In a strategic move, Merck & Co. has solidified its position in the thriving field of antibody-drug conjugates (ADCs) through a groundbreaking collaboration with Daiichi Sankyo. While AstraZeneca was the first to claim two ADCs from Daiichi’s production line, Merck is making a substantial upfront payment of $4 billion to co-develop Daiichi’s next three ADC prospects.
Daiichi Sankyo has been at the forefront of validating the long-untapped potential of ADCs, notably with Enhertu, a HER2 therapy developed in partnership with AstraZeneca, which has revolutionized the treatment of breast cancer. They’re also advancing a robust R&D pipeline led by the TROP2-targeted candidate, datopotamab deruxtecan (Dato-DXd). AstraZeneca had previously acquired rights to Enhertu and Dato-DXd, with payments amounting to $2.35 billion in 2019 and 2020. However, other promising assets remained out of their reach.
With a substantial financial backing from the success of Keytruda and the looming loss of exclusivity on this blockbuster drug, Merck is committing an initial $4 billion upfront for the co-development and co-commercialization of three ADCs with Daiichi. The financial commitment extends further, including $1.5 billion in continuation payments within the next 24 months and the potential for up to $16.5 billion in sales milestones. The deal’s maximum value reaches an impressive $22 billion.
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In addition to the substantial financial investment, Merck will share equally in the profits generated by the three ADCs in Daiichi’s development pipeline. Among these candidates, the most advanced is patritumab deruxtecan (HER3-DXd), a HER3-targeted ADC currently undergoing pivotal trials in EGFR-mutated non-small cell lung cancer. Merck and Daiichi are planning to file for approval in March, marking a significant milestone in ADC development. In parallel, BioNTech has recently acquired an early-stage HER3-targeted ADC, highlighting the growing interest in this therapeutic approach.
Ifinatamab deruxtecan (I-DXd), a B7-H3-targeted ADC, is the next candidate, with phase 2 trials focused on small-cell lung cancer patients, aiming to target an immune checkpoint overexpressed in multiple cancer types. The final asset, raludotatug deruxtecan (R-DXd), targets CDH6, overexpressed in kidney, ovarian, and other organ cancers, and is currently in phase 1 trials with kidney and ovarian cancer patients.
Merck envisions that these three programs collectively hold the potential for “multi-billion dollar worldwide commercial revenue” for both companies, potentially reaching fruition in the mid-2030s. This ambitious move aims to offset the impending patent cliff for Keytruda, a $20 billion-a-year Merck drug, which is set to face significant intellectual property challenges starting in 2028.
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This strategic partnership firmly establishes ADCs as a central element of Merck’s vision for the post-Keytruda era. The pharmaceutical giant has previously made several significant investments in this rapidly growing field, including agreements with Seagen, the acquisition of VelosBio, and collaborations with Kelun-Biotech.
It’s worth noting that the financial structure of this deal is multifaceted, with staggered payments and an opportunity for Merck to opt out of certain ADC deals after 12 or 24 months, depending on their progress. This structure provides flexibility while aligning with Merck’s commitment to advancing ADC innovation.
Furthermore, Merck will cover 75% of the initial $2 billion in research and development expenses, after which costs and profits will be shared between the partners, except in Japan, where Daiichi will maintain exclusive rights and provide royalties to Merck. This strategic alliance positions both companies at the forefront of the ADC revolution, heralding a promising future in cancer treatment innovation.
