Revolution Medicines shares slide after Merck ends $30B takeover talks
Price disagreement scuttles potential acquisition, with biotech's valuation now tied to standalone clinical pipeline
Revolution Medicines shares slumped in premarket trading on Monday after Merck & Co. terminated acquisition discussions that could have valued the cancer drug developer at approximately $30 billion, according to reports from The Wall Street Journal. The negotiations, which had progressed through much of January, stalled over disagreements on valuation between the two companies.
The breakdown of talks represents a sharp reversal for Revolution Medicines, whose stock had surged from roughly $80 to approximately $118 earlier this month amid intensifying speculation that the Redwood City, California-based biotech would become an acquisition target. The company's market capitalization, which stood at around $16 billion before takeover rumors emerged, had expanded to more than $22 billion by the end of last week as investors priced in a potential takeover premium.
Merck's interest in Revolution Medicines was driven by strategic necessity rather than opportunism. The pharmaceutical giant faces a looming patent cliff for Keytruda, its blockbuster cancer immunotherapy, beginning in 2028. Analysts estimate Merck could lose $18 billion in Keytruda sales over five years following patent expiration, creating urgency to bolster its oncology pipeline with transformative assets.
At the center of Merck's acquisition interest was daraxonrasib, Revolution Medicines' experimental therapy targeting RAS-addicted cancers. RAS has historically been considered "undruggable" in oncology due to difficulties in designing effective treatments that block this critical molecular pathway. Daraxonrasib has received Breakthrough Therapy Designation from the FDA and comes with a non-transferable regulatory voucher for pancreatic cancer, which could expedite development and review.
The potential of daraxonrasib is substantial. Analysts at Mizuho Securities predict the pancreatic cancer candidate alone could generate up to $10 billion in annual global sales by 2035 if clinical results demonstrate both efficacy and safety. Phase 3 enrollment for daraxonrasib is expected to complete this year, with data anticipated in 2026—making it a pivotal catalyst for the company's standalone valuation.
However, the $30 billion price tag that reportedly emerged in negotiations proved too rich for Merck's appetite. Chief Executive Officer Robert Davis had indicated at the J.P. Morgan Healthcare Conference earlier this month that the company's recent acquisition focus had primarily been on transactions valued at $15 billion or less. While Davis left the door open to larger deals, he emphasized Merck's "disciplined approach to capital deployment."
The termination of Merck talks marks a strategic reset for Revolution Medicines' valuation. The biotech, which reported trailing twelve-month revenue of $742,000, will now be assessed on its intrinsic merits rather than acquisition potential. With a price-to-sales ratio exceeding 9,000 times trailing revenue, the stock's valuation is heavily dependent on future clinical success.
Despite the setback, analyst sentiment remains overwhelmingly bullish on Revolution Medicines. All 20 analysts covering the stock rate it as either a buy or strong buy, with an average target price of $108.58. The oncology market remains one of pharmaceutical's most profitable segments, with global sales exceeding $240 billion annually and treatments often commanding six-figure price tags.
Earlier in January, there were reports that AbbVie had engaged in advanced discussions with Revolution Medicines, though the Chicago-based pharmaceutical company subsequently denied these talks. The possibility of renewed negotiations with Merck or interest from other suitors cannot be ruled out, given the strategic importance of RAS-targeting therapies in oncology.
For now, investors' attention will shift to Revolution Medicines' clinical pipeline and its ability to deliver on the promise of daraxonrasib. The company's 52-week range of $29.17 to $124.49 underscores both the volatility inherent in biotech stocks and the transformative potential of its drug candidates. As takeover speculation fades, the biotech's future will depend not on who acquires it, but on whether its experimental therapies can successfully address some of cancer's most challenging targets.