Shares of pharmaceutical giant Merck & Co ., Inc. (NYSE: MRK ) edged up 1.6% in premarket trading following news of a significant licensing agreement with Chinese biotech firm Hansoh Pharmaceutical (TADAWUL: 2070 ) Group Company Limited (3692.HK). The deal centers on the experimental obesity drug HS-10535, for which Merck (NS: PROR ) will pay Hansoh an upfront sum of $112 million, with potential milestone payments totaling up to $1.9 billion.
As part of the arrangement, Merck will record a charge of $112 million before taxes in the fourth quarter of 2024. The collaboration with Hansoh Pharma marks a strategic move for Merck to expand its portfolio in the treatment of obesity, a growing global health concern.
The financial terms of the deal reflect the potential Merck sees in HS-10535, which is still in the experimental phase. The upfront payment and subsequent milestone payments are indicative of the company's commitment to advancing its research and development pipeline in a therapeutic area with significant unmet medical needs.
While the charge in Q4 2024 will impact Merck's financials, the long-term prospects of the HS-10535 drug could offer substantial returns should the treatment prove successful in clinical trials and eventually gain market approval.