Merck acquires Verona Pharma in a $10 billion deal to address the upcoming Keytruda patent cliff. The acquisition adds Ohtuvayre, a COPD drug with projected peak sales of $4 billion, to Merck’s portfolio. However, it may only cover 20% of the anticipated Keytruda sales decline due to biosimilar competition.

While the Verona deal is a step in the right direction for Merck, it may not fully solve the challenge posed by Keytruda’s impending sales erosion. The company faces a potential $15-20 billion decline in Keytruda sales from biosimilar competition, with Ohtuvayre’s peak sales projected to contribute only $3-4 billion annually.

Merck’s acquisition of Verona Pharma is part of a broader diversification strategy, including assets like Winrevair and a pipeline of 20 potential blockbusters with $50 billion combined potential. Despite these moves, Merck still needs to address the significant revenue gap left by Keytruda’s decline, with investor confidence in the company’s post-2028 growth trajectory remaining uncertain.

To achieve meaningful growth, Merck must convince investors of its comprehensive strategy to navigate the Keytruda biosimilar competition impact and sustain sales growth post-patent expiry. With Merck stock down 16% year-to-date, the company’s valuation remains under pressure, highlighting the need for a clearer path to future growth beyond Keytruda.

The Verona Pharma acquisition demonstrates progress in Merck’s efforts to address the Keytruda cliff, but challenges remain. With a heavy reliance on Keytruda for nearly half of total sales, Merck’s strategic moves and market expansion will be critical to replace Keytruda’s contribution post-2028. Investor confidence in Merck’s growth story will be essential for future success.

Read more at Nasdaq: Merck’s Latest Move: Why the Verona Deal Still Leaves Questions