Merck invests $1B in Seattle Genetics

Merck to acquire $1B equity stake in Seattle Genetics as part of collaborations

Seattle Genetics (SGEN) and Merck (MRK) announced two new strategic oncology collaborations.

The companies will globally develop and commercialize Seattle Genetics’ ladiratuzumab vedotin, an investigational antibody-drug conjugate, or ADC, targeting LIV-1, which is currently in phase 2 clinical trials for breast cancer and other solid tumors.

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The collaboration will pursue a broad joint development program evaluating ladiratuzumab vedotin as monotherapy and in combination with Merck’s anti-PD-1 therapy Keytruda in triple-negative breast cancer, hormone receptor-positive breast cancer and other LIV-1-expressing solid tumors.

Under the terms of the agreement, Seattle Genetics will receive a $600M upfront payment and Merck will make a $1B equity investment in 5M shares of Seattle Genetics common stock at a price of $200 per share.

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In addition, Seattle Genetics is eligible for progress-dependent milestone payments of up to $2.6B.

Separately, Seattle Genetics has granted Merck an exclusive license to commercialize Tukysa, a small molecule tyrosine kinase inhibitor, for the treatment of HER2-positive cancers, in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe.

Seattle Genetics will receive $125M from Merck as an upfront payment and is eligible for progress-dependent milestones of up to $65M.

Under the terms of the agreement, Seattle Genetics and Merck will collaborate and equally share costs on the global development of ladiratuzumab vedotin and other LIV-1-targeting ADCs.

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The companies have agreed to jointly develop and share future costs and profits for ladiratuzumab vedotin on a 50:50 basis worldwide. Merck will pay Seattle Genetics $600M upfront and make a $1B equity investment in 5M shares of Seattle Genetics common stock at a price of $200 per share.

In addition, Seattle Genetics will be eligible to receive up to $2.6B in milestone payments, including $850M in development milestones and $1.75B in sales milestones.

The companies will jointly develop and commercialize ladiratuzumab vedotin and equally share profits worldwide.

The companies will co-commercialize in the U.S. and Europe. Seattle Genetics will be responsible for marketing applications for approval in the U.S. and Canada, and will record sales in the U.S., Canada and Europe.

Merck will be responsible for marketing applications for approval in Europe and in countries outside the U.S. and Canada, and will record sales in countries outside the U.S., Europe and Canada. Including the upfront payment, equity investment proceeds and potential milestone payments, Seattle Genetics is eligible to receive up to $4.2B.

Under the terms of the agreement, Merck has been granted exclusive rights to commercialize Tukysa in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe. Seattle Genetics retains commercial rights and will record sales in the U.S., Canada and Europe.

Merck will be responsible for marketing applications for approval in its territory, supported by the positive results from the HER2CLIMB clinical trial.

Merck will also co-fund a portion of the Tukysa global development plan, which encompasses several ongoing and planned trials across HER2-positive cancers, including breast, colorectal, gastric and other cancers set forth in a global product development plan.

Seattle Genetics will continue to lead ongoing Tukysa global development planning and operational execution.

Merck will solely fund and conduct country-specific clinical trials necessary to support anticipated regulatory applications in its territory.

Seattle Genetics will receive from Merck $125M as an upfront payment and is eligible to receive progress-dependent milestones of up to $65M. Seattle Genetics will also receive $85M in prepaid research and development payments to be applied to Merck’s global development funding obligations. In addition, Seattle Genetics would receive tiered royalties on sales of Tukysa in Merck’s territory.

SGEN is up 14.8% to $172.40. MRK is up 1.4% to $85.00.

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