Medivation buys into PD-1, picking up where Teva left off

The prostate cancer experts at Medivation ($MDVN) are getting into the hot field of checkpoint inhibitors for cancer, agreeing to pay Israel's CureTech as much as $335 million for the full rights to a promising Phase II asset.

Under the agreement, Medivation will pay $5 million up front to get its hands on pidilizumab, an antibody that blocks the PD-1 pathway in order to unblind the immune system and help T cells better attack cancerous growth. The San Francisco biotech has promised $85 million more tied to development and regulatory milestones, and CureTech is line for up to $245 million in sales payouts if all goes according to plan.

Pidilizumab, formerly CT-011, was partially developed on Teva Pharmaceutical's ($TEVA) dime, as the Israeli drugmaker spent years pouring millions of dollars into CureTech before then-CEO Jeremy Levin decided it had little hope of competing with titan checkpoint inhibitor programs from Bristol-Myers Squibb ($BMY), Merck ($MRK) and Roche ($RHHBY). The Israeli pharma giant dumped its rights to the drug in early 2013, taking a $109 million writedown and moving on.

But CureTech kept rolling with a pair of midstage trials, posting stellar results in lymphoma patients and bringing Medivation to the table in October. The two companies agreed to terms in the fall but needed shareholder approval from Clal Biotechnology Industries, which owns 53% of CureTech. Now, with Clal's blessing, the two are moving forward with plans to get pidilizumab into pivotal trials.

In the nearly two years since Teva bailed on the drug, the PD-1 field has exploded, fueled by a steady stream of excellent clinical results in melanoma, lung cancer and other malignancies. Merck's Keytruda notched the first FDA approval in September, followed by Bristol-Myers' Opdivo just this week. Roche and AstraZeneca ($AZN) are working through late-stage efforts of their own in hopes of following suit, rounding out a group of therapies analysts expect will bring in a combined $35 billion a year at their peak.

For Medivation, pidilizumab offers a chance to broaden its horizons beyond the breakthrough enzalutamide, a blockbuster prostate cancer treatment co-marketed with Astellas as Xtandi. That collaboration is pouring hundreds of millions of dollars into Medivation's coffers each quarter, and the partners are have been steadily working in the clinic to expand Xtandi's use in prostate cancer patients and to eventually get it approved as a targeted breast cancer therapy.

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