Merck signs up to $3.3 billion cancer drug deal with China-based LaNova

(Reuters) -Merck has signed a licensing agreement worth up to $3.3 billion with Shanghai-based LaNova Medicines to develop, make and sell an experimental cancer drug, the two companies said on Thursday.

The deal allows Merck (NS:) to take over development of LaNova's LM-299, a drug candidate targeting a protein called PD-1, which prevents the immune system from killing cancerous cells. It also curbs levels of another protein called VEGF, which can encourage tumor growth if found in excess.

Under the agreement, Merck will pay $588 million upfront to LaNova. The Chinese company is also eligible to receive up to $2.7 billion in milestone payments.