Merck has finalized a significant $10 billion acquisition of Verona Pharma, a biotech company recognized for its first-in-class drug that is already making strides in treating a common lung disorder while showing potential for other respiratory conditions. This acquisition underscores the importance of this drug’s multi-blockbuster potential for Merck, which is actively seeking new assets to counterbalance the anticipated steep decline in revenue as its leading product faces the impending patent expiration, commonly referred to as the patent cliff.
Based in London, Verona has its American depositary shares listed on the Nasdaq. Under the terms of the acquisition announced on Wednesday, Merck will pay $107 for each share, reflecting a substantial premium of over 23% compared to Verona’s closing stock price on the preceding Tuesday. Notably, when Verona went public back in 2017, it set its share price at $13.50, indicating a significant increase in value through this acquisition.
The cornerstone asset of Verona is Ohtuvayre, a drug that received FDA approval last year as a maintenance treatment for chronic obstructive pulmonary disease (COPD). This inhaled medication features the active pharmaceutical ingredient ensifentrine, which is a small molecule employing a dual mechanism of action. It not only inhibits PDE4 enzymes to reduce inflammation but also blocks PDE3 enzymes to enhance airway dilation. This innovative dual action presents exciting possibilities for treating other respiratory disorders, with mid-stage clinical trials currently exploring its efficacy in conditions such as asthma, cystic fibrosis, and non-cystic fibrosis bronchiectasis.
The indication for bronchiectasis is particularly noteworthy, as this chronic lung condition is on the rise and currently lacks FDA-approved treatment options, though this status may soon change. The Insmed drug brensocatib is presently under FDA review for treating non-CF bronchiectasis, with a decision expected by August 12. Analysts predict that this Insmed drug could also emerge as a blockbuster, and the addition of Ohtuvayre positions Merck to tap into the growing market for bronchiectasis treatments.
With the approval of Ohtuvayre in June 2024, this marked the introduction of the first new inhaled COPD medication with a novel mechanism of action in two decades. Following this, Sanofi’s Dupixent and Nucala from GSK — both biologic drugs administered via injection — have notably expanded their indications to include COPD driven by type 2 inflammation, thereby providing new treatment possibilities for patients.
Market response for Ohtuvayre has been promising, with projections indicating that it is likely to become a blockbuster drug. In the first quarter of this year, Verona reported that approximately 25,000 prescriptions for Ohtuvayre were filled for COPD, alongside a significant 50% increase in the number of prescribers compared to the previous quarter. This resulted in a revenue of $71.3 million in the first quarter, a notable rise from $36.6 million in the preceding quarter.
In an interview with MedCity News last year, Verona CEO David Zaccardelli expressed optimism that the clinical and regulatory validation of PDE3 and PDE4 inhibition through a single molecule would inspire other pharmaceutical companies to explore similar drug development pathways. He emphasized Verona’s commitment to commercializing Ohtuvayre in the U.S., while also seeking partnerships for its development and commercialization in international markets. Currently, Verona’s only partner is Nuance Pharma, based in Shanghai, which acquired rights to the small molecule for Greater China in 2021. In the announcement regarding Merck’s acquisition, Zaccardelli noted that the pharmaceutical giant’s extensive commercial footprint and clinical expertise would facilitate broader access to Ohtuvayre for COPD patients.
Merck’s leading product is the cancer immunotherapy Keytruda, which generated an impressive $29.4 billion in revenue last year, representing over a 17% increase compared to the previous year. However, with Keytruda’s patent set to expire in 2028, Merck faces the critical task of identifying commercialized assets or late-stage development drugs capable of filling the anticipated revenue gap.
In a recent investor presentation, Merck indicated that Ohtuvayre presents a multibillion-dollar commercial opportunity extending into the mid-2030s. The company positioned the Verona acquisition as a strategic enhancement to its cardio-pulmonary portfolio, which is currently led by Winrevair, a drug approved by the FDA last year for treating pulmonary arterial hypertension. Winrevair emerged from Merck’s $11.5 billion acquisition of Acceleron Pharma in 2021. Following the spin-off of its older cardiovascular drugs to Organon earlier that year, Winrevair has become Merck’s premier cardio product, accounting for $419 million in sales in 2024 and is also projected to achieve blockbuster status.
“Ohtuvayre complements and enhances our pipeline of therapies for cardio-pulmonary diseases while providing both near- and long-term growth opportunities and value for our shareholders,” stated Merck CEO Robert Davis in a prepared statement. “This unique, first-in-class treatment directly addresses a significant unmet need for COPD patients who continue to experience symptoms, due to its distinctive combination of bronchodilatory effects and non-steroidal anti-inflammatory properties.”
The acquisition of Verona by Merck has received approval from the boards of directors of both companies. However, the deal is still pending approval by Verona’s shareholders and relevant regulatory bodies. The expectation is to finalize the transaction in the fourth quarter of this year.
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