Small steps and fast running'? Merck acquired Imago for $1.35 billion to complete the layout of the tumor sector

Merck CEO Robert Davis has been an active M&A trader since he took office, with the biggest merger in the pharmaceutical industry last year. In that deal, Merck spent $11.5 billion to acquire Acceleron Pharma, a biopharmaceutical company focused on the development of cancer drugs and rare disease drugs, further expanding its pipeline for cardiometabolic disorders and tumors.

A year later, Merck announced another merger. On November 21, Merck and Imago BioSciences announced that the former will acquire the latter through its subsidiary for about $1.35 billion in cash, or $36 per share, more than double Imago's closing price of $17.40 on Friday. The transaction is expected to close in the first quarter of 2023.

Imago is a clinical-stage biopharmaceutical company developing new drugs for the treatment of myeloproliferative tumors and other bone marrow diseases. The company's lead drug candidate is the oral drug Bomedemstat, an oral lysine-specific demethylase 1 (LSD1) inhibitor. LSD1 is an epigenetic regulatory protein that plays a key role in bone marrow cell production.

Bomedemstat is currently in multiple Phase II clinical trials for the treatment of essential thrombocytosis, myelofibrosis and polycythemia vera. In addition, Bomedemstat's trial in combination with Genentech's checkpoint inhibitor Tecentriq for the treatment of extensive-stage small cell lung cancer is in Phase I clinical trials.

A Merck spokesperson said the acquisition expands Merck's hematology portfolio to myeloproliferative tumors while also diversifying the pipeline. Merck believes Bomedemstat has the potential to be an important treatment option for patients with myeloproliferative tumors such as essential thrombocytosis, where treatment progress has been limited for decades.

In addition to direct acquisitions, Merck has recently signed licensing agreements with a number of companies.

In July, Merck and Orion Corporation jointly announced the signing of a global development and commercialization agreement for Orion's investigational drug ODM-208 and other drugs targeting cytochrome P450 11A1 (CYP11A1). Under the terms of the agreement, Merck will make an upfront payment of $290 million to Orion.

In August, Merck and Orna Therapeutics entered into a $3.65 billion collaboration agreement to discover, develop and commercialize multiple projects, including vaccines and therapeutics in infectious diseases and oncology. Merck will explore the future potential of RNA technology in the pharmaceutical field on circular RNA.

In October, Moderna announced a partnership with Merck to develop and sell mRNA-4157/V940, a personalized precision therapy cancer vaccine that is used in combination with Merck's Keytruda to explore the treatment of high-risk melanoma patients. Under the agreement, Merck will pay $250 million to Moderna.

It is worth noting that there is another rumor that has not yet been settled. Earlier this year, news of Merck's merger with biotech company Seagen was raging, but negotiations have not followed up due to transaction price issues.

Merck has frequently made mergers and acquisitions and collaborations in recent years, or is preparing for Keytruda, a blockbuster cancer immunotherapy that will lose key patents in 2028.

But BMO Capital Markets analyst Evan Seigerrman said Merck's deal to buy Imago may not make up for the revenue gap after losing Keytruda's patent, and the company expects to open more deals.