Merck to Acquire Verona Pharma for $10B, Expanding Respiratory Pipeline Amid Keytruda Patent Cliff

Merck (MRK) announced a $10 billion acquisition of UK-based Verona Pharma (VRNA), adding the promising respiratory drug Ohtuvayre to its pipeline as it continues preparing for the eventual loss of patent protection on its blockbuster cancer drug Keytruda. The deal, expected to close in Q4 2025, marks Merck’s largest M&A move since its $10.8 billion acquisition of Prometheus Biosciences in 2023 and is another signal that the company remains aggressive in reshaping its post-Keytruda future.

WATCH: How China Took the Market—and How the U.S. Gave It Away

Under terms of the agreement, Merck will pay $107 per American Depositary Share (ADS) of Verona, representing a 23% premium to the company’s prior Nasdaq close. The deal was unanimously approved by both companies’ boards and will be structured as a UK-law scheme of arrangement. If terminated under certain conditions, Verona will owe Merck a $100 million break-up fee. U.S. regulatory review under the Hart-Scott-Rodino Act and approval from UK courts and Verona shareholders remain outstanding.

The strategic rationale centers around Verona’s flagship product, Ohtuvayre (ensifentrine), a newly approved treatment for chronic obstructive pulmonary disease (COPD), often referred to as “smoker’s lung.” The drug, which combines bronchodilation with anti-inflammatory effects via selective inhibition of phosphodiesterase 3 and 4 (PDE3/PDE4), is the first novel inhaled COPD therapy approved by the FDA in over two decades. Ohtuvayre generated $42.3 million in sales in the first half of 2024 and is forecast by analysts to surpass $3 billion in annual revenue by the mid-2030s, establishing itself as a potential blockbuster.

Merck CEO Rob Davis emphasized the acquisition's strategic fit during the company’s announcement, calling Ohtuvayre “a multibillion-dollar opportunity that will fuel growth well into the next decade.” He reiterated that Merck is “urgently assessing additional value-creating opportunities” and is open to further acquisitions in the $1 billion to $15 billion range—and potentially beyond. Notably, Davis mentioned that this is just the beginning of Merck’s 2025 M&A push, and industry chatter suggests multiple targets may already be under consideration.

Among rumored prospects is MoonLake Immunotherapeutics (MLTX), a Swiss biotech focused on inflammatory diseases. According to the Financial Times, Merck submitted a nonbinding offer exceeding $3 billion earlier this year, which was initially rejected but could be revived. MoonLake’s lead drug, sonelokimab, is in late-stage trials for hidradenitis suppurativa and psoriatic arthritis, two chronic inflammatory conditions with multi-billion-dollar potential. The company is said to be advised by Goldman Sachs and Morgan Stanley, and it may attract additional suitors.

Another frequently cited candidate is Exelixis (EXEL), a U.S.-based oncology firm with a strong pipeline and commercial products in renal cell carcinoma. While Merck has not confirmed discussions, recent industry speculation suggests that Exelixis may be a target as Merck looks to maintain its oncology leadership even after Keytruda’s decline.

The acquisition of Verona aligns closely with Merck’s recent pattern of bolt-on acquisitions aimed at cardio-pulmonary and immunological therapies. In 2021, it bought Acceleron Pharma for $11.5 billion, gaining access to Winrevair, a late-stage treatment for pulmonary arterial hypertension. In 2023, Prometheus Biosciences brought inflammation and immunology assets, further diversifying the company’s therapeutic base.

Market reaction to the Verona news was positive. Verona’s shares jumped over 20% in premarket trading, while Merck shares edged slightly higher, indicating investor support for the deal. Analysts at BMO Capital praised the move as a smart complement to Merck’s growing respiratory franchise. However, some noted that the real challenge remains securing a smooth revenue bridge beyond 2028, when Keytruda’s patent begins to expire in key markets.

Analysts were quick to note that Verona ticks several boxes investors now expect in large-cap pharma M&A: a near-commercial or newly commercial asset, strong data backing, and a scalable revenue opportunity that slots into existing commercial channels. Importantly, Ohtuvayre’s first-in-class mechanism and long runway for exclusivity make it a highly defensible asset.

The transaction reflects broader industry dynamics as large-cap pharmaceutical firms look to shore up pipelines in the face of patent cliffs and pricing pressures. With valuations for late-stage biotechs remaining relatively attractive, Merck’s appetite for M&A appears undiminished—and potentially contagious. Other big pharma names like Pfizer, Bristol Myers Squibb, and AbbVie may feel pressure to respond in kind.

In sum, Merck’s acquisition of Verona Pharma bolsters its respiratory business, secures a much-needed growth driver for the 2030s, and reinforces the company’s commitment to an externally driven innovation strategy. With more M&A expected and CEO Davis openly signaling a willingness to go beyond the current $15 billion range, the biotech space may see more deal activity as the year unfolds—and Merck may continue to lead the charge.