One of America's largest pharmaceutical companies is about to get a little bigger. On Thursday, Merck (NYSE:MRK) agreed to acquire a privately held biotech start-up called VelosBio for $2.75 billion in cash. 

VelosBio's lead candidate, VLS-101, is a potential first-in-class antibody-drug conjugate (ADC) that targets a protein called Ror1, which is often found on the surface of cancer cells. After the antibody component of VLS-101 finds its target, it delivers a miniature chemotherapy grenade to cancer cells. 

A medical business transaction.

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In a phase 1 clinical trial, treatment with VLS-101 shrank tumors for seven out of 15 mantle cell lymphoma patients, and four out of five patients with diffuse large B-cell lymphoma. These results would be pretty good for newly diagnosed patients, but these were people with aggressive disease that failed to respond or relapsed after previous lines of treatment.

The company's past oncology investments are working out well for investors. Also on Thursday, Lynparza, which Merck develops and markets in partnership with AstraZeneca (NASDAQ:AZN), took another big step forward. The EU has expanded Lynparza's marketing approval to include advanced-stage prostate cancer patients with BRCA mutations.

In 2017, Merck agreed to pay AstraZeneca $1.6 billion up front, and up to $6.15 billion in potential milestone payments, to co-develop and co-commercialize Lynparza. Since then, the drug's addressable patient population has expanded to include patients with breast and pancreatic cancer.

In the third quarter, Merck's share of Lynparza profits rose 59% year over year to $196 million, and they will probably continue soaring on the back of today's approval to treat advanced-stage prostate cancer throughout the EU.

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