Merck Inks $5.5 Billion Agreement with Daiichi for Advancing Cancer Therapy Research
Merck, the pharmaceutical company, has entered into a $5.5 billion partnership with Daiichi Sankyo, aiming to collaborate on the development of three potential cancer drugs. This deal carries the potential to be worth up to $22 billion for Daiichi Sankyo, contingent on the success of these cell-targeting therapies.
The announcement of this partnership resulted in a substantial boost to Daiichi Sankyo's shares, which surged by 14.4% at the close of the trading day in Tokyo, marking the most significant gain in over a year.
Daiichi Sankyo is setting ambitious revenue targets, aiming for a minimum of 900 billion yen (equivalent to $6.0 billion) from its oncology division by the fiscal year ending on March 31, 2026.
This objective represents a fivefold increase over a three-year period. Healthcare analyst Tina Banerjee, who shares insights on the Smartkarma platform, described the deal as a "big positive and much-needed for Daiichi Sankyo" and raised expectations for the company's oncology drug pipeline.
The three drug candidates that will be jointly developed with Merck fall into the category of antibody drug conjugates (ADC) and are at various stages of clinical development for treating various solid cancer tumors. Unlike traditional chemotherapy, which can harm healthy cells, ADCs are engineered to specifically target cancer cells, potentially minimizing damage to normal cells.
The three candidates - patritumab deruxtecan, ifinatamab deruxtecan, and raludotatug deruxtecan - are projected to have "multi-billion dollar worldwide commercial revenue potential for each company" by the mid-2030s, according to the statements released by both firms.
The collaboration will involve the joint development and potential global commercialization of these drug candidates, with the exception of Japan, where Daiichi Sankyo will maintain exclusive rights and handle manufacturing and supply. As part of this partnership, Merck will make an upfront payment of $4 billion to Daiichi Sankyo, along with $1.5 billion in follow-up payments over the next two years. Merck could make additional payments amounting to a maximum of $16.5 billion, contingent on future sales milestones, or $5.5 billion for each product.
Daiichi Sankyo's pipeline includes six ADC candidates, with two of them being developed in collaboration with AstraZeneca. This week, there was some disappointment among analysts following a data abstract from a late-stage trial of datopotamab deruxtecan, which is being developed jointly with AstraZeneca.
Under the terms of the agreement announced on Friday, Merck will incur a pre-tax charge of $5.5 billion, approximately $1.70 per share, accounting for the upfront payment and continuation payments. This will lead to a reduction in Merck's financial results for the fourth quarter and the full year of 2023.
Merck's investment in these pipeline assets and the financing costs of this transaction are expected to reduce earnings per share by around 25 cents during the first 12 months following the deal's closure, as indicated by the joint statement. The impact on Daiichi Sankyo's financial results will be disclosed at a later date.