Merck & Co. has agreed to acquire Verona Pharma for $10 billion, the companies said, in a deal designed to expand the pharma giant’s pipeline and portfolio of cardio-pulmonary disease treatments in order to shore up revenues ahead of its two biggest blockbuster franchises losing patent exclusivity in the coming years.
London-based Verona—which also has U.S. offices in Raleigh, NC, and Savannah, GA—markets Ohtuvayre® (ensifentrine), a first-in-class selective dual inhibitor of phosphodiesterase 3 and 4 (PDE3 and PDE4) that combines bronchodilator and non-steroidal anti-inflammatory effects. Ohtuvayre won FDA approval last year as a maintenance treatment for chronic obstructive pulmonary disease (COPD) in adults, and is also being assessed in clinical trials as a potential treatment for non-cystic fibrosis bronchiectasis.
“Ohtuvayre complements and expands our pipeline and portfolio of treatments for cardio-pulmonary diseases while delivering near- and long-term growth as well as value for shareholders,” Merck chairman and CEO Robert M. Davis said in a statement.
Ohtuvayre generated $42.3 million in revenue last year, of which nearly 87% ($36.6 million) consisted of net product sales generated during the fourth quarter alone, following the drug’s launch in August 2024. Ohtuvayre’s sales continued its strong momentum during the first quarter as Verona generated $71.3 million in total net revenue, nearly double (95%) its Q4 total, accounting for nearly all of the company’s $76.3 million in Q1 revenue.
“Since launching Ohtuvayre in August 2024 we have seen rapid and accelerating uptake in the United States. We believe Merck’s commercial footprint and industry-leading clinical capabilities will help accelerate the potential of Ohtuvayre to reach more patients living with COPD,” stated David Zaccardelli, Verona’s president and CEO. “This agreement will enable the strong launch trajectory of this important medicine and provide value to Verona Pharma shareholders.”
“$3B–$3.5B” peak sales potential
At $10 billion, the deal value “suggests $3–3.5B+ in peak sales potential (based on a 3x multiple), which could be conservative as Ohtuvayre is in the midst of having the strongest COPD launch in history,” commented Andrew Tsai, an equity analyst with Jefferies, in a research note.
Tsai last month raised Jefferies’ peak sales projection for Ohtuvayre by $1 billion to $4 billion, based on a survey of 40 high-prescribers of COPD drugs that included pulmonologists, nurse practitioners, physician assistants, and primary care doctors.
“Docs foresee the drug to capture a 20%+ market share, translating to $20B+ in peak sales in theory (vs conservative $2.5–3B),” Tsai observed in a June 22 research note. “Importantly, (+) [positive] feedback is remarkably consistent by type of physician (affirms broad use case).”
Such strong sales projections will enable Merck to recoup revenues it expects to lose as the two biggest blockbuster franchises face loss of patent exclusivity in the coming years.
Gardasil/Gardasil 9 (Human Papillomavirus Quadrivalent (Types 6, 11, 16, and 18) and Keytruda® (pembrolizumab) will all see their U.S. patents start to expire in 2028, though Keytruda is protected by two additional patents in the compound family that have an additional year of exclusivity—patents that Merck cautioned in its Form 10-K annual filing for 2024 that it “expects that they will be the subject of litigation in the future.”
Keytruda was last year’s top-selling drug with sales of $29.482 billion, while Gardasil/Gardasil 9 racked up $8.583 billion. During the first quarter, Keytruda sales rose 4% year-over-year, to $7.205 billion from $6.947 billion, while Gardasil sales nosedived 41% year-over-year, to $1.327 billion from $2.249 billion.
Merck blamed Gardasil’s slumping sales primarily due to lower demand in China, partially offset by higher demand in most regions of the world, particularly in Japan, plus higher pricing and demand in the United States. Excluding China, sales of Gardasil grew 14% (16% after excluding the impact of foreign exchange).
Foreseeing M&A growth
Merck’s planned acquisition of Verona comes less than a month after the pharma reportedly pursued an even bigger acquisition deal: The Financial Times, citing unnamed sources, reported June 2 that MoonLake Immunotherapeutics had rejected an initial acquisition offer by Merck for more than $3 billion. Both companies declined to comment on the report, which sparked a 31% surge in MoonLake’s shares.
Speaking on the company’s first-quarter earnings call in April, Davis told analysts that Merck was very much interested in growing through mergers and acquisitions (M&A) despite an uncertain economic climate that has largely dampened dealmaking among biopharmas.
“I am confident that you are going to see us get some stuff done as we move forward because we’ve got things in the queue that we’re looking for,” Davis said, according to Merck’s transcript of the call.
The deal is Merck’s third-largest acquisition, having purchased Acceleron Pharma in 2021 for approximately $11.5 billion, followed two years later by the approximately $10.8 billion buyout of Prometheus Biosciences.
At $107 per American Depository Share (ADS), each of which represents eight Verona Pharma ordinary shares, the deal represents a 23% premium over Verona’s closing price yesterday of $86.86. Verona’s ADSs jumped 21% in early trading Wednesday, to $104.79 as of 10:15 a.m.
The boards of Merck and Verona have both approved the deal, which is subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act, approval of Verona Pharma shareholders, sanction by the High Court of Justice of England and Wales, and other customary conditions.
The acquisition is expected to close in the fourth quarter of this year, and will result in the capitalization of most of the purchase price as an intangible asset for Ohtuvayre, which will be amortized as a GAAP-only charge over the life of the product.
“This acquisition of Verona Pharma reflects the commitment we have to delivering innovative treatments to patients and our ability to execute on our science-led and value-driven business development strategy,” Davis added.
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