Merck & Co. said on Sunday it will buy San Diego’s Prometheus Biosciences for about $10.8 billion, in an effort to build up its presence in immunology.
In doing so, Merck will pick up a promising experimental treatment for ulcerative colitis and Crohn’s disease, while paying $200 per share for the biotechnology company that specializes in treatments for autoimmune diseases.
The price represents a 75% premium to the $114.01 closing price for Prometheus shares on Friday.
“This is allowing us to move into immunology in a strong way and will allow us sustainable growth, we think, well into the 2030s given the long patent life,” Merck Chief Executive Robert Davis said in an interview.
Prometheus outlines its beginnings on its website, dating back more than 20 years, with the work of Dr. Stephan Targan, of Cedars-Sinai Medical Center in Los Angeles.
That ultimately led to the formation of Precision IBD – IBD stands for inflammatory bowel disease – the precursor to Prometheus Biosciences, which credits a Cedars-Sinai team as continued “close partners and collaborators.”
Local listings for Prometheus include Science Park Road in La Jolla and Carroll Park Drive in Sorrento Valley.
Davis said the Prometheus drug, PRA023, being developed to treat ulcerative colitis, Crohn’s disease and other autoimmune conditions, could be a multibillion-dollar seller. He said the recent release of encouraging Phase II clinical trial results drove Merck to pounce.
“We’ve been watching their clinical development program for a while,” the CEO 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 from eventual revenue loss as patents on its blockbuster cancer immunotherapy Keytruda begin to expire toward 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 to roll in around the time Keytruda patents could potentially expire.
He compared the deal to one he struck in 2021 for Acceleron, which allowed Merck to quickly build out its pipeline of cardiovascular drugs.
“I believe now we have a very strong portfolio in the cardio-metabolic space. We see this acquisition of Prometheus building out a similar portfolio in the immunology space,” Davis said, adding that Merck offers scale, global reach and significant capital to be deployed.
Last summer, Merck was reportedly in talks to buy cancer-focused biotech Seagen Inc., but rival Pfizer Inc ended up striking a $43 billion deal for Seagen last month.
Davis said Merck would continue to be opportunistic on acquisitions, without regard for size.
“We look where we see the most compelling science, and where that science aligns with value we move,” Davis said, noting that the company is not interested in large transformative or cost-synergy driven deals.
Merck’s talks with Prometheus were first reported by the Wall Street Journal.
Merck in February forecast 2023 earnings below Wall Street estimates, with a steep decline in sales of its COVID-19 antiviral treatment.
– Reuters and staff reports
(Reporting by Michael Erman in New Jersey, with additional reporting by Kanjyik Ghosh and Akanksha Khushi in Bengaluru; editing by Tom Hogue, David Goodman and Bill Berkrot)