Merck KGaA to draw on Valo's drug discovery AI in potential $3 billion deal

By Ludwig Burger

FRANKFURT (Reuters) -Germany's Merck KGaA on Thursday agreed to use Boston-based Valo Health's drug research services in a collaboration focused on Parkinson's and related diseases that is potentially worth over $3 billion to the U.S. company.

The pact, which is focused on finding promising therapeutic molecules, underscores Merck's ambition to revive growth at its pharmaceutical division after the $3.9 billion takeover of rare cancer specialist SpringWorks.

Upfront payments and milestone payments contingent on achievements could be over $3 billion, and royalties and R&D funding would come on top, Valo said in a statement.

Family-controlled Merck is keen to strengthen its drug development pipeline after a string of high-profile setbacks in late-stage drug trials, including a decision last year to halt development of head and neck cancer drug Xevinapant.

Merck said in the statement that the deal would help it make faster progress on the most promising drug candidates.

The diversified group's other businesses include chemicals for semiconductor production, where it benefits from investments in artificial intelligence, as well as lab supplies for biotech drug production.

Valo, founded in 2019, is a biotech company that uses data analysis and AI to help in drug discovery and development. 

For its medical research services, Valo says it draws on more than 17 million patient records and biological samples, while guarding data privacy.

With an estimated 1 million people in the U.S. alone living with Parkinson's and available treatments only alleviating symptoms, the pharmaceutical industry has been pushing to develop better drugs but has had many setbacks over decades.

For Merck, the deal marks a return to the therapeutic field after the failure of a key late-stage trial in 2006 and after unwinding a partnership with Newron on another Parkinson's drug candidate in 2011.

Valo has also been active in the area, winning a research grant from The Michael J. Fox Founda­tion in September for work on new ways to treat Parkinson's. 

(Reporting by Ludwig Burger and Patricia Weiss. Editing by Mark Potter)