Ablynx gets caught in Merck KGaA's R&D retreat

A fast-changing Merck KGaA is backing away from discovery and preclinical R&D deals it set up with the antibody specialists at Ablynx ($ABLYF). And the Belgian biotech saw its shares slide 14% today after news of the prospective breakup--included in Ablynx's annual summary--spread in the markets.

Back in the fall of 2013, Merck KGaA's research arm Serono was in a more expansive mindset as it signed off on a deal to grow its relationship with Ablynx, pledging $33.7 million in research funding in back of a $15.5 million upfront. The Darmstadt-based pharma company, which has seen its R&D group in turmoil for years, wanted to bankroll a research group that would ultimately take four programs into the clinic under co-development pacts. And the nanobodies Ablynx would develop would target all four key focus areas at Serono: oncology, immuno-oncology, immunology, and neurology.

But that deal is all but dead today as Merck KGaA continues to quietly restructure its pipeline.

"Negotiations are currently ongoing but Ablynx believes that Merck Serono may no longer provide the remaining funding under the Strategic Collaboration Agreement as scheduled, and Ablynx has now made provisions in its budgets and plans for this change," the biotech said in its annual report. "Ablynx also believes that termination of the Strategic Collaboration Agreement is currently the most likely outcome of the discussions and that under this scenario Ablynx would retain ownership of the five programs currently in progress, whilst having no obligations to initiate further programs under this contract. Separately, Merck Serono has informed Ablynx that it intends to terminate the preclinical oncology programme, ALX-0751. All assets and rights will return to Ablynx.

Merck KGaA is retreating from its Ablynx deals at the same time it's been cutting back on discovery work on multiple sclerosis in its R&D group based in Billerica, MA, a move it confirmed to FierceBiotech last week. Those cuts followed the German Merck's decision to whittle back key MS programs over the past year, retrenching after its oral program for cladribine foundered in 2012. Cladribine was snapped back by regulatory agencies after the company failed to come through with the late-stage data needed for an approval, spurring Merck KGaA to abandon the effort--an R&D snafu that helped inspire the start of a reorganization in the company that has persisted for three years.

The German pharma company recently punted ceralifimod (ONO-4641), the Ono-partnered MS drug, saying that it "does not meet Merck's threshold for continued investment." Plovamer acetate followed down the trail to the scrap heap, getting a low-key heave-ho last fall. And just weeks ago Serono pulled out of its development pact with Symphogen on a cancer program that's on the threshold of Phase III, walking away from a $625 million deal. 

The pullback comes as Merck KGaA gets more ambitious about its oncology R&D, especially after Pfizer ($PFE) weighed in with a huge $850 million upfront to partner on a preclinical immuno-oncology pact. And the German company also inked a new "armed antibody" development deal with Sutro last fall.

Pfizer, meanwhile, has been doing some cutting itself, along with Sanofi ($SNY), GlaxoSmithKline ($GSK) and other companies that are once again trying to find some firm footing in R&D after years of work with relatively little to show for it.

- here's the annual report (PDF)

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