Seattle Genetics (SGEN) and Merck (MRK) Announce Two Strategic Oncology Collaborations; Merck to Invest $1B

Seattle Genetics, Inc. (Nasdaq: SGEN) and Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced two new strategic oncology collaborations.

The companies will globally develop and commercialize Seattle Genetics’ ladiratuzumab vedotin, an investigational antibody-drug conjugate (ADC) targeting LIV-1, which is currently in phase 2 clinical trials for breast cancer and other solid tumors. The collaboration will pursue a broad joint development program evaluating ladiratuzumab vedotin as monotherapy and in combination with Merck’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 terms of the agreement, Seattle Genetics will receive a $600 million upfront payment and Merck will 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 is eligible for progress-dependent milestone payments of up to $2.6 billion.

Separately, Seattle Genetics has granted Merck an exclusive license to commercialize TUKYSA® (tucatinib), a small molecule tyrosine kinase inhibitor, for the treatment of HER2-positive cancers, in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe. Seattle Genetics will receive $125 million from Merck as an upfront payment and is eligible for progress-dependent milestones of up to $65 million.

“Collaborating with Merck on ladiratuzumab vedotin will allow us to accelerate and broaden its development program in breast cancer and other solid tumors, including in combination with Merck’s KEYTRUDA, while also positioning us to leverage our U.S. and European commercial operations,” said Clay Siegall, Ph.D., President and Chief Executive Officer of Seattle Genetics. “The strategic collaboration for TUKYSA will help us reach more patients globally and benefit from the established commercial strength of one of the world’s premier pharmaceutical companies.”

“These two strategic collaborations will enable us to further diversify Merck’s broad oncology portfolio and pipeline, and to continue our efforts to extend and improve the lives of as many patients with cancer as possible,” said Dr. Roger M. Perlmutter, President, Merck Research Laboratories. “We look forward to working with the team at Seattle Genetics to advance the clinical program for ladiratuzumab vedotin, which has shown compelling signals of efficacy in early studies, and to bring TUKYSA to even more patients with cancer around the world.”

Ladiratuzumab Vedotin Collaboration Details

Under the terms of the agreement, Seattle Genetics and Merck will collaborate and equally share costs on the global development of ladiratuzumab vedotin and other LIV-1-targeting ADCs. The companies have agreed to jointly develop and share future costs and profits for ladiratuzumab vedotin on a 50:50 basis worldwide. Merck 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.

The companies will jointly develop and commercialize ladiratuzumab vedotin and equally share profits worldwide. The companies will co-commercialize in the U.S. and Europe. Seattle Genetics will be responsible for marketing applications for approval in the U.S. and Canada, and will record sales in the U.S., Canada and Europe. Merck will be responsible for marketing applications for approval in Europe and in countries outside the U.S. and Canada, and will record sales in countries outside the U.S., Europe and Canada. Including the upfront payment, equity investment proceeds and potential milestone payments, Seattle Genetics is eligible to receive up to $4.2 billion.

The closing of the equity investment is contingent on completion of review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).

TUKYSA Collaboration Details

Under the terms of the agreement, Merck has been granted exclusive rights to commercialize TUKYSA in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe. Seattle Genetics retains commercial rights and will record sales in the U.S., Canada and Europe. Merck will be responsible for marketing applications for approval in its territory, supported by the positive results from the HER2CLIMB clinical trial.

Merck 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 will solely fund and conduct country-specific clinical trials necessary to support anticipated regulatory applications in its territory.

Seattle Genetics will receive from Merck $125 million as an upfront payment and is eligible to receive progress-dependent milestones of up to $65 million. Seattle Genetics will also receive $85 million in prepaid research and development payments to be applied to Merck’s global development funding obligations. In addition, Seattle Genetics would receive tiered royalties on sales of TUKYSA in Merck’s territory.

The financial impact of these collaborations is not included in Seattle Genetics’ 2020 guidance.

Seattle Genetics Conference Call Details

Seattle Genetics’ management will host a conference call to discuss these collaborations today at 6:00 a.m. Pacific Time (PT); 9:00 a.m. Eastern Time (ET). The event will be simultaneously webcast and available for replay from the Seattle Genetics website at www.seattlegenetics.com, under the Investors section. Investors may also participate in the conference call by calling 844-763-8274 (domestic) or +1 412-717-9224 (international). The conference ID is 10147850.

About Ladiratuzumab Vedotin

Ladiratuzumab vedotin is a novel investigational ADC targeted to LIV-1. Most metastatic breast cancers express LIV-1, which also has been detected in several other cancers, including lung, head and neck, esophageal and gastric. Ladiratuzumab vedotin utilizes Seattle Genetics’ proprietary ADC technology and consists of a LIV-1-targeted monoclonal antibody linked to a potent microtubule-disrupting agent, monomethyl auristatin E (MMAE) by a protease-cleavable linker. This novel ADC is designed to bind to LIV-1 on cancer cells and release the cell-killing agent into target cells upon internalization. Ladiratuzumab vedotin may also cause antitumor activity through other mechanisms, including activation of an immune response by induction of immunogenic cell death.

About TUKYSA (tucatinib)

TUKYSA is an oral, small molecule tyrosine kinase inhibitor (TKI) of HER2, a protein that contributes to cancer cell growth. TUKYSA in combination with trastuzumab and capecitabine was approved by the U.S. Food and Drug Administration (FDA) in April 2020 for 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. In addition, TUKYSA received approval in Canada, Singapore, Australia and Switzerland under the Project Orbis initiative of the FDA Oncology Center of Excellence that provides a framework for concurrent submission and review of oncology products among international partners. A marketing application is under review in the European Union.

TUKYSA is being evaluated in several ongoing clinical trials and additional studies are planned. Current trials include the following:

• HER2CLIMB-02: a randomized, double-blind phase 3 trial evaluating TUKYSA in combination with T-DM1 (trastuzumab emtansine; Kadcyla®) versus T-DM1 in first- and second-line metastatic HER2-positive breast cancer.
• CompassHER2 RD: a randomized, double-blind phase 3 trial of TUKYSA in combination with T-DM1 versus T-DM1 in the adjuvant breast cancer setting for patients at high risk of relapse.
• MOUNTAINEER: a pivotal phase 2 trial evaluating TUKYSA in combination with trastuzumab (Herceptin®) in metastatic HER2-positive colorectal cancer.
• MOUNTAINEER-02: a randomized phase 2/3 trial evaluating TUKYSA in combination with trastuzumab, ramucirumab and paclitaxel versus ramucirumab and paclitaxel in second-line metastatic HER2-positive gastric or gastroesophageal junction adenocarcinoma (GEC).
• Gastrointestinal cancers: a phase 1 trial evaluating TUKYSA in combination with trastuzumab and oxaliplatin-based chemotherapy in metastatic HER2-positive colorectal, gastric/ gastroesophageal junction and gallbladder cancers.

For additional information, visit www.clinicaltrials.gov.

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