Merck (MRK) recently entered into a commercialization and development agreement with biopharma company, Endocyte Inc. (ECYT), for the latter’s oncology candidate, vintafolide (EC145).
The Candidate
The agreement between Merck and Endocyte revolves around vintafolide, which is currently in phase III development (PROCEED study) for platinum-resistant ovarian cancer and phase II development for non-small cell lung cancer (NSCLC). Endocyte is using an investigational companion diagnostic agent, etarfolatide (EC20), for the studies.
Endocyte has presented encouraging phase II data on vintafolide from a study comparing vintafolide plus pegylated liposomal doxorubicin (PLD) with PLD alone. Results showed a statistically significant delay in disease progression or death in the overall population.
Vintafolide enjoys orphan drug status in the EU where the company intends to file for approval in the third quarter of 2012.
Terms of the Deal
Per the terms of the deal, Endocyte could receive at least $1 billion from Merck, including an upfront payment of $120 million. Besides the upfront payment, Merck could end up paying up to $880 million on the achievement of development, regulatory and commercialization milestones for vintafolide.
The deal covers six cancer indications. Moreover, Endocyte will share profits equally in the US once vintafolide is approved, and will receive double digit royalty on ex-US sales.
In return, Merck will gain global rights for the development and commercialization of vintafolide. While Endocyte may co-promote the candidate in the US, Merck has exclusive promotion rights in ex-US territories.
Meanwhile, Endocyte will be primarily responsible for the funding and completion of the PROCEED trial. All other vintafolide-related development will be Merck’s responsibility. As far as the companion diagnostic agent is concerned, Endocyte will be responsible for its global development, manufacture and commercialization.
Our Take
We believe this deal signifies Merck’s interest in strengthening its oncology pipeline. Lead products in the company’s oncology portfolio include Temodar and Emend. Merck currently has an oncology candidate, ridaforolimus, under regulatory review in both the US and the EU.
Meanwhile, this deal is a major positive for Endocyte. It not only validates the company’s development efforts, it will also provide the company with a huge inflow of funds, especially if the company achieves the milestones.
We have a Neutral recommendation on Merck and Endocyte. Both companies carry a Zacks Rank #3 (short-term Hold rating).
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