Merck to Acquire Verona Pharma for $10 Billion to Expand Respiratory Drug Portfolio

Merck & Co. announced on Wednesday that it will acquire Verona Pharma, a UK-based biotechnology firm, in a deal valued at approximately $10 billion.

The acquisition marks a strategic effort by Merck to diversify its treatment offerings beyond its blockbuster cancer drug, Keytruda.

The deal gives Merck ownership of Ohtuvayre, an inhaled medication recently approved in the US to treat chronic obstructive pulmonary disease (COPD), a progressive respiratory condition commonly known as “smoker’s lung.” COPD affects over 14 million adults in the United States and is characterized by symptoms such as persistent coughing and shortness of breath.

Robert Davis, Chairman and CEO of Merck, emphasized the strategic importance of Ohtuvayre, noting:

“Ohtuvayre complements and expands our pipeline and portfolio of treatments for cardiopulmonary diseases while delivering near- and long-term growth as well as value for shareholders.”

The deal, at $107 per American Depository Share (ADS), represents a 23% premium to Verona Pharma’s previous closing price on the Nasdaq. Verona Pharma’s shares surged approximately 20% in premarket trading following the announcement, while Merck’s stock saw a slight uptick.

Merck’s interest in expanding its respiratory treatment portfolio comes as its flagship cancer treatment, Keytruda, faces patent expirations beginning in 2028. Keytruda, currently the world’s top-selling pharmaceutical product, generated nearly $30 billion in revenue last year. In anticipation of this, Merck has actively sought acquisitions to bolster its pipeline, nearly tripling its late-stage product candidates since 2021. Recent acquisitions include the $11.5 billion purchase of Acceleron in 2021 and the $10.8 billion acquisition of Prometheus Biosciences in 2023.

Analysts have forecasted strong growth potential for Ohtuvayre, estimating annual sales could exceed $3 billion, significantly higher than the drug’s reported sales of $42.3 million in 2024.

Verona Pharma CEO David Zaccardelli highlighted the potential impact of Merck’s extensive commercial capabilities, saying the acquisition would “help Ohtuvayre reach more COPD patients.”

Industry analysts generally welcomed the move. Kevin Gade, Chief Operating Officer at Bahl & Gaynor, noted:

“Given their home run with Prometheus and Winrevair, this (Ohtuvayre) looks like a potential complementary therapy.”

However, BMO Capital Markets analyst Evan Seigerman added cautious optimism, pointing out that Merck must continue diversifying its portfolio to offset the revenue decline anticipated once Keytruda’s patents expire.

The acquisition has been approved by the boards of both Merck and Verona Pharma and is expected to close by the fourth quarter, subject to shareholder approval and legal sanctions in England and Wales.