Drugmaker Merck is acquiring a $1bn equity stake in Seattle Genetics as part of oncology collaborations with the company.

The companies will develop and market Seattle Genetics’ ladiratuzumab vedotin, an antibody-drug conjugate (ADC) that is in Phase II clinical trials to treat breast cancer and other solid tumours.

They will explore ways to co-develop the drug as monotherapy and in combination with Merck’s anti-PD-1 therapy Keytruda (pembrolizumab) for treating LIV-1-expressing solid tumours, including breast cancers.

Seattle Genetics will receive an upfront payment of $600m, under the agreement, and Merck will invest $1bn to buy five million shares of Seattle Genetics at $200 per share.

Depending on the progress made, Seattle Genetics is also qualified for milestones of up to $2.6bn

Merck also received an exclusive licence to sell Tukysa (tucatinib) for the HER2-positive cancer treatment in Asia, the Middle East, Latin America and other regions outside of the US, Canada and Europe.

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Seattle Genetics retains commercial rights in the US, Canada and Europe. It will receive $125m in upfront payment and is eligible for milestones of up to $65m.

Seattle Genetics president and CEO Clay Siegall said: “Collaborating with Merck on ladiratuzumab vedotin will allow us to accelerate and broaden its development programme in breast cancer and other solid tumours, including in combination with Merck’s Keytruda, while also positioning us to leverage our US and European commercial operations.

“The strategic collaboration for Tukysa will help us reach more patients globally and benefit from the established commercial strength of one of the world’s premier pharmaceutical companies.”

As part of the deal, the partners will equally share costs on the development of ladiratuzumab vedotin and other LIV-1-targeting ADCs globally. Profits on ladiratuzumab vedotin will also be shared equally.

Meanwhile, Merck agreed to co-fund the Tukysa global development plan, which includes multiple ongoing and planned trials for HER2-positive cancers.

Merck Research Laboratories president Roger Perlmutter said: “These two strategic collaborations will enable us to further diversify Merck’s broad oncology portfolio and pipeline, and to continue our efforts to extend and improve the lives of as many patients with cancer as possible.”

Last month, Merck signed an exclusive licensing agreement with Hanmi Pharmaceutical to develop, manufacture and commercialise efinopegdutide (formerly HM12525A) to treat nonalcoholic steatohepatitis (NASH).