Merck & Co has agreed to pay Bristol-Myers Squibb and Ono Pharmaceutical Co $625 million plus royalties to lay to rest a global patent battle relating to cancer immunotherapy Keytruda.

In a lawsuit against Merck, BMS and Ono, which launched the first PD-1 antibody Opdivo (nivolmab) back in July 2014, argued that fellow PD-1 antibody Keytruda (pembrolizumab) infringed on their intellectual property.

Under the settlement agreed, Merck will pay royalties on global Keytruda sales of 6.5 percent for 2017 to 2023 and 2.5 percent between 2024 and 2026, which will be split 75/25 between BMS and Ono.

The agreement will result in the dismissal with prejudice of all patent litigation between the companies pertaining to Keytruda, BMS noted, with chief executive Giovanni Caforio adding that it "validates the strong intellectual property rights we secured as the early innovators in the science of PD-1, a key mechanism in Immuno-Oncology that has proven to have transformational impact in cancer care".

News of the deal came just a day after BMS announced that it would not be pushing for the accelerated approvals pathway for Opdivo in combination with Yervoy (ipilimumab) as a first-line treatment for lung cancer in the US.

The decision is based on a review of available data, the firm said, but stressed that all first-line lung cancer registrational studies will continue as planned.

Reuters reported that Jefferies analyst Jeffrey Holford still expects the immunotherapy combination to win clearance in the second half of 2018 with "no real change to valuation or estimates as a result of this update."

Nevertheless, the move will give Merck's rival Keytruda an important competitive edge, given that US regulators have agreed an accelerated review for its first-line use in combination with chemotherapy to treat NSCLC patients.