Merck and Daiichi Sankyo's $22 Billion Bet Just Hit Its Second Speed Bump

I-DXd appears to have been caught on the wrong side of this shifting standard.

The $22 Billion Question

Let's zoom out and talk about the partnership itself, because the stakes here are enormous.

Merck and Daiichi Sankyo struck their original deal to co-develop three antibody-drug conjugates (ADCs). Think of ADCs as guided missiles for cancer: they're antibodies that find specific markers on tumor cells and deliver a toxic payload directly to them, sparing healthy tissue. It's one of the hottest areas in oncology, and Daiichi Sankyo's DXd technology platform is considered best-in-class.

The financial structure of the deal tells you how much Merck believed in it. The deal included $4 billion in upfront payments plus $1.5 billion in continuation payments across I-DXd, patritumab deruxtecan (targeting HER3), and raludotatug deruxtecan (targeting CDH6). On top of that, Merck could owe up to $5.5 billion per drug in sales milestones. Outside Japan, they split R&D costs and profits 50/50.

In 2024, they expanded the collaboration even further, adding a fourth program called gocatamig, a T-cell engager (a different type of cancer immunotherapy) targeting DLL3, for an additional $170 million upfront.

So we're talking about a partnership with potentially $22 billion in total value across four programs. And now two of those programs have had their U.S. applications withdrawn.

Two Strikes, But Not an Out (Yet)

Wall Street's reaction has been measured, which is interesting. Analysts are treating this as a program-specific setback rather than evidence that the whole partnership is falling apart. The collaboration still has multiple shots on goal: patritumab deruxtecan (the HER3-targeted ADC), raludotatug deruxtecan (targeting CDH6), and gocatamig are all still in active development.

But two withdrawn applications under one partnership is hard to ignore. It raises a legitimate question about execution. Are these just the growing pains of an ambitious ADC pipeline, or is something more structural going on with how these programs are being developed and positioned for regulators?

The charitable read is that Daiichi Sankyo's DXd platform genuinely produces active drugs, but the companies have been too aggressive in seeking accelerated approval with mid-stage data. If that's the case, the fix is straightforward (if painful): run bigger, longer trials and come back with stronger evidence. The less charitable read is that some of these ADCs might not ultimately prove their worth in confirmatory studies, which would turn those billion-dollar upfront payments into very expensive lessons.

A Bigger Story About ADCs and the FDA

This withdrawal isn't just about Merck and Daiichi Sankyo. It's a canary in the coal mine for the entire ADC sector.

ADCs have been the darlings of oncology for the past few years. Daiichi Sankyo's Enhertu (developed with AstraZeneca, not Merck) proved that ADCs could be transformative, and suddenly every pharma company wanted in. The pipeline is now packed with ADC candidates from dozens of companies.

But the I-DXd withdrawal highlights a critical vulnerability: promising early response rates don't guarantee regulatory success. ADCs can shrink tumors impressively in small studies, but convincing the FDA that those responses translate into real clinical benefit requires a much higher evidentiary bar than many companies have been planning for.

In 2026, the FDA is treating accelerated approval as a more conditional, shorter leash rather than a long-term placeholder. Companies filing ADC applications need airtight confirmatory strategies from the start, not as an afterthought.

What Happens Next

Merck and Daiichi Sankyo haven't abandoned I-DXd entirely. The withdrawal was specifically about the accelerated approval pathway based on Phase 2 data. The drug could still come back with results from a larger, more definitive trial.

But the clock is ticking. Every month without an approval means patients in need aren't getting access, competitors are advancing their own programs, and the $22 billion partnership has less to show for itself. With two applications pulled and no approved products yet from the Merck side of the collaboration (Enhertu sits under the separate AstraZeneca deal), the pressure to deliver a win is mounting.

The partnership isn't broken. But it's bruised. And in a regulatory environment that's getting stricter by the quarter, the next application they file had better be bulletproof.

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