Merck in Talks to Buy Revolution Medicines Per Financial Times Report

A recent Financial Times report stated that Merck MRK is in talks to buy Redwood City, CA-based cancer biotech, Revolution Medicines RVMD, in a transaction that could value RVMD for up to $32 billion. However, the report mentioned that the companies have not yet finalized the deal, and a potential deal remains several weeks away. Some other large drugmakers have also been pursuing the acquisition of RVMD, and a valuation range of approximately $28 billion to $32 billion has been under consideration.

Earlier in the week, a report issued by the Wall Street Journal (WSJ) mentioned that AbbVie ABBV was in advanced talks to acquire Revolution Medicines. However, AbbVie denied the rumors in an emailed statement to Reuters.

Revolution Medicines is making several novel drugs that target the active, GTP-bound form (or ON form) of RAS proteins, which the company refers to as RAS(ON).

Following the Financial Times report, RVMD’s shares were up around 12% in after-hours trading on Thursday. Post the release of the WSJ article, shares of Revolution Medicines hit an all-time high of $105 per share. RVMD’s shares are up around 36% this week, with its market cap touching $20 billion on Jan. 8.

If the MRK-RVMD merger goes through, it would be the first mega-merger deal announcement for 2026 and the biggest deal in the biotech sector after Pfizer acquired Seagen for $43 billion in 2023.

Merck’s shares have risen 11.2%, underperforming the industry's 21.0% increase.

RVMD Acquisition Can Strengthen Merck’s Cancer Pipeline

The acquisition will strengthen Merck’s oncology pipeline by adding RVMD’s lead candidate, daraxonrasib, an investigational oral RAS(ON) multi-selective inhibitor designed to target several forms of RAS mutations. The drug is being evaluated in pivotal late-stage studies in patients with previously treated metastatic pancreatic ductal adenocarcinoma (PDAC) and non-small cell lung cancer (NSCLC). The company expects data readout from a phase III PDAC study this year, while phase III studies in first-line metastatic PDAC and NSCLC are also expected to begin this year.

While first-generation RAS inhibitors, such as Amgen’s Lumakras and Bristol-Myers’ Krazati, are available on the market, they are not designed to address the resistance mechanisms that limit their long-term efficacy. Revolution’s RAS(ON) inhibitors are specifically designed to overcome these resistance barriers, potentially offering more durable clinical responses.

RVMD is also developing mutant-selective inhibitors like elironrasib and zoldonrasib that are designed to suppress the growth of specific RAS-bearing cancer cells. Both drugs are being evaluated either as monotherapy or in combination with other anti-cancer therapies in separate early-stage studies across solid tumor indications.

MRK on M&A Spree to Offset Keytruda’s Upcoming LOE

Merck has been on an acquisition spree in the past year, as it faces looming patent expiration of its blockbuster drug, PD-L1 inhibitor Keytruda, in 2028. Keytruda accounts for more than 50% of the company’s pharmaceutical sales. There are rising concerns about the firm’s ability to grow its non-oncology business ahead of the upcoming loss of exclusivity of Keytruda in 2028.

Also, competitive pressure might increase for Keytruda in the near future from dual PD-1/VEGF inhibitors that inhibit both the PD-1 pathway and the VEGF pathway at once. They are designed to overcome the limitations of single-target therapies like Keytruda.

Earlier this month, it closed the previously announced acquisition of Cidara Therapeutics for $9.2 billion. The acquisition will add CDTX’s lead pipeline candidate, CD388, a first-in-class long-acting, strain-agnostic antiviral agent, currently being evaluated in late-stage studies for the prevention of seasonal influenza in individuals at higher risk of complications.

Last year, it also acquired Verona Pharma for around $10 billion, which added the latter’s lead drug Ohtuvayre, a novel, first-in-class maintenance treatment for chronic obstructive pulmonary disease, with multibillion-dollar commercial potential. The Verona acquisition strengthened Merck’s cardio-pulmonary portfolio, as the drug’s differentiated profile provides a significant edge over its competitors. Ohtuvayre's commercial launch is off to a solid start. 

Merck believes that new products like Ohtuvayre can be long-term growth drivers for it and help fill the potential revenue gap created by Keytruda’s upcoming LOE.

Marck carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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