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Here's A Look At The Science Behind Merck's Latest Acquisition

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Biotechnology giant Merck & Co., Inc. (NYSE: MRK) just announced its buyout of German biotechnology company Rigontec. The acquisition is relatively opaque from a financial and asset-related detail perspective, with markets learning very little from the press release outlining the buyout as to exactly what Merck is paying for and what it hopes to get out of the transaction.

With that said, however, there are some clues we can take from the information that is available and we can use these clues to inject a degree of clarity into the situation.

Here goes.

One number we do know is that the acquisition has cost Merck $137 million up front and that the company has earmarked a further €349 million (which, at current exchange rates, comes in at around $417 million) as future milestone payments. Assuming these milestones are met, the payments received, this would value Rigontec at around $450 million – not bad for a company that, right now, doesn't have any commercial assets on the market in either the US or Europe.

So what is Merck doing paying this much money for a development pipeline?

Again, we didn't get too much detail as to which of Rigontec's development assets the biotechnology behemoth is hoping to push forward towards commercialization first, but we can make a reasonable assumption on this one by looking at Rigontec's pipeline.

Specifically, we can assume that the driver behind Merck's decision to go ahead with the buyout and the asset that is going to underpin the majority of the above-mentioned milestone payments is a drug called RGT100.

The mechanism of action (MOA) that underpins RGT100 is pretty neat. The company is attempting to take what is likely most accurately referred to as a double-pronged approach to cancer immunotherapy. The idea is to target what's called the retinoic acid-inducible gene I (RIG-I) pathway, which one of the most essential pathways in the innate immune system. RGT100 is an RIG-I pathway agonist, which means it stimulates the pathway into action on administration (or at least, that's the hypothesis behind the MOA). On stimulation of the RIG-I pathway, the innate immune system gets to work both initiating an immediate immune system driven response targeting the cancerous cells that the drug is going after and also starts to build up a long-term immunity to the cells in question, which should help to eliminate (or at least dramatically reduce) the chance of recurrence or metastasis.

So that's the science, where is this one in development?

Well, it's very early stage right now. The company kicked off a phase 1/2 trial investigating the RGT100 asset in a number of solid tumor patients back in April this year. It's an open label trial (meaning it won't offer up any indication of effect as compared to standard of care or placebo) but these are late stage patients anyway, so any positive outcome would likely be immediately recognizable by way of a simple comparison to legacy data.

From here on out, then, expectations are that Merck's reports on the assets that it has taken over on the back of this buyout will be rooted in the phase 1/2 in question and, specifically, any interim data that comes about on the back of phase 1 in question and that can be used to justify advance into phase 2 part and, beyond into mid to late stage trials.

The trial should wrap up in December 2019, with final data collection and top line read out likely coming during the first quarter of 2020.

Here's the protocol.

Disclosure: The author has no positions in any of the stocks mentioned. 

Posted-In: Biotech General

 

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