Merck Buys Sirna Biotech
Wow! Merck is paying a 100% premium in cash for the tiny company Sirna. The merger activity is really picking up steam and is almost a mania now in my opinion.
Inside Merck’s Biotech Buy - Forbes.com
Merck Buys Maker of Gene-Silencing Drugs - New York Times
Sirna is developing a technology for silencing genes that Merck seems to want very badly. This is the technology that was the basis of the Nobel prize in medicine announced last month. The deal is all cash at double the Sirna stock price as of Oct 30. While RNAi is interesting, it seems to be a large price to pay for a promising but not yet proven technology. It may pay off, but the risks seem high for a technology this early in its development cycle.
To be fair, Sirna does have some other products in development including one for hepatitis C and for macular degeneration. And thy do have deals with a GlaxoSmithKline and Allergan. It will be interesting to see how those deals are dealt with after the acquisition.
I want to comment on the whole merger mania as a whole. By this point, I’m starting to believe that it is moving beyond finding a good deal with a good chance of a return and moved into “jumping on the bandwagon” because everyone else is doing it. When this sort of attitude starts prevailing I think it can lead to some very bad deals. It allows downtrodden beaten up companies that aren’t performing well to be picked up at a premium. Overpaying for an acquisition is never a good thing. I have been involved in some M&A activity where it seems the acquiring party has already made up their mind before even doing the required due diligence. This sort of mentality leads to very poor decisions from my perspective. I can only hope that any further M&A activity is done with an open mind and by looking at the facts and data before coming to a decision. Otherwise, the pharmaceutical industry could be looking at a future of continued lack of drug candidates due to poorly chosen merger activities.
Technorati Tags: Merck, pharma M&A, pharmaceutical deals, Sirna
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