Pfizer Inc. is turbocharging Merck KGaA's development of its programmed death ligand 1 (PD-L1) inhibitor MSB0010718C in a global deal worth $850 million up front and about $2 billion more in regulatory and commercial milestones.

The two companies are pooling their resources in both PD-L1 and PD-1 inhibition. Darmstadt, Germany-based Merck will take a 50 percent interest in Pfizer's PD-1 inhibitor program and will help its partner steer the molecule toward the clinic. The companies are sharing costs and revenues across the two programs.

Pfizer and Merck plan to initiate up to 20 immuno-oncology development programs next year, six of which could potentially be pivotal phase II or phase III studies.

For a company of Merck's size and level of diversification – as well as its biopharma division, it has substantial businesses in specialty chemicals and life sciences reagents – that represents a considerable level of investment. But it will not limit its commitment to the program based on any predetermined internal R&D cost allocations. "In a game like this, where there is so much opportunity ahead of us, it would be wrong to apply mechanistic ratios," Merck's deputy CEO Stefan Oschmann told analysts on a conference call.

MSB0010718C is currently undergoing a large-scale phase I trial in 550 patients with advanced cancers, which includes expanded cohorts in lung, breast and gastric cancers, and a phase II study in Merkel cell carcinoma, a rare form of skin cancer.

Merck also gains the right to co-promote Pfizer's Xalkori (crizotinib), which is approved for treating metastatic anaplastic lymphoma kinase-positive (ALK+) non-small-cell lung cancer. That aspect of the deal extends to the U.S. and other markets that have yet to be determined. It will enable Merck to build up a U.S. commercial oncology infrastructure prior to the anticipated approval of MSB0010718C in 2017.

Anti-PD-L1 antibodies have so far lagged behind their more advanced anti-PD-1 counterparts. Preliminary data from several programs indicate they possess anticancer activity as monotherapy.

MSB0010718C, for example, attained objective response rates of 13.3 percent in 90 non-small-cell lung cancer patients and 17.4 percent in 23 ovarian cancer patients. Ultimately they are most likely to be deployed in combination with other immune checkpoint modulators and/or other anticancer therapies.

THE DIFFERENTIATOR

Merck has differentiated MSB0010718C from rival PD-L1 blockers, such as MEDI4736 and MPDL3280A, in development at London-based Astrazeneca plc and at Basel, Switzerland-based Roche Holding AG, respectively, by retaining its immune effector functions.

Animal and early patient data suggest that does not have an impact on activated T-cell populations.

"We haven't identified any major difference or any major concern in our phase I safety results, Belén Garijo, CEO of Merck's biopharma division, said on the call. "There is nothing that popped up during the due diligence [process] either." Its structure also opens up the possibility of unleashing an antibody-dependent cellular cytotoxic response against tumor cells expressing PD-L1.

Pfizer was by no means the only bidder on the project. "The alliance we're announcing today is the result of a very competitive process," Garijo said. No doubt the underbidders will fuel further immune checkpoint deals in the coming months.

Pfizer already has one immune checkpoint modulator in phase I trials, a 4-1BB agonist called PF-05082566.

The same compound is also undergoing a phase I combination trial with Merck & Co. Inc.'s PD-1 blocker Keytruda (pembrolizumab), which gained approval from the FDA on Sept. 4 for treating unresectable or metastatic melanoma in patients who had already received prior therapy. Pfizer also plans to move an antibody targeting OX-40 into the clinic next year.

The Merck deal represents Pfizer's second major incursion into the cancer immunotherapy space this year, following its multitarget deal with Paris-based Cellectis SA on the latter firm's allogeneic chimeric antigen receptor T-cell (CAR T-cell) technology. That deal also has a big price tag – it could be worth $2.775 billion in total – but the initial outlay, $112 million in up-front and equity investment, is smaller. (See BioWorld Today, June 19, 2014.)

Pfizer – along with nearly every other big pharma firm active in this area – is also growing its knowledge through what seems almost an obligatory research partnership with MD Anderson Cancer Center, in Houston, one of the key nodes of academic and clinical expertise in this burgeoning discipline.

However, its efforts have so far lacked the breadth and scale of its more advanced rivals, such as Merck and New York-based Bristol-Myers Squibb Co., the only company with two approved immune checkpoint blockers, the PD-1 inhibitor Opdivo (nivolumab), which it co-developed with Osaka-based Ono Pharmaceutical Co. Ltd. (and which is so far approved in Japan only), and the original of the species, the CTLA-4 (cytotoxic T-lymphocyte-associated protein 4) inhibitor Yervoy (ipilimumab).

But the alliance with Merck creates another big ship that is set to make waves in this area. It's doubtful whether the current deal would have happened had Pfizer failed to take over Astrazeneca earlier this year. It's now looking increasingly unlikely that Pfizer will return to that possibility, given the recent U.S. moves to make corporate inversions more difficult to execute. Even so, Merck has put some protections in place should that happen. "It is safe to assume that we have conditions in the contract that make us feel safe," Oschmann said.