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Merck to Buy Cancer-Focused VelosBio for $2.75 Billion

Merck is paying $2.75 billion for VelosBio, which is working on cancer therapies.
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Pharmaceutical titan Merck  (MRK) - Get Merck & Co., Inc. Report agreed to purchase VelosBio, a biopharmaceutical company focusing on cancer, for $2.75 billion in cash.

The lead investigational candidate at VelosBio, San Diego, is VLS-101, an antibody-drug conjugate currently being evaluated in a Phase 1 and Phase 2 clinical trial to treat patients with hematologic malignancies and solid tumors.

“At Merck, we continue to bolster our growing oncology pipeline with strategic acquisitions" that complement our current portfolio, Roger Perlmutter, president of Merck Research Laboratories, said in a statement.

“Pioneering work by VelosBio scientists has yielded VLS-101, which in early studies has provided notable evidence of activity in heavily pretreated patients with refractory hematological malignancies, including mantel cell lymphoma and diffuse large B-cell lymphoma.”

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Merck expects the deal to close by year-end.

Morningstar analyst Damien Conover is bullish on Merck. “We continue to view Merck as undervalued, with the market not fully appreciating the firm’s strong immuno-oncology platform, especially in early-stage cancers, where we expect clinical data will likely support increased Keytruda use over the next several years,” he wrote in a commentary.

Conover puts fair value for the stock at $100. 

It recently traded at $81.70, up 1.3%. The stock had fallen 11% year to date through Wednesday. The S&P 500 climbed 7% during that period.

“The strong outlook in immuno-oncology combined with continued pipeline development across several therapeutic areas further supports our wide moat rating,” Conover said.