Merck (MRK) to Buy Private Ophthalmology Company EyeBio

Zacks Equity Research
·4-min read

Merck MRK announced a definitive agreement to acquire London-based private biotech Eyebiotech Limited (“EyeBio”), which makes therapies for retinal diseases. The buyout will expand Merck’s presence in the growing ophthalmology market.

The acquisition will add EyeBio’s lead pipeline candidate, Restoret, a novel Wnt agonist antibody being developed for treating retinal diseases like diabetic macular edema (DME) and neovascular age-related macular degeneration in a phase Ib/IIa study called AMARONE. In February, EyeBio announced first-in-human data from the study. Proof of concept was established in the study with strong visual and anatomic outcomes. The data, for the first time, showed that activating the Wnt pathway in the retina results in a reduction in vascular leakage. This was the first clinical evidence that validated the Wnt pathway in the eye.

Based on the positive data, EyeBio plans to advance Restoret to a pivotal phase IIB/III study for DME in the second half of 2024. The acquisition of EyeBio will also add preclinical candidates for retinal diseases to Merck’s pipeline.

Merck will make a $1.3 billion upfront payment for acquiring EyeBio through a subsidiary. EyeBio will also be eligible to receive up to $1.7 billion in future milestone payments, bringing the potential value of the transaction to $3 billion. The transaction, which is approved by the boards of both companies, is expected to close in the third quarter of 2024. Merck will record a charge of 50 cents for the acquisition in the quarter in which the deal closes.

Merck’s stock has risen 15.5% so far this year, outperforming an increase of 14.5% for the industry.

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In the past couple of years, Merck has been quite active on the merger and acquisition front. Among more recent acquisition deals, in March, Merck closed its previously announced agreement to acquire Harpoon Therapeutics. The acquisition of Harpoon Therapeutics added its lead pipeline candidate, HPN328, a T cell engager targeting delta-like ligand 3, to Merck’s portfolio. HPN328 is currently being evaluated in a phase I/II study in certain patients with small-cell lung cancer and other neuroendocrine tumor types. In 2023, it acquired Prometheus Biosciences, which added MK-7240 to its pipeline. MK-7240, a novel TL1A inhibitor, is being developed for the treatment of immune-mediated diseases, including ulcerative colitis, Crohn’s disease and other autoimmune conditions.

Merck’s proposed Eyebiotech acquisition is the second deal announced this week. On Tuesday, Johnson & Johnson JNJ announced a definitive agreement with Swiss private biotech Numab Therapeutics to acquire global rights to NM26, a phase II-ready bispecific antibody for atopic dermatitis. To execute the deal, Numab Therapeutics will spin off its wholly-owned subsidiary called Yellow Jersey Therapeutics, which holds NM26 rights, to its shareholders. J&J will acquire Yellow Jersey Therapeutics from Numab’s shareholders for a purchase price of $1.25 billion in cash.

In a separate press release, Merck announced that the FDA has granted a priority review tag to a supplemental biologics license application (sBLA) seeking approval for its blockbuster PD-1 inhibitor, Keytruda, for the first-line treatment of patients with unresectable advanced or metastatic malignant pleural mesothelioma. The sBLA was based on data from the pivotal phase II/III KEYNOTE-483 study. Data from the study demonstrated that Keytruda led to a statistically significant improvement in overall survival versus chemotherapy alone in this patient population. The FDA’s decision on the sBLA is expected on Sep 25, 2024

Zacks Rank & Stocks to Consider

Merck currently carries a Zacks Rank #3 (Hold).

Merck & Co., Inc. Price and Consensus

Merck & Co., Inc. Price and Consensus
Merck & Co., Inc. Price and Consensus

Merck & Co., Inc. price-consensus-chart | Merck & Co., Inc. Quote

Some better-ranked stocks in the healthcare sector are Bioventus BVS and Heron Therapeutics HRTX. While Bioventus has a Zacks Rank #1 (Strong Buy), Heron Therapeutics has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, 2024 estimates for Bioventus have improved from 16 cents per share to 27 cents per share. For 2025, earnings estimates have improved from 40 cents to 43 cents per share in the past 60 days. So far this year, shares of BVS have risen 29.2%.

Earnings of Bioventus beat estimates in three of the last four quarters while missing in one, delivering a four-quarter average earnings surprise of 151.67%.

In the past 60 days, loss estimates for Heron Therapeutics for 2024 have narrowed from 22 cents per share to 10 cents per share over the past 60 days. For 2025, estimates have improved from a loss of 9 cents per share to earnings of 1 cent per share over the same timeframe. Year to date, shares of HRTX have risen 92.3%.

Earnings of Heron Therapeutics beat estimates in three of the last four quarters while missing in one, delivering a four-quarter average earnings surprise of 30.33%.

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