UPDATE 3-Merck KGaA, Ablynx link on novel antibody drugs
(Adds CEO interview, analyst comment)
LONDON, Sept 4 (Reuters) - Belgium's Ablynx NV (ABLX.BR), which is using llamas to develop next-generation antibodies, has signed a co-development deal with Germany's Merck KGaA (MRCG.DE) to find new drugs against cancer and immune system diseases.
Ablynx and Merck will contribute equally to discover and develop so-called nanobodies against two unspecified targets, sharing equally in the resulting profits.
If all goes well, the tie-up could potentially be worth billions of dollars, according to Ablynx CEO Edwin Moses.
"It's early stage but we are targeting products with potentially large sales -- they could be billions of dollars -- and if we stay involved in an equal way, we will receive 50 percent of the profits," he said in a telephone interview.
Ablynx shares rose 6.5 percent on the news by 1145 GMT. Stock in Merck, which already sells the established antibody drug Erbitux for cancer, was little changed.
Under the deal, Ablynx gets an upfront cash payment of 10 million euros ($14.5 million). It also the right to opt out of the profit-sharing deal, in which case it would be entitled to milestone payments of up to 325 million euros.
The alliance is the latest in a series of partnerships for Ablynx, which also has deals with Novartis AG (NOVN.VX), Wyeth WYE.N and Boehringer Ingelheim. But the Merck tie-up is the first to offer profit sharing.
The Ghent-based company plans to catch a new wave in antibody medicine by capitalising on a quirk of nature whereby llamas and camels possess unusual antibodies that are much smaller than those in humans and other animals.
Smaller antibody fragments could reach new targets in the body and potentially be given by mouth rather than injection.
Piper Jaffray analyst Sam Fazeli, who rates Ablynx shares a "buy", said the flexible deal structure made good sense.
"We expect future collaborations to follow this pattern," he added in a note.
Other companies working on different kinds of next-generation small antibody medicines include GlaxoSmithKline Plc (GSK.L) -- which bought UK-based Domantis for 230 million pounds ($410 million) in 2006 -- and Denmark's Genmab (GEN.CO). (Editing by David Holmes and Quentin Bryar)
