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Merck (NYSE:MRK) announced Thursday an agreement with Japanese pharma Daiichi Sankyo (OTCPK:DSKYF) to jointly develop and commercialize three antibody-drug conjugates (ADC) targeted at solid tumors.
The deal covers ADCs, patritumab deruxtecan (HER3-DXd), ifinatamab deruxtecan (I-DXd), and raludotatug deruxtecan (R-DXd). They are currently undergoing studies as monotherapy and as part of combination therapies for various cancer types.
Per the terms, Merck will pay Daiichi (OTCPK:DSNKY) $4B upfront and $1.5B in additional payments over the next 12 months. With $16.5B in payments due upon the achievement of future sales milestones, the total consideration of the deal reaches up to $22B.
The companies will equally share expenses as well as profits linked to the candidates globally, except in Japan, where Daiichi (OTCPK:DSNKY) will retain exclusive rights and Merck (MRK) will receive royalties.
However, for raludotatug deruxtecan, Merck will cover 75% of the first $2B of R&D expenses.
In conjunction with the announcement, Merck (MRK) said its Q4 and full-year 2023 results will take a hit as the deal will lead to ~$1.70 per share in pre-tax charges.
There will be an adverse impact of ~$0.25 per share in the first 12 months following the close of the transaction as the company invests in the pipeline and incurs expenses to fund the deal.