Merck & Co. Inc.has given its oncology portfolio a boost, adding a second late-stage asset through a partnership with Endocyte Inc. In a licensing deal announced April 16, Merck will acquire worldwide development and commercialization rights to Endocyte’s vintafolide (EC145), a small molecule drug conjugate targeting the folate receptor on tumors, and access to a companion diagnostic, etarfolatide (EC20).

In exchange, Merck will pay $120 million upfront and potential milestones of up to $880 million, which includes development and commercialization milestones in multiple indications. The deal gives Merck a Phase III oncology drug, a type of asset not easy to come by, particularly one with an opportunity for early approval and a companion diagnostic to help target treatment to the right patients.

Not surprisingly then, the bidding was competitive, according to Endocyte. The $120 million upfront Merck is paying is significant, but the big pharma also agreed to some other flexible deal terms. For example, Endocyte will receive a 50/50 profit share on sales of the drug in the U.S., retain an option to co-promote and also maintain ownership over the companion diagnostic. Endocyte will receive a double-digit royalty on sales of the drug outside the U.S.

As for why Endocyte landed on Merck as a partner, given that the big pharma is not as experienced in oncology as some: “It came down to commitment,” said CEO Ron Ellis. “They were committed to the compound in a number of ways. One was to expand the clinical development to multiple cancers. They were the most aggressive in wanting to see that done. They had a commitment to a global strategy for the drug, and they were fundamentally committed to the approach and the compound.”

Vintafolide is being studied in a Phase III clinical trial, PROCEED, for platinum-resistant ovarian cancer and in a Phase II trial for non-small cell lung cancer. Data from PROCEED, which has progression-free survival as a primary endpoint and overall survival as a secondary endpoint, is expected in early 2014, and will form the basis of a U.S. regulatory submission Also see "Endocyte Back On Track To File Lead Candidate For EU Conditional Approval This Year" - Pink Sheet, 14 March, 2012..

But Endocyte plans to file for an earlier conditional approval in ovarian cancer in Europe, mainly based on a Phase IIb study, PRECEDENT, which demonstrated a PFS benefit. The drug is the first to demonstrate an impact on PFS in the hard-to-treat platinum-resistant patient population, but FDA did not encourage Endocyte to file for accelerated approval based on the early data alone. Endocyte plans to file for conditional approval in Europe in the third quarter Also see "Endocyte Targets Folate Receptor Cancers, Devising Innovative Route To Market" - Pink Sheet, 5 September, 2011..

Beyond ovarian and lung cancer, vintafolide has potential across multiple cancer indications, and that was appealing to Merck.

“The attractive thing about ovarian cancer is that there is an opportunity to file and launch in the EU in the relative short-term for platinum resistant ovarian cancer. There is also very compelling data in the public domain in platinum-sensitive ovarian cancer as well as non-small cell lung cancer,” said Merck’s Oncology Research Head Gary Gilliland. “The most exciting thing beyond that is there is a very broad spectrum of tumors that over-express the folic acid receptor and we think there is tremendous upside potential.”

A Sigh Of Relief

Winning regulatory approval, particularly in the U.S., is far from a guarantee however. Endocyte’s investors were relieved to see a risk-sharing deal get done and with a partner the caliber of Merck. Endocyte’s stock doubled on the news, opening the day at $7.99 from a previous close of $3.80. Endocyte went public in February 2011, raising $79 million from the IPO and $67 million from a follow-on offering in August.

“We like this deal on many levels,” said analyst Simos Simeonidis in a same-day research note. “First of all, it provides validation for EC145 at a time when there’s lingering doubt about its chances for U.S. approval. Secondly, partnering with Merck allows for the right (wide) type of development of the drug/diagnostic combo. Finally, the $120 million in upfront is a healthy number and provides the company with probably a couple more years of cash and the ability to invest in their earlier-stage pipeline.”

In the Phase IIb PRECEDENT study reported at the American Society of Clinical Oncology meeting in 2011, treatment with vintafolide plus Doxil nearly doubled median PFS (21.7 weeks for the combination versus 11.7 weeks for Doxil alone). PFS was even higher for those patients identified as having the most folic acid receptors on their tumors (24 weeks compared to 6.6 weeks for the control group).

The outcome of the Phase III study will be critical to the U.S. approval. “We have had multiple conversations with the FDA, and the primary endpoint [of the study] will be PFS, and approval will be, as always, a review issue,” said Ellis.

Endocyte will be responsible for the majority of the funding and completion of the PROCEED trial, while Merck will be responsible for the other development activities.

EC145 is a folate receptor-targeting ligand that is joined by a linker system to a cytotoxic payload, DAVLBH, a vinka alkyloid. The diagnostic, EC20, uses the same folate-targeting ligand but links it to a radio-labeled imaging agent rather than a cytotoxin to determine which tumors have folate receptors.

Endocyte is the first company to use such an imaging agent to target a drug to the right patients. Determining which patients have tumors that express the folate receptor is critical to treatment with EC145. The greater the number of tumors a patient has that express folate receptors the greater the potential treatment benefit with EC145. Roughly 80% of cancer patients have one positive lesion, according to Endocyte. The patients who stand to benefit the most, however, those whose tumors all express folate receptors, known as FR++, account for about 40% of patients.

Now that the company has nearly doubled its cash position (Endocyte started the year with $128 million in cash), its primary goals beyond vintafolide are to complete the development and commercialization of the EC20 companion diagnostic and move three earlier pipeline drugs into the clinic in the next 12 to 18 months, Ellis said. Two are drug conjugates targeting cancer and the third is for inflammation.

For Merck, the deal gives the big pharma another Phase III oncology asset, as its lead candidate, Taltorvic (ridaforolimus), is facing strong headwinds. In March, FDA’s Oncologic Drugs Advisory Committee voted 13-1 that the drug did not have a favorable risk/benefit profile in patients with advanced soft tissue sarcoma ([A#14120320007]). The drug has a June 5 PDUFA date. Merck is developing ridaforolimus through a licensing collaboration with Ariad Pharmaceuticals Inc. Merck has several other cancer compounds in Phase II testing.

Merck Gains Phase III Drug/Companion Diagnostic In Deal With Endocyte

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