Merck KGaA’s (MKGAF) biopharmaceutical division, Merck Serono, has signed a collaboration and license agreement with Sutro Biopharma to develop antibody drug conjugates (ADCs) targeting cancer cells. This deal is aimed at enhancing Merck KGaA’s access to ADC technologies and expanding its oncology pipeline.
Terms of the Deal
Under this agreement, Merck KGaA will use Sutro’s cell-free protein synthesis platforms Xpress CF and Xpress CF+ to develop ADCs for multiple undisclosed targets. While Sutro will supply ADCs for phase I studies, Merck KGaA will be responsible for the development and commercialization of any product developed under the collaboration.
As far as financial details are concerned, Merck KGaA will make an upfront payment to Sutro apart from funding certain R&D activities. Additionally, Sutro will receive royalties on product sales as well as milestones payments once specific research, development and regulatory milestones (approximately totaling €230 million) are achieved.
Our Take
We are positive on Merck KGaA’s collaboration with Sutro. We believe Merck KGaA’s access to the new technology platforms will complement its efforts to develop its oncology pipeline, which comprises a number of mid and late-stage candidates.
We note that several companies are currently adopting an interest in the development of ADCs for the treatment of cancer. Earlier this month, Seattle Genetics (SGEN) entered into an antibody drug conjugate collaboration with Genmab A/S for the development of Genmab’s ADC for solid cancer using the former’s auristatin-based ADC technology.
Merck KGaA carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the health care sector are Lannett Company, Inc. (LCI) and Avanir Pharmaceuticals, Inc. (AVNR). While Lannett carries a Zacks Rank #1 (Strong Buy), Avanir holds a Zacks Rank #2 (Buy). Seattle Genetics also carries a Zacks Rank #2 (Buy).
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