Merck will buy UK-based Verona Pharma for about $10 billion, the companies said on Wednesday, strengthening the U.S. drugmaker's respiratory treatments as part of efforts to reduce dependence on its blockbuster cancer treatment.

Keytruda, the world's top-selling drug with nearly $30 billion in revenue last year, is nearing key patent expirations from 2028, and Merck has doubled down on efforts to reshape its portfolio.

Since 2021, the company has nearly tripled its late-stage pipeline, combining in-house development with acquisitions such as the $11.5 billion purchase of Acceleron in 2021, which netted the pulmonary arterial hypertension drug Winrevair.

Wednesday's acquisition is Merck's first of the year and its largest since its $10.8 billion buyout of Prometheus Biosciences in 2023.

The deal gives control of Ohtuvayre, a newly approved treatment for chronic obstructive pulmonary disease, a condition commonly called "smoker's lung".

The inhaled drug has generated sales of $42.3 million in 2024 and analysts have estimated it could exceed $3 billion in annual revenue.

Merck will pay $107 per American depository share for Verona, a premium of 23% to the London-based company's last close on the Nasdaq.

Shares in Verona surged 20% in premarket trading, while Merck edged slightly higher.

"Merck deal looks good at first glance. Given their home run with Prometheus and Winrevair, this (Ohtuvayre) looks like a potential complementary therapy," said Kevin Gade, chief operating officer at Bahl & Gaynor.

His sentiment was shared by others, including BMO Capital Markets analyst Evan Seigerman. However, Seigerman added a note of caution, saying more is needed to assure investors of a smooth transition of revenue without a strong decline after Keytruda expiry.

Merck shells out $10 billion for Verona in bid to diversify beyond Keytruda

Merck, a U.S. pharmaceutical company, announced a $10 billion acquisition of Verona Pharma, a UK-based biotech firm, to diversify its portfolio beyond its blockbuster cancer drug Keytruda. The deal adds Ohtuvayre, an inhaled treatment for COPD, to Merck's pipeline, with potential annual revenue exceeding $3 billion. The acquisition follows Merck's previous deals, including the $11.5 billion purchase of Acceleron, and is its largest since 2023. Analysts note the strategic move to mitigate Keytruda's patent expirations in 2028.