(Reuters) - Eli Lilly and Co said on Thursday it would buy Armo BioSciences Inc for about $1.6 billion to expand its portfolio of drugs that seeks to help body's immune system fight cancer as the drugmaker chases its rivals in a lucrative market.
Lilly's offer of $50 per share in cash represents a premium of 68 percent to Armo's Wednesday close. Armo's shares were trading close to the offer price at $49.73.
The deal, which comes just four months after Armo went public, would give Lilly access to the smaller drug developer's lead immuno-oncology candidate, pegilodecakin.
The treatment is being evaluated in pancreatic cancer patients in a late-stage study as well as in earlier stage trials for other forms of cancer.
Immuno-oncology is one of the faster growing areas of cancer treatment with major players such as Merck & Co and Bristol-Myers Squibb closely competing for a bigger share of the market.
Last month, Lilly, which expressed interest in immuno-oncology deals, appointed the director of Thoracic Medical Oncology at New York University's School of Medicine to lead its medical development in this area.
"As we develop our immuno-oncology portfolio, Lilly will pursue medicines that use the body's immune system in new ways to treat cancer," Levi Garraway, senior vice president of global development and medical affairs at Lilly Oncology said in a statement.
Lilly's drugs already in the market include top-selling lung cancer drug Alimta, Cyramza for certain types of cancers of the digestive tract and breast cancer drug Verzenio, among others.
The deal is expected to close by the end of the second quarter of 2018.
Credit Suisse was the exclusive financial adviser to Lilly and Wachtell, Lipton, Rosen & Katz its legal adviser.
Centerview Partners LLC was the lead financial adviser to Armo along with Jefferies LLC. Gunderson Dettmer was its legal advisor.
(Reporting by Manas Mishra in Bengaluru; Editing by Arun Koyyur)