Developers "haven't even begun to explore" the possibilities with bispecific antibodies, Merus N.V. CEO Ton Logtenberg told BioWorld Today as the field surged forward with his company's Biclonics platform luring Incyte Corp. to a long-term, oncology-focused arrangement that gives Merus $120 million up front, an equity investment of $80 million more, and about another $2.8 billion if milestones are reached.

"It boils down at the end of the day to being able to identify the right target pairs," Logtenberg said. "Merus has learned that it is a wise step forward for each target pair to make thousands of bispecific antibodies and then use functional screening, cell-based assays, to find differentiated bispecifics. If you just stitch together a couple of antibodies in a bispecific format, you usually get a very disappointing results," although such was the practice before assays became available "as a funnel to get to the real interesting ones."

Shares of Merus (NASDAQ:MRUS) closed Wednesday at $20.22, up $6.07, or 42.9 percent, while Incyte (NASDAQ:INCY) ended at $99.76, down $2.45. As part of the deal, Incyte will buy 3.2 million shares of Merus stock at $25 each.

Utrecht, the Netherlands-based Merus and Incyte, of Wilmington, Del., agreed to work on as many as 11 bispecific antibody programs. For one preclinical effort, Merus will retain all rights in the U.S. and Incyte will develop and commercialize approved products arising from the program outside the country. If any products are approved, each company has agreed to pay the other tiered royalties ranging from 6 percent to 10 percent.

Under the terms of the pact, which is expected to close in the first quarter of next year, Merus also has the option to co-fund development of product candidates that might emerge from two other programs. For any program where Merus does so, the firm would be responsible for 35 percent of global development costs in exchange for a 50 percent share of U.S. profits and losses, as well as tiered royalties ranging from 6 percent to 10 percent on ex-U.S. sales by Incyte. Merus also has the right to elect to provide up to 50 percent of detailing activities for product candidates arising from one of these programs in the U.S., too.

For each of the other eight programs, Incyte will fund all development and commercialization activities, with Merus in line for development, regulatory and sales milestone payments of up to $350 million per program. Merus will also be eligible to collect royalties tiered similarly to the other programs at 6 percent to 10 percent.

Merus' Biclonics platform is based on the full-length immunoglobulin G format, producing bispecifics that have been shown to work much like conventional monoclonal antibodies, with a long half-life and low immunogenicity. The approach "sets us aside from other platforms, at least the ones that use fragments or linkers or extensions or any kind of genetic engineering" to form their bispecifics, Logtenberg said. The company's internal pipeline has candidates that have reached the phase I/II stage. In the lead is MCLA-128, which binds to HER2 and HER3-expressing solid tumor cells. The candidate is designed to overcome the inherent and acquired resistance of tumor cells to HER2-targeted therapies by blocking growth and survival pathways to stop tumor expansion while preventing tumor cells escaping through activation of the HER3/heregulin pathway. It also recruits and enhances immune effector cells to directly kill the tumor. MCLA-128 is undergoing tests in breast, ovarian and colorectal cancers.

beyond T-cell engagers

"We've started discussions on how we can put this [Incyte] money best to work," Logtenberg said, adding that the funding "creates enormous flexibility," and the company already had guided that it had a cash runway to mid-2018 based on the proceeds from the $55 million IPO earlier this year. He said Merus will "update the market on our strategic choices" later.

Leerink analyst Michael Schmidt said noted in a research report that the tie-up with Merus "significantly expands Incyte's research and development capabilities, and is complementary to [the firm's] existing early stage oncology pipeline, focused on small molecule drugs" that leverage medicinal chemistry expertise. Incyte also has a deal with Lexington, Mass.-based Agenus Inc., penned less than a month after Agenus partner Glaxosmithkline plc, of London, offered good phase III news with the would-be blockbuster shingles therapy HZ/su that exploits the Agenus QS-21 Stimulon adjuvant. Incyte's collaboration with Agenus will investigate checkpoint modulators in onco-immunology, by way of a deal similar to – but much broader than – an earlier pact with Kenilworth, N.J.-based Merck & Co. Inc. Agenus, thanks to its Retrocyte Display technology, collected from Incyte $60 million up front, in the form of a $25 million technology-and-program access fee plus a $35 million equity investment in Agenus at $4.51 per share. Across four lead programs, Agenus could earn as much as $350 million in milestone payments related to development, regulatory and commercial goals. (See BioWorld Today, Jan. 12, 2015.)

Schmidt said bispecific antibodies "are poised to play an important role in the future development of biotherapeutics." Other companies that have waded in recently include Novartis AG, Regeneron Pharmaceuticals Inc., Johnson & Johnson and Celgene Corp. "We spoke with Incyte's management, who highlighted the breadth of the Merus collaboration, which is focused on but not limited to oncology and spans several potential applications of bispecific antibodies, including immune-cell redirection, dual checkpoint inhibition, or dual engagement of oncogenic cell surface receptor among other potential applications," he wrote. Jefferies analyst Brian Abrahams called the deal "a win-win."

In August, the high-profile neurodegenerative disease start-up Denali Therapeutics Inc., of South San Francisco, disclosed among a handful of deals the potential $1 billion agreement with bispecific antibody specialist F-star Ltd., which will use its platform to develop technology enabling the delivery of therapeutics across the blood-brain barrier, the companies said. Denali paid $6 million up front and has the option to acquire exclusive rights to the technology for a total of $450 million, provided it does so before starting phase I development of any products that arise as a result. Alternatively, Denali can choose to license a number of bispecific antibodies generated by Cambridge, U.K.-based F-star in return for license fees, development, regulatory and commercial milestones payments with a potential aggregate value of $1 billion plus royalties on sales. Formed by a management team led by neuroscience veterans from Basel, Switzerland-based Roche AG's Genentech unit, Denali also disclosed at the time of the F-Star pact that it had added a $130 million series B round to the $217 million raised when it was set up in 2015. (See BioWorld Today, May 15, 2015, and Aug. 26, 2016.)

Leerink's Schmidt, in a report earlier this month, said bispecific antibodies are "poised to shine" in 2017. "Whereas the concept of bispecific T-cell engagers is not new, technical challenges have only been overcome in recent years," as shown in the FDA approval of Thousand Oaks, Calif.-based Amgen Inc.'s Blincyto (blinatumomab) to treat patients with Philadelphia chromosome-negative precursor B-cell acute lymphoblastic leukemia (ALL), an uncommon form of ALL. Newly developed bispecific platforms "may be able to improve upon some of the limitations of first-generation products and could broaden the scope of addressable indications," he said. CEO Logtenberg agreed. "The thinking about bispecifics is widening, and starts to include target pairs that go outside of the more traditional T-cell engager space," he said. (See BioWorld Today, Dec. 4, 2014.)