Amgen, Inc. (AMGN), Pfizer Inc. (PFE), Merck & Co., Inc. (MRK): A Closer Look at the Battle Over Cancer Treatments

Inovio Pharmaceuticals Inc (NYSEMKT:INO)’s hTERT cancer vaccine, which will start its Phase I clinical trial in 2014, could potentially defend against a wide variety of cancers, including breast, non-small cell lung and prostate cancers. In addition, Inovio Pharmaceuticals Inc (NYSEMKT:INO) has a diverse pipeline of drugs, including vaccines for HIV, hepatitis, malaria and influenza. Last month, Inovio announced that a preclinical study of its new influenza vaccine for H7N9 (bird flu) had a 100% success rate in animals.

Merck could acquire all of these treatments for less than a billion dollars, as opposed to the estimated $10 billion to $20 billion it would take to buy Onyx. Merck could also initiate a collaboration with Inovio, by using milestone and royalty payments, instead of buying the entire company outright. Merck and Inovio already have a 2004 licensing agreement in which Merck was granted non-exclusive global rights to use Inovio’s electroporation technology for the delivery of proprietary DNA vaccines. Lastly, Inovio CEO Joseph Kim was once a senior vaccine developer at Merck, which makes future collaborations extremely likely.

Inovio shares rose 44% on August 5 on renewed speculation that a Merck acquisition could occur, but both companies have remained silent regarding the rumors.

The Foolish Bottom Line

Onyx, Amgen, Inc. (NASDAQ:AMGN), Pfizer Inc. (NYSE:PFE) and Merck are only a few pieces of the bigger picture in cancer related mergers and acquisitions, yet they are representative of a consistent underlying theme in the industry.

Larger pharmaceutical companies facing major patent expirations are faced with two major choices to expand their pipelines – to either acquire established companies like Onyx at a high premium, or to take a risk on smaller companies, like Inovio, that have promising products in their pipeline. Whereas Amgen, Inc. (NASDAQ:AMGN) made it clear that it prefers the former choice, the latter can also be appealing for companies like Merck, since the reward can be exponential in comparison to the initial investment.

However, investors should beware of playing these stocks on acquisition rumors, since they often never come to fruition. Yet it’s important to keep an eye on these recent moves in oncology treatments, since the major pharmaceutical companies are increasingly considering them invaluable additions to their established pipelines.

The article A Closer Look at the Battle Over Cancer Treatments originally appeared on Fool.com and is written by Leo Sun.

Leo Sun has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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