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Sunday, May 19, 2024
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Merck Closes Prometheus Acquisition

PHARMA: $10.8B buyout ‘Largest Biotech Deal in San Diego’

In December of last year, San Diego biotech Prometheus Biosciences, Inc. announced positive results of its Phase 2 studies of its monoclonal antibody treatment for immune-mediated diseases, including ulcerative colitis, Crohn’s disease and other autoimmune conditions.

Mark McKenna
CEO
Prometheus Biosciences, Inc.

The results “set a new watermark in terms of efficacy in the category,” said Prometheus CEO Mark McKenna, “which got us to the largest biotech deal ever in San Diego and the largest biotech globally for a Phase 2, pre-Phase 3 asset.”

On June 16, that “largest deal” – a $10.8 billion buyout by Merck & Co. (NYSE: MRK) – was finalized after its initial announcement in April. Under the terms of the acquisition agreement, Merck, through a subsidiary, has acquired all outstanding shares of Prometheus for $200 per share in cash.

“Ten weeks from announcement to close makes this one of the fastest deals. Given the FTC environment, it really speaks to the fact that we picked the right partner, one that didn’t have any overlap with our business,” McKenna said, adding that Merck’s acquisition of Prometheus represents the company’s interest in building an “immunology franchise” based on Prometheus’ platform technologies – a motivation acknowledged by Merck’s leadership.

Robert M. Davis
Chairman & CEO
Merck & Co.

“The Prometheus acquisition accelerates our growing presence in immunology, augments our diverse pipeline and increases our ability to deliver patient value. This transaction is another example of Merck acting strategically and decisively when science and value align,” said Robert M. Davis, chairman and CEO of Merck. “Prometheus brings us a potential best-in-class candidate that creates an opportunity for us to transform treatment for patients with immune-mediated diseases.”

The initial technology for the Prometheus360 platform came out of research at Cedars-Sinai utilizing the largest dataset in the category of inflammatory bowel diseases, which provided the basis to do drug discovery “in a way that hasn’t been done before,” McKenna said, adding the dataset included samples that allowed researchers to look at genetics of patients; look at expression and biology; and also clinical metadata “to know how the disease progresses.”

“That is a very unique approach. Most drugs for inflammatory bowel disease come from the fact they are moved over from RA (rheumatoid arthritis) or another disease area,” he continued. “This one is a precision therapy, specifically designed for these patients.”

The lead candidate from the platform – PRA-023, which Merck has now renamed MK-7240 – is a humanized monoclonal antibody directed to a target associated with both intestinal inflammation and fibrosis, hallmarks of diseases like Crohn’s and ulcerative colitis.

Following the successful separate Phase 2 studies of MK-7240 to treat those conditions, Prometheus’ stock went from $36 per share to $103 at open on Dec. 8. The company then raised an additional $550 million through a common stock offering  – capital that was to be used to fund Phase 3 clinical studies of MK-7240, which will now be conducted by Merck.

“We were well capitalized to go it alone. However, when you look at the derisking that the program and patients get by having Merck lead [the Phase 3 study] – almost $11 billion dollars – it was a win, win, win in my opinion – great for patients, great for employees in the company, great for shareholders who many of the early investors got 30x return on their investment,” McKenna said, adding that “running large Phase 3s is not an insignificant endeavor for a 100-person team.”

“Yes, we can do it, but when it comes down to it, how do you compare the resources of Merck versus a small company? I think this is going to supercharge the development efforts and get this to patients faster,” he said.

The development efforts will largely remain in San Diego, as Merck is retaining “the vast majority” of the Prometheus team and keeping the company’s new Torrey Pines building.

“I think it’s a very encouraging sign they bought Prometheus for more than just the assets, it was the people as well,” McKenna said. “I think it’s a great opportunity for Merck, long term, to build here.”

Merck & Co.

Founded: 1891
CEO: Robert M. Davis
Headquarters: Rahway, New Jersey
Business: Pharmaceutical company
Stock: MRK (NYSE)
Revenue: $59.28 billion (FY2022)
Employees: 69,000
Website: www.merck.com
Notable: Merck manufactures, markets and/or distributes  more than 98  drugs in the United States.

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