SpringWorks Therapeutics: Unlocking Value Through Merck's EU Regulatory Milestones

The acquisition of SpringWorks Therapeutics by Merck KGaA in July 2025 marked a strategic consolidation in the rare tumors market, yet the full potential of this merger remains underappreciated. While SpringWorks' Nasdaq delisting removed its shares from public trading, the company's therapies now sit within Merck's portfolio as critical assets poised to benefit from imminent EU regulatory approvals. These pending decisions, particularly for nirogacestat and mirdametinib, represent catalysts that could unlock substantial value for Merck shareholders. This article examines why SpringWorks' legacy therapies are undervalued in the current market and how upcoming approvals may catalyze growth.

Undervaluation: A Strategic Bargain or Overlooked Potential?

SpringWorks' $3.54 billion acquisition by Merck in July 2025 closed at a price per share ($47.00) that matched its pre-merger market capitalization. While this suggests no immediate undervaluation, the transaction's timing—occurring before key EU regulatory decisions—hints at untapped value. The market may not yet have factored in the commercial potential of therapies like nirogacestat and mirdametinib in Europe, where regulatory hurdles remain final but critical.

SpringWorks' drugs address rare diseases with limited treatment options. Nirogacestat targets desmoid tumors, a condition with no approved therapies in the EU, while mirdametinib is the first therapy for neurofibromatosis type 1 (NF1) plexiform neurofibromas in both adults and children. These therapies represent high-margin, niche markets with significant unmet need. Their delayed EU approvals (pending since Spring 2025) suggest the market has yet to fully price in their European commercialization potential.

EU Approvals: The Catalysts on the Horizon

The European Medicines Agency (EMA) has already delivered positive signals. In June 2025, the Committee for Medicinal Products for Human Use (CHMP) recommended approval for nirogacestat, citing Phase 3 trial data showing a 71% reduction in disease progression risk. The European Commission (EC) is expected to finalize approval by Q3 2025, a near-certainty given the CHMP's strong endorsement. Similarly, mirdametinib received a positive opinion in May 2025, with EC approval anticipated shortly.

These approvals will open new revenue streams for Merck. Nirogacestat's U.S. sales, while modest, could expand significantly in the EU's 450 million-person market. Meanwhile, mirdametinib's first-in-class status for NF1-PN positions it as a dominant player in a niche but lucrative space. Analysts estimate peak sales for these drugs at over €500 million annually in Europe alone, a figure not yet reflected in Merck's valuation.

Strategic Synergies: Why Merck Wins Big

Merck's acquisition strategically combines SpringWorks' pipeline with its own investigational therapy, pimicotinib, for tenosynovial giant cell tumors (TGCT). Together, these therapies form a rare tumors franchise addressing multiple indications, leveraging shared clinical infrastructure and regulatory expertise. This synergy reduces R&D costs and accelerates time-to-market for future therapies.

Moreover, Merck's global reach ensures efficient commercialization of SpringWorks' drugs. The company's established distribution networks in Europe and partnerships with rare disease advocacy groups position it to capitalize on these approvals quickly. The EU's centralized regulatory system also means that once approved, these therapies can be marketed across member states, minimizing duplication of efforts.

Investment Considerations: Timing the Catalysts

Investors should monitor two key dates: the EC's final approval of nirogacestat (Q3 2025) and mirdametinib (also Q3/Q4). Positive outcomes could trigger a revaluation of Merck's pipeline, potentially lifting its stock price. Current valuations appear conservative compared to peers in oncology and rare diseases.

Merck's trailing P/E ratio of 15.2x (as of June 2025) lags behind industry averages, suggesting room for upside. A successful EU rollout could narrow this gap as investors reassess the long-term value of its rare tumor portfolio.

Risks to Consider

Regulatory delays remain a risk. Though the CHMP's positive opinions are strong indicators, the EC could request additional data or face bureaucratic hurdles. Additionally, market adoption could lag if healthcare systems delay reimbursement decisions or prioritize cheaper alternatives.

Conclusion: A Prudent Opportunity

SpringWorks' merger with Merck and the pending EU approvals present a compelling value proposition. The drugs' first-in-class status and unmet clinical needs create a high-reward, low-competition environment. With Merck's execution capabilities and the EC's imminent decisions, now is an opportune time to position in Merck's stock. Investors should watch for catalysts in Q3 2025 and consider scaling into the stock ahead of the approvals, mindful of the risks but confident in the strategic rationale.

Investment Recommendation:
- Buy Merck KGaA (OTCMKTS: MRCYF) with a target price of €85–€90 by end-2025, reflecting EU approval-driven growth.
- Hold until the first approval announcement, then reassess based on market reaction and subsequent catalysts.

The road to value realization is clear—watch for the green light from Brussels.