Merck to Acquire Verona Pharma in $10 Billion Bet on Respiratory Market

Merck is acquiring UK-based Verona Pharma in a $10 billion all-cash deal, offering $107 per share—roughly a 23% premium over Verona’s last close. The acquisition secures access to Ohtuvayre, a newly launched COPD treatment that has quickly become one of the most-watched respiratory drug launches in decades.

The move is a strategic shift by Merck (NYSE: MRK) to offset the looming 2028 patent expiry of its flagship oncology therapy, Keytruda. Verona Pharma (NASDAQ: VRNA) brings not only a novel inhaled treatment—Ohtuvayre—but a first-in-class dual PDE3/PDE4 inhibitor already seeing strong market traction. With $71.3 million in revenue reported in its first full commercial quarter, analysts forecast annual peak sales of between $2.6 billion and $4 billion over the next decade.

Verona’s shares surged nearly 20% on the announcement, while Merck gained approximately 3% intraday as investors welcomed the pipeline diversification. The deal is expected to close in Q4 2025, pending regulatory approvals in both the U.S. and UK.

Merck’s Patent Hedge

With Keytruda accounting for close to half of its total pharmaceutical revenue, Merck (NYSE: MRK) has been actively pursuing late-stage and near-commercial biotech assets to cushion the upcoming loss. The Verona buy follows earlier acquisitions such as Acceleron and Prometheus Biosciences, but this marks its largest pure-play respiratory bet to date.

CEO Rob Davis described the acquisition as a pivotal building block in Merck’s growing cardiopulmonary franchise. He emphasized the firm’s ability to scale Ohtuvayre rapidly through its established global infrastructure, targeting both U.S. and international COPD markets.

Though slightly dilutive in the first year post-acquisition, the company expects the deal to become earnings accretive by 2028—the very year Keytruda begins facing biosimilar erosion.

Market Reaction and Sector Signals

Verona Pharma (NASDAQ: VRNA) traded up toward the offer price on the news, reflecting confidence the deal will go through without significant regulatory hurdles. Merck (NYSE: MRK) also rose, buoyed by expectations that the acquisition will strengthen its medium-term earnings profile.

Wall Street has largely endorsed the move. Jefferies increased its peak sales target for Ohtuvayre, while Citi and Morgan Stanley analysts cited Merck’s strong execution record as a de-risking factor. In a market increasingly focused on AI, obesity drugs, and oncology, this deal shifts some of the spotlight back onto respiratory—a space that has lacked innovation for decades.

It also renews momentum in biotech M&A. Following a quiet 2024, large-cap pharma is again hunting for targets with commercially validated assets and clear market runways. Deals like this one may trigger revaluations across respiratory and specialty care names.

What Could Go Wrong

Despite the upbeat tone, risks remain. Ohtuvayre’s long-term trajectory depends on sustained reimbursement support, physician adoption, and headroom for international expansion. Any slowdown in uptake or adverse safety signals could pressure Merck’s return on investment.

Regulatory approval of the deal is still required. While product overlap is minimal—limiting antitrust concerns—investors should monitor both the U.S. FTC and UK CMA review periods. Execution risk is also on the table, particularly given the scale of Merck’s existing portfolio and the need to avoid internal dilution of focus.

Competition may not wait. AstraZeneca (LSE: AZN), GlaxoSmithKline (LSE: GSK), and even newer entrants like Theravance (NASDAQ: TBPH) could respond with accelerated R&D or strategic shifts of their own.

Tips for Traders

• Merck (NYSE: MRK): Consider opportunities on technical pullbacks; long-term fundamentals remain solid, and the deal adds mid-cycle growth stability.

• Verona Pharma (NASDAQ: VRNA): With shares trading just below the $107 offer, risk/reward for event-driven traders now hinges on deal spread and timeline certainty.

• Sector rotation: Watch for renewed strength in respiratory and specialty care names—this deal may rerate similar firms.

• Rivals like AstraZeneca (LSE: AZN) and GlaxoSmithKline (LSE: GSK): Monitor for counter-moves or portfolio realignments in response to Merck’s pivot.

• M&A momentum: Expect further activity as pharma giants look to shore up exposed pipelines before 2028–2030 patent cliffs.