Merck Up on OncoEthix Acquisition Deal, Oncology in Focus - Analyst Blog

Merck & Co. Inc. (MRK) announced that it has acquired through a subsidiary, a privately held Swiss biotech company, OncoEthix, for up to $375 million. Merck's shares were up 2.3% following the announcement.

Under the terms of the deal, OncoEthix will be eligible to receive an upfront payment of $110 million. OncoEthix could further receive additional milestone payments of up to $265 million depending on the achievement of certain clinical and regulatory milestones.

How Will Merck Benefit?

The OncoEthix acquisition has added oncology candidate, OTX015, to Merck's pipeline. OTX015, a novel oral BET (bromodomain) inhibitor, is currently being evaluated in phase Ib studies for the treatment of hematological malignancies and advanced solid tumors.

Interim data from ongoing phase I studies on OTX015 have showed clinical activity in patients suffering from hematological malignancies.

Our Take

We believe that the OncoEthix acquisition is in line with Merck's strategy of strengthening its oncology portfolio. Merck's oncology pipeline currently includes Keytruda, which is being evaluated for different cancer types including bladder, colorectal and gastric among others.

Merck has for some time been looking to expand its long-term portfolio through acquisitions without losing its focus on the core areas of expertise. In August this year, Merck acquired HCV focused company Idenix Pharmaceuticals. Earlier this month, Merck announced its intention to acquire the antibiotic drug maker, Cubist Pharmaceuticals (CBST), and strengthen its hospital acute care portfolio.

Merck currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include AbbVie Inc. (ABBV), Allergan Inc. (AGN) and Cubist Pharmaceuticals. All three carry a Zacks Rank #2 (Buy).

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