Merck, Ariad revise cancer drug agreement; Merck gets greater rights but will cover more costs

Wednesday, May 5, 2010

Merck and Ariad restructure cancer drug deal

NEW YORK — Merck and Ariad Pharmaceuticals are restructuring how they develop a potential cancer drug, with Merck saying Wednesday it will cover all development costs in exchange for worldwide rights to the drug candidate.

The companies teamed up in 2007 to develop ridaforolimus as a cancer treatment. Late-stage trial results are due this year, and Merck may file for Food and Drug Administration approval later this year.

Under the previous agreement, Ariad could have received more than $1 billion in milestone payments and reimbursements for research spending, as well as royalties on sales. Under the new deal, Ariad won’t have to cover any development costs and could get up to $514 million in milestone payments, along with royalties.

Merck has spent more than $200 million on the partnership so far, including about $128.5 million in milestone payments. Last year, the companies canceled one late-stage trial and delayed another. That cost Ariad millions in milestone payments.

Merck is now fully in charge of the drug’s development and marketing. Instead of sharing profits on U.S. sales with Ariad, Merck will receive royalties on all worldwide sales. All research will be transferred to Merck, based in Whitehouse Station, N.J., over the next six months.

Merck said it will pay Ariad $50 million upfront and refund about $19 million in development costs that Ariad has paid since Jan. 1. Ariad said the new agreement strengthens its financial position, as it will not have to pay costs of testing the drug or cover expenses related to regulatory review.

Ariad will get royalty payments of more than 10 percent on international sales — more than what it would have received on overseas sales under the original partnership. The Cambridge, Mass., company also said it will have the option to help promote the drug in the U.S. if it is approved, and Merck would compensate it for those expenses.

In afternoon trading, shares of Ariad Pharmaceuticals Inc. rose 6 cents to $3.87. Shares of Merck & Co., which reported its first-quarter results on Tuesday, lost 49 cents to $35.32.

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