• The medicine, called CD24Fc, was shown to reduce the risk of respiratory failure or death by more than 50% in patients hospitalized with Covid and requiring oxygen
• The $425 million deal comes with the potential for additional payments based on certain regulatory milestones.
• But Merck only gains CD24Fc; OncoImmune will spin out other rights and assets into a new company, into which Merck will invest $50 million.

Pharmaceutical giant Merck said it plans to acquire privately held OncoImmune for $425 million in cash, gaining rights to an under-the-radar drug that has shown striking results in hospitalized patients with Covid-19.

The medicine, CD24Fc, was shown in a late-stage clinical study in September to reduce the risk of respiratory failure or death by more than 50% in patients hospitalized with Covid-19 and requiring oxygen, Merck said Monday.

The drug was given as an intravenous infusion in addition to standard-of-care, which could include remdesivir and dexamethasone, and was compared to standard-of-care alone. The data, in 203 patients, also showed that patients receiving CD24Fc had a 60% higher probability of seeing improved clinical status.

"The results are remarkable," Merck's research chief, Dr. Roger Perlmutter, said in a telephone interview.

With cases of Covid averaging almost 170,000 a day in the U.S. and a record number of people in the hospital with the disease, a drug that could significantly speed recovery and reduce the risk of death or of patients getting so severely ill they require ventilators could make a major difference in the pandemic.

But there's a problem: supply.

"We realized that this small little company was in no position to make CD24Fc to try and treat all of the people who could potentially benefit from this drug," Perlmutter said. "We decided that the only way, seriously, that this could be brought to people who need it is for us to lean in with our capabilities."

Merck plans to shift some of its manufacturing capacity to start making the drug. But it's a complex medicine to manufacture and it will take time. Perlmutter said he's aiming for "before the middle of next year, and ideally much before that," for there to be ample supply.

OncoImmune, founded and helmed by Yang Liu, director of the Division of Immunotherapy at the University of Maryland School of Medicine, reported the top-line results from the trial on its website in September. They haven't yet been published in a peer-reviewed journal. Merck says submission of detailed results is coming.

Though the findings caught little of the world's attention, one person who did notice was Moncef Slaoui, chief advisor to the U.S. government's Operation Warp Speed. He noted in a telephone interview on Nov. 1 that the data for OncoImmune's drug have "just been incredible," noting a "relative mortality impact that's very clear."

Slaoui explained the drug prevents the immune system "from being hyper-activated." It's the same reason the steroid dexamethasone proved so effective in a trial in June at treating patients in more severe stages of Covid-19; when patients become that sick, it can be their own immune system kicking into overdrive that causes problems, not the virus anymore.

"Frankly, nobody would have believed that it would have this kind of effect," Perlmutter said, when asked why the CD24Fc results garnered so little attention. "If you look at the other anti-inflammatories that have been studied in very ill Covid-19 patients, it's been hard to show there's any effect at all."

In addition to the potential to help with the pandemic, Merck acquired OncoImmune because it sees possibilities for CD24Fc beyond Covid. It has shown promise for graft versus host disease, a dangerous immune reaction that can happen after bone marrow transplantation, and Perlmutter said it may have further applications as well.

The $425 million deal comes with the potential for additional payments based on certain regulatory milestones. But Merck only gains CD24Fc, while OncoImmune will spin out other rights and assets into a new company, into which Merck will invest $50 million.

The company doesn't plan to seek emergency use authorization from the Food and Drug Administration until it has enough supply of the medicine for people to actually use it, Perlmutter said. That's now the task for Merck — which is also developing a pill for Covid as well as two vaccines for the disease.

"Now that we have this terrible, terrible surge in Covid-19 cases, and so many people are hospitalized in severe or critical condition, and so many people in ICUs, tens of thousands, or potentially hundreds of thousands or more just in the United States might need this drug," Perlmutter said. "We're going to move heaven and earth to produce the material."