Merck has agreed to acquire Maryland-based clinical-stage biopharmaceutical company OncoImmune for an upfront cash payment of $425m.

OncoImmune is developing CD24Fc, a recombinant fusion protein that targets the innate immune system, intended for the treatment of patients with severe and critical Covid-19.

Under the terms of the transaction, the US-based pharmaceutical form, through its subsidiary, will acquire all the outstanding shares of OncoImmune.

Also, OncoImmune shareholders are eligible to receive payments based on sales, and achievement of certain regulatory milestones.

Merck research laboratories president Roger Perlmutter said: “Meaningful new therapeutic options are desperately needed for possibly millions of people around the world who will develop severe or critical Covid-19 disease.

“Recent clinical investigations support the view that CD24Fc may provide benefit beyond standard of care therapy for Covid-19 patients requiring oxygen support, and hence will represent an important addition to the Merck pipeline of investigational medicines and vaccines designed to address the Covid-19 pandemic.”

The company recently released positive top-line results from an interim efficacy analysis of a Phase 3 study evaluating its lead therapeutic candidate CD24Fc.

The interim analysis included data from 203 participants and showed that a single dose of CD24Fc improved the clinical status in patients with severe or critical Covid-19 by 60%, compared to placebo.

Also, the drug has reduced the risk of death or respiratory failure by more than 50%.

Before the transaction is completed, OncoImmune is expected to spin-out certain rights and assets not related to the CD24Fc programme to a new entity, which will be owned by the existing OncoImmune shareholders.

Merck is also expected to invest $50m and become a minority shareholder in the new entity, in relation to the closing of the transaction.

The acquisition is expected to be closed before the end of 2020, subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act and certain other customary conditions.

OncoImmune co-founder and chief executive officer Yang Liu said: “Outstanding work by the OncoImmune team has provided compelling evidence regarding the use of CD24Fc in patients with severe and critical Covid-19 in our Phase 3 Trial.

“We look forward to working with the scientists and manufacturing engineers at Merck as well as regulators as we seek to accelerate the global development of this potentially important therapy.”

Goodwin Procter served as legal advisor for OncoImmune and Guggenheim Securities as a financial advisor for the company.

Earlier this month, Merck agreed to acquire VelosBio, a clinical-stage biopharmaceutical company, in an all-cash deal valued at $2.75bn.