Latest news with #Ohtuvayre
Yahoo
6 days ago
- Business
- Yahoo
Verona Pharma plc (VRNA): A Bull Case Theory
We came across a bullish thesis on Verona Pharma plc (VRNA) on Capital Employed's Substack by Patients Capital Management. In this article, we will summarize the bulls' thesis on VRNA. Verona Pharma plc (VRNA)'s share was trading at $91.53 as of 3rd July. A patient in a clinic, taking a medication dose from a nebulizer to treat a respiratory disease. Verona Pharma, a UK-based biopharmaceutical company, is advancing a standout therapeutic with its lead asset, Ohtuvayre, poised to redefine treatment for COPD and related respiratory diseases. The most compelling data point is patient feedback: individuals using Ohtuvayre report feeling noticeably better, which is critical in COPD where managing daily wellbeing matters most. Ohtuvayre's non-steroidal mechanism means it can be safely combined with all existing COPD medications, creating effectively zero competition and addressing a major unmet need by avoiding the downsides of chronic steroid therapies. Beyond COPD, Verona Pharma retains significant upside from potential indications in non-CF bronchiectasis and asthma, which remain largely unpriced in current valuations and could offer meaningful long-term growth—serving as optionality embedded in the investment thesis. Strategically, the company is positioning for partnerships by developing dry powder inhaler (DPI) and metered dose inhaler (MDI) formulations, creating a clear window for larger pharmaceutical companies to engage in due diligence or acquisition discussions. Importantly, Verona Pharma carries no near-term financing overhang, eliminating a common investor concern and making potential deal outcomes even more impactful. Despite a strong rally in the stock, the market still appears to underappreciate Verona Pharma's potential: analysts are currently modeling peak sales of around $2.5 billion, even though the nebulized version alone could realistically reach $4–5 billion. As sell-side estimates adjust quarterly to reflect this upside, the stock is likely to re‐rate. Looking ahead, growing investor conviction and evolving shareholder base could provide deeper support for higher valuation levels. With differentiated clinical efficacy, broad strategic optionality, strong balance sheet, and significant valuation mispricing, Verona Pharma offers a compelling multi-catalyst investment opportunity in respiratory therapeutics. Previously, we covered a on Teva Pharmaceutical Industries Limited (TEVA) by Kontra in May 2025, which highlighted the company's transformation under CEO Richard Francis, strong free cash flow growth, and rising contributions from innovative drugs like Austedo and Uzedy. The company's stock price has been stable with an approximate 0.7% gain since our coverage. This is because the thesis has yet to fully play out but remains valid given Teva's ongoing operational momentum and valuation support. Patients Capital Management shares a similar view on Verona Pharma but emphasizes a more targeted bet on a single asset, Ohtuvayre, with blockbuster potential and strategic optionality in respiratory therapeutics. VRNA isn't on our list of the 30 Most Popular Stocks Among Hedge Funds. While we acknowledge the risk and potential of VRNA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
15-07-2025
- Business
- Business Insider
Merck Stock (MRK) Bulls Cheer $10Bn Verona Pharma Gamble
Merck & Co. (MRK) is betting on acquisitions to offset the looming revenue loss from the upcoming patent expiration of Keytruda (pembrolizumab). Its latest move— the $10 billion acquisition of Verona Pharma (VRNA) —adds a promising blockbuster candidate for Chronic Obstructive Pulmonary Disease (COPD), a market worth an estimated $23 billion. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week. By broadening its pipeline beyond oncology, Merck aims to regain investor confidence, especially as its stock has lagged behind the broader market in recent years. In my view, Merck's latest bet is likely to pay off, making me cautiously Neutral about its stock ahead of Keytruda's 2028 primary U.S. patent expiration date. The 'Keytruda Cliff' Represents Merck's Greatest Challenge Merck's biggest challenge is no secret—the looming patent expiration of Keytruda is the clearest example of the broader 'patent cliff' many pharmaceutical giants face. We're talking about blockbuster drugs generating over $10 billion annually, like Eliquis, Stelara, and Humira. In Merck's case, Keytruda brought in $29.5 billion last year —nearly half of the company's total revenue of $64.17 billion. That level of dependence makes the eventual decline in Keytruda sales a major concern. Given that Keytruda is a biologic, the impact of biosimilar competition tends to be less abrupt than with traditional generics. Analysts expect sales to decline more gradually, potentially falling to around $15 billion within four to five years of the patent's