By Sabrina Valle and Ludwig Burger
NEW YORK/FRANKFURT (Reuters) -Merck KGaA has struck a deal to buy U.S. biotech company SpringWorks Therapeutics for an equity value of $3.9 billion to add rare cancer therapies ahead of expected revenue losses linked to expiring patents.
The family-controlled company said in a statement on Monday the purchase price of $47 per share in cash represents an equity value of about $3.9 billion, or an enterprise value of $3.4 billion (3 billion euros), when SpringWorks’ cash holdings are deducted.
The deal is the largest for Merck’s pharmaceutical unit since the 2007 takeover of Serono for more than $13 billion, but the per share value was 22% lower than the about $60 per share analysts had expected after a Reuters report on February 10 that the companies were in advanced talks.
Merck on April 24 lowered price expectations, saying the two companies were in late-stage discussions over a bid of around $47 per SpringWorks share, following a Wall Street Journal report.
The shortage of other serious bidders and the challenging macro environment were likely to have affected the valuation, JP Morgan analyst Anupam Rama said, saying it was “lower than we and many on the Street had discussed”.
Policy and regulatory changes for the healthcare sector in the United States, including massive layoffs at the U.S. Food and Drug Administration, have stalled life science deals in what had been expected to be a stellar year for mergers and acquisitions.
Equity research firm MKP Advisors was among those who speculated rival bidders might emerge.
CEO Belen Garijo said the offer was final and firmly agreed by the target company. The challenges emerging in the United States were reflected in the bid price, she added.
Springworks said it would pay Merck a termination fee of $145.6 million if the deal falls through under certain circumstances.
Merck’s shares were up 2.4% at 1225 GMT, after initially slipping at the 0700 GMT market open.
STILL REPRESENTS A PREMIUM
Merck said the bid represented a premium of 26% to SpringWorks’ unaffected 20-day average price of $37.38 on February 7, a day before the first market speculation of a potential transaction.
The deal will be funded with available cash and new debt. It is expected to be accretive to Merck’s earnings per share, adjusted for special items, in 2027, said a statement from the German group, based in Darmstadt, near Frankfurt.
It added it would be able to pursue larger transactions and that deal was expected to close during the second half of 2025, subject to approval by SpringWorks’ shareholders and regulatory clearance.
Stamford, Connecticut-based SpringWorks, which listed its shares in New York in 2019, develops drugs to treat cancer and rare types of tumour.
It has two products in the U.S.: Ogsiveo with 2024 sales of $172 million to treat desmoid tumours, an aggressive disease affecting soft tissue, as well as Gomekli, which was approved in February to treat NF1-PN, characterised by nerve sheath tumours.
Merck is particularly keen to strengthen its drug development pipeline after high-profile setbacks in late-stage drug trials, including a decision last year to halt development of head and neck cancer drug Xevinapant.
A major trial testing multiple sclerosis drug evobrutinib failed in December 2023.
In 2015, the company agreed to buy U.S. lab equipment supplier Sigma-Aldrich for $17 billion, its biggest deal to date. In 2019, Merck acquired U.S. electronics materials manufacturer Versum for around $6.5 billion.
J.P. Morgan acted as financial adviser to Merck. Centerview Partners and Goldman Sachs acted as joint financial advisers to SpringWorks.
(Reporting by Sabrina Valle in New York, Ludwig Burger, Emma-Victoria Farr in Frankfurt; Editing by Kirsten Donovan and Barbara Lewis)
