Merck & Co. inks $11B Prometheus takeover, firing starting gun on race for blockbuster bowel market

Merck & Co. inks $11B Prometheus takeover, firing starting gun on race for blockbuster bowel market

Merck & Co. is paying $10.8 billion to buy Prometheus Biosciences for its late-phase bowel disease drug candidate. Months after midphase data sent Prometheus’ stock spiraling upward, Merck has agreed to a 75% premium over the biotech’s prior closing price to land a challenger to Roivant Sciences’ RVT-3101.

The focal point of the takeover is PRA023, an anti-TL1A monoclonal antibody that wowed investors with phase 2 data. Late last year, Prometheus reported that 26.5% of ulcerative colitis patients in the PRA023 cohort went into clinical remission by Week 12, compared to 1.5% of their peers on placebo. The biotech shared evidence, from a single-arm study, that the antibody improves outcomes in Crohn’s disease at the same event. Merck, planning for its post-Keytruda future, likes the look of the data.

“The agreement with Prometheus will accelerate our growing presence in immunology where there remains substantial unmet patient need,” Merck CEO Robert Davis said in the Sunday morning release. “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 length of the growth runway is an important factor for Merck, which looks set to face biosimilar competition to its megablockbuster Keytruda in the U.S. from 2028. If PRA023 delivers on its midphase promise, the drug candidate could soften the blow of the initial biosimilar competition and then provide Merck with a series of new growth opportunities as it works to expand the label.

Quoting analysts, Prometheus has predicted that the inflammatory bowel disease market will be worth upward of $49 billion by 2030. That opportunity alone could establish PRA023 as a big blockbuster, but, as Prometheus sees things, it is far from the only opportunity. The biotech is already going after systemic sclerosis associated interstitial lung disease, a market it values at $8 billion, and plans to add a fourth indication from a list of diseases worth $150 billion later this year.

The breadth of Prometheus’ list of potential target diseases, which includes rheumatoid arthritis, atopic dermatitis, psoriasis and other blockbuster indications, is underpinned by evidence that TL1A modulates the location and severity of inflammation and fibrosis. The opportunities have persuaded Merck to offer $200 a share for Prometheus, well above its $114 close last week and the $36 it traded for in December, but the evidence of the role of TL1A has also attracted other drug developers.

Pfizer was Prometheus’ main rival, but it ducked out of the race shortly before the PRA023 data drop last year. Rather than take the anti-TL1A antibody forward itself, Pfizer chose to partner with Roivant to set up a biotech that will advance the molecule into phase 3. The deal echoes other agreements inked by Big Pharma companies over the years in that it allows Pfizer to get the cost of developing the antibody off its books while still positioning it to profit if RVT-3101 is a success.

Prometheus and Roivant both claim they have best-in-class candidates, with the Merck target arguing its early-phase data show PRA023 is “equivalent or differentiated” versus RVT-3101 “in all meaningful metrics evaluated.” Both companies are preparing for phase 3. Prometheus aims to start late-phase trials in ulcerative colitis and Crohn’s this year, and report phase 2 data in systemic sclerosis in 2024.

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