Merck has inked another blockbuster deal, announcing its $10.8 billion acquisition of Prometheus Biosciences, Inc. The all-cash transaction is expected to close in the third quarter of 2023.
“Prometheus is a clinical-stage biotechnology company pioneering a precision medicine approach for the discovery, development, and commercialization of novel therapeutic and companion diagnostic products for the treatment of immune-mediated diseases,” according to the companies’ joint press release. The company is developing “treatment of immune-mediated diseases including ulcerative colitis (UC), Crohns disease (CD), and other autoimmune conditions.”
Merck’s cash war chest reached over $13 billion by the end of 2022, an increase of over 64% vs. 2021 – making 2022 “an exceptional year for Merck, which is a testament to the profound impact our medicines and vaccines are having on patients globally.”
Merck has been on a buying spree over the last 4 years, scooping up companies with promising advances in the healthcare space, including Versum Materials, ArQule, Acceleron Pharma, and Imago BioSciences. Merck was also reported to have been in negotiations to acquire Seagen in 2022 for over $40 billion, but “antitrust concerns might have helped torpedo” the deal.
This latest acquisition arrives as trying times for the broader biotech space. During the 2020-2021, biotech boomed due to “massive investment, cheap capital, and public accolades for companies developing Covid treatments and vaccines during the pandemic.”
The industry now faces downward pressure from three main sources:
- The Federal Reserve’s rapid increase in interest rates has dampened both valuations and investor risk appetite;
- Companies face skilled labor shortages; and
- According to Bioprocess, “biosimilars and bioequivalents will force companies to write new playbooks for defending their incumbent drugs and the success, or failure, of those strategies will create the landscape for investment in biologics for years to come”
The industry is projected to grow steadily, nevertheless, as North America – and the United States in particular – help drive demand, accounting for 37.76% of all revenue in 2022.
According to Matterhorn’s comprehensive M&A database, which harnesses AI to track current and historical deals, Prometheus is advised by Latham & Watkins LLP, while Merck is advised by Paul, Weiss, Rifkind, Wharton & Garrison LLP.