Broadening its push into oncology, Merck said it is paying $2.75 billion for VelosBio Inc., a San Diego-based startup with promising cancer therapies currently in clinical trials.The deal is expected to close by the end of this year.
“At Merck, we continue to bolster our growing oncology pipeline with strategic acquisitions that both complement our current portfolio and strengthen our long-term growth potential,” Dr. Roger M. Perlmutter, president of Merck Research Laboratories, said in a statement.
With the acquisition of VelosBio, Merck, based in Kenilworth, New Jersey, picks up a therapy candidate called VLS-101, an antibody-drug conjugate, a class of biological drugs that target tumor cells. VLS-101 is being evaluated in phase 1 and phase 2 clinical trials for the treatment of patients with hematologic malignancies and solid tumors, respectively.
The phase 2 trial started in October for patients with solid tumors, including specific forms of breast cancer and non-squamous non-small cell lung cancer. VLS-101 targets receptor tyrosine kinase-like orphan receptor 1, known as ROR1.
“We are very pleased that Merck has recognized the value of our first-in-class ROR1-directed investigational therapeutics,” Dave Johnson, founder and CEO of VelosBio, said in a statement. “As part of Merck’s oncology pipeline, our lead product candidate, VLS-101, is now well positioned to achieve its maximum potential to benefit appropriate cancer patients in need.”
Before starting VelosBio in 2017, Johnson was CEO of Acerta Pharma, which was sold to AstraZeneca in 2015.
Oncology is a focus for Merck as it prepares to spin off other portions of its business, including women’s health, biosimilars and legacy products. Cancer therapies are seen as having high potential for growth. Sales of Merck’s cancer drug Keytruda rose 21% in the third quarter of 2020, outpacing the company’s overall sales growth of 1%.
VelosBio has raised more than $200 million from a slew of investors, including a Series A round in 2019 and a Series B earlier this year. Investors include Arix Bioscience, Matrix Capital Management, Pappas Capital, Sofinnova Ventures, and Surveyor Capital.
In a press release, North Carolina-based Pappas Capital called the sale of VelosBio to Merck one of the “most successful” exits in its 25-year history.
“This acquisition is a transformative event that will propel the advancement of VLS-101 as a potential new cancer treatment, and we are humbled to have worked closely with the VelosBio team to achieve this milestone,” Kyle Rasbach, a managing partner at Pappas, said in a statement.
The deal is subject to regulatory approval and other customary conditions, the companies said in a press release.
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