Merck gets on the Treg train with Pandion buy

Merck & Co is not shy about paying big bucks for early-stage companies. But the group’s takeout today of Pandion Therapeutics does break the mould in one respect: the deal involves autoimmune rather than cancer projects.

Pandion, for which Merck is shelling out $1.85bn, has one asset in the clinic, PT101, an IL-2 mutein designed to activate T regulatory cells (Tregs), as well as PD-1 agonists in preclinical development. So it will be a while before it becomes apparent whether this was a canny early move or a waste of money on Merck’s part.

One thing is certain: the deal looks pricey, at a 134% premium to Pandion’s closing share price yesterday. Merck must have seen something it liked in phase I data on PT101. Pandion said in January that the project spurred a mean 3.6-fold increase in Tregs over baseline, with no evidence of expansion of NK cells or pro-inflammatory T cells.

Harnessing Tregs has long been a goal in autoimmune disease, as these are thought to damp down the immune system. While high-dose IL-2 activates pro-inflammatory T and NK cells and is being tested in oncology, low-dose IL-2 selectively activates Tregs, according to Pandion. Still, the company has noted that therapeutic use of low-dose native IL-2 here has been hampered by its activation of the pro-inflammatory side of the immune system.

Several other players are developing engineered IL-2s with a similar aim, and Leerink analysts noted that, based on cross-trial comparisons, PT101’s performance looked competitive with the other projects in development – although they conceded that it was early days.

Merck will now have to show that this Treg expansion translates into a clinical effect, and mid-stage studies of PT101 are due to start soon in ulcerative colitis and systemic lupus erythematosus.

PT101 acts systemically, but Pandion has another trick up its sleeve that might have helped entice Merck: the group is also developing “tissue-tethered” projects, which employ a molecule to direct therapy to a particular tissue of interest.

Pandion has hinted that this approach might work in diabetes: earlier this month, it presented mouse data on a tissue-tethered PD-1 agonist, PT001, showing that this delayed the onset of hyperglycaemia in a model of type 1 diabetes.

The priorities for now appear to be gut and liver-tethered projects, featuring both the IL-2 mutein and PD-1 agonist. On the pancreas-targeting side, Pandion had been partnered with Astellas.

However, the tissue-tethering projects, although intriguing, are still very early. Merck has the money to pursue these types of deals, and has paid over $8bn for four chunky bolt-ons in under two years: as well as Pandion, this includes the purchases of Velosbio, Arqule and Peloton Therapeutics. Now, the group needs at least some of these takeouts to work out.