3 Things You Need to Know About This Big Pharma Deal

Two big pharmaceutical players on opposite sides of the Atlantic have forged yet another bond.

Through the years, London-based drugmaker AstraZeneca (NYSE: AZN  ) and U.S. pharmaceutical firm Merck (NYSE: MRK  ) have partnered on several occasions to develop drugs together. Last week, the two companies added another deal to the list with an agreement for AstraZeneca to license Merck's experimental cancer drug MK-1775. Here are the three most important things you need to know from this recent agreement.

1. Money for Merck
Granted, with $16 billion or so socked away in liquid assets, Merck isn't in desperate need of cash. Every little bit helps, though. And, with the MK-1775 deal, this latest little bit totals $50 million upfront with the prospects of more down the road from milestone payments and royalties.

MK-1775 is an oral small molecule inhibitor of WEE1 kinase in phase 2a trials targeting treatment for certain types of ovarian cancer. Why would Merck want to license the drug rather than develop it on its own? It's not really for the money.

Merck wants to be able to focus more attention on its other cancer drugs. Foremost among these is vintafolide, which the company licensed from Endocyte (NASDAQ: ECYT  ) in April 2012. Vintafolide is currently under review in the European Union for treating platinum-resistant ovarian cancer and is in phase 3 studies for the same indication in the United States.

The other primary cancer drug that Merck wants to further along is MK-3475. This experimental drug is currently in a phase 2 study for treating metastatic melanoma. MK-3475 targets the Programed Cell Death-1, or PD-1, protein, and by doing so, boost the body's immune system to fight against cancerous cells. Merck trails behind Bristol-Myers Squibb (NYSE: BMY  ) , whose anti-PD-1 drug nivolumab is already in late-stage testing.

2. Alternatives for AstraZeneca
While Merck gets some money and the opportunity to focus on other solid opportunities, the MK-1775 licensing arrangement gives AstraZeneca another drug to bolster its oncology pipeline. The British drugmaker counts one cancer drug in phase 3 right now, with six other drugs in phase 2 studies. Three of these current cancer candidates are small molecule drugs like MK-1775.

AstraZeneca picked up rights to selumetinib from Array BioPharma (Nasdaq:ARRY) back in 2003. The drug is advancing to separate phase 3 trials this year in treating melanoma and non-small cell lung cancer.The company also has gastric and breast cancer drug AZD4547 in phase 2 testing.

Olaparib targets BRCA-mutated ovarian cancer. AstraZeneca enrolled its first patient in a phase 3 study of olaparib earlier this month. If all goes well in testing for both olaparib and MK-1775, the combination of the two drugs would give the company a strong ovarian cancer product portfolio.

3. Lag for legalities
All of the talk about licensing MK-1775 isn't done yet. The deal is contingent upon getting past the waiting period enforced by the Hart Scott-Rodino Antitrust Improvement Act. This law requires that the parties wait for the federal government to work through any antitrust concerns.

In this case, there really shouldn't be any significant hurdles. Licensing of one drug isn't a major issue for the Federal Trade Commission when there are several companies competing in the cancer drug market. There will be a little big of a lag for the legalities to be reviewed, but this deal seems likely to sail through with flying colors.

Winners all around
This appears to be a win-win scenario. Merck wins by benefiting financially from MK-1775 while getting to focus more on its later-stage drugs. AstraZeneca wins by gaining a new promising drug for its oncology portfolio.

You could actually throw a couple of more winners into the mix as well. Investors win from these types of arrangements that allow pharmaceutical companies to better leverage their resources. The biggest winners of all, though, could be ovarian cancer patients. Any deals that improve the likelihood for more treatment options in the future is a good deal all around.

Want a really good deal to be a winner yourself? Motley Fool co-founder David Gardner, founder of the world's No. 1 growth-stock newsletter, has developed a unique strategy for uncovering truly wealth-changing stock picks. And he wants to share it, along with a few of his favorite growth stock superstars, with you! It's a special 100% free report called "6 Picks for Ultimate Growth." So stop settling for index-hugging gains, and click here for instant access to a whole new game plan of stock picks to help power your portfolio.


Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 16, 2013, at 8:04 PM, HerbieJPilato wrote:

    And none of it has anything to do with first and foremost having anything to do with legitimately caring for and healing the patient!

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2639994, ~/Articles/ArticleHandler.aspx, 11/26/2014 8:56:15 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement