The acquisition eases pressure on Merck to replace that revenue but does not eliminate the need for further deals. — Reuters
NEW YORK: Merck says it will acquire London-based Verona Pharma for about US$10bil, gaining a promising respiratory treatment as it faces pressure to diversify beyond its blockbuster cancer drug Keytruda.
Merck is set to lose revenue from Keytruda, the world’s top-selling drug with nearly US$30bil in annual sales, as key patents begin to expire in 2028.
The acquisition, the first this year, eases pressure on Merck to replace that revenue but does not eliminate the need for further deals.
“We continue to assess science and value-driven business development opportunities with urgency,” chief executive Rob Davis said, adding he still considers going beyond his US$1bil to US$15bil preferred target range for future deals.
Merck projects peak multibillion-dollar annual revenue by the mid-2030s from Verona’s Ohtuvayre, a newly approved treatment for chronic obstructive pulmonary disease.
The acquisition is seen as a positive step for Merck amid concerns over Keytruda’s looming patent cliff and slowing demand for its HPV vaccine Gardasil, said James Harlow, senior vice-president at Novare Capital Management.
Shares of Merck closed nearly 3% higher at US$83.71 on Wednesday, while US-listed shares of Verona were up about 21% at US$104.77.
“We expect more deals like this from Merck as it continues to position the company for growth post-Keytruda,” Harlow added.
Since 2021, the company has nearly tripled its late-stage pipeline, combining in-house development with acquisitions such as the US$11.5bil purchase of Acceleron in 2021, which netted the pulmonary arterial hypertension drug Winrevair.
Wednesday’s acquisition is Merck’s largest since its US$10.8bil buyout of Prometheus Biosciences in 2023.
The inhaled drug generated sales of US$42.3mil last year and analysts have estimated it could exceed US$3bil in annual revenue.
Jefferies analyst Andrew Tsai projects peak annual sales from Ohtuvayre of US$3bil to US$4bil by the 2030s. The drug is on track to surpass US$400mil in its first full year, he said.
Merck will pay US$107 per American depository share for Verona, a premium of 23% to the London-based company’s last close on the Nasdaq.
“Merck deal looks good at first glance. Given their home run with Prometheus and Winrevair, Ohtuvayre looks like a potential complementary therapy,” said Kevin Gade, chief operating officer at investment firm Bahl & Gaynor.
His sentiment was shared by others including BMO Capital Markets analyst Evan Seigerman.
However, Seigerman added a note of caution, saying more is needed to assure investors of a smooth transition of revenue without a strong decline after Keytruda’s patent expiry.
The Financial Times first reported Merck was nearing a deal to acquire Verona. — Reuters
