Merck (NYSE:MRK) is nearing a deal to acquire Eyebiotech, an ophthalmology biotechnology company, for cash worth $1.3 billion, the Wall Street Journal reported. Through this acquisition, Merck intends to bolster its presence in the eye-care market using Eyebio’s lead drug, Restoret. MRK stock was down 2.6% in yesterday’s trading session.
Restoret is currently in the clinical stage. It is expected to be used in treating an age-related eye condition called wet AMD (age-related macular degeneration), which leads to blurred vision and potential blindness. According to the data from Grand View Research, the global AMD market is projected to grow at a CAGR of 6.9% over an eight-year period ending in 2030.
The deal is expected to be announced as early as Wednesday.
MRK’s Diversification Efforts
The addition of Restoret is part of MRK’s strategy to diversify its revenue sources before the market exclusivity for Keytruda, its successful cancer treatment, ends in 2028.
The expiration of Keytruda could pose a challenge for Merck as it may result in the introduction of more affordable alternatives, potentially affecting MRK’s future sales. It should be noted that Keytruda contributed to over 40% of Merck’s $60 billion in sales last year.
As part of its other diversification efforts, MRK has undertaken several acquisitions recently. In June 2023, the company acquired Prometheus, a maker of autoimmune drugs, for $10.8 billion. Additionally, in November 2021, it bought Acceleron Pharma to strengthen its cardiovascular portfolio.
Is Merck a Buy or Sell?
The company’s strategic efforts to grow through acquisitions keep analysts bullish about its prospects. MRK has a Strong Buy consensus rating with 14 Buy, two Hold, and one Sell ratings. The analysts’ average price target on Merck stock of $139.33 implies an upside potential of about 11% from current levels. Shares of the company have gained more than 26% over the past six months.
