MERCK & Co has said it will buy Prometheus Biosciences Inc for about US$10.8b (A$16b), picking up a promising experimental treatment for ulcerative colitis and Crohn's disease and building up its presence in immunology, Reuters has reported.
Merck will pay US$200 (A$298.5) per share for the California-based biotechnology company that specialises in treatments for autoimmune diseases.
That represents a 75% premium to the US$114.01 (A$169.8) closing price for Prometheus shares last week.
"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 with Reuters.
Davis said the Prometheus drug, PRA023, being developed to treat ulcerative colitis, Crohn's disease, and other autoimmune conditions, could be a multi-billion-dollar seller for Merck.
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," 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 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 US$21b (A$34.3b) 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.
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 believe now we have a very strong portfolio in the cardiometabolic space.
"We see this acquisition of Prometheus building out a similar portfolio in the immunology space," said Davis, adding that Merck would continue to be opportunistic on acquisitions, but will be agnostic about 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.
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