Merck & Co Inc (NYSE:MRK) stock fell 0.68% (As on April 17, 11:22:04 AM UTC-4, Source: Google Finance) after Citi upgrades Merck, says the pharma giant’s drug pipeline is underappreciated. Merck was lifted to Buy from Neutral, with its price target raised to $130 from $105 by Citi analysts. The analysts said the firm’s new estimates are 2-25% ahead of consensus, while their NPV “assumes a very conservative Keytruda tail post-2028.” Merck shares have climbed 1% to just under the $115 mark at the time of writing. In addition, the stock has gained 3% in 2023 and is up over 33% in the last 12 months. The company’s earnings upgrades are driven by materially revised forecasts for MRK’s novel ADC for cancer MK-2870/SKB-264 (TROP2), and cardiology agents sotatercept and MK-0616 (CV Data Meets Our High Expectations., Mar-23),  according to the analysts. Each 12-month delay to Keytruda biosimilars represents a c.7% increase in NPV. They also noted that Merck’s portfolio has little IRA-related pricing risk, given rare disease, animal health, and vaccines exposure.

On the other hand, the company has signed a definitive agreement to buy clinical-stage biotechnology firm Prometheus Biosciences for $10.8bn, strengthening its immunology pipeline. The company will buy all of Prometheus Biosciences’ outstanding shares for $200 a share through a subsidiary. Prometheus Biosciences uses precision medicine to discover, develop and commercialise new therapeutic and companion diagnostic products to treat immune-mediated diseases. PRA023, Prometheus’s lead candidate, is a humanised monoclonal antibody (mAb) targeting tumour necrosis factor (TNF)-like ligand 1A (TL1A). TL1A is implicated in intestinal inflammation and fibrosis. PRA023, which binds human TL1A with high affinity and specificity, is being developed to treat autoimmune conditions including Crohn’s disease (CD) and ulcerative colitis (UC). The agreement with Prometheus will accelerate our growing presence in immunology where there remains substantial unmet patient need. This transaction adds diversity to our overall portfolio and is an important building block as we strengthen the sustainable innovation engine that will drive our growth well into the next decade. The company has reported positive data from a placebo-controlled Phase II ARTEMIS-UC trial of PRA023 conducted in moderate to severely active UC patients, and a Phase IIA APOLLO-CD trial in moderate to severe CD patients in December 2022. The company intends to advance the mAb into Phase III trials for UC and CD in 2023. Subject to the approval of Prometheus Biosciences’ shareholders and other stated conditions, the transaction should be concluded in the third quarter of 2023.