By Natalia Drozdiak and Christopher Alessi
FRANKFURT-- Pfizer Inc. and Germany's Merck KGaA are teaming up
to develop a new tumor treatment product in an effort to boost
their respective oncology businesses, even as U.S.-based Pfizer
reduced its guidance for 2014 as a result of the deal.
Pfizer said it will pay Merck $850 million upfront to jointly
develop and commercialize an anti-PD-L1 antibody. The German
company, which is already developing the compound as a drug for
various types of cancerous tumors, could receive a further $2
billion in regulatory and commercial milestone payments from
Pfizer, the companies said.
"It is the largest deal in the pharmaceutical industry for a
single asset in this stage of development," said Belén Garijo,
chief executive of Merck's pharmaceutical division. The deal also
"enables Merck to accelerate its entry into the U.S. oncology
market" and "fill one of our big strategic gaps," Ms. Garijo
added.
Analysts at Berenberg bank called the deal a "significant
transaction for Merck," saying it had "attracted a deep pocketed
partner in Pfizer."
Pfizer cut its expected reported diluted earnings per-share for
2014 to a range of $1.4 to $1.49 from $1.5 to $1.59.
The two companies will also work to push Pfizer's anti-PD-1
antibody--another tumor fighting compound--into phase 1 trials,
while Merck will co-promote Pfizer's lung cancer drug XALKORI in
the U.S. and other markets.
The value-added co-commercialization agreement for XALKORI
"allows Merck to leverage its U.S. marketing sales force" in order
to expand its oncology presence before a potential approval of the
anti-PD-L1 compound, according to analysts at Warburg Research. "It
will allow us to enter the market immediately," Ms. Garijo
said.
Merck and Pfizer currently have a co-promotion agreement for
Merck's Multiple Sclerosis drug Rebif in the U.S., set to expire at
the end of 2015.
Merck and Pfizer said they will jointly fund development and
commercialization costs and will share all revenues from any
anti-PD-L1 or anti-PD-1 products. The companies will initiate
around 20 immuno-oncology clinical development programs starting
next year.
"Merck's [anti-PD-L1 antibody] has shown promising results in
more than 550 patients" in phase 1 development and was "a really
good starting point for an alliance," said Mikael Dolsten,
president of Pfizer's research and development division.
Growth in Merck's pharmaceutical division, Merck Serono, was
held back in the third quarter, reported Nov. 13, because of a 69%
decline in royalty, license and commission income connected with
patent expirations for arthritis drugs Humira and Enbrel.
The company has moved over the past year to bolster its
non-pharmaceutical divisions through the acquisitions of the U.K.'s
AZ Electronics PLC and U.S.-based Sigma-Aldrich Corp., a supplier
of laboratory testing materials.
Merck KGaA isn't affiliated with Merck & Co. of the U.S.
Pfizer, which has also been squeezed by patent expirations for
popular drugs like cholesterol-lowering Lipitor, lowered the top
end of its full-year revenue forecast for 2014 to $49.46 billion
from $50.7 billion when it reported its third quarter results in
October.
Write to Natalia Drozdiak at natalia.drozdiak@wsj.com and
Christopher Alessi at christopher.alessi@wsj.com
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