Merck Strikes Deal with NGM to Develop Novel Biologics - Analyst Blog
Merck & Co. Inc. (MRK) announced that it has entered into a multi-year agreement with privately-held biotech company NGM Biopharmaceuticals, Inc., for the research, discovery, development and commercializiation of novel biologic therapies across a broad range of therapeutic areas.
The agreement includes several pre-clinical candidates including NP201 (diabetes, obesity and nonalcoholic steatohepatitis). However, candidates NGM282 (primary biliary cirrhosis) and other programs covered by pre-existing collaboration agreements will not be a part of the Merck deal.
Terms of the Deal
Merck intends to make an upfront payment of $94 million and acquire 15% equity stake in NGM for $106 million. Besides this, the company can pay up to $250 million on the fulfillment of certain conditions.
NGM has the option to either receive milestone and royalty payments (in certain cases) or share cost and revenue up to 50% prior to Merck initiating a phase III study for a licensed program. The deal also provides NGM with a choice to participate in the promotion activities of any co-funded program in the U.S.
The agreement between the companies is initially for five years, but Merck will have the option to extend the research agreement for two more two-year terms.
Our Take
We are positive on Merck’s efforts to expand its pipeline through deals and acquisitions. Last month, the company strengthened its antibiotics portfolio by acquiring Cubist Pharmaceuticals. Whereas last year, Merck acquired Idenix Pharmaceuticals and OncoEthix strengthening its hepatitis pipeline and oncology pipeline, respectively.
Meanwhile, the company continues to make steady progress in advancing its late-stage pipeline, and received FDA approval for six new products in 2014 including Keytruda (advanced melanoma in patients whose disease has progressed after other therapies) and Belsomra (insomnia).
Merck currently carries a Zacks Rank #3 (Hold). Investors looking for better-ranked stocks in the healthcare sector can consider Alcobra Ltd. (ADHD), Aratana Therapeutics (PETX) and Lannett Company, Inc. (LCI). All the three sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
MERCK & CO INC (MRK): Free Stock Analysis Report
LANNETT INC (LCI): Free Stock Analysis Report
ALCOBRA LTD (ADHD): Free Stock Analysis Report
ARATANA THERAP (PETX): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
