Petosemtamab secures a buyout for Merus

Merus's decision a couple of years ago to shift investor attention to petosemtamab, then a somewhat obscure early-stage R&D project, has turned out to have been a stroke of genius. On Monday Genmab decided to buy Merus for $8bn, and petosemtamab is the primary reason behind the takeover.

The deal represents a 41% premium to Friday's closing share price, and a near tenfold increase over the $10 per share at which Merus floated in 2017, instantly turning the company into one of Europe's most impressive biotech stories. True, Merus also boasts a marketed drug and antibody development expertise, but compared with petosemtamab these are the icing on the cake.

It was at this year's ASCO that most remaining investor fears about petosemtamab seemed to be swept away, with the anti-EGFR x LGR5 MAb yielding a 63% confirmed response rate among 43 front-line PD-L1-positive head and neck cancer patients, in combination with Keytruda. 

And Bicara?

Until then Merus was locked in a battle against Bicara, a biotech that floated a year ago and is developing an anti-EGFR x TGF-β fusion protein, ficerafusp alfa, in the same setting. However, while ficerafusp activity appears to be limited to HPV-negative patients, petosemtamab boasts ORRs of 50% in HPV-positive and 66% in HPV-negatives.

Though subsequently some analysts, including Jones Research and Evercore ISI, have argued that Bicara is oversold – the group is capitalised at just $639m – Merus has been declared the winner. On Monday Bicara stock opened up 18%.

As such Genmab has shown itself to be willing to pay a large premium for what it determines to be the best asset, rather than shelling out far less for a more speculative bargain. This is precisely what Genmab did in last year's $1.8bn acquisition of ProfoundBio, where a cheaper rival biotech, Sutro, was passed over.

This isn't to say that petosemtamab has been derisked; it has market-leading mid-stage data and could be approved in 2027, but first it needs to repeat the trick in phase 3. Two pivotal head and neck studies are under way: Liger-HN1, a Keytruda combo in PD-L1-positive first-line disease, and Liger-HN2, testing monotherapy in second or third-line all-comers.

At least one of these is due to read out next year, and it's only once these data are known that it will become clear whether Genmab's $8bn ($5.5bn of which is being financed through debt) might be money well spent. Beyond head and neck petosemtamab has also shown that it might play a role in colorectal cancer too.

Validation

In the meantime Merus's ability to design a viable drug was validated by last year's approval of the anti-HER2 x HER3 bispecific MAb Bizengri, though this concerns the niche indication of second-line pancreatic or non-small cell lung cancers with NRG1 gene fusions. A measure of the relative unimportance of this is that Merus divested Bizengri's US commercialisation rights to Partner Therapeutics.

Merus's only other significant wholly owned pipeline asset is MCLA-129, a me-too version of Johnson & Johnson's anti-EGFR x cMet MAb Rybrevant. However, this has disappointed clinically, with toxicity revealed at the 2023 ESMO Asia conference casting serious doubt over whether this asset has any chance of catching up to Rybrevant.

It was shortly before this setback that Merus started shifting the investment narrative towards petosemtamab, and this has now paid off. The message for business development departments appears to be that only the best clinical data secure a buyout, but once the promise is shown biopharma will pay top dollar.

Genmab's selected oncology deals

Source: OncologyPipeline.