Merck, the pharmaceutical giant, has entered into a groundbreaking partnership with Daiichi Sankyo, a Japanese pharmaceutical company, to jointly develop three promising cancer drugs.
The collaboration, which involves an initial payment of $5.5 billion from Merck to Daiichi Sankyo, has the potential to be worth up to $22 billion for the Japanese firm, contingent on the success of these cell-targeting therapies.
Following the announcement of this strategic alliance, Daiichi Sankyo’s shares (4568.T) surged by an impressive 14.4% in Tokyo, marking their most significant gain in over a year. In contrast, Merck’s shares experienced a 1.6% increase in morning trading.
Daiichi Sankyo is setting ambitious revenue targets, aiming to achieve at least 900 billion yen (approximately $6 billion) from its oncology business by the end of the fiscal year on March 31, 2026.
This objective represents a substantial five-fold increase over a mere three-year period.
Tina Banerjee, a healthcare analyst who publishes on the Smartkarma platform, hailed this collaboration as a “big positive and much needed for Daiichi Sankyo.”
She emphasized that it significantly elevates expectations for Daiichi’s oncology drug pipeline.
The three candidate drugs that will be jointly developed with Merck fall under the category of antibody drug conjugates (ADC).
These drugs are currently at various stages of clinical development, focusing on the treatment of multiple solid cancer tumors.
Unlike traditional chemotherapy, which can harm healthy cells, ADCs are specifically designed to target cancer cells, potentially reducing damage to normal cells.
Daiichi Sankyo’s CEO, Sunao Manabe, highlighted the intensifying competition in the ADC development landscape as a driving force behind the decision to seek a partnership with Merck.
The three drug candidates, namely patritumab deruxtecan, ifinatamab deruxtecan, and raludotatug deruxtecan, are projected to have “multi-billion dollar worldwide commercial revenue potential for each company” by the mid-2030s.
Under this agreement, both companies will collaborate on the development and potential commercialization of these drugs worldwide, with the exception of Japan, where Daiichi Sankyo will retain exclusive rights.
Daiichi Sankyo will be responsible for the manufacturing and supply aspects of the partnership.
For Merck, this deal offers access to a prominent player in the ADC space, strengthening its cancer drug portfolio, particularly as patents for its top-selling drug, Keytruda, approach expiration by the end of the decade.
Merck’s financial commitment includes an upfront payment of $4 billion to Daiichi Sankyo, followed by $1.5 billion in continuation payments over the next two years.
Additional payments of up to $16.5 billion are contingent on future sales milestones, amounting to $5.5 billion for each successful product.
Daiichi Sankyo already has six ADC candidates in its pipeline, including two in collaboration with AstraZeneca.
Nevertheless, a recent data abstract on one of these joint ventures with AstraZeneca disappointed some analysts.
As part of the deal, Merck anticipates a pretax charge of $5.5 billion, translating to approximately $1.70 per share. ]
This will have an impact on its fourth-quarter and full-year 2023 financial results, as confirmed by the companies.
Furthermore, Merck expects a reduction in earnings per share by about 25 cents in the first year following the transaction’s closure to account for its investment in pipeline assets and financing costs.
Details about the impact on Daiichi Sankyo’s financial results will be provided in a future announcement, according to the joint statement.