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Merck (MRK) to Buy Private Biotech Tilos for Up to $773M

Zacks Equity Research

Merck & Co., Inc. MRK announced a definitive deal to buy private biotech Tilos Therapeutics for a total potential purchase price of up to $773 million. The deal includes an undisclosed upfront payment and contingent milestone payments.

The acquisition will add Tilos’ portfolio of investigational antibodies targeting a protein called TGFβ, which is believed to play an important role in the development of cancer and fibrotic diseases. Tilos is developing TGFβ inhibiting antibodies in preclinical studies for various forms of cancer, fibrosis and autoimmune disease

Merck has been aggressively buying private and relatively early-stage biotech firms this year.

Last month, Merck announced a definitive agreement to buy small private cancer biotech, Peloton Therapeutics for an upfront payment of $1.05 billion in cash. The acquisition will add Peloton’s novel late-stage renal cell carcinoma (RCC) candidate, PT2977 to Merck’s oncology pipeline. In addition to the upfront payment, Merck will also be entitled to pay a further $1.15 billion of potential milestones payments. The transaction is expected to close in the third quarter of 2019.

In April, Merck closed its previously announced acquisition of small cancer focused biotech, Immune Design for an approximate value of $300 million.

Merck’s shares have performed well this year so far. Merck’s shares have risen 7.9% this year so far compared with the industry’s increase of 1.7%.

 

 

This year has been good as far as M&A activity in the pharmaceuticals/biotech industry is concerned. Oncology and immuno-oncology are key areas of focus. Bristol-Myers Squibb BMY, one of the largest pharma giants, is on track to close its previously announced acquisition of leading biotech company, Celgene CELG for a whopping $74 billion. This will be one of the largest acquisitions in recent times.

Another large-cap pharma company Eli Lilly LLY bought Loxo Oncology in February for $8.0 billion to broaden its oncology portfolio. Roche also announced an agreement to acquire Spark Therapeutics in February 2019 for $4.8 billion.  Post completion of the buyout, Roche will get access to Spark Therapeutics’ novel gene therapy, SPK-8011 for the treatment of hemophilia A, which is expected to enter phase III in 2019

A surge in M&A activity during 2019 is expected in the overall drug/biotech sector on the lines of Bristol-Myers and Eli Lilly as companies look to use huge cash reserve and combat rivalry woes.

Merck currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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