With the current "blockbuster drug" Keytruda, which generates over $25 billion in annual revenue and is expected to reach peak sales of more than $30 billion, why is Merck & Co. still investing $1.3 billion to acquire EyeBio, a relatively small and nascent ophthalmology biotech company? What Merck & Co. values is a vast market with immense development potential.
Merck & Co. Drives into the Ophthalmology Track with Acquisition
Merck Recently Acquires EyeBio for $1.3 Billion, Enters Ophthalmology Therapy DevelopmentMerck has recently reached an acquisition agreement with biotechnology company EyeBio to acquire the latter for $1.3 billion, marking its entry into the field of ophthalmic therapy development. In addition to this upfront payment of $1.3 billion, Merck may also pay up to $1.7 billion in milestone payments for EyeBio, bringing the total value of the deal to $3 billion. EyeBio's leading pipeline asset, Restoret, is used to treat eye diseases, including a type of age-related macular degeneration that causes blurred vision and even blindness. This condition, known as wet age-related macular degeneration (AMD, Wet Age-related Macular Degeneration), is characterized by the abnormal growth of blood vessels beneath the retina. These new blood vessels are prone to leaking blood and fluid, leading to retinal swelling and damage, which can result in vision loss. The exact cause of wet AMD is not fully understood, but risk factors include age (people over 50 are more susceptible), genetics (family history may increase risk), smoking (smokers are at higher risk), diet (high-fat diets may increase risk), hypertension, and cardiovascular disease. Current primary drug therapies for treating wet AMD involve anti-vascular endothelial growth factor (Anti-VEGF) injections. However, most patients with wet AMD (>60%) receiving Anti-VEGF monotherapy still experience unsatisfactory vision gains and subsequently lose vision over time. Many patients continue to exhibit leakage. Therefore, wet AMD remains an indication area with significant unmet needs. Restoret mimics the natural ligand Norrin; it is a tetravalent trispecific antibody (with four antigen-binding sites recognizing three antigens, Figure 1) that acts as an agonist of the Wnt signaling pathway. Restoret is administered via intravitreal injection to treat retinal diseases characterized by leakage, including wet AMD, diabetic macular edema (DME), and familial exudative vitreoretinopathy (FEVR).
Figure 1. Schematic diagram of the tetravalent trispecific antibody Restoret.
(Image Source: EyeBio)
Restoret restores and maintains the blood-retinal barrier (BRB) by stimulating the Wnt pathway, thereby eliminating leakage in retinal vascular diseases. The drug has recently completed mid-term testing and is being developed for the treatment of wet AMD as well as diabetic macular edema (DME).
The Great Potential in Ophthalmology Therapy Development
Blockbuster therapies in ophthalmology include Regeneron and Bayer's Eylea (aflibercept, with sales reaching $9.4 billion in 2023) and Roche's Vabysmo (faricimab-svoa, with sales hitting $2.7 billion in 2023), both targeting wet AMD. According to Grand View Research, the global AMD market size will grow from over $10 billion in 2022 to approximately $18 billion by 2030. Merck once played a leading role in ophthalmology therapy development but exited the field a decade ago, divesting its ophthalmology assets to focus on oncology and immunology therapies, achieving great success by creating Keytruda, the current top drug. However, nothing lasts forever; with Keytruda’s patent protection nearing its end (in 2028), Merck has long been preparing for new ventures, primarily by drawing on the successful "buy-to-build" strategy that made Keytruda a success. Merck's acquisition of immunotherapy developer Prometheus Biosciences last year for $10.8 billion, and its $11.5 billion purchase of Acceleron Pharma in 2021, were both major moves. Now, the $3 billion acquisition of EyeBio, though seemingly sporadic, makes sense considering Merck’s primary blockbuster assets are antibody drugs, making the acquisition of ophthalmology antibody assets like Restoret logical. The EyeBio acquisition reflects a new trend in pharmaceutical mergers and acquisitions: fewer big-ticket deals at any cost, with pharmaceutical companies starting to pursue smaller transactions akin to "scratch-and-win" tickets to fend off the impending patent cliff. The ophthalmology market is a promising area for pharmaceutical companies to explore systematically. In 2023, Bausch + Lomb acquired Xiidra (lifitegrast ophthalmic solution), a dry eye drug, from Novartis for $1.75 billion. Grand View Research stated that by 2030, the global dry eye market would grow from $5.5 billion last year to over $10 billion. Japanese company Astellas Pharma also bolstered its capabilities in ophthalmology by acquiring Iveric Bio for approximately $5.9 billion.
The Significant Pressure of Ophthalmic Therapies on Medical Insurance Costs
The Profit Potential of Ophthalmic Therapies: A Microcosm of the Cost Pressure on Medicare Part BThe profit potential of ophthalmic therapies can be seen in the cost pressure they exert on Medicare Part B. Regenxbio Inc. and AbbVie are developing a one-time gene therapy for wet AMD, which, once approved, could exacerbate cost pressures in this category. Ophthalmology is already one of the most expensive categories under Medicare Part B. According to the latest reports, there are 2 million wet AMD patients in the U.S. who may qualify for gene therapy, but only a small fraction will have the opportunity to receive it. Considering the "starting price" of gene therapies often reaches $1 million, AMD gene therapy will impose a significant burden on Medicare. RGX314, the gene therapy being developed by Regenexbio, has the potential to become the first-in-class treatment for wet AMD and the standard treatment to prevent the progression of diabetic retinopathy. Currently, most wet AMD patients receive anti-VEGF drug injections every 4 to 16 weeks during their illness. The high cost burden leads many patients to forgo treatment, making gene therapy a major breakthrough in this field. RGX314 gene therapy is expected to receive FDA approval in the fourth quarter of 2026.For many years, Regeneron and Bayer's Eylea (aflibercept) has been one of the most expensive drugs under Medicare Part B. In 2022, Medicare spending on Eylea reached $3.5 billion, second only to Merck's blockbuster Keytruda. In addition to Eylea, Roche's AMD and other retinal disease drug Vabysmo (faricimab) is also becoming a significant expenditure under Medicare Part B.
