Merck & Co. has reached a deal to acquire Prometheus Biosciences for about $10.8 billion, betting an experimental drug the biotechnology company is developing will become an important new treatment for a common gut disease.
Merck on Sunday said it will pay $200 per share for Prometheus, representing a roughly 75% premium to the stock’s closing price Friday. The deal is the sector’s second largest this year and the most significant acquisition for Merck since its $11.5 billion buyout of Acceleron Pharma in 2021.
The deal will hand Merck a drug that’s shown promise as a treatment for inflammatory bowel disease, or IBD, a chronic condition that affects several million people in the U.S., according to estimates. IBD causes inflammation and damage to the gastrointestinal tract, and is currently treated with immune-suppressing medicines to manage symptoms. None are curative and not all patients respond to treatment, however.
Prometheus is one of several companies working to develop a new type of biologic drug for IBD. Its medicine is an antibody that homes in on a protein called TL1A, which is thought to regulate inflammation and fibrosis. Results from a Phase 2 study last year in moderate-to-severe ulcerative colitis and hard-to-treat Crohn’s disease were so promising they caused shares of the biotech to triple in value, making Prometheus the top performer among all biotech companies to go public since 2021, according to BioPharma Dive data. (A biotech co-founded by Pfizer and Roivant Sciences is developing another, similar medicine that’s also in mid-stage testing.)
With its acquisition, Merck is wagering that those results will be replicated in further testing. If successful, the drug could help offset the expected loss of patent protection for Merck’s top-selling cancer medicine Keytruda later this decade. The pharma has previously turned to dealmaking, with its Acceleron buyout and reported pursuit of Seagen, to prepare for that loss. It has also shown an increasing interest in immunological and inflammatory conditions, paying $2 billion for autoimmune drug developer Pandion Therapeutics in 2021.
“The agreement with Prometheus will accelerate our growing presence in immunology where there remains substantial unmet patient need,” said CEO Rob Davis, in a statement. “This transaction adds diversity to our overall portfolio and is an important building block as we strengthen the sustainable innovation engine that will drive our growth well into the next decade.”
The deal is expected to close in the third quarter of 2023.