Verona Pharma's Merger Deal Downgraded to Neutral by H.C. Wainwright.

Verona Pharma has been downgraded to Neutral from Buy by H.C. Wainwright analyst Raghuram Selvaraju, with a price target of $107, up from $90. The downgrade comes after Merck announced it will acquire Verona for $107 per American depository share, with the firm expecting no competitors to attempt to outbid Merck.

Merck (NYSE: MRK), known as MSD outside the United States and Canada, has announced its acquisition of Verona Pharma plc (Nasdaq: VRNA) for approximately $10 billion. The acquisition price is $107 per American Depository Share (ADS), with each ADS representing eight Verona Pharma ordinary shares. The deal aims to expand Merck's pipeline and portfolio of treatments for cardio-pulmonary diseases, with a focus on chronic obstructive pulmonary disease (COPD).

The acquisition includes Ohtuvayre® (ensifentrine), a first-in-class selective dual inhibitor of phosphodiesterase 3 and 4 (PDE3 and PDE4), which was approved by the U.S. Food and Drug Administration in June 2024 for the maintenance treatment of COPD in adult patients. Ohtuvayre is the first novel inhaled mechanism for COPD treatment in over 20 years and combines bronchodilator and non-steroidal anti-inflammatory effects. It is also being evaluated in clinical trials for non-cystic fibrosis bronchiectasis.

The acquisition aligns with Merck's science-led business development strategy and is expected to drive growth into the next decade. Robert M. Davis, chairman and chief executive officer of Merck, stated, "This acquisition of Verona Pharma reflects our commitment to delivering innovative treatments to patients and executing on our science-led and value-driven business development strategy."

Verona Pharma's president and CEO, David Zaccardelli, expressed his excitement about the partnership, "Today’s announced agreement with Merck is the culmination of years of focus and determination by the Verona Pharma team advancing Ohtuvayre."

The transaction is subject to regulatory approvals and is expected to close in the fourth quarter of 2025. The capitalization of most of the purchase price will be an intangible asset for Ohtuvayre, amortized as a GAAP-only charge over the life of the product.

Investor Response

Following the announcement, H.C. Wainwright analyst Raghuram Selvaraju downgraded Verona Pharma to Neutral from Buy, with a price target of $107, up from $90. The downgrade reflects the expected acquisition price and the lack of competitive bids for the company.

References:
[1] 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/