Merck’s $11.5bn Acquisition of Acceleron Pharma

By Tudor Popescu and Bella Chen (University of Chicago), Ivan Chung, Justin Leung, and Ryan Chan (HKUST)

 

Overview of the deal


Acquirer: Merck

Target: Acceleron Pharma

Total Transaction Size: $11.5 billion

Closed date: Fourth quarter of 2021

Target advisor: Credit Suisse


Merck, through a subsidiary, will acquire Acceleron, a clinical-stage biopharmaceutical company focused on rare diseases for $11.5 billion. Merck is a multinational pharmaceutical company known most for its product Keytruda, a medication used to treat various types of cancer. Their acquisition gives the company access to Acceleron’s drug candidate, Sotatercept, which is a treatment for pulmonary arterial hypertension. Merck plans to launch sotatercept in 2024-2025, with sales estimated to be more than $2 billion. In addition, Reblozyl, a protein used to treat anemia in certain rare blood disorders which are being marketed by Acceleron, will also contribute to an increase in revenue. This deal will diversify Merck’s portfolio, as the company has been relying heavily on its sales from Keytruda as of late.


“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.” Rob Davis, chief executive officer and president

Company Details (Acquirer - Merck & Co., Inc.)


Merck is a leading publicly-listed biopharmaceutical company (NYSE: MRK) that offers medicines and vaccines for various diseases. Merck invents and brings forward vaccines, medications, and consumer and animal health products for many of the world’s most challenging diseases. It is at the forefront of research to prevent and treat diseases that threaten people and animals – including cancer, infectious diseases, such as HIV and Ebola, and emerging animal diseases.


Founded in 1891, headquartered in Kenilworth, New Jersey, United States

CEO: Robert M. Davis

Number of employees: 74000

Market Cap: $207.42B (as of 08/10/2021)

EV: $225.45B

LTM Revenue: $50.382B

LTM EBITDA: $ $12.053B

LTM EV/Revenue: 4.47x

LTM EV/EBITDA: 11.33x


Company Details (Target - Acceleron Pharma, Inc.)


Acceleron Pharma, Inc. is a publicly-listed biopharmaceutical company (NASDAQ: XLRN). The company engages in developing, manufacturing, and commercializing novel biotherapeutics that modulate the growth of bone, muscle, fat, and the vasculature to treat musculoskeletal, metabolic, and cancer-related diseases.


Founded in 2003, headquartered in Cambridge, Massachusetts, United States

CEO: Habib Dable

Number of employees: 225

Market Cap: $10.715B (as of 08/10/2021)

EV: $10.08B

LTM Revenue: $101.125M

LTM EBITDA: $(220.118M)

LTM EV/Revenue: 99.63x

LTM EV/EBITDA: -45.77x


Projections and Assumptions


Short-term consequences

By purchasing Acceleron Pharma Inc., Merck can gain direct access to Acceleron’s rare disease drug candidate, Sotatercept, which is believed to be a core rationale of the acquisition. The drug, being a pioneer of its kind in the cardiovascular disease sector is projected to be a billion worth revenue stream for Merck, owing to its uniqueness. The deal is a critical step for Merck to consolidate their market-leading status in the lung cancer treatment sector, as it allows product diversification of Merck’s current product portfolio and aids Merck to better deal with the growing generic competition towards Keytruda, a lung cancer star product of Merck. The introduction of Acceleron’s product portfolio, including a co-developed blood-related disorder drug with Bristol Myers Squibb. From a cost perspective, lung cancer treatment is one of the major busin