The deal will give Merck a drug called sotatercept, an experimental therapy for a rare, and sometimes fatal, cardiovascular condition called pulmonary arterial hypertension.
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Merck
said it completed its $11.5 billion acquisition of Acceleron Pharma , disappointing some investors in the biotech who had hoped for a better deal, and giving Merck one more arrow in its quiver as it prepares for the patent on its megablockbuster cancer therapeutic Keytruda to expire later this decade.
Merck (ticker: MRK) announced the deal in late September, offering $180 per share in cash for the company. Acceleron shares had climbed sharply in the days before the announcement, following rumors and press reports that the company was about to be acquired.
The deal is the biggest biotech acquisition of the year, which isn’t saying much, given the relative dearth of M&A in the biotech sector in 2021. It is also the first major deal for Merck under its new CEO, Rob Davis, who succeeded Kenneth Frazier in July.
Merck shares were flat in premarket trading on Monday, after dropping 2.8% on Friday’s trading session. The stock is up 3.5% so far this year, leaving it far behind the S&P 500.
Some Acceleron investors had complained that the price Merck was paying for the company was too low. The life-sciences investment firm Avoro Capital, which said it owned 7% of Acceleron, issued a letter to shareholders in October saying that it didn’t plan to tender its shares.
“We continue to believe that the proposed sale of Acceleron to Merck for $180 per share is not needed at this time, and certainly not at a price that drastically undervalues XLRN—representing just a 38% premium relative to the stock’s average closing price over the prior three months,” read the letter, signed by Avoro managing partner Behzad Aghazadeh.
In the end, Avoro was unable to stop the sale.
Merck extended the deadline for its tender offer in late October, saying that it had done so after withdrawing a premerger notification it had filed with the Federal Trade Commission in order to give the FTC “additional time for review.” The company announced the completion of the tender on Friday, saying at the time that 63.3% of Acceleron’s outstanding shares had been tendered by the deadline.
“This is an important and strategic opportunity for our company to continue growing our cardiovascular portfolio and pipeline, that builds on our long and proud legacy in cardiovascular disease and further bolsters our business development strategy,” said Davis, the Merck CEO, in a statement on Monday.
Acceleron’s lead asset is a drug called sotatercept, an experimental therapy for a rare, and sometimes fatal, cardiovascular condition called pulmonary arterial hypertension. It is currently in Phase 3 trials. If the drug is approved, it is expected to be a blockbuster.
In addition to sotatercept, Merck will also get the royalties on sales of a Bristol Myers Squibb
(BMY) drug called Reblozyl, used to treat certain forms of anemia, to which Acceleron is entitled.
The acquisition of Acceleron represents a substantial bet on the outcome of the sotatercept trial. In an interview in September, Merck Research Laboratories president Dr. Dean Li said that earlier data on sotatercept was very promising. “The best indication of how confident we are is, for us, we look at the Phase 3 design, but we also scrub every part of the Phase 2 trial, and that’s what gives us confidence,” Li said.
Davis said at the time that sotatercept will offer sales growth into the next decade, a period in which the company will face the challenge of filling the revenue gap left by Keytruda, which Wall Street analysts expect to account for 36% of its sales this year, according to FactSet.
“It provides a really nice revenue and earnings stream in the end of this decade, in an important period as we see the loss of exclusivity of Keytruda,” Davis told Barron’s at the time.
Write to Josh Nathan-Kazis at [email protected]
