Merck Offers $10 Billion for Verona Pharma Acquisition to Bolster Respiratory Medicine Portfolio.

Merck has offered $10 billion to acquire Verona Pharma, proposing a $107 per share price. Verona's product, Ohtu, is expected to enhance Merck's competitive edge in the respiratory drug sector. Truist has adjusted its rating for Verona Pharma to Hold from Buy, increasing its price target to $107. Merck's average target price is $101.04, with a high estimate of $138.00 and a low estimate of $82.00, implying an upside of 20.70% from the current price.

In a significant move to bolster its respiratory drug portfolio, Merck has offered to acquire Verona Pharma for approximately $10 billion. The proposed acquisition comes with a $107 per share price, a 23% premium over Verona Pharma's last Nasdaq closing price [1]. This strategic acquisition aims to enhance Merck's competitive edge in the respiratory drug sector, particularly with the addition of Verona's Ohtuvayre, a first-in-class inhaled medication recently approved for chronic obstructive pulmonary disease (COPD).

Ohtuvayre, which combines bronchodilator and non-steroidal anti-inflammatory effects, is seen as a key asset in Merck's diversification strategy. The drug is expected to generate substantial revenue, with peak annual sales projected to reach into the multibillions by the mid-2030s [1]. So far, Ohtuvayre has brought in $42.3 million in 2024 sales, and analysts expect it could cross the $400 million threshold in its first full year on the market [1]. Jefferies analyst Andrew Tsai projects the drug could generate between $3 billion and $4 billion in annual revenue at its peak [1].

The acquisition aligns with Merck's science-led business development strategy and expands its pipeline and portfolio of treatments for cardio-pulmonary diseases [2]. Merck CEO Robert M. Davis emphasized the company's continued appetite for acquisitions, noting that it remains focused on opportunities grounded in strong science and value creation [1]. The acquisition was unanimously approved by both the Merck and Verona Pharma Boards of Directors and is expected to close in the fourth quarter of 2025 [2].

Industry analysts view the Verona deal as a continuation of Merck's active investment strategy in recent years. Since 2021, the company has significantly expanded its late-stage development pipeline through internal R&D and major acquisitions [1]. Notable deals include the $11.5 billion acquisition of Acceleron Pharma and the $10.8 billion purchase of Prometheus Biosciences in 2023 [1].

Some investors remain cautiously optimistic about the acquisition. While Bahl & Gaynor's COO Kevin Gade described the acquisition as complementary to Merck's existing pipeline, others, including analysts at BMO Capital Markets, suggested that Merck will need additional assets to ensure a smooth transition beyond its flagship cancer franchise [1].

Truist has adjusted its rating for Verona Pharma to Hold from Buy, increasing its price target to $107 [3]. Merck's average target price is $101.04, with a high estimate of $138.00 and a low estimate of $82.00, implying an upside of 20.70% from the current price [3].

References:
[1] https://www.pymnts.com/cpi-posts/merck-bets-big-on-respiratory-drug-in-10-billion-verona-pharma-deal/
[2] https://www.merck.com/news/merck-to-acquire-verona-pharma-expanding-its-portfolio-to-include-ohtuvayre-ensifentrine-a-first-in-class-copd-maintenance-treatment-for-adults-and-expected-to-drive-growth-into-the-next-dec/
[3] https://www.trust.com/