Incyte Corporation (NASDAQ:INCY) and Merus NV (NASDAQ:MRUS) announced today that they have entered into a global, strategic collaboration agreement focused on the research, discovery and development of bispecific antibodies utilizing Merus’ proprietary Biclonics technology platform. The Collaboration and License Agreement grants Incyte the exclusive rights for up to eleven bispecific antibody research programs, including two of Merus’ current preclinical immuno-oncology discovery programs.

Biclonics retain the IgG format of antibodies that are produced naturally by the immune system and, by binding to two targets, enable multiple modes of action that cannot otherwise be obtained with conventional monoclonal antibodies.

“By virtue of a unique ability to simultaneously engage multiple protein targets, we believe bispecific antibodies have the potential to play an important role in the future of biotherapeutics,” said Reid Huber, Ph.D., Incyte’s Chief Scientific Officer. “This collaboration with Merus expands our large molecule discovery capabilities into an innovation-rich area of research, creating additional opportunities for us to deliver on our commitment to improving and extending the lives of patients with cancer and other serious diseases.”

“This transformative, global collaboration further underscores the potential of Merus’ Biclonics technology platform and establishes a strong relationship with Incyte, a leader in innovative drug development,” said Ton Logtenberg, Ph.D., Chief Executive Officer of Merus. “We look forward to expanding our pipeline under this agreement, as we efficiently exploit our preclinical discovery engine and progress our most advanced, proprietary assets in the clinic.”

Terms of the Collaboration

Under the terms of the collaboration, Incyte has agreed to pay Merus an upfront payment of $120 million. In addition, Incyte has agreed to purchase 3.2 million shares of Merus stock at $25 per share, for a total equity investment of $80 million.

The parties have agreed to collaborate on the development and commercialization of up to 11 bispecific antibody programs. For one current preclinical program, Merus will retain all rights to develop and commercialize approved products in the United States, and Incyte will develop and commercialize approved products arising from the program outside the United States. Following any regulatory approval of a product candidate for this particular pre-clinical program, each company has agreed to pay the other tiered royalties ranging from 6 to 10 percent on net sales of products in their respective territories.

Merus also has the option to co-fund development of product candidates arising from two other programs. For any program for which Merus exercises its co-development option, Merus would be responsible for 35 percent of global development costs in exchange for a 50 percent share of U.S. profits and losses and tiered royalties ranging from 6 to 10 percent on ex-U.S. sales by Incyte for these programs. Merus also has the right to elect to provide up to 50 percent of detailing activities for product candidates arising from one of these programs in the United States.

For each of the other eight programs, Incyte has agreed to independently fund all development and commercialization activities. For these programs, Merus will be eligible to receive potential development, regulatory and sales milestone payments of up to $350 million per program, which could result in an aggregate milestone opportunity of approximately $2.8 billion if all development, regulatory and sales milestones are achieved across all such eight other programs in all territories. Merus will also be eligible to receive tiered royalties ranging from 6 to 10 percent on global sales of any approved products under these eight programs.

Merus will retain rights to both of its clinical candidates and MCLA-158, as well as its technology platform and future programs emerging from Merus’ platform that are outside the scope of this agreement.

The transaction is expected to close in the first quarter of 2017, subject to the early termination or expiration of any applicable waiting periods under the Hart-Scott Rodino Act and customary closing conditions. (Original Source)

Shares of Incyte closed yesterday at $15.00, up $0.85 or +6.01%. INCY has a 1-year high of $111.70 and a 1-year low of $55. The stock’s 50-day moving average is $101.16 and its 200-day moving average is $88.77.

On the ratings front, Incyte has been the subject of a number of recent research reports. In a report issued on December 5, BMO analyst Ian Somaiya reiterated a Buy rating on INCY, with a price target of $126, which implies an upside of 23% from current levels. Separately, on the same day, RBC’s Simos Simeonidis maintained a Buy rating on the stock .

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Ian Somaiya and Simos Simeonidis have a yearly average return of 9.9% and a loss of -26.8% respectively. Somaiya has a success rate of 50% and is ranked #429 out of 4291 analysts, while Simeonidis has a success rate of 27% and is ranked #4194.

Overall, 12 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $120.50 which is 17.9% above where the stock closed yesterday.

Incyte Corp. is a biopharmaceutical company, which focuses on the discovery, development, development, formulation, manufacturing and commercialization of proprietary therapeutics to treat serious unmet medical needs, primarily in oncology. Its product, Jakafi, a JAK1 and JAK2 inhibitor, is currently approved in the U.S. for the treatment of intermediate or high-risk myelofibrosis and is in development as a potential treatment for other cancers.