For oncology deals, don’t forget the other Merck

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As a relative latecomer to immuno-oncology Merck KGaA needs to move fast to make an impression, especially as this hot area of drug development is dominated by big pharma groups with deep pockets for licensing and acquisitions.

Last week's research alliance with MorphoSys is a small step along the way, but corporate financiers need not worry that it will be Merck’s last. Belén Garijo, head of the group’s pharmaceuticals division, Merck Serono, recently spoke to EP Vantage and laid out her plans to make headway in oncology, which she insists has “always been part of our life”.

The company has faced R&D setbacks over the years, the latest of which occurred just two days ago as a multiple sclerosis deal with Ono Pharmaceutical covering ceralifimod was terminated owing to competitive pressures that emerged after Receptos's similarly acting project succeeded in phase II (Receptos data signals growing competition for MS pills, June 10, 2014).

Meanwhile, Merck's historic focus on liquid crystal displays and consumer health in addition to prescription drugs has resulted in the last of these divisions becoming somewhat marginalised. And, as a group that is majority family-owned, it might lack the ability to raise large amounts of cash quickly to strike when it sees an interesting asset.

Ms Garijo rejected the suggestion. “I don’t feel constrained by cash – look at our cash flow figures,” she told EP Vantage at the recent Asco meeting. “We did some 13 deals in 2013, and we’re looking at partnering and ongoing in-licensing.”

That said, she admitted that not many oncology assets met all the criteria, and many prices in the market at present are mindboggling. “It’s about finding the right balance between investing in R&D and accepting you can’t develop it all in house. There are many ways of partnering.”

The MorphoSys deal looks like one way of accessing a technology without blowing too much cash up front. The subject of the alliance is MorphoSys’s Ylanthia technology, which is claimed to be the industry’s largest Fab antibody fragment library, capable of generating fully human MAbs that have improved biophysical properties and are able to target a broad range of target epitopes.

Development will be co-funded, and the stated focus is immune checkpoint inhibitors, to supplement a small immuno-oncology pipeline the company already has. Merck’s cytokine MSB0010445 is in phase II, and at Asco the group emerged as another developer of an anti-PD-L1 MAb, MSB0010718C, which as an early phase I asset is well behind Roche and AstraZeneca.

A phase I trial of MSB0010718C presented at Asco showed one partial response out of 28 patients treated, with one dose-limiting toxicity at the highest dose. Compared with data on the likes of pembrolizumab and MPDL3280A this by no means overwhelming, though it is early days.

Under pressure

MSB0010718C was discovered in house, but the speed of industry developments here must be putting pressure on Merck, especially as Ms Garijo is no doubt that the future of cancer treatment lies in combinations.

The group’s less-than-stellar performance with other asets cannot be helping either. Its Threshold-partnered hypoxia-targeted project TH-302 has hardly set the oncology world ablaze, and last year a pivotal soft tissue sarcoma study had to be expanded to help powering; an interim analysis is due shortly.

Meanwhile, the NSCLC project tecemotide flunked a phase III trial, though the group is pushing on with a new pivotal study based on a subgroup analysis, and Ms Garijo insists that the project “didn’t fail”.

None of this is to deny that Merck has made some smart moves. Its oncology masterstroke was to buy ex-US rights to Erbitux from ImClone Systems, as it was then, pre-empting Bristol-Myers Squibb’s $2bn billion deal for US rights in 2001. Much growth hangs on wringing additional revenue out of Erbitux (Asco – Academia gives Erbitux another chance to gain share in colorectal cancer, June 2, 2014).

While Erbitux shows that oncology has long been a cornerstone business for Merck, the full realisation came quite recently. “In the last two years we’ve gone a long way to understanding what oncology means for Merck,” said Ms Garijo, who took over the head pharma job six months ago.

Far bigger deals than the MorphoSys alliance must follow if Merck wants to move beyond Erbitux and do more than scratch the surface of immuno-oncology.

To contact the writer of this story email Jacob Plieth in London at jacobp@epvantage.com or follow @JacobEPVantage on Twitter

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