Merck has signed a definitive agreement to acquire Australian oncolytic immunotherapy treatments provider Viralytics in a deal valued at A$502m ($394m).

Upon completion of the acquisition, Viralytics will become a wholly owned subsidiary of Merck, which in turn will obtain full rights to the former’s investigational oncolytic immunotherapy CAVATAK (CVA21).

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CVA21, which is currently being evaluated in multiple Phase I and Phase II clinical trials, is based on Viralytics’s formulation of an oncolytic virus (Coxsackievirus Type A21) that has been shown to preferentially infect and kill cancer cells.

It is being evaluated as both an intratumoral and intravenous agent, including in combination with Merck’s anti-PD-1 therapy KEYTRUDA (pembrolizumab).

“We are eager to further build on Viralytics’s science as we continue our efforts to harness the immune system to improve long-term disease control and survival outcomes for people with cancer.”

As part of an agreement signed between Viralytics and a subsidiary of Merck in November 2015, a study is investigating the use of the CAVATAK and KEYTRUDA combination in melanoma, prostate, lung and bladder cancers.

Merck Research Laboratories global clinical development senior vice-president and head, chief medical officer Dr Roy Baynes said: “Viralytics’s approach of engaging the innate immune system to target and kill cancer cells complements our immuno-oncology strategy, which is focused on the rapid advancement of innovative monotherapy approaches and synergistic combinations to help the broadest range of cancer patients.

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“We are eager to further build on Viralytics’s science as we continue our efforts to harness the immune system to improve long-term disease control and survival outcomes for people with cancer.”

Implementation of the transaction, which is subject to a Viralytics’s shareholder vote along with customary regulatory approvals, is expected by the second quarter of this year.