Merck to Buy Rare-Disease Firm Acceleron for $11.5 Billion

(Bloomberg) -- Merck & Co. agreed to buy Acceleron Pharma Inc. for about $11.5 billion, building out its portfolio of therapies to treat rare diseases. 

Acceleron shareholders will get $180 a share in cash, a 34% premium over the price at the end of last month but below the stock’s intraday highs this week. The shares began soaring in mid-September, and Bloomberg reported Sept. 24 that the company was in advanced sale talks. 

Merck has faced pressure to expand its sales beyond Keytruda, a blockbuster cancer drug that accounts for more than a third of its revenue. It is among several companies that have been on the hunt for future blockbuster drugs through acquisitions, including Sanofi, Pfizer Inc., Amgen Inc., Gilead Sciences Inc. and Roche Holding AG. Earlier this year AstraZeneca Plc bought rare-disease specialist Alexion Pharmaceuticals Inc. in a $39 billion mega-deal as the U.K. drugmaker pushes into a lucrative new area of medicine.

“We do see this as an important step to diversify our portfolio and our pipeline,” said Rob Davis, Merck’s chief executive officer, in an interview. He sees the potential for multiple billions in peak sales “in that important time frame approaching the end of this decade and continuing well into the next decade.”

Davis took over from longtime Merck CEO Kenneth Frazier in July and is among a slate of new executives leading the company. Davis has said he seeks to put the company on a new course through deals and research and development investments.

The deal is expected to close in the fourth quarter and will be financed with a mix of cash and debt, the companies said in a statement on Thursday. Acceleron shares declined 0.3% at 11:06 a.m. in New York, while Merck shares rose 1%.

Acceleron’s pipeline focuses on a particular type of protein that plays a central role in the regulation of cell growth, differentiation and repair. The company’s main candidate is a pulmonary arterial hypertension drug called sotatercept, which is in late-stage development. Acceleron’s portfolio also includes Reblozyl, a treatment for anemia in rare blood disorders that is approved in the U.S., Europe, Canada and Australia, and is being developed with Bristol Myers Squibb Co.

Wall Street analysts said the deal should help reduce Merck’s reliance on Keytruda.

“This acquisition makes sense for Merck on a number of levels, including strategic and organizational, as well as from an investment thesis perspective,” said SVB Leerink analyst Daina Graybosch. The potential payoff for Merck depends on sotatercept’s success in pulmonary arterial hypertension, where it could be priced around $180,000 a year in the U.S., Graybosch said. She has an “outperform” rating on Merck shares.

Pulmonary arterial hypertension is projected to be a $7.5 billion market by 2026 and there’s significant need for new treatments, said Frank Clyburn, Merck’s executive vice president and president of human health, in a call with investors on Thursday morning.

Davis said Merck needs to keep adding to its pipeline of drugs and will pursue deals “of all sizes.” In particular, he said the company is interested in oncology among other areas. He said he is willing to borrow more and consider a credit downgrade if the right opportunity comes along. 

“At the highest level we continue to have the capacity and balance sheet to do deals of all sizes,” he said.

Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. acted as financial advisers to Merck, and Covington & Burling LLP and Gibson, Dunn & Crutcher LLP were its legal advisers. Centerview Partners LLC and J.P. Morgan Securities LLC were financial advisers to Acceleron and Ropes & Gray LLP its legal adviser.

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