Merck Boosts Immuno-oncology with Viralytics Buy

US drugmakerMerck & Co. has agreed to buy Australia’s Viralytics for $394 million, in a deal that will boost its immuno-oncology portfolio.

Through the acquisition, which will see Viralytics become a wholly owned subsidiary of Merck, the New Jersey-based company will gain full rights to Cavatak, an investigational oncolytic immunotherapy. Cavatak is based on Viralytic’s proprietary formulation of an oncolytic virus that has been shown to preferentially infect and kill cancer cells.

The experimental treatment is currently undergoing multiple Phase 1 and Phase 2 clinical trials, both as an intratumoral and intravenous agent, including in combination with Merck’s Keytruda, an anti-PD-1 therapy.  Under an agreement between the two companies that was announced in November 2015, a study is investigating the combination of Keytruda and Cavatak in melanoma, prostate, lung and bladder cancers.

“Viralytics’s approach of engaging the innate immune system to target and kill cancer cells complements our immuno-oncology strategy, which is focused on the rapid advancement of innovative monotherapy approaches and synergistic combinations to help the broadest range of cancer patients,” said Roy Baynes, senior vice president and head of global clinical development, chief medical officer at Merck Research Laboratories.

Speaking to Reuters news agency, Evercore ISI analyst Umer Raffat said the acquisition represents “a very nice tuck-in” for Merck and comes at an interesting time as Viralytics is expected to have news on clinical tests of Cavatak with Merck’s Keytruda in the second quarter of 2018.

The board of Viralytics has unanimously recommended that shareholders vote in favor of the Merck offer, “subject to there being no superior proposal and an independent expert concluding that the scheme is in the best interest of the company’s shareholders.”

The companies anticipate that the transaction will be implemented by the second quarter of this year, subject to Viralytics’ shareholder vote and regulatory approvals.