(Yicai) Oct. 23 -- Shares of Sichuan Kelun Pharmaceutical tumbled after the Chinese drugmaker said Merck is ending a contract to jointly develop a cancer treatment and is altering another similar one, though the companies will continue to work together on other projects.

After plunging by as much as 9.8 percent in morning trading in Shenzhen, Kelun [SHE: 002422] closed down 6.9 percent at CNY25.14 (USD3.44) a share.

Merck, which does business outside of the United States as Merck Sharp & Dohme, is giving up its exclusive rights to research, develop, manufacture and commercialize a new antibody-drug conjugate therapy and no longer requires exclusive rights to another experimental drug, Kelun said early this morning, citing the letter it received from the New Jersey-based firm on Oct. 21.

No reasons were given, but Kelun said that the two drugs involved are not its core products and that the Chengdu-based company will explore licensing deals with other partners.

Under their agreement, Kelun does not need to repay any funds received to date from Merck, including down payments, and Merck will no longer need to pay royalties and milestone fees for the two medicines.

Between May and December last year, Kelun granted Merck exclusive rights to nine experimental drugs in major markets outside of the Chinese mainland, Hong Kong, and Macau and obtained down payments of USD257 million.

If all the medicines had been successfully launched, Kelun could have received milestone payments of USD11.6 billion, as well as sales commissions once they hit the market.

Three of the nine drugs are still in clinical trials, one of which has reached the final stage, Kelun said. The other six, including the two that involved Merck, are in the pre-clinical stage.

Editor: Kim Taylor