Merck & Co. and Seattle Genetics, a Bothell, Washington-headquartered biopharmaceutical company, have formed a collaboration, in a deal worth up to $4.2-billion, for Seattle Genetics’ ladiratuzumab vedotin, an investigational antibody drug conjugate (ADC) for treating breast cancer and other solid tumors.

Under the agreement, the companies will globally develop and commercialize Seattle Genetics’ ladiratuzumab vedotin, which is currently in Phase II clinical trials for breast cancer and other solid tumors. The companies will pursue a broad joint development program evaluating ladiratuzumab vedotin as a monotherapy and in combination with Merck & Co.’s anti-PD-1 therapy, Keytruda (pembrolizumab), in triple-negative breast cancer, hormone receptor-positive breast cancer, and other LIV-1-expressing solid tumors.

Under the deal, Merck & Co. will pay Seattle Genetics $600 million upfront and make a $1.0-billion equity investment in 5.0 million shares of Seattle Genetics common stock at a price of $200 per share. In addition, Seattle Genetics will be eligible to receive up to $2.6 billion in milestone payments, including $850 million in development milestones and $1.75 billion in sales milestones. Including the upfront payment, equity investment proceeds and potential milestone payments, Seattle Genetics is eligible to receive up to $4.2 billion.

The companies will equally share costs on the global development of ladiratuzumab vedotin and other LIV-1-targeting ADCs and have agreed to jointly develop and share future costs and profits for ladiratuzumab vedotin on a 50:50 basis globally and will co-commercialize the drug in the US and Europe.

In a separate development, the companies also formed an additional pact to commercialize Seattle Genetics’ Tukysa (tucatinib), a breast cancer drug, in Asia, the Middle East and Latin America and other regions outside of the US, Canada, and Europe. Under the deal, Seattle Genetics will receive $125 million from Merck & Co. as an upfront payment and is eligible for progress-dependent milestones of up to $65 million.

Tukysa is approved in combination with trastuzumab and capecitabine for treating adult patients with advanced unresectable or metastatic HER2-positive breast cancer, including patients with brain metastases, who have received one or more prior anti-HER2-based regimens in the metastatic setting.

Under the agreement, Seattle Genetics retains commercial rights and will record sales in the US, Canada, and Europe. Merck & Co. will be responsible for marketing applications for approval in its designated territory. Merck & Co. will also co-fund a portion of the Tukysa global development plan, which encompasses several ongoing and planned trials across HER2-positive cancers, including breast, colorectal, gastric, and other cancers set forth in a global product development plan. Seattle Genetics will continue to lead ongoing Tukysa global development planning and operational execution. Merck & Co. says it will solely fund and conduct country-specific clinical trials necessary to support anticipated regulatory applications in its territory.

Source: Merck & Co. and Seattle Genetics