- SVB Securities conducted a pro-forma analysis of the financial impact to Merck & Co Inc (NYSE:MRK) from a potential acquisition of Seagen Inc (NASDAQ:SGEN).
- The analysts refrain from commenting on the probability of the deal happening. The analysis suggests that the short-term impact on EPS from the potential acquisition will likely be meaningfully dilutive.
- Related: Merck Shows Takeover Interest In Seagen: WSJ.
- According to SVB, the deal decreases forecasted GAAP EPS by -12%, -7%, and -2% in 2023, 2024, and 2025 from that expected for standalone Merck.
- But, in the longer term, the positive impact on free cash flow (FCF) generation, top & bottom-line growth, and partial mitigation of Merck's Keytruda loss of exclusivity in 2028 are supportive of the deal.
- The analysts expect lower Keytruda revenue estimate dependence in 2028 to 42.5% from 48.4%.
- Further, a DCF analysis (2024-2032E) suggests that the combined entity could be worth $136/share (~$388 billion equity value). SVB forecasts Merck at $104/share.
- The combined entity can generate an estimated FCF of ~$247 billion from 2024 to 2032 versus around $176 billion for standalone Merck.
- But increasing debt costs, and decreasing equity values, could lead some investors to pause, despite the longer-term impact on FCF, SVB writes.
- Price Action: MRK shares are up 2.32% at $86.58, and SGEN shares are up 1.59% at $168.08 during the market session on the last check Tuesday.
Get all your news in one place.
100’s of premium titles.
One app.
Start reading
One app.
Get all your news in one place.
100’s of premium titles. One news app.
SVB Leerink's Pro-forma Analysis Of Speculated Merck/Seagen Deal - What Investors Need To Know
Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member?
Sign in here
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member?
Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member?
Sign in here
Our Picks