Merck to purchase Prometheus Biosciences for around $10.8 billion

Merck & Co said it would purchase Prometheus Biosciences Inc for around $10.8 billion. Under the purchase deal, Merck will pay $200 for each share of Prometheus Biosciences. The latter is a biotechnology company that is based in California. The company deals in treatments for autoimmune illnesses.

Merck to purchase Prometheus Biosciences

Merck’s purchase of Prometheus Biosciences will be useful in offering a promising experimental treatment for ulcerative colitis and Crohn’s disease. The partnership will also build up on the company’s presence in immunology.

The deal represents a 75% premium to the $114.01 closing price for Prometheus’ shares on Friday. The Chief Executive at Merck, Robert Davis, commented on this development saying that the purchase would allow the company to focus on immunology massively while supporting sustainable growth. The purchase will also allow the company to focus on plans into the 2030s.

According to Davis, the Prometheus drug known as PRA023 that the company is developing will be used to treat Crohn’s disease, uncreative colitis, and other autoimmune illnesses. This drug could be a massive revenue stream for Merck. The executive also said the Phase II clinical trial results triggered the deal.

If this deal is closed by Q3 this year as expected, Merck will release a late-stage ulcerative colitis study for this drug. The study will start in Q4 2023 or Q1 2024. Merck has also been seeking deals to protect itself from an eventual loss of revenues as patents secured on the blockbuster cancer immunotherapy Keyruda start expiring toward the end of the current decade.

Merck reported making nearly $21 billion worth of Keyruda sales last year. According to Davis, the revenue from the acquisition of Prometheus will commence at around the time when Keytruda patents will potentially expire.

Merck seeks strategic acquisitions

Davis has said that the recent deal with Prometheus Biosciences is similar to one secured in 2021 for Acceleron. The deal enabled Merck to create its pipeline for cardiovascular drugs. Davis also said this purchase gave the company a robust portfolio within the cardiometabolic industry. He added that the company would build a similar portfolio within the immunology industry.

In the summer of last year, Merck entered talks to purchase a cancer-focused biotech company, Seagen Inc. However, rival Pfizer Inc secured a $43 billion purchase deal for Seagen last month.

Davis also said that Merck would continue seeking more acquisitions, but it is not rigid about the size of the acquisitions. Davis noted that it sought the most compelling science and the firms that aligned with the company’s value. The executive further said that the company was not interested in large deals that were transformative and cost-synergy.

In February, the company forecasted its 2023 earnings that were below the estimates by Wall Street. There was also a notable decline in sales of the COVID-19 antiviral treatment.