Acceleron Pharma (XLRN)’s assets could be added to the cardiovascular portfolio and pipeline of Merck & Co. (MRK) soon.
The U.S. drug giant is attempting to acquire approximately more than half of the outstanding shares of Acceleron for a price of $180 apiece, to be paid in cash. The deal has a total equity valuation of $11.5 billion.
The closing of the negotiation should occur sometime in the final quarter of 2021. I am neutral on this stock. (See Analysts’ Top Stocks on TipRanks)
Acceleron Pharma is developing innovative therapies to put on the market as treatments for serious and rare diseases.
Currently, the company offers REBLOZYL, a product for adult patients with beta-thalassemia and transfusion-dependent anemia favoring the production of late-stage red blood cells.
The company is also developing Sotatercept, which is in Phase 3 of studies evaluating its safety and effectiveness among patients with pulmonary arterial hypertension. This kind of blood vessel disorder is unfortunately progressive and life-threatening.
Additionally, Acceleron is working on a pulmonary therapeutic candidate, called ACE-1334, and on another treatment for non-transfusion-dependent beta-thalassemia patients.
The pipeline also includes a treatment for a certain type of rare blood cancer. The illness shows up in patients that are not able to produce enough healthy blood cells.
Q2 Earnings Results
Thanks to the partnership with Bristol Myers Squibb, total revenue came in at nearly $28 million. Specifically, Acceleron’s REBLOZYL sold treatments generating royalty revenues of $25.6 million, that were coupled with a costs share revenue line of $2.3 million.
Furthermore, in the second quarter of 2021, Acceleron incurred an adjusted net loss of $49 million, or $0.81 per common share, beating the average consensus by $0.04.
Merger or Non-Merger?
If the shareholders accept the offer, they will receive a 3.5% premium on current market prices, versus the 1.7% yield on the U.S. 10-year Treasury note.
If the merger doesn’t occur, the shareholders of Acceleron will be holding an asset that wants to grow, reaching one day the position of a global leading pharmaceutical company specializing in the treatment of rare pulmonary diseases.
The bottom line is expected to improve, not this year but next year. According to analysts on Wall Street, it will increase by 20% in 2022 on revenue of $211.8 million (up 54.2% year-over-year).
The company has $712.5 million in cash on hand against total debt assets worth $20.7 million.
Wall Street’s Take
In the past three months, nine Wall Street analysts have issued a 12-month price target for XLRN.
The average Acceleron Pharma price target is $179.88, implying 3.4% upside potential. The analyst rating consensus is a Hold rating, based on nine Hold ratings.
Summary
It is up to the shareholders to decide whether Acceleron has to be another asset in the portfolio of Merck, or to continue as a standalone company cultivating the project of becoming a global leader in the field of treatments for rare pulmonary diseases.
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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