Merck & Co Inc will buy $1 billion worth of equity stake in Seattle Genetics and pay $600 million upfront to co-develop and sell the smaller drugmaker's cancer therapy, the companies said on Monday.
Shares of Seattle Genetics rose 7.4% to $161 in premarket trade, while Merck was largely unchanged.
Merck, which already boasts of blockbuster cancer drug Keytruda, has been striking deals to strengthen the portfolio, agreeing in December to buy ArQule Inc in a $2.7 billion transaction to tap into the company's experimental blood cancer therapy that targets genetic mutations.
Targeted cancer therapies are seen as a potential alternative to chemotherapy that has struggled with side effects, and drugmakers have been spending heavily to scoop up companies developing them.
Gilead Sciences on Sunday said it would buy biotech company Immunomedics Inc for $21 billion to strengthen its cancer portfolio.
Under the deal, Seattle's ladiratuzumab vedotin will be tested in combination with Merck's Keytruda in types of breast cancer and other solid tumors, the companies said.
Merck will buy 5 million shares of Seattle Genetics for $200 per share, a premium of 33.4% to the share's last close. The purchase amounts to a stake of nearly 2.9% according to Refinitiv IBES data.
The company is also eligible for additional milestone payments of up to $2.6 billion.
Separately, Seattle Genetics granted Merck exclusive license to sell the company's cancer therapy Tukysa in Asia, the Middle East and Latin America and other regions outside of the United States, Canada and Europe.
Seattle Genetics will receive upfront payment of $125 million from Merck for the licensing, with additional milestone payments of up to $65 million.
(Reporting by Trisha Roy in Bengaluru; Editing by Rashmi Aich and Sriraj Kalluvila) ((Trisha.Roy@thomsonreuters.com; within U.S. +1 646 223 8780, outside U.S. +91 80 6182 3635;))
