Large Acceleron Stakeholder Says Acquisition Price Undervalues Company

Mergers and Acquisitions

With the ink barely dry on Merck’s $11 billion acquisition of Acceleron Pharma, investment firm Avoro Capital has raised concerns that the $180 per-share price the pharma giant is paying undervalues the rare-disease focused company.

Avoro Capital owns a 7% stake in Acceleron, making it one of the largest shareholders in the company behind Bristol Myers Squibb, which has an 11.5% ownership of Acceleron. In a brief statement Thursday afternoon, Avoro said the $180 per-share price is in the best interests of all Acceleron shareholders and undervalues the company, particularly as it closes in on potential regulatory approval of the investigational pulmonary arterial hypertension drug sotatercept. As additional clinical data emerges for the candidate, Avoro believes that will only increase the value of Acceleron’s share price.

“While we believe Merck is a tremendous company and ultimately could be a good partner to maximize the value of sotatercept and the rest of Acceleron’s pipeline for both patients and shareholders, we do not believe a transaction makes sense right now at the current valuation proposed by Merck,” Avoro Capital said in its statement. “Based on our own analysis and that of other prominent scientific observers, we have full confidence that Acceleron’s pipeline will continue to perform well and only further demonstrate the value of the company.”

The investment group went on to say the transaction premium of approximately 38% puts the value for Acceleron at the bottom of comparable other acquisitions made since the beginning of 2020. Those other transactions had premiums that have averaged approximately 89%. If the acquisition moves forward, Avoro said it would be at a “disservice” to other Acceleron shareholders.

Avoro recommended that Acceleron, for the time being at least, remains an independent company.

With its eye on sotatercept, which is currently in Phase III trials, Merck acquired Acceleron to bolster its cardiovascular disease pipeline, including other medications for pulmonary arterial hypertension (PAH), including the approved drug Adempas. Merck also has another PAH asset in an ongoing Phase II/III study. Rob Davis, Merck’s new president and chief executive officer, said Acceleron’s pipeline “complements and strengthens our growing cardiovascular portfolio and pipeline … and holds the potential to build upon Merck’s proud legacy in cardiovascular disease.”

For Merck, sotatercept can be a foundational agent across other forms of pulmonary hypertension with unmet patient need. With Merck already having an approved PAH drug and another in Phase II/III development, there are some questions as to whether or not the company will have to divest its investigational candidate to avoid market monopoly concerns. However, during a conference call following the announcement, Davis said that because of sotatercept’s unique mechanism of action, the company believes there may not be any antitrust issues. That novel mechanism of action is believed to have the potential to address the underlying cause of PAH, a progressive and life-threatening blood vessel disorder. During the conference call, Davis stressed that sotatercept is a complementary asset that is being tested as an add-on therapy, which should keep Merck clear of any concerns.

And with the ink barely dry on the Acceleron deal, Davis hinted that Merck could still be in the hunt for other acquisitions, particularly as it looks to diversify its revenue stream beyond its powerhouse oncology drug, Keytrdua. He said the company is in a strong financial position, even after the $11 billion deal is considered. Business development, Davis said, is an important priority for Merck.

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