American pharmaceutical giant Merck & Co. (MRK) is nearing a $10 billion deal to acquire Verona Pharma PLC (VRNA), according to a Financial Times report. Verona is a biotech company specializing in the development of drugs for lung diseases. Its commercial drug, Ohtuvayre, is available in the U.S. for the treatment of chronic obstructive pulmonary disease (COPD). Analysts predict that sales of Ohtuvayre could peak at $4 billion by the mid-2030s.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
Merck’s decision to buy Verona comes amid the potential for declining sales of its blockbuster cancer drug, Keytruda, which generated $30 billion in revenue last year. Keytruda is set to lose its patent protection in 2028, after which biosimilar competition will enter the market and cause Merck’s sales to decline sharply. Moreover, pharmaceutical companies are also expected to be affected by the U.S. government’s price-setting rules, which will take effect in 2028. Merck is seeking to offset these headwinds by acquiring a company with an established revenue stream.
Merck Is Paying a High Premium for Verona
According to the terms of the deal, Merck would pay $107 per American depositary share for Verona, representing a 23% premium to VRNA’s closing price on July 8. Discussions between the two companies are at an advanced stage, and the deal could be announced today.
Notably, Q1 sales of the non-steroid-based drug Ohtuvayre have already exceeded analysts’ expectations, and its international launch could be fast-tracked under Merck’s strong reputation. The drug is also being tested for the treatment of other lung-related diseases such as bronchiectasis, asthma, and cystic fibrosis, as well as in combination with another COPD drug. A breakthrough in any of these treatments could further expand the scope of Ohtuvayre over the years. Meanwhile, Merck boasts a solid pipeline of potential drugs that are set to hit the market in the coming years.
Merck is actively engaging in strategic acquisitions and licensing deals with biotech and pharmaceutical companies. In addition to the impending patent loss for Keytruda, Merck also faces a slowdown in sales of its popular human papillomavirus vaccine, Gardasil, in China. Following Trump’s tariff policy, Merck also slashed its fiscal 2025 sales outlook.
Is Merck a Good Buy Now?
Analysts remain divided about Merck’s long-term stock outlook. On TipRanks, MRK stock has a Moderate Buy consensus rating based on nine Buys, seven Holds, and one Sell rating. Also, the average Merck price target of $103.25 implies 26.9% upside potential from current levels. Year-to-date, MRK stock has lost 16.7%.
