Merck (MRK) acquires OncoImmune to add another drug to its COVID-19 pipeline

Merck (NYSE: MRK) announced the acquisition of privately-held biopharma company OncoImmune for an upfront payment of $425 million in cash with subsequent payments based on sales as well as the achievement of certain milestones. The deal is expected to close before the end of 2020, subject to approvals.

The deal will give Merck access to CD24Fc, which is OncoImmune’s drug candidate for the treatment of COVID-19. CD24Fc is a protein-based therapy that targets the innate immune system. OncoImmune reported positive data from its SAC-COVID Phase 3 clinical trial in September, which evaluated the efficacy of CD24Fc in hospitalized COVID-19 patients who required oxygen support.

The trial showed that CD24Fc helped reduce the risk of death or respiratory failure by more than 50%. The data from 203 participants showed that treatment with a single dose of CD24Fc helped bring a 60% improvement in the clinical status of the patients.

“Meaningful new therapeutic options are desperately needed for possibly millions of people around the world who will develop severe or critical COVID-19 disease. Recent clinical investigations support the view that CD24Fc may provide benefit beyond standard of care therapy for COVID-19 patients requiring oxygen support, and hence will represent an important addition to the Merck pipeline of investigational medicines and vaccines designed to address the COVID-19 pandemic.” – Dr. Roger M. Perlmutter, President, Merck Research Laboratories.

CD24Fc is OncoImmune’s lead product and it has been tested for additional conditions outside COVID-19. The drug has undergone Phase 2 clinical trials for the prevention of graft versus host disease (GVHD) in patients with leukemia who have undergone stem cell transplantation.

Merck will only gain CD24Fc in the acquisition. OncoImmune will spin out the remaining assets into a new entity, in which Merck will invest $50 million and become a minority shareholder.

Pipeline and M&A

Merck is involved in the development of three other treatment options for COVID-19. The company is testing molnupiravir, a potential pill for COVID-19, in collaboration with Ridgeback Biotherapeutics. Merck is also conducting clinical trials to evaluate two vaccine candidates for COVID-19 – V590, which is being developed in association with IAVI, and V591, which uses a measles virus vector-based platform.

Merck has also submitted applications to the US FDA and the European Medicines Agency (EMA) to obtain license for V114, its pneumococcal conjugate vaccine candidate for the prevention of pneumococcal disease.

Earlier this month, Merck said it was acquiring VelosBio, a private biopharma company focused on cancer therapies, for $2.75 billion. VelosBio’s lead product is VLS-101, an antibody-drug conjugate that is being evaluated for the treatment of hematologic malignancies and solid tumors. The transaction is expected to close by the end of 2020.

Strong Q3 results

Last month, Merck delivered better-than-expected sales and earnings for the third quarter of 2020. Sales increased 1% to $12.6 billion while adjusted EPS rose 16% to $1.74. The topline benefited from strength in oncology and human health vaccines.

Merck’s shares remained in red territory on Monday. The stock has dropped 11% since the beginning of the year.

Click here to read the full transcript of Merck Q3 2020 earnings conference call