Merck to pay as much as $22 billion for Daiichi Sankyo’s cancer drugs

Merck & Co. agreed to buy the rights to sell Daiichi Sankyo Co.’s three experimental cancer drugs, looking to sustain its dominance in treatment of the deadly disease.

Daiichi rose 14% Friday after Merck agreed to pay $4 billion upfront and as much as $22 billion to develop and market the drug candidates.

One them is them slated to seek U.S. approval by March 2024, the company said. Daiichi will retain the rights for the drugs in Japan.

The deal adds promising drug candidates to Merck’s oncology portfolio, as its bestselling cancer therapy Keytruda will see its patent expire later this decade.

A treatment that harnesses patients’ immune systems to fight cancer, Keytruda is also expected to enter U.S. government price negotiations in 2028, when it’s set to reach $33 billion in global sales, about 45% of Merck’s estimated revenue that year.

.

The deal also cements the Japanese drugmaker’s lead in developing antibody-drug conjugates, or ADCs, that attack cancer cells without damaging surrounding healthy tissues.

Daiichi has already teamed up with AstraZeneca Plc to sell a similar drug called Enhertu that’s used to treat breast cancer and is on track to generate more than $10 billion annually.

Daiichi and Astra are co-developing another ADC candidate for lung and breast cancer.

“Keytruda is entrenched in multiple malignancies in combination with chemotherapy,” Marjorie Green, senior vice president and head of late-stage oncology at Merck, said in an interview. “You could imagine you’d be able to combine these ADCs with Keytruda and show superiority.”

Daiichi has expressed interest in commercializing its own drugs to maximize profit.

It has been expanding sales and development teams outside Japan, while seeking to boost manufacturing.

Still, the drugmaker sees value in partnering with Merck to maximize the potential of drugs discovered in their latest studies, as competition to recruit patients into clinical trials using ADCs heats up, Daiichi Chief Executive Officer Sunao Manabe said in a briefing Friday.

“The need for resources and speed, the obligation we have to patients that can benefit from these drugs, told us we needed to partner,” Stuart Mackey, Daiichi Sankyo’s global head of business development, said in an interview.

“We got into discussions with Merck, they saw the data that we were seeing and shared that enthusiasm.”

Earlier this year Pfizer Inc. agreed to acquire Seagen Inc., another developer of ADCs, for $43 billion.

On Thursday, the European Union gave its unconditional nod for the acquisition to proceed.