Right on TARGET

Merck, Endocyte reach deal to develop cancer drug

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WHITEHOUSE STATION, N.J.—How valuable are drugs withcompanion diagnostics? For Merck & Co., its latest deal just might shine alight on their potential value.
In a development deal that could be worth up to $1 billion,Merck and Endocyte are joining forces to develop the cancer drug Vintafolide.
Vintafolide is a treatment being developed side-by-side witha diagnostic agent, Etarfolatide, which identifies patients with the biologicalor genetic traits that would increase their chances of reaping benefits fromthe drug. The drug is currently being evaluated in a Phase III clinical trialfor platinum-resistant ovarian cancer (PROCEED) and a Phase II trial fornon-small cell lung cancer (TARGET).
"Both studies are also using the companion diagnostic agent,Etarfolatide, for patient selection," Ron Ellis, CEO of Endocyte, explains. "Aconditional marketing authorization application for Vintafolide andEtarfolatide as treatment for platinum-resistant ovarian cancer will be filedin the European Union in Q3 2012. Data from the Phase III PROCEED trial isexpect in the first half of 2014, and data from the Phase IIb TARGET trial isexpected in early 2014."
Vintafolide is a novel promising late-stage candidate withclinical data in challenging ovarian and lung cancer indications, Elliscontinues.
"It is a small-molecule drug conjugate comprised of atargeting ligand (for the folate receptor) linked to a potent chemotherapy drugthat is designed to release the active drug only once it is inside the targetcell," he says. "Endocyte has developed a companion diagnostic, Etarfolatide,to identify patients that over-express the folate receptor and thus are mostlikely to benefit from treatment with Vintafolide."
 Additionally, Vintafolide targets a well-validated clinicalmarker, the folate receptor, which is overexpressed in a wide variety ofcancers.
"This agreement underscores our strategy of building aportfolio of oncology therapeutics that employ a companion diagnostic tofacilitate selection of those patients most likely to respond to treatment,"says Peter S. Kim, president of Merck Research Laboratories.
Kim adds that in addition to pursuing the lead indication ofplatinum-resistant ovarian cancer, Merck "plans to further evaluate(Vintafolide's) potential for treatment of multiple other cancer types."
Under terms of the deal, Merck gains global rights to thecompound and in return will pay Endocyte an upfront sum of $120 million.Endocyte also will be eligible to receive milestone payments of up to $880million for a total of six cancer indications.
With the patent on its allergy and asthma drug, Singulair,set to expire, Merck is moving forward with bringing new drugs to market.Merck's interest and commitment to expand development into multiple cancerindications was also a key element of the deal.
Vintafolide represents a building block in amassing oncologydrugs that use a companion diagnostic, as well as a strong late-stage additionto Merck's oncology portfolio.
"This deal underscores Merck's commitment to oncology andlong-term strategy of building a portfolio of oncology therapeutics thatwherever possible employ a companion diagnostic to facilitate selection ofthose patients most likely to respond to treatment," Ellis says.
Finding a dance partner for this deal was no easy chore forEndocyte, but after a competitive selection process, it quickly became apparentthat in addition to Merck's reputation for the discovery of breakthroughmedicines there was a particular appreciation of the value of companion imagingdiagnostics.
The deal could prove to be a windfall for Endocyte.According to Mike Sherman, the company's chief financial officer, ifVintafolide is approved, the company will receive an equal share of profit inthe United States, where it has retained the right to co-promote the drug.Merck also will pay the company a double-digit percentage royalty on sales ofthe product in the rest of the world.
The blockbuster deal may offer some vindication ofEndocyte's faith in the compound, even after it was drubbed in December oninconclusive data from a Phase IIb study.
Cowen analyst Simos Simeonidis told the Wall StreetJournal that Endocyte received favorable terms in the agreement.
"We like Merck as a partner since it has the bandwidth andknow-how to make the most of this compound," he said in a research note.
Analyst Howard Liang of Leerink Swann offered praise of thedeal from Endocyte's perspective. In a research note, he highlighted the "veryhealthy" $120 million upfront payment and the validation Merck's partnershipgives to Endocyte's program.
Closing of the transaction is contingent upon regulatoryconditions.


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