Merck buys Prometheus Biosciences for about $11 billion

April 16 (Reuters) – Merck & Co ( MRK.N ) said on Sunday it will buy Prometheus Biosciences Inc ( RXDX.O ) for about $10.8 billion, picking up a promising experimental treatment for ulcerative colitis and Crohn’s disease and is building up its presence in immunology.

Merck will pay $200 per share for the California-based biotech company that specializes in treatments for autoimmune diseases. That represents a 75% premium to the close of $1[ads1]14.01 for Prometheus shares on Friday.

“This allows us to enter immunology in a strong way and will allow us sustainable growth, we believe, well into the 2030s given the long patent life,” Merck CEO Robert Davis said in an interview.

Davis said the Prometheus drug, PRA023, which is being developed to treat ulcerative colitis, Crohn’s disease and other autoimmune conditions, could be a multibillion-dollar seller for Merck. He said the recent release of encouraging Phase II clinical trial results prompted Merck to pounce.

“We’ve been looking at their clinical development program for some time,” Davis said.

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.

Merck has been looking for deals to protect itself against potential revenue losses as patents on its blockbuster cancer immunotherapy Keytruda begin to expire at 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 rolling in around the time Keytruda patents could 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 think we now 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 ( SGEN.O ), but rival Pfizer Inc ( PFE.N ) ended up striking a $43 billion deal for Seagen last month.

Davis said Merck will continue to be opportunistic on acquisitions but is agnostic about size.

“We look at where we see the most compelling science, and where that science aligns with the value we’re moving toward,” Davis said, noting the company isn’t interested in big transformative or cost-synergy-driven deals.

Merck’s talks with Prometheus were first reported by the Wall Street Journal.

The company in February forecast 2023 revenue below Wall Street estimates and a sharp decline in sales of its COVID-19 antiviral treatment.

Reporting by Kanjyik Ghosh in Bengaluru; Editing by Tom Hogue

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