BofA Maintains Buy on Merck as SpringWorks Acquisition Positions Firm for Oncology Dominance

The pharmaceutical sector is no stranger to high-stakes acquisitions, but Merck KGaA’s $3.9 billion takeover of SpringWorks Therapeutics stands out for its bold bet on rare tumor therapies and strategic geographic expansion. Despite macroeconomic headwinds, Bank of America (BofA) has reaffirmed its Buy rating on Merck KGaA, citing the SpringWorks deal as a catalyst to bolster its oncology franchise and unlock long-term growth.

A Precision Play in Rare Cancers
At the heart of the acquisition are two FDA-approved therapies: OGSIVEO® (nirogacestat) and GOMEKLI™ (mirdametinib). OGSIVEO is the first systemic treatment for desmoid tumors, a rare and aggressive soft-tissue malignancy, while GOMEKLI addresses neurofibromatosis type 1-associated plexiform neurofibromas (NF1-PN), a condition affecting roughly 1 in 3,000 people. Both therapies target underserved patient populations, aligning with Merck KGaA’s focus on rare tumors and external innovation, as outlined in its 2024 Capital Markets strategy.

The deal’s $47-per-share price—26% above SpringWorks’ February trading—reflects confidence in these therapies’ commercial potential. With GOMEKLI’s February 2025 FDA approval and OGSIVEO’s pending European nod, Merck KGaA is positioning itself to capture $500 million to $1 billion in peak sales from these assets alone.

Strategic Synergies and Financial Upside
BofA’s optimism hinges on three pillars:
1. Revenue Diversification: The U.S. acquisition strengthens Merck KGaA’s presence in the world’s largest pharma market, where SpringWorks has already built a commercial foothold.
2. Pipeline Expansion: SpringWorks’ pipeline, including trials for tenosynovial giant cell tumors (TGCT), complements Merck KGaA’s existing rare tumor programs like pimicotinib (licensed from Abbisko).
3. EPS Accretion: The transaction is projected to boost earnings per share by 2027, even after accounting for integration costs.

The financial terms are equally compelling. Merck KGaA will fund the deal with cash and debt while maintaining its investment-grade credit rating. Meanwhile, SpringWorks’ therapies—already generating revenue—will immediately contribute to the Healthcare division’s top line.

Navigating Risks, Seizing Opportunities
No deal is without risks. Regulatory delays, particularly in Europe, could delay OGSIVEO’s rollout. Additionally, Merck KGaA must integrate SpringWorks’ U.S. operations smoothly to avoid cultural or operational missteps. Yet the strategic rationale is undeniable: the rare tumor market, projected to hit $15 billion by 2030, offers a high-margin, low-competition arena.

Conclusion: A Buy Rating Backed by Data
BofA’s Buy rating isn’t just sentiment—it’s math. With SpringWorks’ therapies poised to fill critical gaps in oncology care and Merck KGaA’s balance sheet intact, the deal represents a low-risk, high-reward bet. Analysts project lurbinectedin (another SpringWorks asset) alone could add $500 million to $1 billion in annual sales, while the combined pipeline positions Merck KGaA to lead in rare tumors.

Moreover, the $3.4 billion enterprise value reflects a 26% premium, suggesting SpringWorks is undervalued relative to its growth trajectory. As the EMA’s Q2 decision on OGSIVEO looms, investors have little to lose and much to gain. BofA’s price target implies a $10 upside, but the true value lies in Merck KGaA’s transformation into a global oncology powerhouse—a move that justifies the Buy rating.

In a sector increasingly dominated by me-too drugs, Merck KGaA’s SpringWorks acquisition is a rare gem. This isn’t just a stock pick—it’s a bet on innovation in one of medicine’s most urgent frontiers.