Merck Seeks Deals As It Expands Its Cancer Treatments -- WSJ
June 20 2019 - 3:02AM
Dow Jones News
By Jared S. Hopkins
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (June 20, 2019).
Merck & Co. is searching for small and midsize deals,
including more transactions aimed at expanding its portfolio of
cancer treatments beyond the company's top-selling product
Keytruda, according to people familiar with the matter.
Merck has been buying cancer drugmakers with promising therapies
and technologies. This month, Merck bought Tilos Therapeutics Inc.
for $773 million. In May, it agreed to acquire Peloton Therapeutics
Inc. for $1.1 billion.
The goal of the deal making is to both capitalize on the
strength of Keytruda and further broaden the company's non-oncology
products, the people said. Merck is also interested in similarly
sized deals that would add to its offerings of vaccines and
animal-health medicines, the people said.
Keytruda, which unleashes a patient's own immune system to fight
tumors, was once an afterthought buried in Merck's
research-and-development pipeline but has in the past few years
become a commercial juggernaut for the company.
The immunotherapy, whose approvals include treating 12 different
types of tumors, rang up $7 billion in global sales last year and
is projected to be the world's top-selling drug by 2024, according
to research firm EvaluatePharma.
Keytruda's success has lifted Merck's market capitalization to a
record $219.77 billion. Since the company released positive study
results for Keytruda in April 2018, Merck shares are up about 45%,
compared with the S&P 500's 9.3% gain.
Now some investors and analysts are starting to worry that Merck
may be too dependent on Keytruda for growth. By 2024, Merck's $20
billion in cancer-drug sales will be nearly 40% of company revenue,
JPMorgan Chase & Co. projects. Merck also sells other
prescription drugs, in addition to its vaccines and animal-health
medicines.
"There is an emerging view, 'Are they too tied to'" Keytruda,
Credit Suisse AG analyst Vamil Divan said in an interview.
Merck is expected to address the concerns and outline its
strategy Thursday, when Chief Executive Kenneth Frazier leads the
company's first investor day in five years and discusses its
pipeline of experimental drugs.
Among the likely topics is the company's vaccines in
development, including a potential competitor to Pfizer Inc.'s
big-selling Prevnar vaccine, which protects against infections such
as pneumonia and meningitis. JPMorgan analysts project Merck's drug
could reach sales of $1.5 billion.
Merck is also developing treatments for HIV/AIDS, chronic cough
and heart failure.
The company is investing in its animal-health unit, which sells
products for pets and livestock animals. In December, it acquired
animal-tech company Antelliq Group for $2.4 billion. Merck is
exploring Keytruda as a treatment for pets with cancer, according
to a person familiar with the matter.
Yet outside of the company's pipeline of cancer drugs, analysts
haven't been impressed with Merck's drugs in development. Dr. Divan
of Credit Suisse said the experimental drugs and vaccines target
markets that other companies have struggled to succeed in or that
are highly competitive.
"It's up to them to show why they can do better than other
companies have in these areas before," Dr. Divan said.
Cancer, too, is a highly competitive market, which analysts and
industry officials expect will get only more competitive as big
drugmakers such as GlaxoSmithKline PLC try to build up a presence
after staying away.
The intense interest has driven deal making in the sector -- and
raised premiums for cancer-drug startups. The latest deal came
Monday, when Pfizer agreed to pay a 62% premium to buy Array
BioPharma Inc. for $10.6 billion.
Write to Jared S. Hopkins at jared.hopkins@wsj.com
(END) Dow Jones Newswires
June 20, 2019 02:47 ET (06:47 GMT)
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