In a bold move to diversify its pharmaceutical portfolio, Merck announced on Wednesday, July 9, 2025, its acquisition of UK-based Verona Pharma for approximately $10 billion. This strategic purchase marks Merck's first acquisition of the year and is a significant step in expanding its respiratory treatment offerings, particularly with the addition of the novel COPD drug Ohtuvayre® (ensifentrine).
The deal, finalized through a definitive agreement, involves Merck paying $107 per American Depository Share (ADS) of Verona Pharma, with each ADS representing eight ordinary shares. This price reflects a 23% premium over Verona's last closing price on the Nasdaq, underscoring Merck's commitment to securing this promising asset. Shares of Verona surged 20% in premarket trading following the announcement, while Merck's shares edged slightly higher, signaling positive investor sentiment.
Ohtuvayre®, approved by the U.S. Food and Drug Administration in June 2024, is a first-in-class inhaled therapy for the maintenance treatment of chronic obstructive pulmonary disease (COPD) in adults. It represents the first novel inhaled mechanism for COPD treatment in over two decades, combining bronchodilator and non-steroidal anti-inflammatory effects in a single molecule. Since its launch in August 2024, Ohtuvayre has seen rapid and accelerating uptake in the U.S., generating sales of $42.3 million in 2024 alone.
Merck's acquisition of Verona Pharma not only expands its cardio-pulmonary pipeline but also aligns with the company's science-led and value-driven business development strategy. Robert M. Davis, Merck's chairman and chief executive officer, highlighted the significance of this move, stating, "This acquisition of Verona Pharma reflects the commitment we have to delivering innovative treatments to patients and our ability to execute on our science-led and value-driven business development strategy. Ohtuvayre complements and expands our pipeline and portfolio of treatments for cardio-pulmonary diseases while delivering near- and long-term growth as well as value for shareholders."
David Zaccardelli, president and chief executive officer of Verona Pharma, echoed this enthusiasm, emphasizing the potential of Ohtuvayre under Merck's stewardship: "Today’s announced agreement with Merck is the culmination of years of focus and determination by the Verona Pharma team advancing Ohtuvayre, the first novel inhaled mechanism for the maintenance treatment of COPD in two decades. Since launching Ohtuvayre in August 2024 we have seen rapid and accelerating uptake in the U.S. We believe Merck’s commercial footprint and industry-leading clinical capabilities will help accelerate the potential of Ohtuvayre to reach more patients living with COPD."
The acquisition comes at a critical juncture for Merck, as the company faces looming patent expirations on its blockbuster cancer drug Keytruda, which generated nearly $30 billion in revenue last year. Keytruda's key patents are set to expire starting in 2028, creating pressure on Merck to diversify its revenue streams and develop new growth drivers. The purchase of Verona Pharma and its innovative respiratory drug is a strategic move to address this challenge.
Since 2021, Merck has aggressively expanded its late-stage pipeline through a combination of in-house development and acquisitions. Notable deals include the $11.5 billion purchase of Acceleron in 2021, which brought in the pulmonary arterial hypertension drug Winrevair, and the $10.8 billion acquisition of Prometheus Biosciences in 2023. The Verona Pharma deal, being the largest acquisition since Prometheus, reinforces Merck's commitment to broadening its therapeutic areas.
Analysts are optimistic about the commercial potential of Ohtuvayre. Jefferies analyst Andrew Tsai projects peak annual sales between $3 billion and $4 billion by the mid-2030s, with the drug expected to surpass $400 million in sales during its first full year on the market. This forecast positions Ohtuvayre as a significant contributor to Merck's future revenue, helping to offset declines anticipated from Keytruda's patent cliff.
Despite the enthusiasm, some industry experts advise caution. BMO Capital Markets analyst Evan Seigerman noted that while the deal looks promising, "more is needed to assure investors of a smooth transition of revenue without a strong decline after Keytruda expiry." This highlights the ongoing challenge for Merck to maintain growth momentum as it shifts its focus beyond oncology.
Ohtuvayre's therapeutic profile addresses a substantial unmet medical need. Chronic obstructive pulmonary disease (COPD), often referred to as "smoker's lung," is a progressive respiratory condition characterized by restricted airflow and breathing difficulties. It affects an estimated 390 million people worldwide and ranks as the fourth leading cause of death globally. Existing treatments have remained largely unchanged for over 20 years, making Ohtuvayre's dual bronchodilator and anti-inflammatory mechanism a breakthrough in COPD management.
The drug works by selectively inhibiting phosphodiesterase 3 and 4 (PDE3 and PDE4), enzymes involved in airway constriction and inflammation. This dual action provides symptomatic relief and targets underlying inflammation without relying on steroids, which can have significant side effects.
The transaction has received unanimous approval from the boards of both Merck and Verona Pharma and is expected to close in the fourth quarter of 2025, pending customary regulatory approvals, including under the Hart-Scott-Rodino Antitrust Improvements Act and sanction by the High Court of Justice of England and Wales. Merck held an investor call on the morning of the announcement to discuss the details of the acquisition and its strategic implications.
Financial and legal advisors played a key role in facilitating the deal. Citi and Morgan Stanley & Co. LLC served as financial advisors to Merck, with Freshfields LLP providing legal counsel. Verona Pharma was advised by Centerview Partners LLC and Latham & Watkins LLP.
The acquisition is expected to capitalize most of the purchase price as an intangible asset for Ohtuvayre, which will be amortized over the product's life as a GAAP-only charge. This accounting treatment reflects the value Merck places on the drug's long-term commercial prospects.
Looking ahead, Merck's CEO Rob Davis emphasized the company's ongoing commitment to business development, stating, "We continue to assess science- and value-driven business development opportunities with urgency," and expressed openness to deals beyond the company's preferred $1 billion to $15 billion target range. This signals that Merck is actively seeking further acquisitions to bolster its pipeline and prepare for a post-Keytruda future.
As Merck integrates Verona Pharma and Ohtuvayre into its portfolio, the pharmaceutical giant positions itself to address a critical respiratory disease market with a novel therapeutic option. The acquisition not only strengthens Merck's cardio-pulmonary pipeline but also exemplifies the company's strategic shift towards diversified innovation amid evolving market dynamics.