Merck (NYSE:MRK) is to acquire US$1bn equity stake in Seattle Genetics, Inc. (Nasdaq:SGEN) as part of a new strategic oncology collaboration.

The companies will globally develop and commercialize Seattle Genetics’ ladiratuzumab vedotin, an investigational antibody-drug conjugate, which is currently in phase 2 clinical trials for breast cancer and other solid tumours.

The collaboration will pursue a broad joint development program evaluating ladiratuzumab vedotin as monotherapy and in combination with Merck’s anti-PD-1 therapy Keytruda in triple-negative breast cancer.

Under the terms of the agreement, Merck will buy 5mln shares at US$200 each, a 25% premium to Friday’s closing price, as well as paying US$600mln upfront.

Seattle Genetics is also eligible for progress-dependent milestone payments of up to US$2.6bn.

Separately, Seattle Genetics has granted Merck an exclusive license to commercialize Tukysa, a small molecule tyrosine kinase inhibitor, for the treatment of HER2-positive cancers, in Asia, the Middle East and Latin America.

It will receive US$125mln upfront and milestones of up to US$65mln.

Seattle Genetics shot up 10% to US$164.85 while Merck remained flat at US$84.23 on Monday.