Pfizer, Merck KGaA partner PD-L1 drug with Verastem's failed cancer drug

Five months after Verastem acknowledged the stock-crushing failure of its cancer drug VS-6063 (defactinib) against mesothelioma, the Cambridge, MA-based biotech will now try its chances in a combination study using a checkpoint inhibitor from Pfizer and Merck KGaA.

The companies announced this morning that VS-6063 will be paired with avelumab, a PD-L1 checkpoint inhibitor in the hands of Pfizer ($PFE) and its partner Merck KGaA, in a Phase I/Ib study for ovarian cancer that will launch in the second half of the year. No financial terms were disclosed, a characteristic of the slew of development partnerships that have been struck with Merck ($MRK), Bristol-Myers Squibb ($BMY), Roche ($RHHBY) and other checkpoint drug leaders over the past year.

Pfizer should be quite familiar with VS-6063. The pharma giant outlicensed the FAK inhibitor to Verastem ($VSTM) back in 2012, when it was called PF-04554878, again declining to spell out the dollars involved. Pfizer paid $850 million upfront to partner with Merck KGaA on avelumab, the largest upfront in industry history, and is now playing catch-up with the pioneers in the field. 

Avelumab, like Merck's Keytruda, Bristol-Myers' Opdivo and Roche's atezolizumab, is designed to dismantle a biologic barricade that prevents an immune system attack on cancer cells. And the industry is beavering away at dozens of studies looking at their potential in combination with other drugs. Verastem announced the start of a Phase I pairing VS-6063 with Keytruda back in January.

VS-6063, though, flopped against mesothelioma last fall, failing to distinguish itself against a placebo in a Phase II trial. That failure drove down the company's share price by 65%, leaving it perilously close to penny-stock territory. The biotech--one of the first in a wave of biotechs to go public over the past three years--later axed half its staff and today got a 10% boost from the partnership news.

Verastem tied the announcement to a release on its annual numbers, noting $110 million in cash and equivalents at the end of 2015.

Verastem was founded by Christoph Westphal, the high-profile investor who sold Sirtris to GlaxoSmithKline ($GSK) for $720 million. GSK's subsidiary made little progress with the assets, though, and the pharma giant opted to shut down the company and absorb the research work into its operations around Philadelphia.

- here's the release