Merck KGaA, the German healthcare and technology group, announced on Monday that it is in advanced negotiations to acquire the U.S. cancer and rare diseases drugmaker SpringWorks Therapeutics. Merck stated that discussions with SpringWorks are ongoing, with Reuters confirming the information. However, Merck emphasized that no legally binding agreement has been reached yet, and the potential deal's outcome remains uncertain. SpringWorks chose not to provide any comment on the matter.
If successful, sources indicated that a deal could be finalized in the upcoming weeks but did not disclose specific details as they wished to maintain confidentiality. Following the news, SpringWorks' shares surged by 34% on Monday, reaching a market value of approximately $4 billion. In contrast, Merck's German-listed shares experienced a 3.7% decrease.
In recent years, Merck has experienced setbacks in late-stage drug trials, leading to the discontinuation of drug developments such as Xevinapant, aimed at treating head and neck cancer. Despite these setbacks, Merck reported a significant increase of 12% in adjusted quarterly earnings, benefiting from reduced spending on drug development and heightened demand for its specialty materials.
Analysts at JPMorgan highlighted the potential benefits of the acquisition, citing the synergies and complementary aspects that could enhance Merck's existing oncology franchise, which accounts for about a quarter of its healthcare sales in 2024. The acquisition of SpringWorks could offer assets to offset challenges from competition within the industry.
Merck has a history of strategic acquisitions, including the purchase of Sigma-Aldrich for $17 billion in 2015 and Versum for 5.8 billion euros ($5.97 billion) in 2019. Despite these past acquisitions, Merck's CEO expressed a cautious approach towards future acquisitions, especially in a market where companies are heavily priced.