Pfizer and Merck KGaA are teaming up to develop a new tumor treatment product

Pfizer Inc. and Germany’s Merck KGaA are teaming up to develop a new tumor treatment product, in a move that will boost the U.S. company’s oncology business.

Merck said Monday it will receive $850 million upfront to jointly develop and commercialize an anti-PD-L1 antibody with Pfizer and could receive a further $2 billion in regulatory and commercial milestone payments. Merck is already developing the drug as a treatment against various types of tumors.

“It is the largest deal in the pharmaceutical industry for a single asset in this stage of development,” said Belén Garijo, chief executive of Merck’s pharmaceutical division.

The deal also “enables Merck to accelerate its entry into the U.S. oncology market,” Garijo added.

The two companies will also push to advance Pfizer’s anti-PD-1 antibody — another tumor-fighting agent — into phase 1 trials, while Merck will co-promote Pfizer’s lung cancer drug XALKORI in the U.S. and other markets.

Both companies will jointly fund development and commercialization costs and will share all revenues from selling any anti-PD-L1 or anti-PD-1 products, Merck said.

Merck added that about 20 immuno-oncology clinical development programs are set to begin next year.

Growth in Merck’s pharmaceutical division, Merck Serono, was held back in the third quarter, reported Nov. 13, because of a 69% decline in royalty, license and commission income connected with patent expirations for arthritis drugs Humira and Enbrel. Third-quarter pharmaceutical sales were driven largely by growth in emerging markets such as China and Brazil.

The company has moved over the past year to bolster its non-pharmaceutical divisions through the acquisitions of the U.K.’s AZ Electronics PLC and U.S.-based Sigma-Aldrich Corp., a supplier of laboratory testing materials.

Merck KGaA isn’t affiliated with Merck & Co. of the U.S.