Harpoon Therapeutics Acquisition by Merck
T-cell engagers & Merck’s portfolio in the wake of Keytruda's looming patent expiry
2024 kicked off with four major biotech M&A deals with a combined consideration of upwards of $3.93bn; the recent activity was coming off the heels of an active Q4 2023, which witnessed 14 biotech M&A deals with a combined consideration upwards of $55.9bn. AbbVie and Bristol Myers Squibb led the acquisitions, each with three over the past 18 deals, but many big pharma companies had executed an acquisition deal in this space over the past quarter plus. Within this emergent M&A activity, I wanted to analyze the Harpoon Therapeutics acquisition by Merck, a $680m deal which brings Harpoon’s pipeline of configured T-cell engagers into Merck’s asset portfolio.
Background on Harpoon
Founded in 2015, Harpoon Therapeutics has employed its platform (Tri-specific T-Cell Activating Construct or “TriTAC”) for the design and development of T-cell engagers for assisting T-cells in targeting solid tumor cancers. While the nature of the therapeutic seems similar to a cell therapy-modality, the technology is slightly different: Harpoon focuses on developing proteins that would steer T-cells towards targeting solid tumor and hematologic cancers, rather than bioengineering T-cells from a patient to identify antigens or expressed proteins. The latter approach, which would be exemplified by chimeric antigen receptor (CAR)-T cell therapeutics, differs slightly in that the modality is not a protein designed to engage the patient’s T-cells with a tumor, but rather a patient’s T-cells that have been genetically modified to recognize and attack cancerous cells.
In 2019, Harpoon conducted its initial public offering and over the past five years, has developed its seven T-cell engager targets (its TriTACs). Two of these programs are currently undergoing Phase 1 clinical trials, whereas the other five are either completing preclinical discovery or are approaching the end of their preclinical phase. As such, the company’s pipeline at the time of acquisition contains fairly early-stage immunotherapeutics.
Acquisition Financials
At time of acquisition, Harpoon was trading around $10.50/share, and at the announcement of the acquisition on Jan 8th, the share price jumped to ~$22/share to reflect Merck’s offer at a 118% premium. Prior to the acquisition announcement, the company had been valued ~$180m on the basis of its share price and shares outstanding, and subsequent to the announcement, its market capitalization reached $380m (as of the time of this article). This current market capitalization, however, does not reflect the valuation at which Merck had announced it would be acquiring Harpoon Therapeutics ($680m).
Analysis
The acquisition, as speculated by journalists and pharma analysts alike,[1] seems to be a strategic asset acquisition to hedge against the risks associated with losing important Keytruda patents. Keytruda, a monoclonal antibody therapeutic approved to treat different cancer types, has been Merck’s most cash generative drug, netting $17.2bn in sales in 2021[2]and taking first place as the best-selling drug globally in 2023.[3] As Keytruda’s patent could potentially expire by 2028 (or key patents that underlie Keytruda could expire by then),[4] the pharma giant seems to be positioning its portfolio strategically along similar therapeutic areas.
As such, the decision to acquire Harpoon Therapeutics, a company with an early-stage pipeline for T-cell engagers, at a marked premium would most likely be to shore up the pipeline of cancer therapies in the wake of Merck’s impending loss of monopoly on Keytruda. This decision could reflect a strategy to diversify modality (i.e., Keytruda, being a monoclonal antibody immunotherapy, versus TriTAC, being recombinant proteins for T-cell engagement) of cancer therapies, while also finding ways to integrate a novel platform into its existing R&D cycles.
Altogether, Merck’s corporate strategy, in anticipating the revenue decline associated with a loss of monopoly on Keytruda, could possibly continue to seek out acquisitions of companies similar in profile to Harpoon: a diversified platform and modality targeting a similar set of diseases as Keytruda. Regardless, the next four years will prove pivotal for the giant.
[1] https://www.reuters.com/markets/deals/merck-buy-harpoon-therapeutics-680-million-2024-01-08/
[2] https://www.fiercepharma.com/special-reports/top-20-drugs-worldwide-sales-2021
[3] https://www.evaluate.com/vantage/articles/analysis/biggest-selling-drugs-2023
[4] https://www.reuters.com/business/healthcare-pharmaceuticals/merck-could-keep-its-patent-edge-by-shifting-keytruda-cancer-drug-simple-shot-2022-12-02/