Merck Finalizes $10 Billion Acquisition of Verona Pharma with No Competing Bids

Merck successfully completed its $10 billion acquisition of Verona Pharma last month, a deal notable for the absence of a competitive bidding process. According to a filing by the British company with the Securities and Exchange Commission, Merck was the sole entity to submit a formal offer for the company.

The lack of competitive interest is surprising, considering Verona had secured a significant FDA approval a year prior for its medicine, Ohtuvayre. This treatment, administered twice daily via a hand-held nebulizer, is the first new option for chronic obstructive pulmonary disorder (COPD) in over a decade. The drug received favorable regulatory clearance for use either as a standalone therapy or in combination with other COPD maintenance drugs, with annual peak sales potential projected at up to $5 billion.

Verona’s attempts to attract potential partners or acquirers, starting in early 2023, yielded minimal results. Outreach conducted by Verona and its investment advisors drew interest from only one unidentified third party in July 2023, which signed a nondisclosure agreement but ultimately never made an offer. A subsequent round of outreach, beginning in December 2023, failed to attract any substantial interest for over a year.

Discussions with Merck intensified in February of the current year, leading to a new nondisclosure agreement. The engagement, including meetings with Merck’s Human Health International chief, initially centered on potential collaboration or ownership rights for Ohtuvayre within specific territories. Separately, in early June, Verona received nonbinding term sheets from multiple third parties regarding a potential collaboration, but these documents did not constitute formal offers to acquire.

The transaction was finalized quickly after Merck submitted a firm offer of $104 per share on July 3, setting a five-day deadline. Following a counteroffer of $112 per share from Verona, Merck raised its bid to $107 per share. The companies ultimately reached an agreement on July 8. The agreed-upon price represented a 23% markup on Verona’s market close price that day and a 39% premium over the company’s 60-day volume-weighted average price.

This acquisition is the second-largest biopharma deal this year, following Johnson & Johnson’s purchase of Intra-Cellular Therapies for $14.6 billion—another transaction reportedly secured by a lone bid. Merck’s investment is consistent with its strategy to diversify its pipeline and mitigate the future revenue impact from the loss of exclusivity for its major cancer drug, Keytruda, which currently accounts for over half of the company’s revenue. Merck has recently pursued several large-scale acquisitions, including Acceleron ($11.5 billion in 2021) and Prometheus ($10.8 billion in 2023).

Source: https://www.fiercepharma.com/pharma/its-10b-buyout-verona-merck-was-lone-ranger