Here is Merck’s Billion-Dollar Buy

Endocyte Inc. (NASDAQ:ECYT) shares got a much-needed boost as Merck & Co. (NYSE:MRK) agreed to pay the company up to $1 billion to develop and market the experimental cancer drug vintafolide. Merck will make an initial payment of $120 million to Endocyte, with future payments of as much as $880 million if specific milestones are met, the Wall Street Journal reported.

Vintafolide is now in a Phase 3 clinical trial for ovarian cancer and a Phase 2 trial for non-small cell lung cancer. Both studies use Endocyte’s experimental companion diagnostic agent, etarfolatide. According to Merck, the deal brings attention to the company’s strategy of implementing companion diagnostics in its cancer treatments to choose patients that are most likely to respond to treatment.

“Vintafolide is a promising and innovative late-stage cancer drug candidate,” said Merck Research Laboratories President Peter Kim. “In addition to pursuing the lead indication of platinum-resistant ovarian cancer, Merck plans to further evaluate its potential for treatment of multiple other cancer types.”

The deal gives Merck global rights to vintafolide. Along with the $120 million upfront payment, Endocyte could receive additional payments based on the development, regulatory, and commercial success of vintafolide for six cancer indications. Endocyte will receive an equal share of U.S. profit and royalties on sales in the rest of the world if vintafolide gets regulatory approval.

Endocyte shares rocketed nearly 100 percent on Monday. The stock had previously been down 65 percent in the last six months. Merck shares closed at $37.78 on Friday and were up just 0.58 percent as of 3:14 p.m. EST on Monday. The stock has climbed 15 percent in the last six months. Merck is pushing to bring new drugs to market as it foresees the impending loss of its exclusive patent for the popular allergy and asthma medication Singulair. The company was forced to lay off massive numbers of employees last year to trim costs.