Merck Shares Surge Following Hansoh Pharma Deal

Investing.com -- Pharmaceutical giant Merck & Co., Inc. (NYSE:MRK) saw its shares rise by 1.6% in pre-market trading following the news of a significant licensing agreement with Chinese biotechnology company Hansoh Pharmaceutical Group Company Limited (3692.HK). The agreement focuses on the experimental obesity drug HS-10535, with Merck set to make an upfront payment of $112 million to Hansoh, along with potential milestone payments that could total up to $1.9 billion.

As part of the deal, Merck will record a pre-tax expense of $112 million in the fourth quarter of 2024. The collaboration with Hansoh Pharma is seen as a strategic move for Merck to expand its portfolio in the treatment of obesity, which is an increasingly pressing global health issue.

The financial terms of the agreement reflect the potential that Merck sees in the still experimental HS-10535. The upfront payment and subsequent milestone payments demonstrate the company's commitment to advancing its research and development pipeline in a treatment space with significant unmet medical needs.

While the expense in the fourth quarter of 2024 will impact Merck's finances, the long-term prospects for the HS-10535 drug may offer substantial returns, should the treatment prove successful in clinical trials and ultimately receive market approval.