Bristol-Myers Squibb Co. and Ono Pharmaceutical Co. Ltd. signed a global patent license agreement with Merck & Co. Inc. to settle all patent infringement litigation related to Merck's PD-1 antibody Keytruda.

The agreement will result in the dismissal with prejudice of all patent litigation between the companies pertaining to Keytruda.

Bristol-Myers Squibb and Ono, who discovered and developed the PD-1 antibody Opdivo, had claimed in litigation that Merck's sale of Keytruda infringed their patents related to the use of PD-1 antibodies to treat cancer in the U.S., Europe, Australia and Japan.

Under the agreement, Merck will make an initial payment of $625 million to Bristol-Myers Squibb and Ono. It is also obligated to pay ongoing royalties on global sales of Keytruda of 6.5% from Jan. 1, 2017, through Dec. 31, 2023, and 2.5% from Jan. 1, 2024, through Dec. 31, 2026. The royalties will be shared between Bristol-Myers Squibb and Ono in a 75/25 percent allocation, respectively.

The companies have also granted certain rights to each other under their respective patent portfolios pertaining to PD-1.