Verona Pharma Plc (NASDAQ: VRNA) rallied about 20% on Wednesday after Merck & Co Inc (NYSE: MRK) said it will buy the UK-based biotech firm known for its COPD drug Ohtuvayre.
The $10 billion all-cash agreement values VRNA shares at $107 each, representing about a 23% premium on their previous close. The transaction is expected to complete in Q4, pending regulatory and shareholder approvals.
Investors should note that Ohtuvayre, a dual PDE3/PDE4 inhibitor approved by the FDA in 2024, has already generated over $70 million in quarterly sales and is forecast to exceed $3.0 billion in annual revenue.
Verona stock price increase following the announcement signals investor enthusiasm for the deal, which, for Merck, was absolutely crucial for the following two reasons.
Verona deal could prove a hedge against Keytruda patent cliff
Merck’s blockbuster cancer immunotherapy Keytruda, which brought in roughly $30 billion last year, faces patent expirations starting in 2028.
Experts believe biosimilar competition could erode up to 50% of Keytruda’s revenue, creating a multi-billion-dollar gap in MRK’s future earnings.
Verona acquisition is a strategic hedge against that cliff.
As BMO analyst Evan Seigerman put it in a CNBC interview today: “they’re not buying an early R&D asset – they’re buying something that’s on the market,” adding this will potentially help Merck supplant its revenues now.
Ohtuvayre’s rapid uptake and broad COPD applicability position it as a near-term revenue engine, helping Merck diversify its portfolio and reduce dependence on a single asset.
With additional indications like non-cystic fibrosis bronchiectasis in the pipeline, the drug offers long-term upside.
VRNA acquisition could cushion the blow from tariffs
Merck has announced plans of buying Verona in the wake of rising geopolitical concerns.
President Trump has threatened 200% tariffs on pharmaceutical imports, with implementation timelines stretching into 2026.
While details remain fluid, the administration’s push for onshoring drug manufacturing is clear.
Merck, which expects a $200 million hit from existing tariffs this year, has been repositioning its supply chain.
CEO Robert Davis emphasized the company’s $21 billion investment in US manufacturing since 2018, aimed at insulating operations from future trade shocks.
By acquiring VRNA, Merck gains control of a US-launched, US-distributed product – a strategic asset in a tariff-sensitive environment.
Ohtuvayre’s domestic footprint reduces exposure to foreign active pharmaceutical ingredient (API) dependencies, aligning with Section 232 national security goals. That’s why MRK shares are up 3.0% on Wednesday.
Why Verona stock deal is worth cheering?
The deal’s structure and timing have resonated with investors.
As Evan Seigerman explained, “$10 to $15 billion seems to be the sweet spot. They can do that with cash, get a little bit of debt. It’s not going to stretch them… These deals are much more palatable”.
Unlike mega-mergers that often face integration hurdles, VRNA acquisition is digestible, focused, and growth-oriented.
With Ohtuvayre’s strong launch trajectory and Merck’s commercial muscle, the pharma deal promises accelerated market penetration and shareholder value.
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