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Merck (MRK) Unit to Buy Elanco's Aqua Business for $1.3B

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Merck’s (MRK - Free Report) Animal Health unit, known as Merck Animal Health, announced that it has entered into an agreement with Elanco Animal Health Incorporated (ELAN - Free Report) to acquire the latter’s aqua business for $1.3 billion in cash.

The acquisition of Elanco Animal Health’s aqua business will add an innovative portfolio of medicines and vaccines, nutritionals and supplements for aquatic species, two related aqua manufacturing facilities in Canada and Vietnam, and a research facility in Chile to Merck’s Animal Health business unit.

The transaction is expected to be completed by mid-2024, subject to customary closing conditions.

Shares of Merck have rallied 19.4% in the past year compared with the industry’s increase of 22.4%.

Zacks Investment ResearchImage Source: Zacks Investment Research

The acquisition will bring in products like Clynav, a new-generation DNA-based vaccine that protects Atlantic salmon against pancreas disease, and Imvixa, an anti-parasitic sea lice treatment. The acquisition also complements Merck Animal Health’s warm water vaccine portfolio by adding a portfolio of water treatment products for warm water production.

Additionally, the DNA-based vaccine technology has the potential to expedite the development of novel vaccines to address the unmet needs of the aqua industry.

We note that Merck’s Animal Health business is a key contributor to its top-line growth.

In 2023, the Animal Health segment generated revenues of $5.63 billion, up 1% year over year (3% excluding Fx impact). The company is recording above-market growth and a lucrative acquisition like this will help in augmenting the business further.

Zacks Rank & Stocks to Consider

Merck currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the healthcare sector are Kodiak Sciences Inc. (KOD - Free Report) and Puma Biotechnology, Inc. (PBYI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, estimates for Kodiak Sciences’ 2024 loss per share have narrowed from $3.70 to $3.66. In the past year, shares of KOD have plunged 45.8%.

Kodiak Sciences beat estimates in two of the last four quarters and missed the same on the remaining two occasions. KOD delivered a four-quarter average earnings surprise of 4.33%.

In the past 60 days, estimates for Puma Biotechnology’s 2024 earnings per share have improved from 64 cents to 69 cents. In the past year, shares of PBYI have risen 2.1%.

Earnings of Puma Biotechnology beat estimates in three of the last four quarters while missing the same on the remaining occasion. PBYI delivered a four-quarter average earnings surprise of 76.55%.

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