Citing “Strong Sales,” Pension Manager Buys Partial Keytruda Rights for $1.3B

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Keytruda 100mg/4mL Carton
[Merck & Co.]

A Canadian pension manager has shelled out $1.3 billion to acquire partial rights to Merck & Co.’s blockbuster cancer immunotherapy Keytruda® (pembrolizumab) from LifeArc—which said it will use the proceeds to fund life sciences research in the U.K.

Canada Pension Plan Investment Board (CPPIB) did not reveal its precise stake of LifeArc’s royalty interests it has acquired on worldwide sales of Keytruda. CPPIB said the deal would make LifeArc one of the U.K.’s leading medical research charities by size of investment, allowing it to significantly expand its research funding, and thus support its mission of advancing research that directly benefits human health.

“This agreement with CPPIB allows us to increase our support for new approaches and collaborations and bolster access to our expertise and resources,” stated LifeArc CEO Melanie Lee, PhD, CBE. “Ultimately, we can support life sciences research and accelerate the development of new therapies, diagnostics, and devices for those people in greatest need.”

LifeArc was launched in 1992 as MRC Technology, the commercialization arm of the Medical Research Council—the U.K.’s national funding agency for basic research and training of scientists. In 2007, researchers from MRC Technology partnered with Organon to translate innovative drug targets into potent and selective therapeutic antibody candidates—one of which was the antibody that became Keytruda. Organon was acquired later that year for $14 billion by Schering-Plough, which Merck bought two years later for $41 billion.

MRC Technology changed its name to LifeArc in 2017, when it announced plans to invest up to £500 million ($636 million) over five years toward innovations in antimicrobials, neuroscience, personalized oncology, and respiratory medicine.

CPPIB invests in rights for royalties, patents, trademarks, and copyrights—primarily in the pharmaceutical and technology sectors. The Keytruda investment was made through CPPIB’s Americas Structured Credit and Financials Group, which in addition to intellectual property, invests in portfolios of credit and other structured credit investments.

“An ideal investment”

“This transaction is an ideal investment for the global intellectual property program and Keytruda, an immunotherapy treatment indicated for use in a range of different cancer types, has shown strong sales growth worldwide,” CPPIB stated.

Keytruda ended the first quarter with $9.663 billion in total sales, up 8% from $8.919 billion in the first three months of 2018. Sales of the immunotherapy nearly doubled last year, jumping 88% to $7.171 billion from $3.809 billion in 2017—high enough for Keytruda to place No. 5 on GEN’s A-List of Top 15 Best-Selling Drugs of 2018, just behind the competing cancer immunotherapy Opdivo® (nivolumed) marketed by Bristol-Myers Squibb and Ono Therapeutics.

The programmed death receptor-1 (PD-1)-blocking antibody is approved for numerous cancer indications, including in melanoma, non-smalll cell lung cancer, head and neck squamous cell cancer, classical Hodgkin lymphoma, primary mediastinal large B-cell lymphoma, urothelial carcinoma, microsatellite instability-high cancer, gastric cancer, cervical cancer, hepatocellular carcinoma, Merkel cell carcinoma, and renal cell carcinoma.

John Graham, senior managing director & global head of credit investments for CPPIB, added that its acquisition would help professional investment management organization expand its global intellectual property program, as alternative assets related to IP help to diversify the fund by generating income streams that are not dependent on the ups and downs of the broader capital markets.

“The acquisition of royalty interests from LifeArc for this market-leading cancer therapy provides stable, long-term cash flows,” Graham stated.

CPPIB invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits in the best interests of 20 million contributors and beneficiaries. As of March 31, 2019, the CPP Fund totaled C$392 billion (approximately $292 billion).

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