Lilly and Foghorn Announce Strategic Collaboration for Novel Oncology Targets Using Foghorn's Proprietary Gene Traffic Control® Platform

Loxo Oncology at Lilly, a research and development group of Eli Lilly and Company and Foghorn Therapeutics Inc. announced a strategic collaboration to create novel oncology medicines by applying Foghorn's proprietary Gene Traffic Control® platform. The collaboration includes a co-development and co-commercialization agreement for Foghorn's selective BRM oncology program and an additional undisclosed oncology target. In addition, the collaboration includes three additional discovery programs using Foghorn's proprietary Gene Traffic Control platform.

Under the terms of the agreement, Foghorn will receive upfront consideration of $300 million in cash for the collaboration agreement and an equity investment by Lilly of $80 million in Foghorn common shares at a price of $20 per share.

"Oncogenic mutations in BRG1 impact a large population of cancer patients and we believe are best addressed therapeutically with a highly selective BRM inhibitor, though designing such a drug is a difficult chemistry challenge. We've been very impressed by the progress the Foghorn team has made against this product profile and are excited to work with this highly talented team," said Jacob Van Naarden, CEO of Loxo Oncology at Lilly and president, Lilly Oncology. "Foghorn has a differentiated platform and we look forward to the prospect of leveraging it to discover multiple new drugs against similarly challenging targets with strong biologic rationale."

"We are excited to be collaborating with the Loxo Oncology at Lilly team to use our platform and utilize Foghorn's powerful precision biology-first approach to create medicines targeting genetic dependencies within the chromatin regulatory system," said Foghorn CEO Adrian Gottschalk. "This collaboration enables an acceleration and expansion of our pipeline and significantly strengthens our balance sheet as we strive to bring new medicines to patients and their families."

Terms of Collaboration

For the BRM-selective program and the additional undisclosed target program, Foghorn will lead discovery and early research activities, while Lilly will lead development and commercialization activities with participation from Foghorn in operational activities and cost sharing. Foghorn and Lilly will share 50/50 in the U.S. economics, and Foghorn is eligible to receive royalties on ex-U.S. sales starting in the low double-digit range and escalating into the twenties based on revenue levels.   

For the additional discovery programs, Foghorn will lead discovery and early research activities. Foghorn may receive up to a total of $1.3 billion in potential development and commercialization milestones. Additionally, Foghorn will have an option to participate in a percentage of the U.S. economics and is eligible to receive tiered royalties from the mid-single digit to low-double digit range on sales outside the U.S. that may be exercised after the successful completion of the dose-finding toxicity studies.

The terms of the transaction have cleared the required waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). 

This transaction will be reflected in Lilly's reported results and financial guidance according to Generally Accepted Accounting Principles (GAAP). There will be no change to Lilly's 2021 non-GAAP earnings per share guidance as a result of this transaction.