Pfizer powers into immuno-oncology with $2.85B R&D pact with Merck KGaA

Pfizer ($PFE) is determined to be a major player in the fast-emerging field of immuno-oncology, and the pharma giant is paying handsomely to buy its way into an anti-PD-L1 program now underway at Merck KGaA. In a deal announced Monday Pfizer outlined plans to pay a whopping $850 million upfront and up to $2 billion in milestones for the right to co-develop and co-market MSB0010718C and any other IO drugs they put in the pipeline.

This is a broad collaboration on the cancer front for both Pfizer and Merck KGaA. In addition to launching combination studies using their existing cancer therapies, they'll work together to push Pfizer's preclinical anti-PD-1 antibody into Phase I. And Merck KGaA also gets the right to co-promote Xalkori in the U.S. and other "key" markets.

These partners--which both have plenty to prove on the R&D side of the business--won't be wasting any time.

Image removed.Merck KGaA's Belén Garijo

"Up to 20 high priority immuno-oncology clinical development programs are expected to commence in 2015, including pivotal registration studies," noted Belén Garijo, who heads up the biopharmaceutical division of Merck KGaA. "On top of that, the global alliance will enable Merck to gain an early entry into the US oncology market as well as to strengthen our existing oncology business in several other important global markets."

The big upfront part of this deal is rare and may well garner criticism for being too much for Pfizer to pay out at this point. The pact immendiately vaults to the front of the line as the biggest upfront deal payment in the industry, a list that had been topped by Celgene's $710 million payout to Nogra for commercial rights on its Crohn's drug. 

This deal may well help douse persistent rumors that Pfizer will make another run at AstraZeneca ($AZN), where one of the main attractions was an immuno-oncology program for MEDI-4736. Buying into this program would make an AstraZeneca deal, bitterly opposed in the U.K. and now less appealing due to new M&A rules in the U.S., look somewhat redundant. And it will also enhance Pfizer's R&D prospects, which have been limited to a few major efforts, including the cancer drug palbociclib.

The pact also marks a turning point for Merck KGaA, which has been struggling in R&D for years. The company recently decided to terminate an ill-fated second shot at developing a cancer vaccine. And it made some serious missteps in multiple sclerosis earlier. But its decision to enter the hot IO field – which has inspired billions of dollars in deals and rivals emerge to begin competing with the leaders: Bristol-Myers ($BMY), Merck ($MRK), Roche ($RHHBY) and AstraZeneca.

MSB0010718C has finished a Phase I study and is currently in a Phase II trial for m-Merkel cell carcinoma, a rare form of skin cancer. These drugs are designed to dismantle a key mechanism that cancer cells use to stay hidden from the immune system. Merck and Bristol-Myers have already gained pioneering approvals for their lead drugs, and analysts believe that the market will be worth tens of billions of dollars.

Karl-Ludwig Kley, chairman of Merck KGaA in Darmstadt, Germany, stated: "We live up to our promise to strengthen all three pillars of our business: Healthcare, Performance Materials and Life Science. After this year's acquisition of AZ Electronic Materials and the proposal to acquire Sigma-Aldrich, we have now turned the focus on healthcare. The agreement with Pfizer is a very important milestone in taking our pharma pipeline forward."

- here's the release

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