On Sunday, Merck & Co. disclosed plans to buy Prometheus Biosciences, a biotechnology company with a promising medicine that regulates the immune system, for almost $11 billion.
The deal, which is the biopharma industry’s second largest this year, is already fueling speculation about whether other immunology companies might see takeover interest as well. Jefferies analyst Michael Yee identified 15 with drugs in mid- to late-stage human testing — as well as one, Arcutis Biotherapeutics, with a marketed product — that could be “potentially interesting” to large pharmaceutical firms, many of which are facing or will soon face patent expirations on key products.
Inflammation and immunology “has been an attractive and rewarding therapeutic area over the last 12 months,” according to Yee, who, in a note to clients, highlighted a recent string of drug studies that generated positive results. The Prometheus deal, he wrote, underscores the “high value, big markets” within immunology, as well as the need for new medicines.
Major public immunology companies
|Company||Lead immunology drug||Stage of testing||Market Cap (in millions)|
|Roivant Sciences||RVT-3101||Phase 2||$5,392|
|Kymera Therapeutics||KT-474||Phase 2||$1,813|
|Akero Therapeutics||efruxifermin||Phase 2||$1,784|
|Ventyx Biosciences||VTX-958||Phase 2||$1,701|
|Pliant Therapeutics||PLN-74809||Phase 2||$1,562|
|Celldex Therapeutics||barzolvolimab||Phase 2||$1,430|
|Morphic Therapeutic||MORF-057||Phase 2||$1,369|
|DICE Therapeutics||DC-806||Phase 1*||$1,280|
|Viridian Therapeutics||VRDN-001||Phase 2||$1,081|
|Protagonist Therapeutics||PN-943||Phase 2||$1,055|
|Moonlake Therapeutics||sonelokimab||Phase 2||$745|
|Aclaris Therapeutics||zunsemetinib||Phase 2||$590|
|RAPT Therapeutics||RPT193||Phase 2||$575|
*DICE plans to initiate a mid-stage study before the end of June. Market capitalizations as of the morning of April 17. SOURCE: Michael Yee, Jefferies
In each year between 2020 and 2022, there were five or so acquisitions of immunology drugmakers worth at least $50 million, according to data from BioPharma Dive. In those deals, the buyers were often large firms like Sanofi, Amgen or Pfizer, which shelled out $7 billion to purchase Arena Pharmaceuticals.
Yee’s list includes companies like Ventyx Biosciences, which is developing a drug meant to combat inflammation by blocking a protein known as TYK2. Ventyx reported positive results from an early-stage study last summer, and has since pushed the drug into a trio of mid-stage trials evaluating it as a potential treatment for psoriasis, psoriatic arthritis and Crohn’s disease.
Ventyx isn’t alone. A handful of biotechnology startups have set their sights on this protein, as has Japan’s biggest drugmaker, Takeda Pharmaceuticals, which last year won a bidding war for rights to a closely watched therapy from Nimbus Therapeutics. Takeda ultimately agreed to pay Nimbus at least $4 billion in one of the industry’s largest-ever licensing deals.
Should these drugs continue to advance, they may one day compete with Sotyktu, a medicine from Bristol Myers Squibb that in September became the first TYK2 blocker approved for the U.S. market.
Another entry on Yee’s list, Roivant Sciences, is conducting research similar to Prometheus. Both companies have a drug that targets a protein called TL1A. Within a month of each other, Prometheus and Roivant announced their respective drugs had met the main goals of mid-stage clinical trials testing them in patients with inflammatory bowel disease.
Dennis Ding, also an analyst at Jefferies, wrote in a note to clients that he expects big pharmaceutical companies will show strong interest in TL1A medicines moving forward, as the way they work could be useful not only in IBD, but a range of other fibrosis-causing diseases. Merck’s acquisition of Prometheus “helps validate the class even further,” according to Ding.
Shares of Roivant rose more than 17% Monday morning, to trade around $8.30 apiece.
To some analysts, like Evercore ISI’s Umer Raffat, Merck's acquisition offer was larger than what might be expected. Deal terms hold that Merck will buy each Prometheus share for $200 apiece, reflecting a 75% premium to the target company’s stock price at Friday’s market close.
Thomas Smith, an analyst at SVB Securities, believes Merck ran into competition courting Prometheus, hence the deal’s price point. Given those recent, positive clinical trial results, “it is a reasonable assumption that additional parties were involved,” Smith wrote in a note to clients.