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Merck to Buy Immunotherapy Developer Immune Design for $300M

Zacks Equity Research

Merck & Co. Inc. MRK announced that it will acquire late-stage immunotherapy company Immune Design IMDZ for $300 million in cash. Per the deal, Merck through a subsidiary will acquire Immune Design for $5.85 per share in cash, which represents a premium of 312% on Immune Design’s closing price on Feb 20. The transaction is expected to close early in the second quarter of 2019.

Shares of Merck rose 0.5% following the announcement, while shares of Immune Design went up more than 300%.

Shares of Merck have rallied 17.2% in the past year compared with the industry’s growth of 2%. Shares of Immune Design have increased 68.7% in the past year, against the industry’s decline of 15.2%.

 

Immune Design’s employs next-generation vivo approaches to activate the immune system to produce or expand specific immune cells to fight cancer and other diseases. It is developing multiple candidates on its two proprietary technologies — ZVex and GLAAS. With the acquisition, Merck will boost its capabilities in infectious diseases and cancer. 

Immune Design’s key pipeline candidate is G100. The company is developing multiple candidates on its two proprietary technologies. Immune Design had previously announced plans to assess the efficacy of G100 in combination with Merck’s Keytruda in relapsed refractory follicular lymphoma patients who have received three prior lines of systemic therapy.

The candidate enjoys Orphan Drug designation for NHL from the FDA. The acquisition is expected to beef up Merck’s already strong oncology franchise, which has been doing well on strong performance of Keytruda.

Per the agreement, Merck, through a subsidiary, will initiate a tender offer to acquire all outstanding shares of Immune Design. Upon the successful completion of the tender offer, Merck will acquire all shares not acquired in the tender through a second-step merger.

This year began with a bang for the pharmaceuticals/biotech industry. Bristol-Myers Squibb Co. BMY, one of the largest pharma giants, announced that it will acquire the leading biotech company Celgene  for a whopping $74 billion. This would be one of the largest acquisitions in recent times. 

Following suit, another large-cap pharma company Eli Lilly LLY announced the acquisition of Loxo Oncology for $8.0 billion to broaden its oncology portfolio. Lilly closed the Loxo deal last week.

Walking the lines of Bristol-Myers and Eli Lilly, a surge in M&A activity during 2019 is expected in the overall drug/biotech sector, as companies look to use huge cash trunks and combat rivalry woes. Oncology and immuno-oncology are key areas of focus.

We remind investors that, at the J.P. Morgan Healthcare Conference held in San Francisco, CA, in January, Merck’s CEO Ken Frazier had said that possibilities of more M&A in the pharma activity are high as valuations are coming down. He then said the company had not made a big acquisition lately.

Justifying this, Frazier said that though the company tried to ink some deals, none worked out due to lack of a willing seller or because the late-stage asset was robustly competitive. Since then, Merck was speculated to announce an acquisition deal.

Merck & Co., Inc. Price

Merck & Co., Inc. Price | Merck & Co., Inc. Quote

Zacks Rank

Both Merck and Immune Design currently carry a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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