Genmab pays $8B for huge potential in Merus Head & Neck Cancer Drig
Genmab's growth and pipeline diversification strategy is picking another piece through the acquisition of Merus for a $8 billion deal focused on late-stage candidates for giant sellers with head and neck cancer.
Financial terms of the acquisition agreement were announced Monday, calling on Genmab to pay $97 in cash per share for Merus, a 41% premium on the stock’s closing price on Friday.
Merus's drug is an antibody designed to hit multiple targets of cancer cells. The lead candidate, petosemtamab, or Peto for short, is a bispecific antibody that targets EGFR and LGR5, two proteins overexpress on cells of certain types of solid tumors. In addition to inhibiting the two proteins and their role in promoting cancer growth, Peto also provides a third mechanism of action by prompting immune cells to target and kill cancer cells. Peto's lead indication is head and neck cancer. Although checkpoint inhibitors are approved for treatment of head and neck cancer, the low response rate of this immunotherapy has left patients unmet needs.
In the temporary phase 2 results, PETO achieved a total response rate of 60% with a median response duration of 11 months. After the data were presented at the annual meeting of the American Society of Clinical Oncology in June, industry analysts said the results give Merus drug an advantage over Ficerafusp Alfa, a bifunctional antibody designed to target EGFR and a different protein called TGF-BETA.
Both Bicara and Merus drugs are tested critically in head and neck cancer. Merus' PETO was evaluated in a two-stage study, one for first-line treatment and the other for second-line treatment. Genmab and Merus expect one or two studies to produce data in 2026. If all goes well, the Genmab project Peto can enter the market in 2027. A separate phase 1/2 program is evaluating medications for metastatic colorectal cancer. Merus said it expects to obtain preliminary data from the study in the second half of this year.
Genmab specializes in antibody drugs. Its antibodies have attracted patients for years, part of the drug developed by large partners. The biggest source of Genmab's revenue is Royalty Johnson & Johnson payments for Darzalex, a monoclonal antibody that has become the standard treatment for multiple myeloma. But Genmab has developed a strategy to develop and commercialize drugs it has fully owned. Last year, it paid $1.8 billion to buy Deep Bio, a developer of anti-cancer antibodies. RINA-S is the ovarian cancer candidate for the deal and is expected to release phase two data in 2026. Acasunlimab is a wholly owned bispecific antibody of Genmab and is currently serving as a second-line treatment for non-small cell lung cancer. The data for the second phase is expected by the end of this year.
William Blair analyst Matt Phipps said in a note sent to investors that the acquisition might be the avenue for Merus, but the company expects the deal to not be reached until Peto's 3-stage reading in 2026. Meanwhile, GenMAB receives benefits from Genmab through drug use, who can earn $3.8 billion in peak sales on instructions for head and neck cancer.
“While the deal is bigger than what we expect from Genmab, we believe the opportunistic acquisition is positive, which adds several other late-stage or approved plans that could drive substantial revenue growth in the 2030s, thus exceeding the revenue peak at Darzalex royalties,” Phipps said.
In order to obtain the acquisition, Genmab may have to strip J&J Drug Rybrevant of the royalties, Leerink Partners analyst Andrew Behrens said in a research note. Genmab's research led to Rybrevant's discovery, which received royalties from J&J's product sales. Rybrevant is approved for the first-line treatment of non-small cell lung cancer (NSCLC), but J&J is also testing colorectal cancer in the drug, which overlaps with the potential application of Peto in this indication. Or, Genmab may have to outline Merus' MCLA-129, a bispecific antibody with the same target as Rybrevant, Berens said. MCLA-129 is undergoing a 1/2 phase study in NSCLC and solid tumors.
Merus has a commercial product. Late last year, the FDA granted accelerated approval for Bizengri, a bispecific antibody used to treat non-small cell lung and pancreatic adenocarcinoma. Partner Therapeutics authorizes commercialization rights in the United States and owes MERUS royalties on sale.
Genmab funded the Merus acquisition through existing cash and $5.5 billion in new debt financing. The boards of directors of both companies approved the deal, which is expected to close in early 2026.
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