Merck has agreed to acquire COPD drugmaker Verona Pharma for $10 billion, as part of its strategy to address the impending Keytruda patent cliff in 2028. Verona’s key product, the inhaled drug Ohtuvayre, received FDA approval in June 2024 and is projected to generate peak annual sales of $4 billion.
Despite this acquisition, Merck faces a potential $15-20 billion decline in Keytruda sales due to biosimilar competition. Ohtuvayre is expected to only cover approximately 20% of this loss with an annual revenue contribution of $3-4 billion. Merck’s evolving strategy includes new product launches and a pipeline of drugs with a combined potential of $50 billion, but it remains insufficient to fully offset the anticipated revenue gap.
Merck’s stock has dropped 16% year-to-date, underperforming the S&P 500, which is up 7%. The company will need to execute several similar acquisitions and successfully expand its market to reassure investors about its growth prospects beyond Keytruda’s patents.
