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Merck Agrees To Acquire Pandion Therapeutics Amid Expectations Of Rebound In Pharma M&A This Year

This article is more than 3 years old.
Updated Feb 26, 2021, 12:51pm EST

Topline

Merck said Thursday it agreed to acquire Pandion Therapeutics, a clinical-stage biotech firm developing products for patients with autoimmune diseases, in a deal valued at $1.85 billion, amid hopes that pharma M&A activity rebounds this year.

Key Facts

Merck will buy Pandion for $60 per share in cash, representing a 134% premium based on Pandion shares’ closing price on Wednesday.

The transaction, which is expected to close in the first half of 2021, comes only a few weeks after Merck named Robert M. Davis as its new CEO, succeeding Kenneth Frazier, and one month after Merck ended its Covid-19 vaccine program.

Based in Cambridge, Mass., Pandion’s lead candidate product, PT101, a potential treatment of ulcerative colitis and other autoimmune diseases, completed a phase 1-A clinical trial earlier this year, which, Merck said, “achieved its primary objective of safety and tolerability.”


Crucial Quote

“We believe Merck is well positioned to bring our novel approach to the millions of those living with autoimmune diseases, and we look forward to seeing these molecules progress in the clinic,” said Dr. Rahul Kakkar, chief executive officer, Pandion Therapeutics.

Key Background

Although the pharma industry announced some big acquisitions in the last year – notably AstraZeneca’s $39 billion deal for Alexion – 2020 witnessed a decline in pharma M&A activity.  According to PricewaterhouseCoopers (PwC), excluding the huge AstraZeneca merger, the number of pharma/life sciences transactions fell by 2.3% to 242 last year, while the aggregate value of those deals plunged by 61% to $141 billion. PwC projects that 2021 will see M&A deals in the sector totaling between $250 billion to $275 billion, including several megamergers each at least $50 billion in size. Big cap companies like Amgen, Biogen and Bristol Myers Squibb are expected to lead the way with major acquisitions. “Companies will be looking for acquisitions that help support their strategic agendas, but we also see an opportunity for at least one really transformational transaction,” Sky Milch, U.S. pharmaceutical and life sciences deals leader at PwC, told FiercePharma news website. Milch estimated that as of December 2020, the global biopharma industry had about $1.47 trillion in capital (down only 6% from 2019) that it could use to make M&A deals. Last spring and summer, the Covid-19 pandemic forced some companies to develop drugs and vaccines to treat the virus, rather than use resources for M&A, while government-ordered shutdowns disrupted the industry’s supply chains, FiercePharma noted. By the fall, the rebound in pharma M&A got a big push from Gilead Sciences’ $21 billion purchase of breast cancer drug maker Immunomedics for $21 billion. 

Tangent

The new Biden administration in Washington may seek to enact drug pricing proposals that could take away some pricing power of pharma companies. But Milch of PwC is not overly concerned about its potential impact on M&A, telling FiercePharma: “I think people know there’s going to be a continued focus on drug pricing, [but] I don’t anticipate it will have a heavy impact on M&A.”

Further Reading

A Dose Of Change In The Pharma Supply Chain (Forbes)

The Pharma Industry Expects Covid-19 To Be Around For The Long Haul (Forbes)

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