Merck & Co.’s sweeping cancer drug alliance with Daiichi Sankyo Friday highlights the pharmaceutical industry’s newfound enthusiasm for so-called antibody-drug conjugates, a class of medicines that’s yielded major products like Seagen’s Adcetris, Roche’s Kadcyla and AstraZeneca’s Enhertu.
Merck, which reportedly had also sought to buy Seagen, isn’t paying that much upfront, agreeing to send Daiichi Sankyo $5.5 billion over the next two years. But the deal’s total value is as high as $22 billion, if all sales milestones are met, making it one of the most lucrative pharma licensing arrangements in recent history.
It will add to some $16 billion worth of antibody-drug conjugate licensing deals signed in 2022, according to analytics company Global Data. And it comes as the European Society of Medical Oncology’s annual meeting gets underway in Spain, featuring clinical trial data for the drugs in lung, cervical, prostate and breast cancers.
Antibody-drug conjugates, or ADCs, pair the tumor-cell killing capabilities of chemotherapy with the targeting technology of synthetic antibodies. When the combined drug binds with a cancer cell, a chemical linker unleashes the toxin into the cell, sparing surrounding healthy tissue from exposure.
Merck has already been active in the field, paying Seagen $1.7 billion in cash, licensing fees and equity in 2020 for rights to an experimental ADC as well as to the marketed drug Tukysa. A few months later it signed a $3 billion deal to acquire VelosBio. And last year, it paid Kelun-Biotech $175 million upfront for rights to a number of early-stage ADCs.
In partnering with Daiichi Sankyo, Merck may have been spurred on by one of the more audacious big pharma bets on ADCs. In 2019, AstraZeneca paid Daiichi Sankyo more than $1 billion upfront and promised an additional $5.6 billion in contingent payments for rights to the drug that became Enhertu, a deal it funded with a $3.5 billion share offering. That bet is on the verge of returning blockbuster annual revenue for AstraZeneca, which reported $104 million in product sales and $475 million in alliance revenue through the first six months of 2023.
Gilead’s deal for Immunomedics was also bold as it sought to build an oncology business, although it had the cash from its HIV and hepatitis C drugs to tap. Like Enhertu, Trodelvy could also record blockbuster numbers soon, having accounted for $482 million in sales through June 30.
Other companies have been joining in. Bristol Myers Squibb, Merck’s rival in immunotherapy, paid Eisai $650 million in 2021 for rights to an ADC the Japanese drugmaker was developing for tumors positive for folate receptor-alpha, which include endometrial, ovarian, lung and breast cancers.
BioNTech, which made a name as a developer of mRNA vaccines and drugs, earlier this year signed a $170 million up front deal with Duality for rights to two ADCs.
Eli Lilly has also become active in the last two years, buying a German biotech called Emergence for its ADC pipeline, signing a deal with ImmunoGen, and acquiring French ADC developer called Mablink Bioscience.