Merck & Co.’s $11.5 Billion Acceleron Deal May Face Hurdles

04.10.2021 - US drugs giant Merck & Co. has signed a definitive agreement to acquire publicly traded US biotech Acceleron Pharma for $180 per share, yielding a total equity value of roughly $11.5 billion. Not only because of the size of the transaction, the takeover plans are being closely watched. An activist investor or anti-trust authority could potentially upset the deal, reports suggest.

Through a special subsidiary, Merck & Co. plans to initiate a tender offer to acquire all outstanding shares of Acceleron. Closing of the offer is subject to certain conditions, including the tender of a majority of outstanding shares and the receipt of applicable regulatory approvals.

On successful completion of the offer, Merck & Co. would merge the acquisition subsidiary into Acceleron. Any remaining shares of the biotech’s common stock not tendered would be canceled and converted into the right to receive the same $180 per share price payable in the tender offer.

Acceleron’s lead clinical candidate, pulmonary arterial hypertension (PAH) drug sotatercept, for which analysts have estimated peak sales of $1.4-2 billion, is the drawing card for Merck & Co. The drug boasts a novel mechanism of action said to have the potential to improve short-term and/or long-term clinical outcomes in patients suffering from the progressive and life-threatening blood vessel disorder.

First results of the three trials being conducted with sotatercet under the Phase 3 umbrella are expected by 2024.

In announcing the agreement on Sept. 30, Merck & Co. said it expected to close the buy in the fourth quarter, but venture capital firm Avoro Capital – which owns an estimated 7% of Acceleron’s shares – quickly spoke up, saying that the price “drastically undervalues” the company.

With the trials having another three years to run, Avoro said it believes Acceleron could command a much higher selling price if it waits for more data. Analysts have calculated that the biotech’s shareholders stand to receive the highest premium available, of up to 45% above the company’s share price before rumors of the Merck & Co. takeover plans emerged. Avoro, however, maintains that hat the premium is “only” 38%.

Beating the drum for the deal, Merck & Co.'s new CEO Ron Davis – who recently succeeded the retiring Kenneth Frazier – said, “Acceleron’s innovative research has yielded an exciting late-stage candidate that complements and strengthens our growing cardiovascular portfolio and pipeline and holds the potential to build upon Merck’s proud legacy in cardiovascular disease.”

Habib Dable, Acceleron’s president and CEO, said the Merck & Co. offer “represents the culmination of decades of work by Acceleron researchers successfully leveraging our company’s deep scientific expertise in the biology of the TGF-beta superfamily.”  “He said the company believes Merck & Co. is well-positioned to apply its industry-leading clinical and commercial capabilities to harness the potential of sotatercept.

Beyond sotatercept, the biotech’s portfolio includes Reblozyl (luspatercept-aamt), a top-of-the line erythroid maturation recombinant fusion protein approved in the US, Europe, Canada and Australia for the treatment of anemia in certain rare blood disorders. Acceleron is developing and commercializing this candidate through a global collaboration with Bristol Myers Squibb.

Avaro’s backpedaling is not the only potential stumbling block to closing the acquisition. Some observers said they thought it might face opposition from the US Federal Trade Commission (FTC), due to perceived overlaps with Merck & Co.’s PAH program, and that these could force Merck & Co. to divest its inhaled sGC agent MK-5475.

Some analysts noted that the FTC is more closely scrutinizing M&A transactions in biopharma –  the same warning issued for French drugmaker Sanofi’s acquisition of  US biotech Translate Bio, although that seems to have gone ahead with no visible strings attached. Merck & Co. CEO Davis has brushed aside any anti-trust issues, saying he believes the deal is safe.

Author: Dede Williams, Freelance Journalist