Right on TARGET
June 2012
by David Hutton  |  Email the author


WHITEHOUSE STATION, N.J.—How valuable are drugs with companion diagnostics? For Merck & Co., its latest deal just might shine a light on their potential value. In a development deal that could be worth up to $1 billion, Merck and Endocyte are joining forces to develop the cancer drug Vintafolide.  
Vintafolide is a treatment being developed side-by-side with a diagnostic agent, Etarfolatide, which identifies patients with the biological or genetic traits that would increase their chances of reaping benefits from the drug. The drug is currently being evaluated in a Phase III clinical trial for platinum-resistant ovarian cancer (PROCEED) and a Phase II trial for non-small cell lung cancer (TARGET).
"Both studies are also using the companion diagnostic agent, Etarfolatide, for patient selection," Ron Ellis, CEO of Endocyte, explains. "A conditional marketing authorization application for Vintafolide and Etarfolatide as treatment for platinum-resistant ovarian cancer will be filed in the European Union in Q3 2012. Data from the Phase III PROCEED trial is expect in the first half of 2014, and data from the Phase IIb TARGET trial is expected in early 2014."  
Vintafolide is a novel promising late-stage candidate with clinical data in challenging ovarian and lung cancer indications, Ellis continues.  
"It is a small-molecule drug conjugate comprised of a targeting ligand (for the folate receptor) linked to a potent chemotherapy drug that is designed to release the active drug only once it is inside the target cell," he says. "Endocyte has developed a companion diagnostic, Etarfolatide, to identify patients that over-express the folate receptor and thus are most likely to benefit from treatment with Vintafolide."  
Additionally, Vintafolide targets a well-validated clinical marker, the folate receptor, which is overexpressed in a wide variety of cancers.  
"This agreement underscores our strategy of building a portfolio of oncology therapeutics that employ a companion diagnostic to facilitate selection of those patients most likely to respond to treatment," says Peter S. Kim, president of Merck Research Laboratories. Kim adds that in addition to pursuing the lead indication of platinum-resistant ovarian cancer, Merck "plans to further evaluate (Vintafolide's) potential for treatment of multiple other cancer types."  
Under terms of the deal, Merck gains global rights to the compound and in return will pay Endocyte an upfront sum of $120 million. Endocyte also will be eligible to receive milestone payments of up to $880 million for a total of six cancer indications.
With the patent on its allergy and asthma drug, Singulair, set to expire, Merck is moving forward with bringing new drugs to market. Merck's interest and commitment to expand development into multiple cancer indications was also a key element of the deal.  
Vintafolide represents a building block in amassing oncology drugs that use a companion diagnostic, as well as a strong late-stage addition to Merck's oncology portfolio.  
"This deal underscores Merck's commitment to oncology and long- term strategy of building a portfolio of oncology therapeutics that wherever possible employ a companion diagnostic to facilitate selection of those patients most likely to respond to treatment," Ellis says.  
Finding a dance partner for this deal was no easy chore for Endocyte, but after a competitive selection process, it quickly became apparent that in addition to Merck's reputation for the discovery of breakthrough medicines there was a particular appreciation of the value of companion imaging diagnostics.  
The deal could prove to be a windfall for Endocyte. According to Mike Sherman, the company's chief financial officer, if Vintafolide is approved, the company will receive an equal share of profit in the United States, where it has retained the right to co-promote the drug. Merck also will pay the company a double-digit percentage royalty on sales of the product in the rest of the world.  
The blockbuster deal may offer some vindication of Endocyte's faith in the compound, even after it was drubbed in December on inconclusive data from a Phase IIb study. Cowen analyst Simos Simeonidis told the Wall Street Journal that Endocyte received favorable terms in the agreement.  
"We like Merck as a partner since it has the bandwidth and know-how to make the most of this compound," he said in a research note.  
Analyst Howard Liang of Leerink Swann offered praise of the deal from Endocyte's perspective. In a research note, he highlighted the "very healthy" $120 million upfront payment and the validation Merck's partnership gives to Endocyte's program. Closing of the transaction is contingent upon regulatory conditions.  

Code: E061221

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