Merck & Co., the second-biggest U.S. drug company, agreed to pay as much as $500 million for closely held SmartCells Inc., maker of an experimental diabetes treatment designed to better regulate insulin in the blood.
SmartCells will receive upfront cash plus additional payments if products developed from the treatment meet clinical and regulatory goals, Whitehouse Station, New Jersey-based Merck said in a statement today. Investors in Beverly, Massachusetts- based SmartCells may get more money depending on future sales, according to the statement.
Diabetes drugs led by Januvia, Merck’s third-biggest seller, generated $2.58 billion in revenue last year, almost 10 percent of the company’s sales. SmartCells fits Merck’s strategy of augmenting existing products with small deals while chasing opportunities outside the U.S., said Les Funtleyder, a Miller Tabak & Co. portfolio manager in New York.
“We obviously know diabetes is a big, big problem, both here in the U.S. and in emerging markets,” Funtleyder said in a telephone interview. “This is in their wheelhouse. They’re familiar with the class of drugs, familiar with the disease, so it seems like a good deal.”
Merck rose 16 cents, or less than a percent, to $35.22 in New York Stock Exchange composite trading at 4 p.m. The shares have declined 4.3 percent in 12 months.
The drugmaker has announced 14 pending or completed acquisitions in the past five years, with an average premium of 73 percent. The largest was its 2009 purchase of Schering-Plough for $51 billion.
Pfizer Inc., based in New York, is the biggest U.S. drugmaker.