Merck's Strategic Move: A $3.9 Billion Acquisition of SpringWorks

Germany's Merck KGaA is acquiring U.S. biotech firm SpringWorks Therapeutics for $3.9 billion. The move aims to bolster Merck's cancer therapy portfolio amidst anticipated revenue declines due to expiring patents. The acquisition price is lower than expected due to U.S. healthcare market challenges and devaluation.

Germany's Merck KGaA has announced its acquisition of U.S.-based biotech firm SpringWorks Therapeutics for $3.9 billion in equity value. The deal is intended to expand Merck's arsenal of rare cancer treatments, a timely move as the company prepares for projected revenue dips from patent expirations.

The purchase price is about 20% less than analysts predicted, largely due to the lack of competitive offers and a downturn in the U.S. biotech sector. CEO Belen Garijo explained that U.S. healthcare sector challenges contributed to the reduced bid price, despite early-year projections of robust merger activity.

Merck's shares climbed 1.2% following the news, bolstered by SpringWorks' recent drug approvals in both Europe and the U.S. The acquisition—Merck's largest since 2007—will be funded through cash reserves and new debt, promising to enhance the company's earnings by 2027, pending regulatory and shareholder approval.

(With inputs from agencies.)