Merck’s Post-Keytruda Acquisition: Verona Pharma Deal & Stock Analysis

Merck & Co. (NYSE: MRK) has been riding the success of Keytruda, its blockbuster immuno-oncology drug that generated nearly $30 billion in 2024 sales. With Keytruda’s patents expiring by the end of this decade, Merck faces a potential revenue gap of up to $20 billion annually as biosimilars enter the market. Investors are asking: does Merck’s $10 billion acquisition of Verona Pharma meaningfully offset that cliff and make MRK stock a buy?

The Looming Patent Cliff & Industry Context

Drug companies often face steep revenue declines when patents expire, a phenomenon known as the “patent cliff.” According to Investopedia, average revenue losses can exceed 30 percent within two years of expiry. Merck is no exception: Keytruda’s exclusivity window closes around 2029, leaving a multibillion-dollar hole. To maintain growth, Merck must both accelerate internal R&D and pursue tuck-in deals that replace lost sales.

Acquisition Details: Ohtuvayre Enters Merck’s Portfolio

On July 9, 2025, Merck agreed to acquire U.K.-based Verona Pharma for $10 billion in cash. The crown jewel is Ohtuvayre, the first approved maintenance therapy for chronic obstructive pulmonary disease (COPD), which gained FDA approval in mid-2024. Verona Pharma forecasts peak annual Ohtuvayre sales of roughly $4 billion. Merck expects to launch the drug globally by 2026, leveraging its commercial infrastructure and respiratory franchise.

Key details:

• Acquisition price: $10 billion cash
• Therapy: Ohtuvayre (COPD maintenance)
• Regulatory status: FDA approved (2024), EU filing pending
• Peak sales estimate: ~$4 billion/year

For more on the FDA approval, see the FDA press release.

Strategic Fit & Diversification

This deal marks Merck’s third large respiratory acquisition in four years, following the 2021 purchase of Acceleron Pharma and its pulmonary arterial hypertension franchise. By adding Ohtuvayre, Merck diversifies into an area that complements Keytruda’s oncology focus. Respiratory diseases now account for an estimated 8 percent of Merck’s total revenues, up from 4 percent in 2020. This shift helps mitigate the concentration risk from Keytruda and strengthens Merck’s position in high-growth immunology and pulmonary markets.

Merck Stock Performance & Valuation

MRK shares have underperformed the S&P 500 over the past 12 months, trading at roughly 9 times forward earnings versus the healthcare sector average of 16 times. Part of this discount reflects investor caution around the Keytruda cliff. However, Merck’s dividend yield near 4 percent remains one of the highest in Big Pharma, offering attractive income while the pipeline ramps up.

Sources: Yahoo Finance, Morningstar.

Risk Factors & Caveats

While the acquisition is a step forward, investors should weigh the following risks:

• Pipeline execution: Merck must successfully integrate Verona’s team and meet global launch timelines without disrupting its R&D cadence.
• Regulatory hurdles: EU and emerging-market approvals are not guaranteed, potentially delaying peak sales.
• Financial leverage: The cash outlay may pressure free cash flow in the near term, though Merck’s balance sheet remains strong.
• Residual Keytruda gap: Ohtuvayre covers only ~20 percent of the projected Keytruda shortfall, necessitating further deals or internal successes.

Conclusion: Buy, Hold, or Wait?

Merck’s bold move into COPD signals a clear strategy to diversify away from Keytruda’s patent cliff. For long‐term investors comfortable with clinical and regulatory risk, the stock’s steep valuation discount and high dividend yield make MRK a compelling buy. Those seeking proof of concept may choose to hold until further trial readouts or partnership announcements bolster confidence. Either way, Merck’s diversified pipeline—now bolstered by Ohtuvayre—positions it for sustainable growth beyond 2029.

Ready to dive deeper? Check out our detailed Merck stock analysis for interactive charts, analyst ratings, and more.