Merck (MRK) Opts For Buying German Immuno-Oncology Biotech

Merck (NYSE:MRK) announced that it will acquire Germany-based Rigontec, a privately held immuno-oncology focused biotech for an upfront cash payment of almost $137 million (115 million euros).

Rigontec is a leader in retinoic acid-inducible gene I (RIG-I), targeting therapeutics. It is a novel immuno-oncology treatment approach.The deal’s completion date is not yet disclosed, subject to certain closing conditions.

Apart from the upfront payment, based upon achievement of certain milestones, Merck may also make additional contingent payments worth approximately 349 million euros.

Shares of Merck have underperformed the industry year to date. The stock has gained 8.7% compared with the industry’s 12.6% rally during the period.

The acquisition complements Merck’s current immuno-oncology pipeline of Keytruda label expansion studies. With the winding up of this buyout, Merck will add Rigontec’s lead candidate, RGT100, in its portfolio. Notably, RGT100 is currently under evaluation in a phase I study for treatment of patients with various tumors.

Significantly, Merck is actively pursuing deals in order to build a long-term portfolio. The company entered into several licensing deals in the past few of years and targets to achieve more in the future.

We remind investors that in July, Merck announced an oncology collaboration with AstraZeneca (NYSE:AZN) to jointly commercialize and develop the latter’s PARP Inhibitor, Lynparza and MEK 1/2 inhibitor, selumetinib (another oncology candidate of AstraZeneca), both as monotherapy and in combination studies, for multiple cancer types.

Merck will make an upfront payment of $1.6 billion to AstraZeneca. Presently marketed for advanced ovarian cancer, Lynparza is in different studies for a range of tumor types including breast, prostate and pancreatic cancers.

Merck and AstraZeneca will independently develop combination medicines with Lynpraza or selumetinib with their respective PD-L1/PD-1 inhibitors, Imfinzi and Keytruda.

Zacks Rank & Stocks to Consider

Merck currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the pharma sector are Aduro Biotech, Inc. (NASDAQ:ADRO) and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aduro Biotech’s loss per share estimates reduced from $1.46 to $1.32 for 2017 and from $1.26 to $1.24 for 2018 over the last 30 days. The company delivered positive earnings surprises in two of the trailing four quarters with an average beat of 2.53%.

ACADIA’s loss per share estimates narrowed from $2.80 to $2.57 for 2017 and from $2.06 to $1.90 for 2018 over the last 30 days. The company posted positive earnings surprises in two of the last four quarters with an average beat of 7.97%.

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