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Merck Bets Big on Respiratory Drug in $10 Billion Verona Pharma Deal

By  |  July 9, 2025

The acquisition, Merck’s first major transaction of 2025, underscores the company’s efforts to prepare for the eventual loss of exclusivity on Keytruda, its top-selling cancer immunotherapy drug, which generated nearly $30 billion in revenue last year. Key patents for the therapy are expected to begin expiring in 2028, prompting concerns over future earnings. According to Reuters, the Verona deal offers Merck a foothold in the respiratory drug market as it seeks to balance its portfolio.

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    Verona’s Ohtuvayre, an inhaled medication recently approved for COPD—often referred to as “smoker’s lung”—is seen as a key asset in this diversification strategy. Per Reuters, Merck anticipates peak annual sales for the drug to reach into the multibillions by the mid-2030s. So far, Ohtuvayre has brought in $42.3 million in 2024 sales, and analysts expect it could cross the $400 million threshold in its first full year on the market.

    Jefferies analyst Andrew Tsai projects the drug could generate between $3 billion and $4 billion in annual revenue at its peak, positioning it as a major contributor to Merck’s post-Keytruda growth. Merck is offering $107 per American depository share for Verona, a 23% premium over the company’s last Nasdaq closing price, according to Reuters.

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    Merck CEO Rob Davis emphasized the company’s continued appetite for acquisitions, noting that it remains focused on opportunities grounded in strong science and value creation. “We continue to assess science- and value-driven business development opportunities with urgency,” Davis said, adding that he is open to exceeding the company’s usual deal size range of $1 billion to $15 billion if the opportunity is right.

    Industry analysts view the Verona deal as a continuation of Merck’s active investment strategy in recent years. Since 2021, the company has significantly expanded its late-stage development pipeline through internal R&D and major acquisitions. Notable deals include the $11.5 billion acquisition of Acceleron Pharma, which brought in the pulmonary arterial hypertension therapy Winrevair, and the $10.8 billion purchase of Prometheus Biosciences in 2023.

    “This is a smart move given Merck’s need to reduce its dependency on Keytruda,” said James Harlow, Senior Vice President at Novare Capital Management. “We expect more deals like this from Merck as it continues to position the company for growth post-Keytruda.”

    Some investors, however, remain cautiously optimistic. While Bahl & Gaynor’s COO Kevin Gade described the acquisition as complementary to Merck’s existing pipeline, others, including analysts at BMO Capital Markets, suggested that Merck will need additional assets to ensure a smooth transition beyond its flagship cancer franchise.

    Source: Reuters