Street View: Merck's Verona acquisition fits the script

Merck MRK.N said on Wednesday it will acquire UK-based Verona Pharma VRNA.O I9SAy.F for about $10 billion, gaining a promising respiratory treatment as it faces pressure to diversify beyond its blockbuster cancer drug Keytruda

MRK is set to lose revenue from Keytruda, the world's top-selling drug with nearly $30 billion in annual sales, as key patents begin to expire from 2028

Co projects peak multibillion-dollar annual revenue by the mid-2030s from Verona's Ohtuvayre, a newly approved treatment for chronic obstructive pulmonary disease

COMPLEMENTARY AND FITS WELL

J.P.Morgan sees VRNA as a solid transaction for Merck, adding a de-risked asset to the company's portfolio with peak sales potential of $3 bln to $4 bln and patent exclusivity through the mid-2030s

BofA Global Researh says "the deal is a reasonable one: a novel, complementary asset, with substantial future value realized across the period when Keytruda experiences biosimilar competition"

BofA, however, flags Merck will need more than one $3–5 billion revenue stream to offset concerns over the looming biosimilar competition to Keytruda

Berenberg likes the deal because the drug's (Ohtuvayre) "novel mechanism of action" fits well with Merck's cardio-pulmonary therapeutic focus

Wolfe Research says the two companies are complementary and that Merck has the scale and reach to expand Ohtuvayre's prescriber base