TheChek News Flow

US pharmaceuticals group has been looking to rebuild its pipeline before crucial cancer drug comes off-patent

Merck has held talks over a more than $3bn acquisition of Swiss biotechnology group MoonLake Immunotherapeutics, as the US pharmaceutical company seeks to replenish its drug pipeline.

The New Jersey-based drugmaker submitted a nonbinding offer for MoonLake earlier this year, valuing the business in excess of $3bn, a premium to its $2.6bn market value, according to three people familiar with the matter.

The initial approach was rejected but talks could be revived, the people said. Merck’s approach for US-listed MoonLake ahead of late-stage clinical data for its flagship drug — a treatment for hidradenitis suppurativa, a chronic form of acne — puts the biotech company on a strong footing to get sold, the people said. However, they added that there was no guarantee a deal would happen and there was a possibility that other buyers would emerge.

Founded in 2021 by a former McKinsey partner Jorge Santos da Silva, MoonLake is testing its lead drug sonelokimab in phase-three trials as a treatment for hidradenitis suppurativa in adolescents and adults as well as a chronic inflammatory disease known as psoriatic arthritis. Morgan Stanley and Goldman Sachs are advising MoonLake on the sale process.

The negotiations are the first hint that Merck is returning to the negotiating table a year after buying biotech EyeBio in its last multibillion-dollar biotech deal. Its shares have fallen 39 per cent over the past year, compared with an 11 per cent decline in the S&P 500 pharmaceutical index.

Merck, MoonLake, Goldman Sachs and Morgan Stanley declined to comment.

Shareholders have been agitating for Merck to do deals to reverse souring investor sentiment. Pressure has been piled on the pharma group over a projected dip in revenues from $30bn a year cancer drug Keytruda coming off-patent as early as 2028, sharp declines in revenues from its Gardasil vaccine in China, and slower than expected growth in its newly launched high blood pressure drug Winrevair. Merck has also struck several small deals with China-based biotechs in the past year.

Merck’s chief executive Rob Davis told investors in April after President Donald Trump’s tariff policy was first announced that market turmoil was “not stopping us from being aggressive and wanting to move forward and do deals”.

“As it relates to the sellers, I would say that we continue to see, at least in the conversations we’ve had, a little bit of a disconnect between what is the reality of the market that the sellers face and what is the expectation for value that they have,” added Davis. “I don’t think they are fully yet aligned to the realities of where we are today.”

Shares in MoonLake have risen almost 50 per cent over the past two years to more than $40 a share, as investors have bet that it will be an acquisition target.

US healthcare dealmaking has slowed in recent months as the sector grapples with economic uncertainty, turmoil at regulatory agencies including the Food and Drug Administration under the supervision of health secretary Robert F Kennedy Jr, a vocal vaccine sceptic, and competition from Chinese biotechs producing cheaper copycat versions of drugs.

Despite the slowdown in dealmaking, French drugmaker Sanofi on Monday agreed to buy immunology-focused biotech Blueprint Medicines in a deal worth up to $9.5bn and Bristol Myers Squibb struck an up to $11bn partnership deal with German drugmaker BioNTech over a cancer treatment in development that aims to displace Merck’s Keytruda.

European Commission hands down first punishment for a “no-poach” deal and says food delivery groups shared trade secrets

The EU has fined European takeaway groups Delivery Hero and Glovo €329mn for taking part in an “online food delivery cartel”, in the latest antitrust crackdown by the bloc.

On Monday, the European Commission said the two groups had breached competition rules in the four years leading up to Delivery Hero’s acquisition in 2022 of a controlling stake in Glovo, when the German group only held a minority share in its Spanish rival.

The regulator said Delivery Hero had used its stake in Glovo to co-ordinate with it, with the two agreeing not to poach each other’s employees, and exchanging commercially sensitive information. The companies had also agreed which locations each would trade in, the commission said, adding that such co-ordination reduced choice and increased prices for consumers.

The probe was launched in July 2024, and followed raids of Delivery Hero and Glovo’s premises in June 2022 and November 2023.

The fine marks the first time that Brussels has penalised companies for the anti-competitive use of a minority share in a rival business. It is also the first instance in which it has punished groups for a “no-poach” agreement, in which groups agree not to take each other’s workers.

The EU’s competition chief Teresa Ribera said the case was “important” because of the way the practices were “facilitated through an anti-competitive use of Delivery Hero’s minority stake in Glovo”. She added: “Today’s decision shows once again that competition rules matter to citizens’ daily life.”

Delivery Hero said the settlement enabled “stakeholders to move on swiftly”, and reiterated its “commitment to continuing a culture of compliance throughout its organisation and operating in a responsible and ethical manner in the highly competitive industry in which it operates”.

The update comes at a time of consolidation for takeaway groups, which have faced a tougher macroeconomic environment after a pandemic-era boost.

Delivery Hero’s shares were hit last year when it first revealed the scale of the potential fine. It had previously set aside €400mn to deal with the probe, saying on Monday that the final amount was “lower than anticipated”. Its shares rose 1 per cent in lunchtime trading on Monday.

