Merck Acquires Verona Pharma for $100 Billion to Boost Respiratory Treatments

Merck & Co., Inc. (MRK.US) announced on Wednesday that it will acquire Verona Pharma plc (VRNA.US) for approximately $100 billion. This strategic move aims to bolster Merck's respiratory treatment business and reduce its reliance on its flagship cancer treatment drugs. The acquisition of Verona Pharma, a UK-based pharmaceutical company, is expected to enhance Merck's capabilities in developing innovative therapies for respiratory diseases, thereby strengthening its position in the global pharmaceutical market. This acquisition is part of Merck's broader strategy to diversify its product portfolio and mitigate risks associated with over-reliance on a single therapeutic area. By integrating Verona Pharma's expertise and pipeline, Merck aims to accelerate the development of new treatments for respiratory conditions, which are a significant unmet medical need. The deal underscores Merck's commitment to advancing respiratory health and improving patient outcomes through innovative therapies.

Keytruda, one of the world's best-selling drugs, generated nearly $30 billion in revenue last year. With its patent set to expire in 2028, Merck is intensifying its efforts to adjust its product mix. Since 2021, the company has nearly doubled its late-stage development pipeline. Merck is pursuing both internal research and development and strategic acquisitions to expand its business. For instance, in 2021, the company acquired Acceleron Pharmaceuticals for $11.5 billion, gaining access to the pulmonary arterial hypertension drug Winrevair.

Wednesday's acquisition marks Merck's first deal of the year and its largest since acquiring Prometheus Biosciences for $10.8 billion in 2023. The acquisition of Verona Pharma grants Merck access to Ohtuvayre, a drug approved by the U.S. Food and Drug Administration (FDA) in 2023 for the treatment of chronic obstructive pulmonary disease (COPD). This inhaled medication generated $42.3 million in sales in 2024, with analysts projecting annual sales to exceed $3 billion.

Merck will acquire Verona Pharma at a price of $107 per American Depositary Share (ADS), representing a 23% premium over Verona Pharma's closing price on Tuesday. Kevin Gade, Chief Operating Officer of Bahl & Gaynor, commented, "Merck's acquisition looks promising at first glance. Given their success with Prometheus and Winrevair, Ohtuvayre appears to be a complementary therapy." Evan Seigerman, an analyst at BMO Capital Markets, shares this view but cautions that additional measures are needed to ensure a smooth transition in revenue post the Keytruda patent expiry, avoiding a significant drop.