Silence Therapeutics soars 125% as Merck to acquire developer of blood cancer drug

UK biotech Silence Therapeutics has surged 125% in premarket trading on Monday after announcing an agreement to be acquired by Germany’s Merck, which offered a 130% premium to the stock’s last close. The deal will give Merck an experimental treatment for a rare blood cancer that is ready to start phase III clinical trials.

Silence Therapeutics jumped on the Nasdaq and was up 125.6% at the time of this writing. Merck KGaA stock, meanwhile, was down around 0.5% in Germany.

Silence Therapeutics rallied after Merck announced the acquisition. Merck will pay $20 for each American depositary share of Silence Therapeutics, which trades on the Nasdaq under the symbol ticker SLN. That represents a 130% premium to the closing price on Friday, October 16. Each ADS represents three ordinary shares of the biotech. The deal values Silence’s equity at approximately $1.3 billion and gives it an enterprise value of $1.1 billion.

The transaction will be paid for entirely in cash. Merck plans to finance the acquisition with new debt, Bloomberg reports. The companies expect the deal to close in the first quarter of next year.

The main asset Merck will gain is divesiran, an experimental treatment for polycythemia vera, a rare blood cancer in which the body produces too many red blood cells. The drug is ready to start phase III clinical trials and, according to both companies’ assessment, has the potential to become best in class.

Silence develops medicines based on RNA interference, a natural mechanism that suppresses the activity of specific genes. Its technology acts like a molecular off switch, breaking down RNA molecules that carry instructions for cells to produce a particular protein. The company’s proprietary platform allows these drugs to be delivered to liver cells.

Divesiran uses this approach to restrict the availability of iron to the bone marrow, thereby reducing the excessive production of red blood cells. In August, Silence reported positive results from a phase II trial involving 48 patients. The treatment-response criterion was met by 88% of patients receiving the drug versus 19% in the placebo group. The company had planned to begin phase III in the first half of next year.

Another Silence drug candidate is zerlasiran, an experimental treatment to lower lipoprotein(a). Elevated levels are largely determined by genetics and increase the risk of heart attack and stroke. Zerlasiran suppresses the activity of the LPA gene in the liver, reducing production of a component of this lipoprotein. Silence has completed the core preparations for phase III trials but had been seeking a partner to begin that stage of development.

Merck is seeking to replenish its drug pipeline after a series of development setbacks and as its multiple sclerosis treatment Mavenclad faces increasing generic competition, Bloomberg writes. The Silence deal builds on its expansion into rare diseases following the acquisition of SpringWorks Therapeutics last year.

Silence Chairman Iain Ross said Merck’s scale, resources, and commercial capabilities would help accelerate divesiran’s late-stage development and subsequent commercialization.

Silence has six “buy” ratings from Wall Street analysts versus just one “sell,” according to MarketWatch data. The average target price is $35.80 per share, implying around 80% upside from the current stock price.