Moving from Exploratory Collaborations to Record-Setting Deals in IO

Merck-Eisai partnershipIn early March, we wrote about the collaboration between Bristol-Myers Squibb and Nektar aimed at developing Nektar’s T-cell stimulating molecule NKTR-214 in combination with BMS’s checkpoint inhibitor Opdivo (nivolumab). That deal brought Nektar an eye-opening $1.85 billion in upfront cash and investments for a share of its development-stage drug, with the potential for an additional $1.78 billion in milestone payments and a profit sharing deal on eventual sales that favored Nektar.

 

Soon after, Merck and Eisai announced their own noteworthy deal, focused on Merck’s IO drug Keytruda (pembrolizumab) and Eisai’s Lenvima (lenvatinib mesylate), an oral tyrosine kinase inhibitor that is already approved as a single agent for thyroid cancer and in combination with Afinitor for the treatment of renal cell carcinoma. While the immediate upfront cash payment, at $300 million, isn’t as high as that in the BMS-Nektar collaboration, the combination of other rights, payments, milestones, R&D reimbursement, and royalties mean that Merck could eventually pay as much as $5.8 billion for half-ownership of Lenvima. In exchange, Merck will receive up to 50% of the profits from Lenvima sales, whether as a monotherapy or in combination with Keytruda. This is Merck’s second big combination deal with Keytruda. In July 2017, the company bought half the rights to AstraZeneca’s Lynparza (olaparib) in an $8.5 billion deal that included $1.6 billion upfront.

 

Lenvima has already shown considerable promise in combination with Merck’s IO treatment.  In 2018, the combination earned breakthrough designation in advanced and/or metastatic renal cell carcinoma based on positive results of a Phase 1b/2 study that achieved an overall response rate of 63% after 24 weeks of therapy and saw tumor regression in 93% (28/30 patients) of patients. The partners are planning to expand combination studies of Keytruda and Lenvima considerably to encompass as many as 11 potential indications, including endometrial cancer, non-small cell lung cancer, liver cancer, head and neck cancer, bladder cancer, and melanoma.

 

We view these deals as reflecting a move by oncology drug developers from simple R&D collaborations aimed at testing the potential of drug combinations to high money deals once the value of such collaborations is demonstrated. As such, we predict we’ll be seeing more transactions like these for drug combinations that fare well in early clinical trials.

 

Given the large number of early-stage combination drug collaborations, we’ll be interested to see which companies and drugs will be next, and how future collaborations will be structured, especially as oncology drug combinations grow beyond drug pairs to perhaps involve additional therapeutics.