Anatomy of a deal: How Merck closed Immune Design for $300M

After Immune Design CEO Carlos Paya said his company was not for sale, Merck Research Labs President Roger Perlmutter went to a "significant stockholder" of Immune Design to make his case. (Merck)

Two weeks ago, Merck & Co. announced its plan to buy out Immune Design—a biotech working on immunotherapies for non-Hodgkin lymphoma, respiratory syncytial virus and peanut allergies—for $300 million. The Big Pharma moved on its tender offer on Monday, ending a nine-month back-and-forth that transformed a potential licensing deal into an outright acquisition.

It all started with talks about a potential licensing deal between the two at “an Infectious Disease and Vaccine Symposium sponsored by Merck” in May 2018, according to an SEC filing. Merck and Immune Design continued to discuss a possible license over the ensuing months—until October, when Merck EVP and Merck Research Labs President Roger Perlmutter, M.D., Ph.D., got involved.

Perlmutter met with Immune Design CEO Carlos Paya, M.D., Ph.D., “during a scientific conference to further discuss a potential licensing transaction.” During that meeting, the subject of an acquisition came up, though Perlmutter did not specify a price, according to the filing.

Paya’s response? Immune Design was not for sale—“especially within the range of its then-current trading price.” But Merck wasn’t taking no for an answer.

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A week later, Perlmutter went to representatives of a “significant stockholder of IMDZ” to gauge how amenable they would be to a takeover by Merck. In early November, Merck gave Paya a verbal offer, which was soon followed by a nonbinding indication of interest to Immune Design’s board. Merck proposed acquiring the company for $200 million in cash, with two potential further payments of $85 million, based on “the achievement of certain regulatory approvals.”

A week later, Merck sent a revised offer after feedback from Immune Design. This time, the offer was for $225 million in cash with no additional “value rights payments.” Finally, on Nov. 26, Merck sent over what eventually became its tender offer: a proposal to acquire 100% of Immune Design’s shares at a purchase price equal to $5.85 per share. The duo announced the deal, which will have an approximate value of $300 million, in February.

“Scientists at Immune Design have established a unique portfolio of approaches to cancer immunization and adjuvant systems designed to enhance the ability of a vaccine to protect against infection, which could meaningfully improve vaccine development," Perlmutter said at the time. “This acquisition builds upon Merck’s industry-leading programs that harness the power of the immune system to prevent and treat disease.”

The deal is expected to close in the second quarter.