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Merck (MRK) to Acquire Acceleron, Build Rare Disease Portfolio
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Putting all rumors to rest, Merck (MRK - Free Report) has announced that it will acquire Acceleron Pharma, Inc. for $180 per share in cash for an approximate total equity value of $11.5 billion in a bid to build its rare diseases portfolio.
Acceleron, a biopharmaceutical company with a focus on rare diseases, has been in the spotlight of late on acquisition rumors that led to a surge in its share price. Bristol Myers Squibb (BMY - Free Report) , which already owns an 11.5% stake in Acceleron, was also a likely suitor for the same.
Acceleron’s stock has gained 34.5% in the year so far against the industry’s decline of 5.6%. Shares have gained steam in the last couple of weeks as the acquisition talks started doing the rounds.
Image Source: Zacks Investment Research
Per the terms, Merck, through a subsidiary, will initiate a tender offer to acquire all outstanding shares of Acceleron. The deal is expected to close in the fourth quarter of 2021.
The acquisition will give Merck access to Accelereon’s promising pipeline candidate — sotatercept — which is being evaluated for the treatment of pulmonary arterial hypertension (PAH), a progressive and life-threatening blood vessel disorder. Sotatercept, currently in phase III studies as an add-on to the current standard of care for the treatment of PAH, has a novel mechanism of action with the potential to improve short-term and/or long-term clinical outcomes in PAH patients.
Sotatercept is being evaluated in multiple phase III studies for the treatment of certain patients with PAH as well as a phase II study in patients with combined post- and pre-capillary pulmonary hypertension in heart failure with preserved ejection fraction. It enjoys orphan drug status and was also granted Breakthrough Therapy designation in the United States
This apart, Acceleron earns royalties on sales of Reblozyl (luspatercept-aamt), which has been developed as part of its global collaboration with Bristol Myers. Reblozyl is approved for the treatment of anemia in certain rare blood disorders in the United States and Europe, among other countries.
Once the acquisition is completed, Merck will receive royalty payments in the low-to-mid-20% range of global net sales of Reblozyl from Bristol Myers. For sotatercept, Merck will retain exclusive development and commercialization rights in PAH and will pay Bristol Myers a flat royalty in the low-20% range.
Our Take
PAH market represents a significant opportunity and the potential approval of sotatercept strengthens Merck’s cardiovascular portfolio.
Assuming an approval and targeted launch in the 2024-2025 timeframe, the acquisition will diversify Merck’s revenue base. The company is highly dependent on its blockbuster immuno-oncology drug Keytruda, which in turn is slated to lose its exclusivity period later in the decade. In the conference call, management stated that the PAH market is expected to reach roughly $7.5 billion by 2026, according to EvaluatePharma.
Merck’s shares have declined 8.2% so far this year against the industry’s 7.9% increase.
Image Source: Zacks Investment Research
The acquisition should boost Merck’s top line once sotatercept gains approval. Management stated that commercial exclusivity for PAH in the United States is expected to extend through 2036-2037.
However, it might not be enough to offset the decline in revenues once Keytruda loses exclusivity.
While mergers & acquisitions have always taken centerstage in the pharma/biotech sector, there hasn’t been much happening on that front in the year so far, barring a few. Earlier, AstraZeneca (AZN - Free Report) acquired Alexion for $39 billion. Nevertheless, as the economic situation improves, the pace is expected to pick up as pharma/biotech bigwigs constantly eye lucrative acquisitions to bolster their portfolio/pipeline and combat rivalry.
Image: Bigstock
Merck (MRK) to Acquire Acceleron, Build Rare Disease Portfolio
Putting all rumors to rest, Merck (MRK - Free Report) has announced that it will acquire Acceleron Pharma, Inc. for $180 per share in cash for an approximate total equity value of $11.5 billion in a bid to build its rare diseases portfolio.
Acceleron, a biopharmaceutical company with a focus on rare diseases, has been in the spotlight of late on acquisition rumors that led to a surge in its share price. Bristol Myers Squibb (BMY - Free Report) , which already owns an 11.5% stake in Acceleron, was also a likely suitor for the same.
Acceleron’s stock has gained 34.5% in the year so far against the industry’s decline of 5.6%. Shares have gained steam in the last couple of weeks as the acquisition talks started doing the rounds.
Per the terms, Merck, through a subsidiary, will initiate a tender offer to acquire all outstanding shares of Acceleron. The deal is expected to close in the fourth quarter of 2021.
The acquisition will give Merck access to Accelereon’s promising pipeline candidate — sotatercept — which is being evaluated for the treatment of pulmonary arterial hypertension (PAH), a progressive and life-threatening blood vessel disorder. Sotatercept, currently in phase III studies as an add-on to the current standard of care for the treatment of PAH, has a novel mechanism of action with the potential to improve short-term and/or long-term clinical outcomes in PAH patients.
Sotatercept is being evaluated in multiple phase III studies for the treatment of certain patients with PAH as well as a phase II study in patients with combined post- and pre-capillary pulmonary hypertension in heart failure with preserved ejection fraction. It enjoys orphan drug status and was also granted Breakthrough Therapy designation in the United States
This apart, Acceleron earns royalties on sales of Reblozyl (luspatercept-aamt), which has been developed as part of its global collaboration with Bristol Myers. Reblozyl is approved for the treatment of anemia in certain rare blood disorders in the United States and Europe, among other countries.
Once the acquisition is completed, Merck will receive royalty payments in the low-to-mid-20% range of global net sales of Reblozyl from Bristol Myers. For sotatercept, Merck will retain exclusive development and commercialization rights in PAH and will pay Bristol Myers a flat royalty in the low-20% range.
Our Take
PAH market represents a significant opportunity and the potential approval of sotatercept strengthens Merck’s cardiovascular portfolio.
Assuming an approval and targeted launch in the 2024-2025 timeframe, the acquisition will diversify Merck’s revenue base. The company is highly dependent on its blockbuster immuno-oncology drug Keytruda, which in turn is slated to lose its exclusivity period later in the decade. In the conference call, management stated that the PAH market is expected to reach roughly $7.5 billion by 2026, according to EvaluatePharma.
Merck’s shares have declined 8.2% so far this year against the industry’s 7.9% increase.
The acquisition should boost Merck’s top line once sotatercept gains approval. Management stated that commercial exclusivity for PAH in the United States is expected to extend through 2036-2037.
However, it might not be enough to offset the decline in revenues once Keytruda loses exclusivity.
While mergers & acquisitions have always taken centerstage in the pharma/biotech sector, there hasn’t been much happening on that front in the year so far, barring a few. Earlier, AstraZeneca (AZN - Free Report) acquired Alexion for $39 billion. Nevertheless, as the economic situation improves, the pace is expected to pick up as pharma/biotech bigwigs constantly eye lucrative acquisitions to bolster their portfolio/pipeline and combat rivalry.
Merck currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.