Merck MRK announced a definitive agreement to acquire Harpoon Therapeutics HARP for an approximate total equity value of $680 million.

The acquisition will strengthen Merck's oncology pipeline by adding south San Francisco-based Harpoon Therapeutics' novel class of T cell engagers, which it is developing by leveraging its proprietary Tri-specific T cell Activating Construct platform. The T cell engagers are designed to remain inactive till they reach the tumor.

The company has made significant progress in the development of its lead pipeline candidate, HPN328, a T cell engager targeting delta-like ligand 3 (DLL3). 

HPN328 is currently being evaluated in a phase I/II study in certain patients with small cell lung cancer (SCLC) and other neuroendocrine tumor types. The DLL3 ligand is expressed at high levels in SCLC and neuroendocrine tumors.

In October, Harpoon Therapeutics presented positive interim data from the phase I/II study. This was the largest data set so far for HPN328, showing compelling activity of HPN328 with the potential for best-in-class efficacy. The clinical benefit observed in the study, particularly the response data in the 1 mg priming dose cohorts, was encouraging. Merck plans to develop HPN328 in combination with its other pipeline candidates.

Harpoon's other important pipeline candidate is HPN217, which is being developed in a phase I study for relapsed, refractory multiple myeloma. In September, HPN217 demonstrated early and durable responses at the target dose of 12 mg.

For the acquisition, Merck has offered to pay a price per share of $23.00 in cash, which represents a premium of 118% to Harpoon's adjusted closing price of $10.55 on Jan 5. Harpoon's stock was up 111% on Monday.

Harpoon's stock has risen 179.4% in the past year against a decrease of 1.2% for the industry.

Image Source: Zacks Investment Research

Merck's stock is up 5.9% in the past year compared with an increase of 13.4% for the industry.

Image Source: Zacks Investment Research

The transaction is expected to be closed in the first half of 2024. The boards of both the companies have approved the transaction.

There have been quite a few merger and acquisition (M&A) deals in the pharma and biotech sector in the past year. Generally, the drug and biotech sector is characterized by aggressive M&A activity. Given that it takes several years and millions of dollars to develop new therapeutics from scratch, large pharmaceutical companies, sitting on huge piles of cash, regularly buy innovative small/mid-cap biotech companies to build out their pipelines. Fast-growing and lucrative markets such as oncology, rare diseases and cell and gene therapy are mostly the focus areas for M&A activities.