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Merck to pay almost $3B for VelosBio, broadening antibody cancer drug push

Merck & Co. on Thursday said it will pay $2.75 billion to acquire VelosBio, a privately held, San Diego-based developer of antibody cancer drugs.

The deal will give Merck access to several experimental antibody-drug conjugates, led by a treatment called VLS-101 that’s now in early and mid-stage testing for use in an array of blood cancers and solid tumors. Initial data disclosed by VelosBio this week showed encouraging results for VLS-101 in two types of lymphoma.

The science behind antibody-drug conjugates, or ADCs, is now advancing rapidly after years of slow progress, resulting in stepped-up dealmaking and several recent drug approvals. Merck has shown particular interest in the field, having recently invested $1.7 billion in ADC developer SeaGen.

The ultra-fast ascension of VelosBio — acquired three years after its formation — reflects the speed at which ADC drugs have emerged as a broader class of cancer treatment.

The technology, which links a tumor-targeting antibody to a toxic chemical, has been around for some time, but was proven only in a few niche areas. For years, drugmakers struggled to develop ADCs with sufficient precision or potency to fulfill the technology’s broader promise.

Only three ADCs, for instance, were cleared for use in the U.S. prior to 2016.

Since 2017, however, the Food and Drug Administration has approved seven ADCs, and pharma’s interest has increased in kind. Over the past year, AstraZeneca and Gilead have spent more than $25 billion combined investing in ADC drugs and their developers.

Merck, a leader in cancer immunotherapy, has now inked two ADC deals of its own. In September, the pharma signed an alliance with one of the field’s pioneers, SeaGen, that included a $1 billion equity investment as well as partial rights to an ADC for breast cancer.

VelosBio, meanwhile, is one of two companies to emerge from research by Thomas Kipps at UC San Diego into ROR1, a cell surface protein found on tumors but not healthy cells. The first, Oncternal Therapeutics, started up in 2013 and went public via a reverse merger last year.

VelosBio, meanwhile, was spun out of Oncternal in 2017 along with a license to two programs, among them what has become VLS-101. It has since raised nearly $200 million — most recently a $137 million round from a broad group of investors — to advance its work.

Over that time, several other drugs and cell therapies that target ROR1 have emerged. Among them: a small molecule from French biotech Kancera, cell therapies from Oncternal and Bristol Myers Squibb, and an antibody from Oncternal now in human trials.

Unlike the others in development, however, VelosBio’s VLS-101 is an ADC. On Wednesday, the company disclosed data from a Phase 1 study showing that two groups of heavily pre-treated lymphoma patients — seven of 15 with mantle cell lymphoma and four of five with diffuse large B-cell lymphoma — responded to treatment with VLS-101.

VelosBio began a Phase 2 trial in multiple solid tumor types, including two forms of breast cancer, in October.

Oncternal’s antibody drug is in Phase 1/2 trials in mantle cell and large B-cell lymphoma, as well as metastatic breast cancer.