Why Merck Is Lending Its Crown Jewel to a Rival's Clinical Trial

Supplying Keytruda for Exelixis' trial is a small cost that could yield a big return: another approved combination that extends Keytruda's relevance well past 2028.

Why Exelixis Is the Perfect Partner

Exelixis isn't a startup fishing for validation. It's a profitable, mid-cap oncology company with a deep bench of combination trials already underway. And zanzalintinib is its crown jewel.

Designed as a next-generation version of cabozantinib, zanzalintinib targets the same cancer-fueling pathways (VEGFR, MET, AXL) but aims for a better balance between efficacy and side effects. The drug is in multiple Phase 3 trials across different tumor types:

• STELLAR-303: zanzalintinib + atezolizumab in colorectal cancer (positive topline data reported in mid-2025)
• STELLAR-304: zanzalintinib + nivolumab in non-clear cell kidney cancer
• STELLAR-305: zanzalintinib + Keytruda in head and neck cancer
• Two Phase 3 trials of zanzalintinib + belzutifan (Merck's HIF-2α inhibitor) in kidney cancer

Notice something? Exelixis is pairing zanzalintinib with drugs from multiple Big Pharma partners: Merck, Bristol-Myers Squibb, and Roche. It's positioning zanzalintinib as the default TKI partner for immune checkpoint combinations, like a versatile ingredient that goes with everything.

Analysts have called this a "combination TKI platform" strategy. Exelixis management has set an internal target of up to $5 billion in peak sales by 2033 if the pivotal trials deliver.

The Fine Print That Matters

The Merck collaboration actually goes beyond STELLAR-305. There are three distinct layers:

Layer 1: Head and neck cancer. Exelixis sponsors the trial. Merck supplies Keytruda. Simple supply arrangement.

Layer 2: Kidney cancer. This is bigger. Merck is sponsoring a Phase 1/2 trial and two Phase 3 trials of zanzalintinib combined with its other drug, Welireg (belzutifan). Merck fully funds one of the Phase 3 studies; Exelixis co-funds the rest and supplies both zanzalintinib and cabozantinib.

Layer 3: Colorectal cancer. A planned Phase 3 trial (STELLAR-316) will test zanzalintinib in patients with minimal residual disease, combined with a checkpoint inhibitor whose identity has not yet been publicly confirmed.

For Exelixis, the beauty of this structure is cost efficiency. Big Pharma trial infrastructure and drug supply, zero dilution on commercial rights. For Merck, it's optionality: multiple shots on goal in kidney, head and neck, and colorectal cancer, all reinforcing Keytruda's ecosystem.

What Wall Street Thinks

The reaction has been predictably split by market cap.

For Exelixis (EXEL), analysts are broadly positive. The Merck deals validate zanzalintinib as a serious next-gen asset, not just a cabozantinib sequel. Some firms have raised their probability-of-success assumptions for zanzalintinib in kidney and head and neck cancer. Combined with Exelixis' $750 million share buyback authorization and steady cabozantinib cash flow, the consensus leans toward "undervalued versus its pipeline."

For Merck (MRK), the reaction is more of a shrug. Relative to a company generating tens of billions annually, these collaborations are incremental. Merck's stock continues to move more on broader questions about its kidney cancer strategy and Keytruda's looming patent expiry than on any single supply deal.

That asymmetry tells you something important: this collaboration matters a lot more to Exelixis' story than to Merck's.

The Bigger Picture

Supply agreements like this one are the biotech equivalent of a first date. They're low-commitment, relatively inexpensive, and carry no obligation to take things further. But if the trial data look good? The dinner invitations start coming.

Positive STELLAR-305 results could lead to a co-commercialization deal, expanded geographic partnerships, or even acquisition interest. Analysts have noted that visible relationships with multiple Big Pharma partners tend to raise takeover premiums for mid-cap biotechs.

For now, Merck gets another combination trial feeding its patent thicket. Exelixis gets blue-chip validation for its pipeline without giving up the economics. Both companies are making rational, self-interested bets.

The real question is whether zanzalintinib can deliver in Phase 3. If it does, this quiet supply agreement could look like the opening chapter of something much bigger.

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