Why Revolution Medicines Stock Plummeted by Almost 17% Today
Key Points
An apparent suitor has withdrawn from talks about acquiring the biotech, according to a media report.
That's particularly discouraging, given that this business was apparently discussing a deal in the tens of billions of dollars for Revolution.
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Monday was generally a good day for the stock market; nevertheless, some titles landed in negative territory. One that plunged well into the red was clinical-stage biotech Revolution Medicines (NASDAQ: RVMD), which took a nearly 17% hit to its share price after a media report published over the weekend.
Buyout blues
On Sunday, The Wall Street Journal wrote that Merck was no longer in discussions with Revolution regarding an acquisition. Investors were understandably crushed by this apparent news, as hot speculation had it that the two companies were discussing a deal worth tens of billions of dollars.
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Citing unidentified "people familiar with the matter," the Journal said that the talks stalled after Revolution and Merck failed to agree on the price of a buyout. The financial newspaper's sources added that this isn't necessarily the end of Merck's pursuit, as the discussions between the two companies could resume.
Merck is not the only enterprise reported to be interested in acquiring Revolution; earlier this month, the Journal wrote that AbbVie and other pharmaceutical companies were also in the hunt. AbbVie subsequently denied it was pursuing Revolution.
A prized and pricey asset
I'd bet my bottom dollar that the speculation about multiple potential suitors is true.
Revolution's specialty is the development of oncology drugs, which remains a very hot, high-interest segment of the pharmaceutical industry. What's more, the company's leading drug candidate, daraxonrasib, is currently in Phase 3 clinical trials for the treatment of pancreatic and non-small cell lung cancer.
So even if Merck goes away completely, I think Revolution will sell for a handsome premium if it finds an appropriate suitor. Given that, today's panicky reaction to the Journal's article seems overblown.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Merck. The Motley Fool has a disclosure policy.
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