Arix Bioscience PLC (LON:ARIX) noted that portfolio company Artios Pharma and Merck KGaA have signed a three-year strategic research collaboration to discover and develop multiple-precision oncology drugs.

As part of the agreement, Artios, which has pioneered DNA Damage Response (DDR) cancer treatments, will receive an upfront payment of US$30mln with Merck KGaA having an option over the development of compounds on up to eight targets.

On each of these targets, Artios will be eligible to receive up to US$860mln plus double-digit royalty payments on net sales, which could make this a $7bn deal.

The collaboration does not include Artios’ lead programmes, Pol? and ATR inhibitors, for which it retains all rights.

Artios was founded by entrepreneur and scientist Niall Martin, who during his tenure at KuDOS (sold to AstraZeneca) played a key role in the discovery and early development of Lynparza (olaparib), the first approved DDR therapy and PARP inhibitor now used to treat ovarian and breast cancer.

Arix is the largest shareholder in Artios with a 12.7% stake on a fully diluted basis.

In a statement, Jonathan Tobin, managing director at Arix and an Artios board director, said: “Artios is a global powerhouse in DDR. Together with Merck KGaA’s significant expertise and R&D resources, the collaboration will identify and develop precision oncology medicines targeting nucleases.

“As early investors and the largest shareholder in Artios, we are proud of the company’s success. It is a testament to its leadership team and strategy in developing a unique discovery platform of novel DNA repair nuclease inhibitors and targets, which will bring real impact to cancer patients.”

This collaboration follows the $2.75bn acquisition of Arix portfolio company VelosBio, last month, and reconfirms the potential of Arix’s private companies, it said.

Jefferies analyst Ken Rumph commented: “With Arix still trading on a significant discount despite the Velos deal’s boost to NAV and cash, more validation from another early-stage asset should attract more interest and narrow the discount.”

Merck KGaA is a separate company from US pharma giant Merck & Co.

Shares in Arix jumped 12.7% to 177.5p.

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