Merck extends Ablynx immuno-oncology relationship with heavily backloaded €4B deal

Ablynx (EBR:ABLX) has extended its immuno-oncology pact with Merck ($MRK), boosting its potential earnings from the alliance by €4 billion ($4.4 billion) through the addition of up to 12 new programmes. But Ablynx will have to wait a while for its paydays, with just €13 million of the cash arriving as an upfront payment.

Ablynx CEO Edwin Moses

Ghent, Belgium-based Ablynx will pocket the small upfront fee in return for granting exclusivity to Merck and to cover full-time equivalent payments. The meat of the agreement awaits down the line, though. If Ablynx can hit all the milestones on a program, it will net €340 million plus royalties. When spread across the 12 programs, this means Ablynx is in line to pull in more than €4 billion. And when the deal Merck and Ablynx struck 18 months ago is taken into account, the partners now have a combined alliance covering 17 programs worth a potential €5.7 billion.

Whether Ablynx ever receives even a notable fraction of this large sum is still an open question. The newly added programs are at a very early stage of development. Ablynx's next task is to discover and develop 12 programs using its nanobody technology, a way to create therapeutic proteins based on single-domain antibody fragments. Ablynx CEO Edwin Moses told FierceBiotech the first of the programs are ready to start now, with others coming online as Merck gathers more data, refines its priorities and suggests new targets in the fast-moving immuno-oncology space over the coming year.

Once these assets reach in vivo preclinical proof-of-concept, Merck will have the option to select lead candidates for further development. Moses said assets from the 2014 deal are already being tested in preclinical models and the timeframe for proof-of-concept should be 18 to 24 months from a program starting. From that point things can move quickly in immuno-oncology, as demonstrated by the progress of Merck's Keytruda. Merck will provide funding for Ablynx's early-stage research and pick up the tab once clinical trials and manufacturing start.

Ablynx will swell its headcount from 320 to up to 350 by the end of the year to handle the project, which has received a favorable response from analysts. "We are impressed Merck has decided to significantly extend its collaboration after 18 months as this suggests reassuring progress developing the original immuno-oncology candidates," Jefferies Analyst Peter Welford wrote in a note to investors. Ablynx's financial backers were similarly impressed and sent the company's stock price up almost 9% on the day of the news. 

Moses attributed Merck's interest in its technology to its ability to link two or three nanobodies together to target multiple immune checkpoints simultaneously. "We know the technology is very well suited to making these combination molecules," Moses said. That Merck, a notable player in the immuno-oncology sector, appears to agree is a boost for Ablynx, which is interested in striking new deals to explore the use of its combination nanobodies in other therapeutic fields. The pitch is that Ablynx has a simple, proven way of creating combination therapies.

While the new deal is obviously a positive for Ablynx, the flipside of the arrangement is that Merck has risked very little upfront to secure itself a look at a broad pipeline of immuno-oncology assets. With Merck and its peers scrambling to stake claims for slices of the immuno-oncology landscape, deals that give it access to a total of 17 programs on an almost no win, no fee basis could prove invaluable. 

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