Merck refiles $11.5B Acceleron deal with the FTC. But extending regulators' review time only one benefit

Merck
Merck's key target with the buyout deal is Acceleron's pulmonary hypertension drug sotatercept, and the extension comes at a sensitive time as activist investors at Acceleron Pharma are rallying support to boycott the acquisition. (Merck & Co.)

Merck & Co.’s $11.5 billion bid for Acceleron Pharma is hitting a delay just as activist investors threaten to derail the deal altogether.

Merck has withdrawn its notification of the Acceleron buyout and intends to refile it Monday, the company said Friday. Merck made the move to provide the U.S. Federal Trade Commission (FTC) with additional time for review, it added.

But while a refiling allows anti-competition regulators additional review time, it now also gives Merck a chance to extend the tender offer time for collecting the required shares from Acceleron investors. The tender offer is now scheduled to expire on Nov. 18, rather than the previous Nov. 10.

The refiling extends the merger review’s waiting period by another 15 days to Nov. 16. Merck will get a de facto antitrust go-ahead once that period expires; the FTC may also issue what’s known as a “second request” for more information related to the transaction, which could further prolong the process.

It’s not unusual these days that biopharma companies have had to refile their premerger notice. Sanofi recently did that for its acquisition of Translate Bio, and AstraZeneca also refiled the notification during FTC’s review of the Alexion takeover. Both transactions have since cleared the antitrust hurdle.

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The extension comes at a sensitive time, as activist investors at Acceleron are rallying support to boycott the tie-up. Most notably, Avoro Capital, which is known for blocking Immunomedics’ $2 billion partnership with Seattle Genetics, has been a vocal critic about the Merck deal.

After an initial message opposing the deal, Avoro followed up with a second open letter Thursday asking fellow Acceleron investors not to tender their shares. The timing and the price aren’t right, Avoro argues.

The hedge fund has suggested that Merck’s $180-per-share price, which represents a 38% premium over Acceleron’s average stock price during the prior three months, significantly undervalues the biotech. It also pointed to recent comments from sell-side analysts at Raymond James, Cowen, Barclays and Jefferies, who suggested Merck is getting a bargain based on the current offer.  

With Acceleron, Merck is mainly targeting sotatercept, which could become the first disease-modifying treatment for pulmonary hypertension patients. Instead of a sale now, Acceleron should wait until sotatercept’s phase 3 readout, a “value inflection point,” Avoro said.

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Waiting for more data has its risk, but “based on the data so far, this risk is overwhelmingly worth taking,” the private investment shop said in its recent letter.

Avoro owns about 7% of Acceleron. In addition, Holocene Advisors and Darwin Global Management have also publicly opposed the deal. Darwin, which recently built a 3.84% stake in Acceleron, has argued that the company is worth at least $353 a piece.

But not all investors agree with the bullish assessment of Acceleron. Bristol Myers Squibb, Acceleron’s largest shareholder with an 11.5% stake, reportedly plans to tender its share. The Big Pharma company has also been identified as a company that yielded to Merck during an earlier bidding process for Acceleron. SVB Leerink and Piper Sandler analysts have largely viewed Merck’s proposal as fair.

Merck expects the deal to close in the fourth quarter. As of Thursday, the New Jersey pharma had received about 13.7% of Acceleron shares.