Germany's Merck in advanced talks to acquire US biotech firm SpringWorks

By Sabrina Valle and Patricia Weiss

NEW YORK/FRANKFURT (Reuters) - Merck KGaA, the German healthcare and technology group, said on Monday it is in advanced talks to acquire U.S. cancer and rare diseases drugmaker SpringWorks Therapeutics.

Merck, in a statement, said its negotiations to buy SpringWorks are ongoing, confirming an earlier report from Reuters. The Darmstadt, Germany-based company said that no legally binding agreement has been signed and there is no certainty a deal will materialize.

SpringWorks declined to comment.

If the talks are successful, a deal could be signed in the coming weeks, three sources told Reuters earlier in the day, requesting anonymity as the discussions are confidential. They did not disclose the exact terms being discussed.

SpringWorks' shares closed 34% higher on Monday, giving the company a market value of around $4 billion. The stock initially jumped nearly 49% on the Reuters report, and touched its highest level since April 2022.

Merck's German-listed shares closed down 3.7%.

Dealmaking in the U.S. healthcare sector is showing signs of picking up, after a slowdown in activity in 2024 as large pharmaceutical companies took a breather to integrate big acquisitions they completed the previous year. Johnson & Johnson last month agreed to buy Intra-Cellular Therapeutics for about $14.6 billion.

Stamford, Connecticut-based SpringWorks, which listed its shares in New York in 2019, is a commercial-stage biotech firm that develops drugs to treat various forms of cancer, including rare tumors and uterine cancer. Its monotherapy drug for the treatment of desmoid tumors, which are dense, soft-tissue tumors, has been approved in the United States. The company is expecting the approval of a product that treats neurofibromatosis type-1, a rare genetic disorder, later in February.

STRATEGIC BET

A transaction for SpringWorks would rank as one of the biggest pharma deals for Merck in recent years and boost its efforts to build out its cancer treatment pipeline.

Merck has suffered high-profile setbacks recently in late-stage drug trials, prompting it to halt development of head and neck cancer drug Xevinapant. A major trial testing multiple sclerosis drug Evobrutinib failed in December 2023.

In its most recent quarterly earnings, Merck reported a 12% rise in adjusted quarterly earnings, helped by temporarily lower spending on drug development and a rebound in demand for its specialty materials.

"Given Merck KGaA’s existing franchise in oncology, which constitutes about 25% of its healthcare sales in 2024, we see the potential acquisition of SpringWorks as likely complementary and giving potential for synergies," analysts at JPMorgan wrote in a note.

"Most importantly, given the projected size of the SpringWorks products, we see the assets potentially more than offsetting the erosion from LOEs (levels of evidence) and competition that Merck is facing."

Merck has not shied away from splashy takeovers in the past. In 2015, the company agreed to buy U.S. lab equipment supplier Sigma-Aldrich for $17 billion, its biggest-ever deal. In 2019, Merck acquired U.S. electronics materials manufacturer Versum for 5.8 billion euros ($5.97 billion).

In an interview in January, Merck's CEO said a recovery in sales growth at its major businesses would allow the company to take a cautious approach to buying other companies, which are expensively priced.

($1 = 0.9708 euros)

(Reporting by Sabrina Valle in New York and Patricia Weiss in Frankfurt; Additional reporting by Milana Vinn in New York and Bipasha Dey in Bengaluru; Editing by Anirban Sen, Susan Fenton, Nick Zieminski and Leslie Adler)