Merck puts eye-popping $9.3B on the line in lopsided ADC deal with Kelun-Biotech

In one of the most lopsided biobucks deals this publication has ever seen, Merck & Co. is offering $175 million upfront to Kelun-Biotech plus an eye-popping $9.3 billion in potential milestones on the tail end.

The exclusive licensing deal, announced Thursday, marks the third antibody-drug conjugate agreement between the two companies. Under the latest arrangement, the two companies will develop seven ADCs for cancer. Merck snagged the right to research, develop, manufacture and commercialize the ADCs and placed a hold on future candidates with an exclusive opt-in agreement. Kelun-Biotech, a subsidiary of Sichuan Kelun Pharmaceutical, will hang on to rights in mainland China, Hong Kong and Macau.

The small upfront fee stands in stark contrast to the multibillion total offering should all go well with the ADCs. The $9.3 billion will be distributed based on future development, regulatory and sales milestones if Kelun-Biotech does not retain the China, Hong Kong and Macau rights and if all candidates achieve approval. That’s a pretty big if; the likelihood that all seven now-preclinical therapies will make it to the market is slim.

On top of the milestones, the Chinese biotech is also eligible for royalties on net sales. Additionally, Merck will make an undisclosed equity investment in Kelun-Biotech.

The two companies are already working together on two ADCs, one of which is the late-stage targeted breast cancer asset MK-2870. Back in July, Merck handed out $35 million to Kelun-Biotech to secure the rights to a second therapy as part of the pharma’s efforts to bulk up its ADC capabilities. That deal had a potential $901 million in milestones.

The first deal, announced in May, involved rights for MK-2870 for $47 million upfront and $1.4 billion in milestones.