expiration. Still, declining revenue is never a good look for a company, and Merck now faces the critical task of replacing that lost income. One part of Merck's strategy is to introduce a subcutaneous version of pembrolizumab, which offers the convenience of shorter treatment times for both patients and healthcare providers. If it proves to be as effective as the intravenous version, it could gain traction for its ease of use. However, while this could help extend Keytruda's commercial life, it's unlikely to fully bridge the revenue gap. Payers may not be willing to pay a premium for convenience alone, especially once lower-cost biosimilars hit the market. Merck Bets Big on Ohtuvayre as It Looks Beyond Keytruda As part of its broader strategy, Merck is also leaning heavily on acquisitions and promising pipeline assets. Its recent interest in Verona Pharma's Ohtuvayre came as little surprise. Approved by the FDA in June 2024, Ohtuvayre has quickly gained traction. It's considered a 'first-in-class' treatment for COPD, uniquely combining non-steroidal anti-inflammatory effects with bronchodilation in a single molecule—an important innovation, given that many COPD patients continue to struggle with symptoms despite multiple existing therapies. In the first quarter of 2025, Ohtuvayre generated $71.3 million in sales, beating analyst expectations. Forecasts now suggest the drug could achieve peak annual sales of over $4 billion. In addition, it's being explored for other respiratory conditions, including non-cystic fibrosis bronchiectasis and asthma, potentially broadening its commercial impact even further. Further Strategic Acquisitions Bolster Merck's Pipeline Before Verona, Merck had been active in expanding its pulmonary and oncology portfolio. Think back to the $11.5 billion purchase of Acceleron Pharma in 2021 for its pulmonary arterial hypertension therapy, Winrevair. This asset generated $419 million in sales last year. In another example, Merck's more recent $680 million acquisition of Harpoon Therapeutics bolstered its immunotherapy pipeline. That's the nature of big pharmaceutical companies like Merck—blockbuster drugs eventually run their course. The real challenge is building a sustainable 'flywheel effect,' where profits from a hit like Keytruda are reinvested into developing the next wave of blockbuster therapies. When internal R&D falls short, companies often turn to acquisitions—but that's typically a more expensive route. For instance, developing a drug like Ohtuvayre in-house would likely have cost Merck a fraction—perhaps less than 10%—of the $10 billion it paid to acquire Verona Pharma. That said, Merck has the financial flexibility to make such moves. With a debt-to-assets ratio near historical lows, the company is well-positioned to pursue strategic investments without overextending itself. Judging by its Price-to-Earnings (P/E) ratio of just 12.2, which trades 55% lower than its sector median (26.98), the market isn't confident in Merck's ability to replace Keytruda. This is, at least in part, owed to Merck's underwhelming near-term revenue growth prospects. Its forward year-over-year revenue growth of 4.4% is 45% lower than the sector median of 8%. Certainly, Merck's ability to resolve these 'growing pains' will determine the future direction of its stock. Is Merck a Buy, Sell, or Hold? On Wall Street, Merck sports a Moderate Buy consensus rating based on 10 Buy, seven Hold, and zero Sell ratings in the past three months. MRK's average stock price target of $103.60 implies an upside potential of almost 24% over the next twelve months. Last week, analyst Terence Flynn from Morgan Stanley issued a Hold rating on MRK with a price target of $98. Regarding Ohtuvayre's immediate and long-term impact on Merck's financials, the analyst noted that 'The company expects the acquisition to become accretive to earnings by 2027, and fully accretive by 2028.' The strategic fit of Ohtuvayre within Merck's existing cardio-pulmonary portfolio and the potential for synergies further support the Hold rating, as the long-term benefits are balanced by the short-term financial adjustments required.' Bold $10Bn Bet on Verona Isn't Enough to Dislodge Neutral Outlook Merck's acquisition of Verona Pharma is part of its broader strategy to offset the looming revenue hit from Keytruda's patent expiration. While Ohtuvayre offers a promising blockbuster opportunity with relatively low development risk, it came at a steep price, making the deal something of a double-edged sword, especially since the drug's long-term success is not guaranteed. That said, Merck's current valuation suggests the market may be underestimating its potential. For investors who believe in the upside of recent initiatives—like the launch of subcutaneous pembrolizumab and the addition of Ohtuvayre—this skepticism could represent an opportunity. In the meantime, Merck's solid 3.86% dividend yield offers a cushion if the stock continues to lag. Neutral.
