Loxo Oncology, Eli Lilly’s oncology focused division it created in 2019 with the $8 billion acquisition of the company, announced it will partner with Merus to develop up to three CD3-engaging T-cell re-directing bispecific antibody therapies, through a research collaboration and exclusive licensing agreement that could generate up to $1.6 billion for the pharma giant.

The partnership is intended to combine Merus’ Biclonics platform with the scientific and drug design expertise of Loxo,  in a deal designed to catapult Lilly into a top-tier precision oncology company.

Through Biclonics, Merus aims to produce novel bispecific antibodies that are capable of binding two targets, but which neither require linkers or modifications to force correct pairing of heavy and light chains, nor require fusion proteins to add functionality. According to Merus, Bioclonics can be reliably manufactured with high yields since they follow the immunoglobulin G (IgG) format of natural antibodies.

“CD3-engaging bispecific antibodies are rapidly becoming one of the most transformative immune-modulating modalities used to treat cancer. We expect these therapies will become an important component of the Loxo Oncology at Lilly biologics strategy,” Jacob Van Naarden, chief operating officer of Loxo Oncology at Lilly, said in a statement. “Merus has built a differentiated platform and one that we believe can enable us to create bispecific antibody therapies with wider therapeutic indexes than those available today. We look forward to working closely with Merus to develop new potential medicines for patients with cancer.”

Merus says its CD3 T-cell engager platform includes more than 175 novel and diverse anti-CD3 common light chain antibodies across a wide range of affinities and attributes, enabling functional screening of large libraries for optimal performance.

“Exciting possibilities”

“The collaboration with Loxo Oncology at Lilly and their world class research capabilities opens up exciting possibilities for Merus’ Biclonics platform,” Merus President and CEO Bill Lundberg, MD, added. “We look forward to working together with Loxo Oncology at Lilly to define a new generation of medicines to treat cancer.”

Based in Utrecht, The Netherlands, Merus has applied its Biclonics and three-antibody-binding Triclonics™ platforms—which the company refers to as “Multiclonics^®” platforms—to build a pipeline of five product candidates led by Zenocutuzomab (known as Zeno or MCLA-128), a Phase I/II  Biclonics therapeutic targeting the HER3 pathway.

Merus has agreed to lead discovery and early stage research activities while Loxo Oncology at Lilly will be responsible for additional research, development and commercialization activities.

Loxo Oncology at Lilly won its first FDA approval in May 2020 when the agency authorized  Retevmo™ (selpercatinib), a RET inhibitor indicated for forms of non-small cell lung cancer, medullary thyroid cancer, and other types of thyroid cancers in patients whose tumors have an alteration in the RET (“rearranged during transfection”) gene.

Lilly agreed to pay Merus $40 million in upfront cash, a $20 million equity investment in Merus’ common shares, and up to $540 million for each of the three planned products tied to achieving development and commercialization milestones, for a total of up to approximately $1.6 billion. Should Lilly successfully commercialize a therapy from the collaboration, it also agreed to pay Merus tiered royalties ranging from the mid-single to low-double digits on product sales.

The transaction is subject to customary closing conditions.

Lilly said the collaboration will not result in any change to its 2021 non-GAAP earnings per share guidance, which the company announced December 15. Lilly expects its 2021 earnings per share to range from $7.25 to $7.90 on a reported basis, and $7.75 to $8.40 on a non-GAAP basis.