Deal adds blockbuster potential as Keytruda patent cliff nears
Merck announced Wednesday it will acquire UK-based Verona Pharma for approximately $10 billion, securing access to a newly approved respiratory drug as it braces for the expiration of Keytruda’s key patents starting in 2028. Keytruda, the world’s top-selling cancer drug, generates nearly $30 billion in annual revenue, and its looming patent cliff has prompted Merck to aggressively seek new growth drivers.
This acquisition marks Merck’s largest deal since its $10.8 billion purchase of Prometheus Biosciences in 2023. CEO Rob Davis emphasized that Merck will continue pursuing “science- and value-driven” opportunities, even beyond its preferred $1 billion to $15 billion deal range, as the company navigates a critical transition period.
Ohtuvayre expected to bring multibillion-dollar sales
Verona’s lead asset, Ohtuvayre, recently received regulatory approval as a treatment for chronic obstructive pulmonary disease (COPD), also known as smoker’s lung. Though 2024 sales totaled just $42.3 million, Jefferies projects peak annual revenue could reach $3 billion to $4 billion by the mid-2030s. Merck sees Ohtuvayre as a key pillar in its strategy to mitigate the impact of declining Keytruda sales and softening demand for Gardasil, its HPV vaccine.
Merck will pay $107 per American Depository Share, a 23% premium over Verona’s last Nasdaq close. Shares of Verona soared 20% on the news, while Merck’s stock rose 2.4%, reflecting investor confidence in the deal’s long-term value.
Analysts bullish, but warn more deals needed
Industry experts widely praised the acquisition. “This looks like a complementary therapy with blockbuster potential,” said Kevin Gade of Bahl & Gaynor. BMO’s Evan Seigerman echoed the optimism but cautioned that Merck will need additional deals to ensure revenue stability post-Keytruda. Since 2021, Merck has nearly tripled its late-stage pipeline, thanks to in-house development and high-profile acquisitions like Acceleron and Prometheus.
While Ohtuvayre is unlikely to fully offset the revenue loss from Keytruda on its own, the deal is seen as a strategic step forward in rebuilding Merck’s pipeline. The company expects Ohtuvayre to surpass $400 million in sales in its first full year, with long-term upside ahead.