Merck Closes Exclusive Global License Agreement for LM-299, An Investigational Anti-PD-1/VEGF Bispecific Antibody

Rhea-AI Summary

Merck (MRK) has finalized an exclusive global license agreement with LaNova Medicines for LM-299, a novel investigational PD-1/VEGF bispecific antibody. The deal includes an upfront payment of $588 million, which will result in a pre-tax charge of approximately $0.18 per share in Merck's Q4 2024 results. LaNova could receive up to $2.7 billion in milestone payments, including $300 million upon technology transfer expected in 2025. Under the agreement, Merck will handle the development, manufacturing, and commercialization of LM-299.

Positive

• Strategic acquisition of novel bispecific antibody expanding product pipeline
• Global exclusive licensing rights secured for development and commercialization

Negative

• Significant upfront payment of $588 million impacting Q4 2024 earnings ($0.18 per share)
• Potential future liability of up to $2.7 billion in milestone payments
• $300 million technology transfer payment due in 2025

Insights

Biotechnology Analyst

This licensing deal represents a significant strategic move in Merck's oncology portfolio. The $588 million upfront payment and potential $2.7 billion in milestone payments for LM-299 demonstrates Merck's strong commitment to expanding its presence in the bispecific antibody space. The dual-targeting mechanism of PD-1 and VEGF is particularly noteworthy as it combines two well-validated cancer pathways: immune checkpoint inhibition and anti-angiogenesis. This approach could potentially offer superior efficacy compared to single-targeting therapies, especially in resistant tumors. The technology transfer milestone of $300 million expected in 2025 suggests confidence in the near-term development timeline. For context, bispecific antibodies have shown promising results in various cancers and this investment aligns with the growing market trend toward multi-targeted therapeutic approaches.

Financial Analyst

The financial structure of this deal is particularly compelling. The $588 million upfront charge, impacting Q4 2024 by $0.18 per share, represents a significant but manageable investment given Merck's robust balance sheet and $248.7 billion market cap. The milestone payment structure, totaling up to $2.7 billion, effectively spreads the risk across development stages. The $300 million technology transfer payment expected in 2025 provides a clear near-term catalyst. This deal structure is typical for high-potential assets in oncology, where substantial upfront payments are balanced with milestone-based incentives. The impact on Q4 earnings is material but shouldn't significantly affect Merck's overall financial health, given their strong cash position and revenue streams from existing products.

RAHWAY, N.J.--(BUSINESS WIRE)-- Merck (NYSE: MRK), known as MSD outside of the United States and Canada, today announced the closing of the exclusive global license agreement for LM-299, a novel investigational PD-1/VEGF bispecific antibody, from LaNova Medicines Ltd. As previously announced, Merck will develop, manufacture and commercialize LM-299.

Merck will record a pre-tax charge relating to the upfront payment of $588 million, or approximately $0.18 per share, in the company’s fourth quarter 2024 GAAP and non-GAAP results. LaNova is also eligible to receive up to $2.7 billion in milestone payments associated with the technology transfer, development, regulatory approval and commercialization of LM-299 across multiple indications, including $300 million upon technology transfer anticipated to be completed in 2025.

About LM-299

LM-299 is an investigational bispecific antibody targeting both programmed cell death protein-1 (PD-1) and vascular endothelial growth factor (VEGF). This innovative therapeutic approach is designed to inhibit both PD-1/PD-L1 and VEGF/VEGFR receptor signaling pathways releasing a key immune checkpoint while also inhibiting the production of new blood vessels (angiogenesis). LM-299 has a differentiated molecular design, comprising an anti-VEGF antibody linked to two C-terminal single domain anti-PD-1 antibodies. A Phase 1 clinical trial for LM-299 is currently enrolling patients in China.

About Merck

At Merck, known as MSD outside of the United States and Canada, we are unified around our purpose: We use the power of leading-edge science to save and improve lives around the world. For more than 130 years, we have brought hope to humanity through the development of important medicines and vaccines. We aspire to be the premier research-intensive biopharmaceutical company in the world – and today, we are at the forefront of research to deliver innovative health solutions that advance the prevention and treatment of diseases in people and animals. We foster a diverse and inclusive global workforce and operate responsibly every day to enable a safe, sustainable and healthy future for all people and communities. For more information, visit www.merck.com and connect with us on X (formerly Twitter), Facebook, Instagram, YouTube and LinkedIn.

Forward-Looking Statement of Merck & Co., Inc., Rahway, N.J., USA

This news release of Merck & Co., Inc., Rahway, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline candidates that the candidates will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2023 and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

View source version on businesswire.com: https://www.businesswire.com/news/home/20241220203443/en/

Merck Media Contacts:

Robert Josephson

(203) 914-2372

Justine Moore

(347) 281-3754

Merck Investor Contacts:

Peter Dannenbaum

(732) 594-1579

Steven Graziano

(732) 594-1583

Source: Merck & Co., Inc.

FAQ

What is the financial impact of Merck's LM-299 license agreement on Q4 2024 earnings?

The agreement will result in a pre-tax charge of $588 million, or approximately $0.18 per share, in Merck's Q4 2024 GAAP and non-GAAP results.

How much could LaNova receive in total milestone payments from Merck (MRK) for LM-299?

LaNova could receive up to $2.7 billion in total milestone payments for technology transfer, development, regulatory approval, and commercialization across multiple indications.

When is the technology transfer payment for MRK's LM-299 license expected?

A $300 million technology transfer payment is anticipated to be completed in 2025.

What rights does Merck (MRK) acquire through the LM-299 license agreement?

Merck acquires exclusive global rights to develop, manufacture, and commercialize LM-299, a novel investigational PD-1/VEGF bispecific antibody.