Both companies admitted their involvement in the cartel and agreed to settle the case, leading to a 10 per cent reduction in their penalties. Delivery Hero will pay €223mn in fines and Glovo will pay €106mn.

Two deals show that when conditions are right, investors can still win ample payouts

Biotechnology companies do two things, in an ideal world: make drugs that improve patient’s lives, and sell themselves — in whole or in part — to Big Pharma. This second element has been difficult to execute of late, because of high interest rates and uncertainty over the direction of US healthcare policy. Two chunky deals inked on Monday show that, when conditions are right, biotech investors can still win ample payouts. 

Sanofi, the French pharmaceuticals giant, said it had agreed to buy Blueprint Medicines, which makes the world’s only approved treatment for a rare immunological disorder, for $9.1bn in cash, which increases to $9.5bn if some milestones are met. Bristol-Myers-Squibb, meanwhile, will pay BioNTech $3.5bn for 50 per cent of an immunotherapy cancer drug currently in trials, rising to $11.1bn if conditions are met.

While the two deals involve drugs at different stages, and tackling different conditions, they both bring generous terms to the sellers. Blueprint’s investors get a 27 per cent premium to Friday’s share price, which had already run up 15 per cent this year. BioNTech, meanwhile, is getting a valuation potentially as high as $22bn for an asset it acquired for less than $1bn in November 2024. Its stock rose almost 20 per cent on Monday morning. 

Both of the drugs are in hot therapeutic areas, which might explain how these deals got done in a tough market. That’s particularly true for BioNTech’s compound. Helping the immune system to better target cancer has been an extraordinarily successful strategy. The granddaddy of such drugs, Merck’s Keytruda, had nearly $30bn of sales last year and faces the expiry of key patents in 2028.

Now a new generation of drugs — of which BioNTech’s is one — looks to combine immune-oncology with other mechanisms, such as cutting off blood supply to cancer. Pfizer only last week struck a licensing agreement in this space with Chinese biotech 3SBio, for an upfront payment of $1.25bn, plus a contingent payment of a further $4.8bn. BioNTech’s drug, the companies hope, will be approved to treat multiple types of tumour.

Large drugmakers, for their part, need to bolster their growth prospects. BMS has large patents edging towards their expiry date. And while Sanofi may not have quite the same incentive to buy rivals, disappointing results for one of its homegrown drugs on Friday highlight the wisdom of diversifying bets.

Biotech remains challenged. The S&P 500’s biotech sub-index is down more than 10 per cent this year, while the broader index is flat. But investors still have a chance of picking winners. When a company with an exciting drug meets one with a hole in its pipeline, there are few impediments to the healthy circulation of money.

Deal to allow investors to buy into group following March takeover of X

Elon Musk’s xAI is launching a $300mn share sale that values the group at $113bn, as the world’s richest man returns to his business empire and the race to develop artificial intelligence.

The deal will allow staff to sell shares to new investors, according to people close to the situation, validating the pricetag struck when Musk’s xAI start-up acquired his social media service X in March.

The secondary stock offering, known as a tender offer, is expected to be followed by a larger investment round in which the company will offer new equity to outside investors, one of the people said.

The March takeover valued the overall group at $113bn: pricing xAI at $80bn with X at $33bn. Musk bought X, formerly Twitter, for $44bn in October 2022.

xAI declined to comment.

The new share sale comes after Musk, who helped bankroll Donald Trump’s presidential campaign, stepped back last week from his role heading the administration’s cost-cutting initiative. His time at the so-called Department of Government Efficiency (Doge) came to an end after he clashed with cabinet secretaries and criticised central parts of the Trump administration’s policy agenda.

The Tesla and SpaceX chief said he is refocusing on his business holdings after his companies suffered what he called “blowback” over his ties to the president.

“Back to spending 24/7 at work and sleeping in conference/server/factory rooms,” Musk wrote on X late last month. “I must be super focused on X/xAI and Tesla . . . as we have critical technologies rolling out.”

Musk has said the combined group will allow his two companies to benefit from combining models, computing power, distribution and talent. For instance, AI developers can better train their models on the social media group’s data and tap its audience.

However, he did not disclose further specifics on how the March deal was structured. The opaque transaction allowed X, which had alienated some advertisers after adopting Musk’s hands-off approach to content moderation, to leverage the rising value of xAI.

The AI start-up obtained a $45bn valuation in a $5bn private funding round late last year. Musk last year granted investors that backed his Twitter acquisition 25 per cent of the shares in xAI.

Musk launched xAI in 2023 to take on Sam Altman’s OpenAI and other Big Tech rivals. It quickly unveiled the Grok chatbot and built a supercomputer cluster dubbed Colossus, one of the biggest AI data centre projects in the US.

As well as competing with Big Tech and the sometimes rough-and-ready image of Grok, Musk has also agreed partnerships. Last month, Microsoft announced it was making xAI models available to its cloud computing customers, while messaging app Telegram agreed to distribute Grok to its 1bn users.