Lilly to Pay Merus as Much as $1.6 Billion in Cancer Team-Up

(Bloomberg) -- Eli Lilly & Co. will pay Merus NV as much as $1.6 billion to collaborate on research and development of up to three early experimental cancer drugs.

Merus will receive an upfront cash payment of $40 million and an equity investment of $20 million in its common shares, according to a statement on Tuesday. Merus, based in the Netherlands, is also eligible to receive as much as $540 million per product for reaching development and commercial goals.

Lilly purchased Loxo Oncology Inc. in 2019 for $8 billion to expand in cancer, one of the most lucrative areas of the pharmaceutical industry. The Merus collaboration is one of a torrent of deals in the sector that show the pent-up demand at pharma giants for new products outside of Covid-19 vaccines and therapeutics.

“This is a really important, strong validation of our platform from one of the most important companies in the industry,” Merus Chief Executive Officer Bill Lundberg said in an interview. “Being able to leverage the expertise and the capability of Lilly will help to deliver on these opportunities.”

Merus is developing bispecific drugs that kill cancers by linking with T-cells that normally seek out and attack tumors. The company already has other drugs in clinical development and in 2017 closed a deal giving rights to up to 11 bispecifics to Incyte Corp., one of its biggest stakeholders.

The biotech’s platform, called Biclonics, includes more than 175 antibodies that bind to CD3, a protein found on T-cells. Binding the protein can help activate the immune cells, bringing them to bear on specific cancer cell targets such as PD-L1, a protein that normally keeps immune responses in check, Lundberg said.

Merus will continue developing the candidates in the early research phase, and Lilly’s involvement will begin later in the preclinical and clinical stages, Lundberg said. Merus will be eligible for royalties on product sales should Lilly commercialize a therapy from the collaboration.

Lilly has been making bolt-on deals like its $1 billion acquisition of Prevail Therapeutics Inc. in December to gain gene therapies for Parkinson’s disease and other neurodegenerative conditions.

The company’s approach to oncology is “going to be early-phase deals, most likely, because that’s where we have an opportunity to add some value and to maybe have a different opinion,” Joshua Smiley, Lilly’s chief financial officer, said in an interview last week.

Merus has gained 49% over the past 12 months before today.