Merck Is Spending $650 Million, With Ex-Merck Led Lycera -- On "Outsourced" Oral Auto-Immune R&D

This is -- in my opinion -- simply more evidence of the accelerating meta-trend: moving the riskier R&D bets off of the company's balance sheets, in the early years (i.e., no asset to write down, if the research effort doesn't pan out; thus no massive charges or restatements, or internal head-cutting). No, just an income statement line, for quarter by quarter R&D spend (expense) to manage, inside Merck. This is smart business, especially in the field of oral autoimmune candidates, as the very next "big thing" might emerge anywhere, at any moment, rendering the effort entirely outmoded.

So, on balance, it is wiser for Whitehouse Station to have the relationship only "blossom into" an asset, as it were, at near commercial launch time -- should that day ever approach.

Just the same, in December 2011, Lycera met its first R&D milestone under the prerviously-inked 2011 $350 million R&D aggreement with Merck -- proving the concept. And this is a highly regarded ex-Merck scientist, running Lycera, afterall -- so, Merck is making some pretty smart bets, it would seem, even in its choices of outsourced partners.

Here is a bit of last week's press release from Lycera:

. . . .This new relationship between the two companies builds on a previous agreement announced in 2011 that is focused on therapies targeting the retinoic acid related orphan receptor (RORγt), the key transcription factor coordinating both differentiation of T-helper 17 (Th17) cells and production of highly pro-inflammatory mediators such as interleukin-17 (IL-17).

“We are absolutely delighted to expand our relationship with Merck, a collaboration that builds on the culture of scientific excellence fostered by both companies,” said Kathleen M. Metters, Ph.D., Lycera president and chief executive officer. “Lycera’s proven track record in accelerating early stage programs to development candidate status holds the potential to fuel Merck’s early stage pipeline.”

Under the terms of the agreement, Lycera will receive an upfront payment and research funding, and is eligible to receive in excess of $300 million in research, development, regulatory and commercial milestone payments. Further details of the financial terms were not disclosed. Merck is responsible for clinical development and will have worldwide marketing and commercialization rights to any products that may be developed as a result of the collaboration. . . .

Since the markets are closed for Presidents' Day, it seemed sensible to file a "catch-up" story today. This was the winner. As ever, we will keep you posted.