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Merck (MRK) is reportedly in discussions to acquire Revolution Medicines (RVMD) in a deal valued between $28-$32 bln, or possibly more, according to the Financial Times. The potential acquisition aims to bolster MRK’s oncology pipeline as it faces the looming patent cliff of its blockbuster immunotherapy, Keytruda.

• On January 7, the Wall Street Journal reported that AbbVie (ABBV) was in discussions to purchase RVMD, causing an initial price spike. However, ABBV later issued a formal denial. The following day, January 8, the Financial Times reported that MRK is the primary suitor currently in talks. Since the onset of buyout speculation, RVMD' stock has surged by over 40%.
• According to reports, the bidding environment remains fluid. Other "Big Pharma" players are reportedly circling the company, potentially setting the stage for a competitive bidding war that could push the final valuation above the $32 bln mark.
• MRK has already made a sizable splash in the M&A arena recently. This past November, MRK solidified its expansion into infectious diseases by acquiring Cidara Therapeutics for approximately $9.2 bln, gaining access to its late-stage universal influenza preventative, CD388.
• Acquiring RVMD would provide MRK with a dominant position in RAS-addicted cancers. RVMD’s RAS(ON) inhibitors target the active state of RAS proteins -- once considered "undruggable" -- which are drivers in roughly 30% of all human cancers.
• This platform serves as a vital clinical hedge against the 2028 loss of exclusivity for Keytruda, allowing MRK to transition from immuno-oncology into the next generation of precision, targeted therapies.
• It's estimated that RVMD's portfolio could generate over $10 bln in risk-adjusted annual sales by 2035. While the $28-$32 bln price tag is steep, the acquisition would consolidate high-value IP and eliminate the need for costly external royalties, such as the $2 bln funding deal Revolution recently signed with Royalty Pharma.

Briefing.com Analyst Insight:

MRK’s pursuit of RVMD is a high-stakes move to secure its future post-Keytruda. RVMD’s oncology portfolio is led by daraxonrasib (RMC-6236), a multi-selective inhibitor that recently showed a 35% objective response rate in Phase 1/2 pancreatic cancer trials. While recent results for daraxonrasib and zoldonrasib are promising, investors must note that RVMD currently has no FDA-approved products. With pivotal Phase 3 data for daraxonrasib not expected until 2026 and possible approvals in 2027 or 2028, MRK would be paying a massive premium for clinical-stage assets.