Merck KGaA wins GSK for immunotherapy deal worth up to $4.2 billion

FRANKFURT (Reuters) – GlaxoSmithKline (GSK.L) bolstered its cancer drug development pipeline on Tuesday, agreeing to pay up to 3.7 billion euros ($4.22 billion) to Germany’s Merck KGaA (MRCG.DE) for the rights to a novel immunotherapy.

Merck will receive an upfront payment of 300 million euros for the drug known as M7824 and is eligible for potential payments of up to 500 million euros depending on development milestones in lung cancer, the two companies said in statements on Tuesday.

Merck will also be eligible for further payments of up to 2.9 billion euros, depending on commercial milestones, for a total deal value of up to 3.7 billion euros.

GSK in December moved to bolster its cancer medicines cabinet with the $5.1 billion purchase of Tesaro (TSRO.O).

Later that month GSK unveiled plans to separate its prescription drugs and vaccines business from its over-the-counter products unit under a joint venture deal with Pfizer’s (PFE.N) consumer health division.

The M7824 drug, a fusion protein that triggers two immune responses to cancer cells, is being tested on various tumor types and was recently shown to delay the progression of a certain type of lung cancer for at least 9.5 months in half of the trial participants.

Merck has already started a phase II trial in non-small cell lung cancer, comparing M7824 directly with Keytruda by U.S. rival Merck & Co (MRK.N), currently seen as the most promising cancer immunotherapy on the market with $7.2 billion in 2018 sales.

Merck’s shares traded 1.3 percent higher at 1225 GMT while GSK was up 1.9 percent, both outperforming the 0.7 percent gain in the STOXX Europe 600 Health Care .SXDP index.

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