In 16 April 2023, Merck & Co. announced its intention to acquire Prometheus Biosciences, pending board and regulatory approval, at $200.00 per share in cash price, a 75% premium, and a total equity value of $10.8bn. With a relatively high purchase price for a set of early to mid-stage assets, the deal would be the second largest acquisition so far this year, only behind Pfizer’s $43bn offer for Seagen, and the third highest compared to last year. Central to this transaction is ownership of Prometheus’s lead drug, PRA023, an anti-TL1A monoclonal antibody currently being evaluated in ulcerative colitis (UC) and Crohn’s disease (CD). At the time of the announcement, PRA023 had completed a Phase II trial in UC and a Phase IIa study in CD. In addition to this agent, a companion diagnostic test (CDx) for PRA023 is being assessed alongside PRA023. This is another bold step by Merck within the inflammatory bowel disease (IBD) market and a crowded immunology field.
The relatively high price for Prometheus suggests general market interest and the possibility that multiple competing offers were presented for this asset. The premium offer is also a recognition of Merck’s belief in the potential of PRA023 within IBD and immunology in general. Merck’s strategic vision for PRA023 is that it is most likely to become the premier first-line therapy in IBD and possibly other immunological indications. A large part of Merck’s confidence in PRA023 lies with the CDx, which presents a unique opportunity to establish the use of biomarkers within IBD and immunology, which will strengthen PRA023’s standing in the relative markets. The use of CDx will address the desire of gastroenterologists to have an improved process to better select the most efficacious and beneficial treatment for their patients. Merck is expected to leverage its experience with Keytruda and the use of biomarkers in oncology to enhance its adaptation to IBD and other indications. It should also be noted that interim results of Phase II PRA023 UC study, ARTEMIS-UC, showed a prevalence of CDx-positive (CDx+) patients of approximately 24%. It could be assumed that Merck anticipates a similar target population size in CD, which would justify the sizeable offer. The large portion of patients that are expected to be CDx+ will support, based on the cost-benefit analysis, the adoption of the test by payers and healthcare administrators.
For Merck to reach its intended benchmarks with PRA023, the company must show that PRA023 is as effective or superior to current market therapies, especially adalimumab, in the general patient population. This would allow PRA023 to be seen as a viable option regardless of CDx status. Though it is not anticipated that Merck will evaluate PRA023 in either UC or CD pivotal trials against an active comparator, the risk of not displaying superiority and diminishing the overall view of the agent is too high. Also, clinical results must indicate that CDx+ patients have a significantly higher response rate compared to the general patient population. This will give healthcare providers (HCPs) the confidence to fully incorporate the CDx into their standard workup of new patients.