma and others. ARMO also has a number of other immuno-oncology product candidates in various stages of pre-clinical development.

"The acquisition of ARMO BioSciences adds a promising next generation clinical immunotherapy asset to Lilly's portfolio of innovative oncology medicines,” noted Sue Mahony, Lilly senior vice president and president of 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,” added Levi Garraway, senior vice president, global development and medical affairs, Lilly Oncology.

"Given the resources that Lilly, a leader in oncology R&D, can bring to bear to maximize the value of pegilodecakin and the rest of the ARMO pipeline, we believe it is in the best interest of ARMO, our stockholders and the patients we serve, to execute this transaction,” said ARMO’s president and chief executive, Peter Van Vlasselaer.

The transaction is expected to close by the end of the second quarter, subject to customary closing conditions.