Merrimack Pharmaceuticals Inc. got a boost Wednesday after Baxter International Inc. committed to pay the company up to $970 million for rights to advance and market MM-398, a nanoliposomal encapsulation of irinotecan for pancreatic cancer outside the U.S. and Taiwan.

To fuel the program's advancement, Baxter is paying Merrimack $100 million up front, plus up to $870 million in development, regulatory and sales milestones. Merrimack is also eligible for tiered royalties on net sales in licensed territories of between low double digits and low 20s.

Merrimack retained U.S. rights to the therapy and could launch it as early as 2016 if the FDA approves it to treat patients with metastatic pancreatic cancer previously treated with gemcitabine. The Cambridge, Mass.-based company will file a new drug application for that indication this year and will seek priority review.

Shares of Merrimack (NASDAQ:MACK), which traded as high as $8.50, closed Wednesday at $7.33, up 14 cents.

Deerfield, Ill.-based Baxter expects to submit applications for ex-U.S. regulatory approvals beginning in 2015, a year in which the company will split in two, creating Baxalta Inc., a new, publicly traded biopharmaceuticals company expected to launch in mid-2015.

Both the FDA and the EMA have granted MM-398 orphan drug designation in metastatic pancreatic cancer.

The deal is a win for Pharmaengine Inc., as the new partnership triggers a $7 million payment from Merrimack under a deal the companies struck in 2011. (See BioWorld Today, May 10, 2011.)

Merrimack President and CEO Bob Mulroy told BioWord Today other financially attractive offers for MM-398 rolled in during what he characterized as "a very competitive process."

"There were a lot of folks who had a similar financial perspective on the opportunity for the product," he said. "What drove us to Baxter was that we think they're the best fit for us and for the product."

With as much as 90 percent of new cancer cases expected to be in emerging markets over the next 20 years, "we were looking for a strong operator there who's familiar with how things get done in those countries," said Mulroy. "Baxter is the world leader in not only hospital sales, but direct sales to oncologists in all of these territories."

Merrimack is eligible for $120 million in regulatory milestone payments related to the first pancreatic cancer indication Baxter achieves and $280 million in development and regulatory milestone payments for a second pancreatic cancer indication.

Merrimack is also eligible to receive $220 million in future development and regulatory milestone payments related to two additional indications. Merrimack has the potential to receive $250 million in sales milestone payments.

Cowen and Co. LLC analyst Eric Schmidt said the $100 million up front was "at the high end of our expectations and should go a long way toward relieving the balance sheet pressures" on the company's stock. "Moreover," he noted, "we expect future milestone payments to essentially pay for MACK's portion of the development costs associated with pursuing additional indications for MM-398."

Merrimack intends to "aggressively pursue the development of MM-398 across multiple cancer indications," said Mulroy, who added that, including the up-front fee, the partnership will yield $320 million in fairly short order.

The first applications lodged seeking MM-398 approval will be based primarily on strong positive data Merrimack showcased in May from its NAPOLI-1 phase III trial with MM-398 in metastatic pancreatic cancer patients previously treated with gemcitabine.

The study evaluated MM-398 with 5-fluorouracil (5-FU) and leucovorin, yielding an overall survival of 6.1 months, a 1.9-month improvement over the 4.2-month survival demonstrated by the control arm of 5-FU and leucovorin alone. (See BioWorld Today, May 2, 2014.)

Next year, Merrimack likely will pursue first-line pancreatic cancer, with plans to move into other major tumor types after that, work that will march ahead in parallel with Merrimack's development of a second-generation companion diagnostic it is developing to identify patients who best respond to MM-398. That diagnostic is not part of the Baxter deal, though a nonproprietary diagnostic to be paired with the drug at first is available to Baxter.

Merrimack is moving at a rapid clip to prepare for anticipated global launches. Last year, it upgraded the manufacturing facility where it will manufacture commercial supply for both itself and Baxter. If approved, an outcome Schmidt called "very likely," the drug could yield $300 million to $500 million in U.S. sales, carrying an equal value outside the U.S., according to Cowen.

Pharmaengine, which holds MM-398's Taiwan rights, stands to benefit further from the deal, too. Including milestone payments already made by Merrimack, the Taipei, Taiwan-based company is eligible for $80 million in development and regulatory milestone payments and $130 million in sales milestone payments upon the achievement of other undisclosed development, regulatory and annual net sales milestones.

It is also eligible for tiered royalties in the range from high single digits up to the low teens based on net sales of MM-398 in Europe and certain countries in Asia.

MM-398 is a novel encapsulation of irinotecan in a long-circulating nanoliposomal formulation designed to increase drug deposition and prolong cytotoxic effects, with the goal of improving its anticancer properties.

Pancreatic cancer is the world's 12th most common cancer. It's difficult to diagnose and has limited treatment options.