Dako joins with Merck to concoct cancer treatment companion Dx tests

Dako has sealed a deal with yet another Big Pharma company to develop companion diagnostic tests for potential new cancer drugs. This time, it will work with Merck ($MRK), a pharmaceutical giant facing some turmoil as it revamps its struggling R&D operations.

The Danish diagnostics giant's deal with Merck involves coming up with tests that could be paired with oncology drugs in Merck's pipeline. Neither side is disclosing financial details, but the agreement represents another win for Dako and its owner Agilent Technologies ($A), which snatched Dako up in 2012 for $2.2 billion. Dako has continued to forge companion diagnostics deals ever since, with companies including Pfizer ($PFE), Eli Lilly ($LLY) and Amgen ($AMGN), among others.

Agilent/Dako's motivation for the latest deal is simple. Companion diagnostics is a growing business, and Big Pharma are looking for diagnostics development partners that can develop new tests for their pipelines. Dako is among the larger companies that's developed expertise in the companion diagnostics space and therefore makes a logical partner for drug companies seeking test developers that understand the process and have a track record of success.

Dako's growth in the companion diagnostics space is not without rough patches. In September, the FDA hit Dako with a warning letter criticizing how it makes test kits at a Denmark plant, including its high-profile companion diagnostic for Roche's ($RHHBY) blockbuster Herceptin breast cancer treatment. Regulators took issue with everything from not addressing manufacturing problems flagged at an earlier inspection to process validation, how the company evaluates complaints and reporting failures.

Merck, meanwhile, is restructuring its R&D operations from top to bottom. Plans include setting up "innovation hubs" in Shanghai, London, San Francisco and Boston, among other changes.

- read the release

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