Merck Joins Forces with Daiichi Sankyo in $5.5 Billion Deal to Develop Cancer Drugs

In a strategic move to advance cancer treatment options, pharmaceutical giant Merck (known as MSD outside of the United States and Canada) has agreed to pay $5.5 billion to Daiichi Sankyo for a collaborative effort to jointly develop three promising candidate cancer drugs. This deal could potentially be worth up to $22 billion to Daiichi Sankyo, depending on the success of these cell-targeting therapies.

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Collaboration in Cancer Drug Development

Merck and Daiichi Sankyo have made waves in the pharmaceutical world by entering a transformative partnership aimed at revolutionizing cancer treatment. The deal focuses on the development of three potential cancer drugs, all belonging to the category of antibody drug conjugates (ADCs).

These ADCs represent a significant shift in cancer therapy as they are designed to target cancer cells specifically, reducing damage to healthy cells—a challenge often faced with conventional chemotherapy. The collaborative effort between Merck and Daiichi Sankyo marks a substantial step forward in cancer research and the potential for more effective and precise treatments.

Daiichi Sankyo-Merck Alliance Sparks Market Enthusiasm

As news of this collaboration broke, the market responded with enthusiasm. Shares of Daiichi Sankyo (4568.T) soared by 14.4% in Tokyo, marking their most substantial gain in over a year. Meanwhile, Merck’s shares increased by 1.6% in early trading.

Analysts and healthcare experts worldwide have recognized the significance of this partnership. Tina Banerjee, a healthcare analyst contributing to the Smartkarma platform, described the deal as a “big positive and much needed for Daiichi Sankyo.” The agreement has raised expectations for Daiichi’s oncology drug pipeline and generated a renewed sense of hope for patients battling various forms of cancer.

The Promise of the Three Cancer Candidates

The three ADC drug candidates that will be jointly developed by Merck and Daiichi Sankyo are patritumab deruxtecan, ifinatamab deruxtecan, and raludotatug deruxtecan. These innovative drugs are in various stages of clinical development and offer a multi-billion-dollar commercial revenue potential for both companies by the mid-2030s.

The collaboration between Merck and Daiichi Sankyo extends to the global development and potential commercialization of these drug candidates, with the exception of Japan, where Daiichi Sankyo will retain exclusive rights. Daiichi Sankyo will take on the responsibility of manufacturing and supply for these drugs.

Impact on Earnings and Future Prospects

The financial aspect of the collaboration includes Merck’s upfront payment of $4 billion to Daiichi Sankyo, along with $1.5 billion in continuation payments over the next two years. There is also the possibility of Merck making additional payments of up to $16.5 billion based on future sales milestones, translating to $5.5 billion for each successful product.

The joint effort is significant for Merck as it expands its portfolio of cancer drugs, especially as patents for its top-selling Keytruda approach expiration by the end of the decade. Merck’s commitment to this partnership means taking a pre-tax charge of $5.5 billion, impacting its financial results in the fourth quarter of 2023 and the full-year 2023.

Daiichi Sankyo, with six ADC candidates in its pipeline, is positioning itself as a leader in the ADC development field. The collaboration with Merck further solidifies its presence in the oncology domain and holds the potential to be a game-changer in cancer treatment.

Author

Sinead Huang