Merck has agreed to help develop a cancer pill invented by tiny Ariad Pharmaceuticals of Cambridge, Mass., in a deal the little biotech says could be worth $1 billion.
The drug, AP23573, is being tested in bone and soft tissue sarcomas, a deadly but rare cancer that afflicts only 13,000 people a year worldwide. It could reach the market in late 2009 or 2010 if all goes well and has shown some potential with endometrial and lung cancer, which potentially represent much bigger markets.
Merck has been quietly building an anti-cancer franchise since it bought gene-chip maker Rosetta InPharmatics in 2001 for $600 million. Rosetta’s chief, oncologist Stephen Friend, now runs Merck’s cancer research effort. The $240-a-day Zolinza, Merck’s first cancer pill, was approved last year to treat a rare skin cancer, two years after Merck bought its tiny, unknown maker. As of February, Merck had disclosed eight cancer drugs in the early or middle stages of testing.
Merck will pay Ariad $75 million upfront and up to $450 million as AP23573 is tested in various cancer types. Ariad will get $200 million more if the drug hits undisclosed sales levels, and Merck will cover half the cost of testing AP23573 in various cancers, an estimated outlay of $200 million. Merck is also willing to advance Ariad cash for paying the biotech’s part of the partnership. The two companies will split U.S. profits on the drug, and Ariad will get a “substantial” royalty on sales outside the U.S.
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