Eli Lilly is buying Loxo Oncology for about $8 billion in cash.

That's about a 70-percent premium to Loxo's closing price on Friday.

Loxo's shares jumped on the news.

But Eli Lilly's stock dropped.

Reuters shareholder activist reporter, Liana Baker, is covering the story: (SOUNDBITE) REUTERS SHAREHOLDER ACTIVIST REPORTER LIANA BAKER, SAYING: "So, for Eli Lilly, this is really a diversification move.

They're mostly known as a diabetes company for treatment.

So, this really gives them an entree into highly profitable cancer drugs.

So, Loxo was a hugely speculated takeover target, and we were sort of wondering who would be the buyer this year.

We're trying to figure out if there was a bidding war around this, because it's a pretty big multiple that Eli Lilly is paying for Loxo today." Analysts say with the purchase of Loxo, Lilly is betting on a cancer therapy market expected to be worth several billions of dollars.

But the $8 billion valuation seems high as Loxo hasn't made any money yet.

Wall Street expects it to bring in a revenue of $1 billion only by 2023.

The deal follows Bristol-Myers Squibb's move last week to buy Celegene and its cancer drugs for $74 billion.