Merck turns to Ablynx to hunt cancer immunotherapies in potential $2.3B deal

Right now, any biotech that might have the key to new and better checkpoint immunotherapies is the belle of the deal-making ball. And Belgium's Ablynx--which has been lining up pharma giants for a string of 9-figure deals to develop next-gen antibodies--just parlayed its tech know-how into a heavily backloaded $2.3 billion discovery deal with Merck ($MRK), arguably the leader in the field.

Like almost all of these early-stage deals, the payments start small and then swell in anticipation of success. Merck is covering a $27 million upfront along with $14.4 million in research support for Ablynx. This is the second discovery pact signed by the two companies, which got started together in the far more problematic arena of neurosciences.  

The deal highlights the promise of Ablynx's unique antibody approach, taking the smaller, simplified structures of camel and llama antibodies and repurposing them for work in humans. To put it simply, nanobodies are designed to latch on to their target better, offering a lower tox design with high affinity. Due to its much smaller size--about one-tenth the size of currently used antibodies--it can also act more like a small molecule than a large molecule, inhibiting enzymes.

Merck R&D chief Roger Perlmutter

The promise of the technology is that it can be used to find better cancer immunotherapies that will build on MK-3475, Merck's star program that has demonstrated remarkable success at unleashing an immune system attack on cancer. Merck is racing Bristol-Myers Squibb ($BMY) and Roche ($RHHBY) for the first approval in what could well be a multibillion-dollar market, with practically every other pharma player in the book trying to play catch-up.

The deal also allows Merck R&D chief Roger Perlmutter to begin delivering on a fresh wave of promised research deals, turning to outside collaborators to help reshape an R&D division that had badly lost its way over the past 7 years. Perlmutter has an insider's knowledge of Ablynx. He was appointed to the biotech's board of directors back in the fall of 2012, after he left Amgen.

- here's the press release