Merck KGaA said today it will jointly develop and commercialize its MSB0010718C with Pfizer, in a deal that raises the companies’ presence in cancer immunotherapies—and could net the German drug developer as much as $2.85 billion.

The investigational anti-PD-L1 antibody is a potential treatment for multiple types of cancer now in two ongoing clinical studies: A Phase II trial evaluating the antibody in patients with metastatic Merkel cell carcinoma; and a Phase I program in more than 550 patients across were treated with MSB0010718C across multiple types of cancers.

At its Analyst and Investor day on September 18, Merck KGaA disclosed positive interim Phase I data for the compound showing a complete response and partial responses in patients with non-small cell lung cancer and ovarian cancer. Additional Phase I data are expected to be presented at medical congresses in 2015.

The companies said they will team up launch up to 20 “high priority” immuno-oncology clinical development programs involving the compound, all expected to commence in 2015. The clinical development programs include up to six Phase II or Phase III registration trials.

Pfizer and Merck KGaA said they will study MSB0010718C both as a single agent as well as in various combinations with Pfizer’s and Merck KGaA’s broad portfolio of approved and investigational oncology therapies.

“The global alliance will enable Merck to gain an early entry into the US oncology market as well as to strengthen our existing oncology business in several other important global markets,” Belén Garijo, president and CEO of Merck KGaA’s biopharmaceutical division Merck Serono and executive board member-elect, said in a statement.

The new alliance with Pfizer comes some two months after Merck KGaA scrapped development of tecemotide (L-BLP25), an investigational MUC1 antigen-specific cancer immunotherapy, as a monotherapy in Stage III non-small cell lung cancer (NSCLC). The company cited disappointing results from a a Phase I/II study in Japan that missed its primary endpoint of overall survival (OS), and the secondary endpoints of progression-free survival (PFS), time to progression (TTP), and time to treatment failure.

Pfizer had hoped to emerge as a major cancer immunotherapy player earlier by acquiring AstraZeneca, until that deal fell through amid concerns about potential layoffs in the U.K. and inversion mergers in the U.S. AstraZeneca is among several drug developers that have made progress toward developing immune-oncology treatments (MEDI-4736); others include Merck & Co., which won approval in September for Keytruda® (pembrolizumab; formerly MK-3475); Bristol-Myers Squibb (via nivolumab), Roche (MPDL3280A), and Incyte (INCB24360).

As part of their new alliance, Merck KGaA and Pfizer also agreed to advance Pfizer’s already-marketed anti-PD-1 antibody Xalkori® (crizotinib) into Phase I trials for additional indications. Xalkori is indicated for NSCLC that has spread to other parts of the body and is caused by a defect in anaplastic lymphoma kinase (ALK). As part of their agreement, Merck KGaA will co-promote Xalkori for NSCLC in the U.S. and several other unspecified “key” markets.

Pfizer agreed to pay Merck KGaA $850 million upfront, with Merck KGaA also eligible to receive regulatory and commercial milestone payments of up to approximately $2 billion.

Both companies agreed to jointly fund all development and commercialization costs and to share equally all revenues obtained from selling any anti-PD-L1 or anti-PD-1 products generated from their collaboration.

“Immuno-oncology is a top priority for Pfizer. Combining this promising anti-PD-L1 antibody with Pfizer’s extensive portfolio of small molecules and antibodies, provides an opportunity to potentially broaden the use of immunotherapy for patients with cancer and rapidly expand our oncology business,” Albert Bourla, Pfizer’s group president, vaccines, oncology and consumer healthcare businesses, said in a statement.

“In addition, this alliance enables us to significantly accelerate the timeframe of our development programs and move into the first wave of potential immuno-oncology based treatment regimens.”

Pfizer said the upfront payment to Merck KGaA will result in a lower guidance range to investors of reported diluted earnings per share. That range will dip from $1.50 to $1.59 per share to $1.40 to $1.49 per share.

However, Pfizer added that the updated guidance did not reflect additional impact of exchanging future profits for Xalkori, which the company said “will reduce our 2014 reported financial results” by a “fair value” that is now being determined.

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