Bristol Myers Squibb offered to buy Mirati Therapeutics for up to $5.8 billion, but MRTX stock tumbled Monday on the lowball price.
The deal values Mirati stock at $58 per share, representing a total $4.8 billion takeover price. But MRTX stock closed at 60.20 on Friday. On today's stock market, MRTX stock toppled 5.3%, closing at 57.02. Bristol stock also dipped a fraction, ending the regular session at 56.61.
Bristol's offer includes a contingent value right worth $12 per share of MRTX stock. It will pay that if the FDA accepts an application for approval of Mirati's drug, MRTX1719. The company is testing that drug in patients with a form of lung cancer. That would bring the total deal value up to $5.8 billion.
On Thursday, a Food and Drug Administration panel said the evidence backing Amgen's lung cancer treatment, Lumakras, a rival to a Mirati drug called Krazati, isn't sufficient to support its accelerated approval. Now, it's unclear whether the FDA will allow Amgen to keep Lumakras on the market. The same day, Bloomberg reported Sanofi was looking to buy Mirati, and MRTX stock rocketed more than 45%.
But Leerink Partners analyst Andrew Berens says Bristol's offer is probably too low.
"We think another bidder could emerge given our assessment of Mirati's strategic value and a number of near-term catalysts," he said in a report. "Even with the consideration of the CVR, we think the $64 per share, $5.3 billion offer is significantly below what we see as the strategic value of the company."
MRTX Stock: A Potential Blockbuster
Krazati and Lumakras both block a protein created by the KRAS gene to treat non-small cell lung cancer.
Similarly, Mirati and Amgen are also testing out rival approaches to what are known as MTAP-deleted cancers. They are doing so by targeting a protein called PRMT5. This group of cancers accounts for about 10% to 15% of all cancers, according to various reports.
Another Leerink analyst, David Risinger, expects Mirati's drug, MRTX1719, to become a blockbuster. But the contingent value right payout might have to wait until 2031. Mirati isn't expected to begin midstage testing of MRTX1719 until the first half of 2024. This means investors in MRTX stock are likely to view the contingent value right at a significant discount.
Risinger notes the acquisition fits well into Bristol Myers' oncology franchise.
"We see significant sales prospects for Krazati in lung, colon and pancreatic (cancers)," he said. "And we note that there is material Krazati share gain potential from Amgen's KRAS inhibitor, Lumakras, given recent regulator criticism of Lumakras in the U.S. and France."
Continued Interest In Targeted Oncology
Needham analyst Ami Fadia says the deal deepens Bristol Myers' efforts in precision cancer drugs. Mirati estimates there are more than 250,000 patients in the U.S. and Europe whose cancers could be treated by targeting the PRMT5 protein.
This is "one of the largest precision oncology targets," Fadia said in a report.
But she kept her hold rating on MRTX stock. She notes other companies — GSK, Johnson & Johnson and Pfizer — have attempted to target these cancers. But Mirati, Amgen and a third rival, Tango Therapeutics, are attempting to lengthen the amount of time these drugs work.
Recently, Mirati said a third of patients with MTAP-deleted cancers responded to treatment with Mirati's MRTX1719. The study was early-stage and in just 18 patients. RBC Capital Markets analyst Gregory Renza says, broadly, the deal underscores Big Pharma's interest in targeted cancer treatments.
"A small, Phase 1 solid tumor dataset of 18 patients commanding a $1 billion value in the form of a CVR for an accepted (new drug application) filing looks intriguing, which could help neutralize criticism that the strategic value of targeted oncology assets has diminished over the years," he said in a note to clients.
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