Merck signs up to $3.3 billion cancer drug deal with China-based LaNova

By Leroy Leo

(Reuters) -Merck has licensed an early-stage cancer drug from a China-based biotech in an up to $3.3 billion deal, two months after a similar therapy from Summit Therapeutics (NASDAQ:SMMT) outperformed its blockbuster Keytruda in a late-stage trial in the country.

The deal allows Merck (NS:PROR) to take over development of privately held LaNova Medicines' LM-299, the companies said on Thursday.

The drug candidate targets a protein called PD-1, which prevents the immune system from killing cancerous cells. It also curbs levels of another protein called VEGF, which can encourage tumor growth if found in excess.

Under the agreement, Merck will pay $588 million upfront. LaNova is also eligible to receive up to $2.7 billion in milestone payments.

In September, Summit and its partner Akeso released data that showed patients using their drug ivonescimab, which targets the same proteins, had significantly better survival rates than those on Keytruda.

This class of drug has been attracting increased interest for deals. On Wednesday, German drugmaker BioNTech (NASDAQ:BNTX) said it would acquire China's Biotheus to gain access to its so-called bi-specific antibody that targets PD-1 and VEGF.

BMO analyst Evan Seigerman said the LaNova deal offers a hedge to Merck after the data shown by Summit and others.

"The company (Merck) still maintains the best-in-class PD-1 (in Keytruda) with a wall of clinical data and a rapidly advancing pipeline of other modalities to back it," Seigerman added. "LaNova's LM-299 simply adds another arrow to Merck's arsenal."

Keytruda became the world's biggest-selling drug last year, with sales of about $25 billion. But the therapy is set to lose its patent protection by the end of the decade, pushing Merck to scout for deals.