Pharmaceutical giants Merck (NYSE:MRK) and Daiichi Sankyo (OTCPK:DSKYF) have entered into a significant partnership to develop and distribute three antibody-drug conjugates (ADCs)—patritumab deruxtecan, ifinatamab deruxtecan, and raludotatug deruxtecan—targeting solid tumors. The announcement was made on Friday.
The deal, which could amount up to $22 billion, involves an initial payment of $4 billion to Daiichi, followed by another $1.5 billion over the next two years. The agreement also includes potential future payments of $16.5 billion tied to sales milestones. For raludotatug deruxtecan, 75% of the initial $2 billion research and development costs will be shouldered by Merck.
The companies are scrutinizing these drugs as standalone treatments and as part of combination therapies for different types of cancer. The partnership could significantly bolster Merck's oncology portfolio.
As per the agreement, profits from the drug sales will be shared globally, except in Japan where Daiichi retains exclusive rights. The companies project these drugs to generate multi-billion dollar revenues by mid-2030s, contingent on regulatory approval. One of the drugs from this collaboration is expected to receive approval by March 2024.
This substantial deal is set to impact Merck's financials. It will result in approximately $1.70 per share in pre-tax charges on Merck's Q4 and full-year 2023 results and an adverse impact of about 25 cents per share in the first year after the deal's closure.
Merck shares experienced a 1% increase in early trading following the announcement, despite a 10% value loss year-to-date.
In addition to its new partnership with Merck, Daiichi Sankyo also collaborates with AstraZeneca (NASDAQ:AZN) on other cancer treatments, including ADC Enhertu, which is predicted to generate over $10 billion annually.
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