Keytruda is far and away Merck’s top-selling product, but the cancer immunotherapy’s patents will expire in seven years and the pharmaceutical giant is looking around for drugs that could succeed it. Acceleron Pharma’s lead cardiovascular drug candidate has blockbuster prospects, and Merck sees enough promise in the science and the addressable market to commit $11.5 billion to acquire the company.
The Acceleron drug, sotatercept, is in late-stage clinical testing as a treatment for pulmonary arterial hypertension (PAH). While there are drugs available for the rare disorder, the condition continues to progress despite treatment, leading to hospitalization and in many cases, death. The Acceleron drug has shown signs of efficacy in treating PAH, and the company believes it has the potential to address other types of pulmonary hypertension as well.
“There’s a lot of advances in cardiovascular disease,” Dean Li, president of Merck Research Labs, said during a Thursday conference call. “We are a great cancer company. We’ve had long history in cardiovascular disease. Cardiovascular disease is still a very important, unmet need, no different than cancer. So, we see lots of opportunity.”
According to financial terms announced Thursday, Kenilworth, New Jersey-based Merck will pay $180 for each share of Acceleron. That amount is a 12.6% premium to the company’s closing stock price last Thursday and a nearly 36% premium compared to a month ago. Acceleron shares had risen sharply as rumors circulated about a potential buyout.
Pulmonary arterial hypertension is a rare form of high blood pressure that develops in the blood vessels carrying blood from the heart to the lungs. The cause isn’t known but when it develops, it gets progressively worse. The symptoms include shortness of breath, fatigue, and chest pain. Treatments approved for PAH are vasodilators—they widen blood vessels. The available PAH drugs include one sold by Merck. The company has rights to market Bayer PAH drug riociguat (Adempas) outside of the U.S. The Merck pipeline also includes one PAH drug candidate, MK-5475. That inhalable drug, a soluble guanylate cyclase stimulator, is currently in Phase 2/3 testing.
The research of Cambridge, Massachusetts-based Acceleron focuses on TGF beta, a family of proteins that play a role in regulating cell growth and repair. Li said that genetic and preclinical research suggests that PAH results from an imbalance of cell signals, causing a thickening of the pulmonary vessel. This thickening narrows the blood vessel, puts pressure on the lungs, and increases the burden on the heart. Sotatercept is an engineered protein given by subcutaneous injection. Li said the drug rebalances TGF beta family signaling, which has the potential to modify the underlying disease. The drug might not only stop the progression of PAH, it may also reverse it, Li said.
Targeting TGF beta as a way to treat disease has precedent. In 2019 the FDA approved Reblozyl, Acceleron’s drug for treating anemia in patients who have the rare blood disorder beta thalassemia. That drug was developed under a partnership with Celgene, which is now a part of Bristol Myers Squibb. BMS holds the development and commercialization rights for Reblozyl, and pays Acceleron royalties from its sales of the drug. In 2020, Reblozyl generated $275 million in revenue.
Sotatercept was also developed under the Celgene partnership that BMS inherited. With the Acceleron acquisition, Merck will keep the rights for sotatercept in PAH and pay BMS a royalty from the drug’s sales, if it reaches the market.
During the conference call, Evercore ISI analyst Umer Raffat asked Merck executives how comfortable they were purchasing Acceleron for a price that the biotech’s partner, BMS, was unwilling to pay. CEO Rob Davis said that the value placed on Acceleron was based on the distinctiveness of the drug, confidence that Merck could get the drug through late-stage development, and the multi-billion dollar commercialization opportunity. Davis added that he does not see this acquisition facing opposition from the Federal Trade Commission. While the agency has stepped up its scrutiny of merger and acquisition activity in the pharmaceutical sector, Davis said that sotatercept is an add-on therapy that builds on the current standard of care in PAH. Furthermore, most PAH patients progress and need additional therapy, so there’s an unmet needs. The Acceleron drug fills that need with a drug that takes a different approach, and offers the potential to be disease modifying.
“All of those factors are unique to sotatercept,” Davis said. “There are not other drugs in development that fit that same profile, either within Merck or outside. And so that’s why we feel like this is something that’s unique.”
Citing figures from EvaluatePharma, Merck said the PAH market in 2019 was $5.7 billion and is projected to reach $7.5 billion by 2026. Merck has a modest cardiovascular portfolio, with none of its current drugs achieving blockbuster status. The biggest cardiovascular products, cholesterol-lowering drugs, no longer belong to the company. Zetia, and the Zetia and Zocor combination marketed as Vytorin, generated $664 million in sales for Merck last year, but those older products were among the drugs included in the spinoff of Organon earlier this year. By contrast, Keytruda alone accounted for $14.4 billion in sales last year. Sotatercept has more time before it faces the “patent cliff” Keytruda is approaching. Its patents will expire in 2036 and 2037.
Beyond sotatercept and Reblozyl, Acceleron has one other TGF superfamily program in its pipeline. ACE-1334 is being developed to treat systemic sclerosis-associated interstitial lung disease. Last month, in its report of second quarter financial results, the company said it expects to start a Phase 1b/2 study in that indication by the end of 2021.
The Phase 3 study that could support a regulatory submission for sotatercept is still enrolling patients. Additional clinical trials that could extend the drug’s use are also underway. Merck expects to complete the Acceleron acquisition in the fourth quarter of this year. If a better offer emerges and Acceleron accepts it, the biotech will owe Merck a $345 million termination fee, according to the merger agreement. In the meantime, Davis said Merck will continue hunting for more deals to augment its pipeline. The drugs and the companies that Merck considers could be at any stage of development, and Merck’s search is not tied to any specific therapeutic areas, Davis said.