Agenus sells cut of Incyte, Merck milestone streams

Agenus has sold a portion of the royalties and milestones it is due to receive from Incyte and Merck. Xoma is paying $15 million for 10% of the $600 million in milestones Agenus is in line to pocket and a 33% cut of any royalties.

Massachusetts-based Agenus secured the sources of milestones and royalties through deals it struck with Incyte and Merck in 2015 and 2014, respectively. Going into the deal with Xoma, Agenus was still owed up to $505 million from Incyte and $95 million from Merck, plus royalties on product sales if any drugs covered by the agreements make it to market.

Now, Agenus has decided it is best served by forgoing some of that theoretical income to secure $15 million today. Following the Xoma deal, Agenus’ Incyte and Merck milestone packages are worth up to $450 million and $85.5 million, respectively. Agenus will get two-thirds of any royalties, too.

The deal comes as Agenus seeks to keep its pipeline of immuno-oncology candidates moving forward while attracting partners for the assets. Agenus’ ability to fund the work from other sources has been hindered by recent events. Since peaking in March, Agenus’ stock price has fallen by more than 60%. Agenus closed out June with $43 million in the bank, down from $60 million at the turn of the year.

Striking the deal with Xoma gives Agenus a nondilutive financial boost. For Xoma, the deal marks a milestone in its pivot from floundering drug developer to aggregator of royalty streams. Xoma made the pivot last year after its own R&D efforts suffered multiple setbacks.

Following the Agenus deal, Xoma stands to profit from the advance of seven antibodies. One of the drugs is a phase 1 asset against an undisclosed target that is in development at Merck. The other six assets are in development at Incyte. Three of the Incyte drugs—agonists of GITR and OX-40, and an antagonist of LAG-3—are in clinical development. A fourth, which targets TIM-3, is due to enter the clinic later this year.

Editor's note: This story has been updated to include the correct percentages of the milestone and royalty payments that Agenus and Xoma will receive. Agenus will retain 90% of potential milestone payments and 67% of future royalties, while Xoma will receive 10% of potential milestone payments and 33% of future royalties.