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Merrimack, Baxter Ink $970M+ Deal for Pancreatic Cancer Drug

Xconomy Boston — 

It’s been an up and down year for Merrimack Pharmaceuticals. On one hand, the Cambridge, MA-based company succeeded in a Phase 3 trial in the notoriously tough field of pancreatic cancer, and has a chance to win FDA approval for its first drug, MM-398. On the other hand, Merrimack lost Sanofi as a partner for a second drug prospect (MM-121) on the cusp of late-stage testing, meaning it’ll have to foot a big bill to take the candidate forward, or find someone else to do so.

Today, however, that job may have gotten a little easier, because Merrimack has found a partner for MM-398, Baxter International (NYSE: BAX). Deerfield, IL-based Baxter has agreed to pay $100 million up front, and potentially another $870 million down the road, for exclusive non-U.S. rights to the cancer drug candidate—a nanotherapeutic derivative of the old chemotherapy drug irinotecan—in all potential disease types. Merrimack (NASDAQ: MACK) keeps U.S. rights to its drug.

Baxter is paying Merrimack $100 million up front. Merrimack could receive another $120 million in regulatory milestone payments tied to MM-398’s progress in its first pancreatic cancer indication, and another $280 million in milestones should MM-398 progress in a second pancreatic cancer indication. Should the drug progress in two other unspecified disease types, Merrimack could bank an additional $220 million. The other $250 million in the deal is tied to overseas sales targets. The Cambridge company will also be paid royalties on net sales of the drug.

Merrimack is preparing an application for FDA approval of MM-398 this year. Baxter will follow up outside the U.S. next year. Merrimack shares climbed over 18 percent in pre-market trading Wednesday.

Through the deal, Baxter is getting a hold of a drug that scored mixed, but ultimately positive results in a Phase 3 test for pancreatic cancer. MM-398 met its study goal, in that, when it was taken along with chemotherapy drugs 5-flourouacil (5-FU) and leucovorin, it helped very sick pancreatic cancer patients—those who hadn’t responded to prior therapies—live about 1.9 months longer than those on the chemo drugs alone. MM-398 didn’t produce similar results when taken on its own, however—patients on the drug lived a median of 4.9 months, compared to 4.2 months on chemo alone—and it led to more side effects.

Still, it’s very difficult to achieve any benefit in pancreatic cancer, an extremely fast-moving disease. Patients usually die within months of diagnosis, and there are few treatment options available. First line-treatments are largely built around the chemo drug gemcitabine. Even a roughly 2 month survival benefit can sway regulators—Celgene, for instance, won FDA approval to sell protein-bound paclitaxel (Abraxane) in combination with gemcitabine as a first-line pancreatic cancer regimen after it extended patients’ lives in a study by an average of 1.8 months.

Merrimack CEO Bob Mulroy told Xconomy previously that about half of pancreatic cancer patients are eligible to move on to some sort of second-line therapy, and this is where the company wants MM-398 to initially break in. He added, however, that Merrimack aims to combine MM-398 with different types of drugs to treat different types of diseases. The company is testing MM-398 in brain and lung cancer, for instance.

MM-398 is the first evidence that Merrimack’s approach for making nanotherapeutics out of chemotherapy drugs can produce a benefit. The Baxter partnership is a boon for the company following Sanofi’s decision to give it back worldwide rights to MM-121 in June. Merrimack either has to find a new partner to help develop the drug, or pick up the tab for a Phase 3 clinical study. The Baxter deal gives the company a new source of cash should it choose to move MM-121 forward on its own, without giving up all of the drug’s potential sales upside.