Medarex Inc. and E. Merck have signed a binding letter of intent tocollaborate in the development of bispecific antibodies for thetreatment of certain cancers. The deal could be worth as much as $29million to Medarex.The collaboration initially will focus on the development of abispecific antibody for the treatment of tumors overexpressing theepidermal growth factor receptor (EGF-R), including certain lung,head and neck, bladder, cervical, and ovarian cancers. The bispecificantibody will be composed of Merck's humanized EGF-R targetingantibody linked to Medarex's humanized Trigger antibody.Merck of Darmstadt, Germany, will provide research and developmentfunding to Medarex (NASDAQ:MEDX) of at least $2.75 million (andup to $4 million) over the next year to start clinical trials of its EGF-Rbispecific antibody, and for additional research.If the results look promising, Merck will provide Princeton, N.J.-basedMedarex additional funding of up to $25 million to complete Phase IIIclinical trials."We've been working on (this deal) for about four or five months,"Michael Appelbaum, Medarex's senior vice president of finance andadministration, told BioWorld. "E. Merck has a very interestingtargeting antibody - the other half of the bispecific technology."In addition to the EGF-R bispecific technology, the collaborationcovers a bispecific antibody for the treatment of other tumors using adifferent Merck humanized targeting antibody, and proprietarybispecific antibody technology capable of triggering the killing oftumors by T cells. The collaboration does not cover MDX-210 or anyother of Medarex's products.Once the additional funding kicks in, Merck has an option to purchaseMedarex stock at $12.50 per share for an aggregate purchase price of$12.5 million to satisfy half its funding obligation (Medarex's stockclosed unchanged on Friday at $6.25 per share). If that route is taken,Medarex's future royalty obligations would be lessened. Appelbaumsaid all details surrounding royalty agreements are confidential.Merck will have additional rights to buy Medarex's common stock at$15 per share to acquire an ownership interest of up to 10 percent ofMedarex's common stock on a fully diluted basis. After funding of thefirst $29 million, the parties will equally share development costs.Medarex will hold exclusive commercialization rights in the U.S.,subject to royalties payable to Merck, for all bispecific antibodiesdeveloped in the collaboration.Merck will hold exclusive rights in Europe, subject to royaltypayments, and the companies will jointly hold rights for the rest of theworld.

-- Jim Shrine

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