Merck data and a tumbling stock price cost Armo’s investors $320M-plus in Eli Lilly buyout

Peter Van Vlasselaer

Usually, being patient in an M&A deal is a big help to the seller. You never take the first offer. You always want more.

In Armo’s case, though, that first offer turned out to be significantly better than the final deal that was left on the table from Eli Lilly.

The biotech spelled out the back-and-forth about its sale in an SEC filing this week, starting with a note that the top execs turned out at JPMorgan with the clear message that they were up for a buyout offer.

Beth Seidenberg

In early March, with its stock trading high in the 40s, a certain bidder came along to start the process with a $60 per share bid. Armo’s stock price was $47.80, and execs began to drop some hints that they were in play while telling their bidder they wanted more. By March 23rd, with another company crunching the numbers, Company A came back with a nonbinding offer to bid in the $60-$65 range.

The stock, though, was trending down, closing that day at $38.96.

A few days later, Eli Lilly got involved. But the stock was still headed south. On April 15, Armo told Lilly they’d take $55.

Then, on April 16, everything went to hell. Merck published its KEYNOTE-189 data, to considerable applause from analysts who scored it another big win on lung cancer, trumping Bristol-Myers’ rival.

Armo’s shares didn’t look so hot in light of Merck’s domination, and the stock sank to $28.96; the bids began to drop, and the second of the four interested parties backed away from the bargaining table rather than offer a number. On May 7 Lilly came back, dropping its offer to $48, then bumping it to $50 the next day — not far from the early March price.

The difference from that original tentative bid was $320 million.

Armo CEO Peter Van Vlasselaer isn’t complaining publicly, though. He’s selling stock worth $40 million in the deal. Beth Seidenberg and Kleiner Perkins came through with $213 million and OrbiMed’s stake is worth $206 million.

Now Eli Lilly gets to play on the same field as Merck, and right now Merck has the dominant team.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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