Merck & Co.’s $6.7 billion acquisition offer for Terns Pharmaceuticals has ignited a wave of debate across Wall Street. The spotlight is fixed on TERN-701, a promising cancer drug candidate viewed by analysts as a future multi-billion-dollar “blockbuster.”
Core points of the controversy:
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Contentious Valuation: Merck offered $53 per share, representing only a 6% premium over the previous closing price—one of the lowest acquisition premiums for a public drugmaker in years. Some analysts argue this vastly undervalues TERN-701, which is projected to reach peak annual sales of over $6 billion by 2040.
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The Potential of TERN-701: This oral targeted therapy for chronic myeloid leukemia (CML) has shown early potential to challenge established treatments from Novartis. Early-stage clinical data demonstrated significant efficacy in reducing diseased blood cells, even in patients who had progressed on existing therapies.
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Merck’s Strategic Move: This deal serves to diversify Merck’s oncology portfolio and offset projected revenue declines as its top-seller, Keytruda, nears patent expiration. If finalized, it is seen as a “shrewd” move by Merck’s business development team to secure a valuable asset at a discount.
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Possibility of a Bidding War: Some experts suggest that rival giants like AbbVie or Bristol Myers Squibb might swoop in with superior offers, given the immense appeal of an oncology asset capable of generating “multi-blockbuster” revenue.
While some investors are content with the short-term returns, others maintain that Terns is being undervalued and deserves a bid reflecting a higher multiple of its forecasted peak sales.
Source: https://www.biopharmadive.com/news/merck-terns-buyout-valuation-debate/815812/