Endocyte could get $1B from Merck development deal

Endocyte Inc. said Monday that Merck & Co. will help develop and market its experimental cancer drug vintafolide, and Endocyte could get more than $1 billion if the drug is successfully developed as a treatment for multiple types of cancer.

Endocyte will get $120 million upfront in the deal, and it could get another $880 million as the drug passes through clinical testing and regulatory review and reaches sales targets. The company will get the full $880 million if the drug is approved as a treatment for six types of cancer. Endocyte will receive half the profits on U.S. sales of the drug and will get royalty payments of more than 10 percent on sales elsewhere.

The West Lafayette-based company has no products on the market. Its shares more than doubled in value in morning trading, rising as high as $7.91 each from Friday's closing price of $3.80. The stock has traded between $3.02 and $14.80 over the past year.

Merck, based in Whitehouse Station, N.J., is the second-largest drugmaker in the world in terms of revenue.

Endocyte is running a late-stage trial of vintafolide as a treatment for ovarian cancer that has not responded to platinum-based chemotherapy, and is conducting a mid-stage trial of the drug, also known as EC145, as a treatment for non-small cell lung cancer. Merck said it wants to evaluate the drug as a treatment for other types of cancer.

The two studies are also evaluating an experimental diagnostic agent called etarfolide, or EC20, which is intended to identify patients who could benefit from treatment with EC145. Both vintafolide and etarfolide have received orphan drug status in the European Union, which means they will have extended marketing exclusivity if they are approved.

Endocyte plans to ask European regulators for conditional marketing approval of both products during the third quarter. If the drugs are conditionally approved, Endocyte and Merck will be allowed to market them to patients who don't have other treatment options. However they would still be required to complete clinical studies to prove the drugs work.

Endocyte will be responsible for most of the funding of the late-stage trial. The companies said Merck will be responsible for all other costs related to the development of vintafolide and will make the decisions about development of the drug. Endocyte will be responsible for development of etarfolide.

The late-stage trial of vintafolide compares the drug to a standard chemotherapy drug called Doxil. Studies have been delayed by a shortage of Doxil, but Endocyte restarted the study in March.

Shares of Merck rose 24 cents, to $38.02 each, in morning trading.