Yahoo
14-07-2025
- Business
- Yahoo
Merck to Acquire Verona for $10 Billion, Targeting Life Beyond Keytruda
Merck (MRK, Financials) is spending $10 billion to acquire U.K.-based Verona Pharma, the company announced Wednesday; the move is part of Merck's push to diversify its drug portfolio as its blockbuster cancer drug Keytruda approaches major patent cliffs starting in 2028. Warning! GuruFocus has detected 3 Warning Sign with MRK. Verona brings with it Ohtuvayre, an inhaled treatment for chronic obstructive pulmonary disease, often known as smoker's lung. The drug was approved earlier this year and has generated $42.3 million in sales so far in 2024; analysts see long-term potential, estimating peak annual revenue could top $3 billion. Merck will pay $107 per American depository sharerepresenting a 23% premium to Verona's last Nasdaq close. Shares of Verona surged 20% in premarket trading following the announcement; Merck edged slightly higher. This is Merck's largest deal since its $10.8 billion acquisition of Prometheus Biosciences in 2023 and adds to its growing pipeline of late-stage assets. The company has made a string of acquisitions since 2021, including the $11.5 billion Acceleron deal, which brought in Winrevaira treatment for pulmonary arterial hypertension. While analysts generally welcomed the Verona deal, some flagged that Merck still has work to do to assure investors it can offset looming Keytruda losses. This looks like a potential complementary therapy, said Kevin Gade of Bahl & Gaynor. But others, like BMO Capital's Evan Seigerman, noted that one acquisition won't be enough to fully bridge the gap. This article first appeared on GuruFocus. Sign in to access your portfolio
Yahoo
11-07-2025
- Business
- Yahoo
Piper Sandler Lifts PT on Verona Pharma (VRNA) Stock, Maintains Overweight
Verona Pharma plc (NASDAQ:VRNA) is one of the Piper Sandler increased the price target on the company's stock to $160 from $76, while maintaining an 'Overweight' rating. The analyst highlighted that the Street anticipates Ohtuvayre to reach blockbuster status in 2027 with strong growth as it further gets incorporated into the Chronic Obstructive Pulmonary Disease treatment paradigm. Notably, the drug's dual bronchodilation and anti-inflammatory effects offer critical advantages in COPD therapy. A patient in a clinic, taking a medication dose from a nebulizer to treat a respiratory disease. Verona Pharma plc (NASDAQ:VRNA) highlighted that the strong US launch of Ohtuvayre (ensifentrine) for the maintenance treatment of chronic obstructive pulmonary disease (COPD) has been accelerating, with 95% net sales growth in Q1 2025 as compared to Q4 2024, thanks to the significant increases in prescriptions, prescribers, new patients, and refills. Furthermore, the dramatic uptake of Ohtuvayre supports the unmet need of patients with COPD. Talking about Ohtuvayre's Q1 2025 performance metrics, while the refills represented ~60% of overall dispenses, the new patient starts were more than 25% greater than those in Q4 2024. Furthermore, a newly granted patent, which expires in June 2044, was listed in the FDA's Orange Book for Ohtuvayre, apart from the 3 original Orange Book-listed patents. TimesSquare Capital Management, an equity investment management company, released its Q1 2025 investor letter. Here is what the fund said: 'Our preferences among Health Care stocks are those companies providing novel therapies for unmet needs that deserve premium pricing, or specialized service providers. There were two additions to the sector this quarter. Verona Pharma plc (NASDAQ:VRNA) is focused on developing therapies for respiratory diseases. Their Ensifentrine received FDA approval for treating chronic obstructive pulmonary disease. The first two quarters of the product launch exceeded estimates.' While we acknowledge the potential of VRNA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 13 Cheap AI Stocks to Buy According to Analysts and 11 Unstoppable Growth Stocks to Invest in Now Disclosure: None. This article is originally published at Insider Monkey. Sign in to access your portfolio
Forbes
11-07-2025
- Business
- Forbes
Merck's Verona Acquisition: Plugging A $4B Hole In A $20B Gap