2023, A Year of Abundance for Ophthalmic Therapies
2023 was a fruitful year for the ophthalmology field, with the FDA approving 12 ophthalmic drugs. In 2023, the FDA approved Apellis' pegcetacoplan injection (Syfovre) for the treatment of geographic atrophy (GA) caused by AMD. Syfovre thus became the first FDA-approved drug for the treatment of GA. In August 2023, Astellas Pharma received FDA approval for avacincaptad pegol intravitreal injection (Izervay), also for the treatment of geographic atrophy. It took only half a year to go from no available treatments for geographic atrophy to the approval of two drugs.Regeneron's Eylea injection received FDA approval in February for retinopathy of prematurity (ROP). Prior to this, the only commonly used treatment for ROP that had received FDA approval was laser photocoagulation, which caused significant stress for both infants and their families.
In May 2023, Bausch + Lomb's perfluorohexyloctane ophthalmic solution (MIEBO) for dry eye disease (DED) received approval. This is the first FDA-approved drug that directly targets DED caused by tear evaporation. MIEBO has become the first FDA-approved prescription ophthalmic treatment for Bausch + Lomb since it became an independent publicly traded eye care company.
In May, Eyenovia's MydCombi (tropicamide and phenylephrine hydrochloride ophthalmic spray) achieved another breakthrough for inducing mydriasis.
In June, Novaliq's Vevye (cyclosporine ophthalmic solution) was approved by the FDA for the treatment of dry eye disease. Vevye has become the first cyclosporine solution for the treatment of dry eye disease.
In July, Tarsus Pharmaceuticals' 0.25% lotilaner eye drops for the treatment of Demodex blepharitis received FDA approval, becoming the first drug specifically targeting this indication.
In August 2023, Regeneron's 8 mg Eylea HD received FDA approval for wet AMD, diabetic macular edema (DME), and diabetic retinopathy (DR).
In September, Ocuphire Pharma and Viatris's 0.75% phentolamine ophthalmic solution (Ryzumvi) received FDA approval for the reversal of drug-induced mydriasis (RM).
In October, Orasis Pharmaceuticals' 0.4% pilocarpine HCl ophthalmic solution (Qlosi) was approved for the treatment of presbyopia in adults. A week later, the FDA also approved Genentech's faricimab-svoa (Vabysmo) for macular edema following retinal vein occlusion.
In December, Glaukos' travoprost intracameral implant (iDose TR) received FDA approval for reducing intraocular pressure in patients with ocular hypertension or open-angle glaucoma.
Looking to the Future in 2024
The Momentum of Ophthalmic Therapy Development Continues Unabated in 2024. Eyenovia's APP13007 (Clobetasol Propionate Ophthalmic Nano-suspension, 0.05%) eye drops received FDA approval for the relief of pain and inflammation following ophthalmic surgery. The active ingredient, clobetasol propionate, a steroid commonly used to treat skin conditions such as eczema and psoriasis, has now gained approval in the field of ophthalmology, becoming the first new steroid product in this area in 15 years. It provides rapid and sustained elimination of inflammation and pain relief. This novel eye drop addresses a $1.3 billion topical ophthalmic steroid market, driven by approximately 7 million annual ophthalmic surgeries in the U.S. The NDA for NVK002 (low-dose atropine 0.01%), an ophthalmic drug under development for refractive error treatment, has been accepted by the FDA, drawing significant attention. NVK002 represents a potential therapy for childhood myopia, targeting patients aged 3 to 17. Childhood myopia can begin as early as 3 to 4 years old and progressively worsens. It impacts quality of life and may lead to severe ocular conditions like glaucoma, retinal detachment, and macular degeneration. Myopia adversely affects the vision of 30% of the global population. Currently, there are no FDA-approved drugs for myopia treatment available in the U.S.Reference:
Hopkins, J. S. Bausch + Lomb’s CEO Inks First Big Deal Since Return. WSJ. 30. 06. 2023.
Astellas Enters into Definitive Agreement to Acquire Iveric Bio. Astellas Press Release. 01. 05. 2023.
DeArment, A. Regenxbio Aims For Big Chunk Of Retinal Disease Market With AbbVie-Partnered Gene Therapy. Scrip. 17. 01. 2024.
McCaughan, M. Number One With A Bullet: Eylea Takes Top Spot In Medicare Part B Drugs. Pink. 02. 08. 2017.
Hutton, D. FDA approves Eyenovia’s APP13007 for relief of pain, inflammation after surgery. Ophthalmology Times. 05. 03. 2024.
Charters, L. Research finds NVK002 0.01% sustains myopia control without rebound progression after discontinuation. Ophthalmology Times. 05. 05. 2024.
Harp, M. D. Advancements in ophthalmology: A comprehensive look at the FDA's 2023 approvals. Ophthalmology Times. 12. 12. 2023.
