Merck snags rights to Endocyte's ovarian cancer drug in $1B deal

Merck has scooped up worldwide rights to Endocyte's ($ECYT) late-stage ovarian cancer drug in a billion-dollar deal, paying $120 million upfront and committing up to $880 million in milestones. And West Lafayette, IN-based Endocyte will also get co-promotion rights and a split of U.S. profits while earning double-digit royalties in the rest of the world.

Investors liked the sound of big round numbers, bidding up Endocyte shares by 111% once the news hit.

Merck ($MRK) says the drug--Vintafolide, or EC145--matches the profile of what it's looking for in a cancer drug, highlighting Endocyte's development of a companion diagnostic to identify patients most likely to respond to the treatment. And Endocyte says it's only months away from filing for U.S. approval. The treatment has been given orphan drug status in Europe.

Endocyte's strategy is to use an imaging agent, EC20, to identify patients whose tumors express folate receptors. Those patients who test positive are treated with EC145, which combines a chemotherapy with a conjugate that includes vitamin folate, targeting specific cancer cells. That approach has produced positive results in mid-stage studies, with folate receptor-positive patients achieving a median 5.5 month PFS rate compared to a control arm's 1.5 months.

"Vintafolide is a promising and innovative late-stage cancer drug candidate. In addition to pursuing the lead indication of platinum-resistant ovarian cancer, Merck plans to further evaluate its potential for treatment of multiple other cancer types," said Peter S. Kim, executive vice president and president at Merck Research Laboratories. "This agreement underscores our strategy of building a portfolio of oncology therapeutics that employ a companion diagnostic to facilitate selection of those patients most likely to respond to treatment."

- here's the press release

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