Merck inks $394M takeover of oncolytic virus play Viralytics

Merck is offering a 160% premium to acquire Viralytics. (Montgomery County Planning Commission/CC BY-SA 2.0)

Merck is set to pay $394 million to acquire Viralytics. The takeover will give Merck control of an oncolytic immunotherapy that Viralytics is testing in combination with Keytruda in early-phase trials.

Sydney-based Viralytics’ most advanced candidate is Cavatak, a common cold RNA virus. Viralytics selected the nongenetically altered virus on the strength of its ability to target ICAM-1 and infect a variety of cancer cells. Once inside the cells, the virus starts wiping out the tumor through oncolytic and immunotherapeutic activity. That mechanism chimes with Merck’s strategy.

“Viralytics’s approach of engaging the innate immune system to target and kill cancer cells complements our immuno-oncology strategy,” Roy Baynes, head of global clinical development at Merck Research Laboratories, said in a statement. “We are eager to further build on Viralytics’s science as we continue our efforts to harness the immune system to improve long-term disease control and survival outcomes for people with cancer.”

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Viralytics has some early clinical data to back up its approach to targeting tumors. Of particular relevance to Merck, a combination of Cavatak and Keytruda triggered objective responses in 61% of the late-stage melanoma patients in a small, ongoing phase 1b trial. That suggests the combination is more effective than either drug in isolation. 

The data contributed to Merck offering a 160% premium to acquire Viralytics. The Australian biotech’s largest shareholder plans to vote in favor of the takeover “in the absence of a superior proposal.” Merck expects to wrap up the buyout in the second quarter.

RELATED: Viralytics' anticancer virus aces checkpoint inhibitor combo trials

Viralytics is involved in three Cavatak-Keytruda combination trials. Merck was already collaborating with Viralytics on one of the trials, which is testing the cocktail in patients with bladder cancer and non-small cell lung cancer (NSCLC). The other two phase 1 trials are targeting patients with advanced melanoma and NSCLC.

The Keytruda combination is one big focus of Viralytics’ clinical trial strategy. That side of the R&D agenda should benefit from a closer relationship to Merck. The prospects for the other key pillar of Viralytics’ trial program, which is combining the oncolytic virus with Bristol-Myers Squibb’s Yervoy, is less certain.

By swooping on Viralytics, Merck has given itself a chance to differentiate its PD-1-based therapeutic regimens and offset the risk the proliferation of checkpoint inhibitors will devalue Keytruda. Similar thinking underpins other recent immuno-oncology deals, including Bristol-Myers’ partnership with Nektar Therapeutics.