Photo by Smith Collection/Gado/Getty Images Merck's recent acquisition announcement sends a strong signal regarding its urgency to tackle the impending Keytruda patent cliff. The pharmaceutical leader has made an agreement to acquire the COPD drug manufacturer Verona Pharma for $10 billion, adding yet another potential blockbuster to its expanding collection of post-Keytruda assets. The Verona Deal: What Merck Gets Verona Pharma's most valuable asset is Ohtuvayre, an inhaled medication for chronic obstructive pulmonary disease that received FDA approval in June 2024. With anticipated peak annual sales of $4 billion, the drug is a significant addition to Merck's revenue diversification strategy. This acquisition was expected given our earlier analysis underscoring Merck's urgent need to address the Keytruda patent cliff set for 2028. Additionally, see – ProKidney: What's Happening With PROK Stock? The Math Still Doesn't Add Up Although this acquisition signifies progress, it's evidently insufficient to resolve Merck's fundamental issue. The company anticipates a potential $15-20 billion decline in Keytruda's sales as biosimilar competition enters the market. Even if Ohtuvayre achieves its peak sales forecast, this acquisition is expected to generate only $3-4 billion in annual revenue contributions, covering roughly 20% of the anticipated Keytruda decline. The Bigger Picture This deal aligns with Merck's broader diversification strategy, which incorporates the promising Winrevair for pulmonary arterial hypertension and a robust pipeline of 20 potential blockbuster drugs with a combined potential of $50 billion. The company has shown its readiness to invest capital aggressively, following prior acquisitions such as the $11.5 billion Acceleron purchase and the $680 million Harpoon Therapeutics deal. Nevertheless, the overall impact of these actions still seems inadequate to completely counterbalance the eventual decline of Keytruda. While Merck has built a solid pipeline and commenced new product launches, the timeline remains tight and the revenue gap significant. The Investment Reality For Merck stock to experience substantial growth, the company must assure investors that it has a thorough solution to not only mitigate the effect of Keytruda biosimilar competition but also to achieve sales growth even after the patent expiration. That level of assurance does not appear to be materializing at this time. For context, Merck stock has decreased by 16% year-to-date, lagging behind the broader S&P 500 index, which has risen by 7%, and several of its peers such as Johnson & Johnson and AbbVie, both of which have increased by 6% The acquisition of Verona Pharma is a step forward, yet it also underscores the scale of Merck's challenge. At $10 billion for a drug with $4 billion peak sales potential, the company is investing in assets that provide only partial remedies to a significant revenue gap. Looking Forward Merck's acquisition strategy reflects management's understanding of the Keytruda cliff and their determination to address it. However, the company will require several more transactions of a similar scale, effective pipeline execution, and possibly some level of market expansion to completely substitute Keytruda's contribution. Until investors perceive a clearer trajectory for growth beyond 2028, Merck's valuation is likely to remain under pressure despite these strategic initiatives. For context, at its current price of around $85, MRK stock is trading at a little under 11 times its trailing adjusted earnings of $7.79 per share. This is lower than the stock's historical average price-to-earnings ratio of roughly 15 times. Of course, other factors are also influential, including slowing Gardasil sales in China. Additionally, see – Merck's Valuation Ratios. In summary, the race against the 2028 patent cliff persists, and although Merck is putting forth significant effort, it remains uncertain whether the company can maintain its growth narrative. Merck's heavy dependence on Keytruda is a considerable concern for investors, as nearly half of the company's total sales are derived from this single product. This is precisely why sector diversification is a crucial factor we evaluate for our Trefis High Quality (HQ) portfolio. This strategic focus on achieving a balanced mix of companies across sectors has allowed the HQ portfolio to outperform the S&P 500, attaining returns exceeding 91% since its inception. Invest with Trefis Market-Beating Portfolios See all Trefis Price Estimates
