Merck sees a pipeline diversification opportunity in its $1.3 billion acquisition of EyeBio

Merck is looking for blockbuster drugs to offset falling revenues when its leading product, the cancer immunotherapy Keytruda, goes off patent in the next few years. A pharmaceutical giant is acquiring a competitor by acquiring a clinical-stage startup whose lead program is on track to begin pivotal trials in the treatment of diabetic macular edema.

Under terms of the deal announced Wednesday, Merck is acquiring Eyebiotech Limited, or EyeBio, for $1.3 billion in upfront cash. Shareholders of the New York-based company could receive up to $1.7 billion more in milestone payments.

EyeBio is developing a drug for retinal diseases in which inflammation leads to damage to the internal blood-retinal barrier. This breakdown leads to vascular leakage, which is a risk factor for eye diseases such as diabetic macular edema and age-related neovascular macular degeneration. EyeBio drugs are antibodies designed to bind to and activate their targets.

EyeBio’s core program, called Restoret, addresses the Wingless-related integration site (Wnt) pathway in the eye. Wnt genes encode proteins crucial for the proper development and maintenance of the blood-retinal barrier, and problems with Wnt signaling can lead to retinal vascular leakage. In diabetic macular edema, blood vessels in the retina leak into the macula, leading to swelling and blurred vision. This condition is a complication of diabetic retinopathy. Restoret is a trispecific agonist antibody designed to activate the Wnt pathway to restore and maintain the blood-retinal barrier.

The acquisition agreement comes three months after early clinical data for Restoret was presented at the Macula Society meeting. In an open-label Phase 1b/2a study in patients with diabetic macular edema, EyeBio therapy was well tolerated and no drug-related adverse events or ocular inflammation were reported. In 26 patients who received the experimental monotherapy treatment, results showed improvement in best-corrected visual acuity and reduction in retinal thickness. Similar results were seen in study participants who received Restoret in combination with Eylea, a blockbuster drug from Regeneron Pharmaceuticals whose approved indications include diabetic macular edema. Eylea works by blocking proteins that promote blood vessel growth, contributing to vascular permeability. Last year, the drug generated more than $9.3 billion in revenue across all approved ocular indications, according to Regeneron’s annual report.

EyeBio was founded in 2021 by co-founders David Guyer, former executive chairman and CEO of Iveric Bio, and Anthony Adamis, a veteran of the Roche Genentech subsidiary. Iveric developed Izervay, a drug for geographic atrophy of the eye disorder. Astellas Pharma acquired Iveric last summer, just before Izervay was approved by the FDA.

EyeBio launched in 2022 with $65 million in Series A funding led by SV Health Investors. Samsara BioCapital, Jeitao Capital and MRL Ventures also invested in the young company. Late last year, EyeBio expanded its funding round to $130 million with new investors Bain Capital Life Sciences, Omega Funds and Vertex Ventures.

The acquisition of EyeBio received approval from the company’s management board. Merck expects to complete the transaction in the third quarter of this year. By then, a pivotal Phase 2b/3 trial testing Restoret in diabetic macular edema may have begun. Merck said the study is expected to start in the second half of 2024.

“We continue to execute on our science-based business growth strategy to expand and diversify our pipeline,” Dean Li, president of Merck Research Laboratories, said in a prepared statement. “The EyeBio team, led by Dr. David Guyer and Dr. Tony Adamis, has extensive experience in developing groundbreaking ophthalmic therapies. By combining our strengths, our goal is to rigorously advance and accelerate the development of their promising pipeline of candidates targeting retinal diseases.”

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