Merck's $10.8B Prometheus buy just split in two

Merck paid roughly $10.8 billion in 2023 for a San Diego biotech called Prometheus Biosciences and its single experimental drug, tulisokibart. The drug targets a single immune signaling protein called TL1A, and the case for the price was simple: block that one target, and you can treat a dozen inflammatory diseases with one molecule. This week, midphase readouts from two of those diseases came back, and the answer came in two opposite halves.

Tulisokibart hit its primary endpoint in a phase 2b study of hidradenitis suppurativa, or HS, a long-term inflammatory skin disease that produces painful abscesses and tunnels under the arms, groin, and buttocks, and also hit the key secondary endpoints. Full efficacy and safety detail will come at an upcoming medical meeting. The same week, a separate midphase study in systemic sclerosis with interstitial lung disease, or SSc-ILD, a rare scarring lung illness, missed its primary endpoint. Merck said it is ending that trial and reported no new safety concerns. Two readouts, two verdicts, one program.

That bifurcation is the structural read. Merck's TL1A bet was always two bets in a single program. The first half is TL1A as an inflammation node, the same idea that made TNF and IL-23 inhibitors useful across several diseases. The HS win belongs in this bucket, along with the phase 3 ATLAS-UC induction win Merck reported in June in ulcerative colitis, where induction of remission was the primary endpoint. The second half is TL1A as a fibrosis node. Dean Li, the head of Merck Research Laboratories, has called the broader program a beachhead into "immunofibrosis," the idea that the same TL1A pathway drives the scar-forming process in SSc-ILD and other fibrotic diseases, with implications that go beyond inflammation. The SSc-ILD miss belongs in this bucket, and it dents the second half of the thesis.

The inflammation half still has a crowded and competitive calendar. Merck is not the only company racing the same target. Roche's afimkibart and a Sanofi/Teva partnership's duvakitug are both advancing through their own mid- and late-stage programs, and Merck's commercial case for tulisokibart rests on being first or first-among-equals into the class. The next high-stakes verdict is the phase 3 maintenance data in ulcerative colitis, expected later this year, which will determine whether patients who achieved remission on induction can stay there. Behind that, Merck is running tulisokibart in rheumatoid arthritis and radiographic axial spondyloarthritis, with primary completion dates inside the next twelve months and June 2027 respectively. HS, RA, axSpA, and UC maintenance are the four readouts that decide whether the inflammation half of the thesis survives the loss of Keytruda revenue to biosimilar competition starting in 2028.

The fibrosis half is where Merck has just lost ground. A single midphase miss in a rare disease does not kill the immunofibrosis idea, but it does shrink the addressable population Merck can credibly point to, and the remaining fibrosis bets in the program are smaller and later. The next several years of readouts will look more like immunology than like fibrosis.

The cleanest read: Merck paid $10.8 billion in 2023 for a single molecule and a two-part thesis. The molecule has now had three midphase or phase 3 verdicts — UC induction win, HS win, SSc-ILD miss. The molecule is doing what molecules do. The thesis is what Merck is now selling, and it has lost one of its two halves. The next twelve months of readouts — UC maintenance, RA, and axSpA — will determine how much of the first half survives.