Revolution Medicines Stock Sinks After Merck Deal Talks Collapse

What happened

Merck & Co. has reportedly ended acquisition discussions with Revolution Medicines due to valuation disagreements, causing the stock to decline. This mirrors prior volatility from collapsed AbbVie talks, which the DeepValue report highlighted as a key driver of fragile M&A sentiment. The failure underscores the report's warning that M&A premiums are ephemeral and dependent on clinical execution, not speculation. Revolution's $19 billion valuation remains tethered to unproven Phase 3 trials for daraxonrasib, with a $1 billion annual burn rate and encumbered cash from royalty financing. Consequently, investors must now focus on fundamental catalysts like the 2026 RASolute 302 readout, rather than fleeting takeout hopes.

Implication

Near-term, the stock may face sustained selling pressure as M&A optimism evaporates, aligning with the DeepValue report's caution on crowded ownership. Long-term value hinges entirely on successful Phase 3 data for daraxonrasib in PDAC and NSCLC, with failure likely driving shares toward the $60 bear case. The company's $1 billion annual burn and royalty obligations limit flexibility without a strategic deal, increasing reliance on pivotal trials. This event validates the report's assessment of fragile sentiment and reinforces the need for clinical evidence over speculation. Investors should consider trimming positions above $115, as recommended, and await clearer data signals before reevaluating exposure.

Thesis delta

The DeepValue report already flagged M&A optionality as a risky, non-fundamental component of the investment thesis. This event confirms that risk, shifting the thesis slightly towards greater emphasis on clinical execution over speculative takeout scenarios. However, no fundamental change in the underlying high-risk profile; the call remains to trim above $115 and reassess after pivotal data in 2026.