Viralytics shoots higher after Merck lobs $500m bid

A $502m offer from Merck has lit a rocket under Viralytics, with the cancer drug developer’s shares soaring 176pc.

the Merck logo on a stained glass panel at a Merck company building in the US. (AP Photo/Mel Evans)

Global pharmaceutical giant Merck has swooped on Australian junior Viralytics in a $502 million deal to secure its immunotherapy cancer drug, which is based on a common cold virus.

MSD, which is the tradename for Merck outside of the US, has bid $1.75-cash-per-share, which is a 160 per cent premium to the one month volume weighted average price of Viralytics’ (VLA) shares.

Shares in Viralytics have soared on the news and are up 176 per cent to $1.70.

Viralytics’ flagship treatment is its Cavatak drug, which uses a formulation of a common cold virus that has been shown to preferentially infect and kill cancer cells.

The drug is being tested in combination with well-known cancer drug Keytruda, for use in melanoma, prostate, lung and bladder cancers.

“This proposed acquisition culminates years of dedicated work by the Viralytics team and represents an opportunity for significant value creation for our shareholders,” Malcolm McColl, chief executive of Viralytics, said.

The board of directors of Viralytics has unanimously recommended that its shareholders back the deal.

“Viralytics is proud to have progressed its lead investigational candidate Cavatak to phase one and phase two clinical trials and, we believe that MSD, the leader in immuno-oncology, is best suited to advance Cavatak for the benefit of patients globally, and to realise its potential,” Dr McColl said.

Viralytics’s largest shareholder, Lepu Medical Group, which holds a 13 per cent stake, intends to vote in favour of the deal.

“Lepu Medical Group acknowledges this is an attractive opportunity for Viralytics and, as such, is supportive of the transaction,” Dr Pu, chairman of Lepu Medical Group, said.

Roy Baynes, senior vice president and head of global clinical development, chief medical officer, Merck research laboratories, said Viralytics’s approach of engaging the innate immune system to target and kill cancer cells complemented Merck’s immuno-oncology strategy.

“The strategy is focused on the rapid advancement of innovative monotherapy approaches and synergistic combinations to help the broadest range of cancer patients,” Dr Baynes said.