Merck to build out immunology presence with $11 billion Prometheus deal
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[April 17, 2023]
By Michael Erman
(Reuters) -Merck & Co said on Sunday it will buy Prometheus Biosciences
Inc for about $10.8 billion, picking up a promising experimental
treatment for ulcerative colitis and Crohn's disease and building up its
presence in immunology.
Merck will pay $200 per share for the California-based biotechnology
company that specializes in treatments for autoimmune diseases,
representing a 75.4% premium to Prometheus' last closing price.
Shares of Prometheus were trading at $194.49 before the bell on Monday.
"This is allowing us to move into immunology in a strong way and will
allow us sustainable growth, we think, well into the 2030s given the
long patent life," Merck Chief Executive Robert Davis said in an
interview.
Davis said the Prometheus drug, PRA023, being developed to treat two
inflammatory bowel diseases (IBD) - ulcerative colitis and Crohn's
disease - and other autoimmune conditions, could be a
multibillion-dollar seller for Merck. He said the recent release of
encouraging mid-stage trial results drove Merck to pounce.
"We've been watching their clinical development program for a while,"
Davis said.
The likelihood of a counter-bid is slim as other large drugmakers
already have a meaningful exposure to IBD or immunology, and Merck
represents the cleanest acquirer from an antitrust perspective, said
Stifel analyst Annabel Samimy.
"Merck has acquired a game-changing asset in PRA023," said Samimy.
If the deal closes in the third quarter of this year as hoped, Merck
could launch a late-stage ulcerative colitis study of the drug in the
fourth quarter or first quarter of 2024, Davis said.
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Signage is seen at the Merck & Co.
headquarters in Kenilworth, New Jersey, U.S., November 13, 2021.
REUTERS/Andrew Kelly
Merck has been looking for deals to
protect itself from eventual revenue loss as patents on its
blockbuster cancer immunotherapy Keytruda begin to expire toward the
end of the decade. The company reported nearly $21 billion in
Keytruda sales last year.
Davis said revenue from the Prometheus acquisition could start to
roll in around the time Keytruda patents potentially expire.
Davis compared the deal to one he struck in 2021 for Acceleron,
which allowed Merck to quickly build out its pipeline of
cardiovascular drugs.
"I believe now we have a very strong portfolio in the
cardiometabolic space. We see this acquisition of Prometheus
building out a similar portfolio in the immunology space," Davis
said, adding that Merck brings scale, global reach and significant
capital to deploy.
Last summer, Merck was reportedly in talks to buy cancer focused
biotech Seagen Inc, but rival Pfizer Inc ended up striking a $43
billion deal for Seagen last month.
Davis said Merck would continue to be opportunistic on acquisitions,
but is agnostic about size.
Merck's talks with Prometheus were first reported by the Wall Street
Journal.
The company in February forecast 2023 earnings below Wall Street
estimates and a steep decline in sales of its COVID-19 antiviral
treatment.
(Reporting by Michael Erman in New Jersey, Additional reporting by
Manas Mishra, Kanjyik Ghosh and Akanksha Khushi in Bengaluru;
Editing by Tom Hogue, David Goodman Bill Berkrot and Sriraj
Kalluvila)
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