Loxo, Bayer to co-develop cancer drugs in up to $1.55 billion deal

(Reuters) - Loxo Oncology Inc will collaborate with Germany's Bayer AG to develop and commercialize two of its cancer therapies, the companies said on Tuesday, in deal that could bring the U.S. drug developer up to $1.55 billion.

The drugs - larotrectinib and follow-on compound LOXO-195 - are TRK inhibitors, which directly target an acquired rather than inherited genetic defect.

Loxo will receive $400 million upfront from Bayer and will split development costs equally with the German company.

Loxo is also eligible to receive $450 million for larotrectinib and $200 million for LOXO-195 in milestone payments once the drugs are approved and sold.

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The deal will help fill a gap in Bayer's late-stage pipeline. The German drug and seeds company that is buying U.S. seeds giant Monsanto has been struggling to develop new drugs that could offset an expected slump in sales when its best-selling anti-clotting drug Xarelto loses patent protection in 2024.

Loxo said it expects to file for U.S. marketing approval of larotrectinib later this year or early next year.

(Reporting by Tamara Mathias in Bengaluru; additional reporting by Ludwig Burger in Frankfurt; editing by Sai Sachin Ravikumar)