Full Article reprinted from "The Pink Sheet" December 23, 2008
Merck's fledgling bioventures business may have dominated headlines following the company's recent analyst day, but the firm's other initiatives are likely to contribute more to near-term growth as Merck tries to address the revenue gap that will be left by key patent expirations in the next few years. Read more...
Merck Outlines Plans For 2009 NDA Filings; Migraine Drug Is Best Bet
Merck's fledgling bioventures business may have dominated headlines following the company's recent analyst day, but the firm's other initiatives are likely to contribute more to near-term growth as Merck tries to address the revenue gap that will be left by key patent expirations in the next few years.
Merck is anticipating one near-term filing from Merck BioVentures - a pegylated erythropoietin similar to Amgen's Aranesp, which is targeted for approval in 2012 - but the ambitious plans for follow-on biologics will take more time to come to fruition.
In 2009, Merck expects to file three NDAs: talcagepant for migraines, rolofylline for acute heart failure, and a pill combining Zetia (ezetimibe) and atorvastatin (Pfizer's Lipitor) for atherosclerosis. The firm also has two applications pending for new indications to expand use of leading products Gardasil (human papillomavirus vaccine) and Isentress (raltegravir).
The company is also working aggressively on lifecycle management strategies to bolster its big franchises in diabetes (Januvia/Janumet) and cholesterol-lowering agents by continuing to develop new fixed-dose combinations and new formulations, including Isentress once-daily and extended-release Janumet (sitagliptin/metformin). In addition, the company is continuing with an extensive multi-year program to reorganize its businesses and bring costs more in line with expected revenues.
Several of these prospects could come to market by late 2009 or 2010. But these initiatives alone won't come close to filling gaps left by the upcoming patent expirations. The antihypertensive franchise of Cozaar and Hyzaar (losartan), which yielded global sales between $3.5 billion and $3.7 billion in 2008, loses protection in 2010; the company's biggest product, the asthma medication Singulair (montelukast), which brought in sales between $4.3 billion to $4.5 billion this year, will face generic competition in 2012.
Still, positive news would help boost confidence in the company's long-term outlook.
Meanwhile, Merck says 2009 is likely to be a transition year. The company isn't projecting growth in 2009 and anticipates only a modest recovery in 2010; on Dec. 4 it lowered its guidance for the year, saying sales are likely to be flat to slightly down and earnings will be lower than in 2008. Foreign exchange fluctuations, lower interest income and lower-than-expected sales of key products, including Gardasil and Singulair, are the main reasons it lowered its guidance.
Nevertheless, "2009 will be an important year of transformation and execution for us," CEO Richard Clark told analysts at the briefing. "Merck anticipated change in the industry sooner than others and we started down this path earlier. ...We have made significant progress with building our new models and reengineering our operations through initiatives such as the basic research global operating strategy, the new clinical development model, our new commercial model, and the continuation of the Merck supply strategy."
Keeping all of those new strategies working together will be "one key to creating momentum," Clark said.
Merck needs all the help it can get following a disastrous 2008, which saw major pipeline setbacks, challenges to its best-selling cholesterol-lowering business, and an unexpected slow down in sales growth of some other stalwart products. In addition, it launched only one drug, an injectable formulation of Emend (aprepitant), an anti-emetic previously available only in an oral formulation.
Ambitious efforts to fill the gap to date through R&D efforts have been stopped by roadblocks, including FDA's "not approvable" decision on the niacin/flushing inhibitor cholesterol drug Tredaptive (formerly Cordaptive) and the discontinuation of the obesity drug taranabant in October.
In October, the company also said it would cut 7,200 jobs, or 11 percent of its workforce, including 25 percent of its executives. Prospects For 2009 Submissions
Of the three drugs that Merck is preparing to submit to the FDA, analysts largely believe that talcagepant, for migraines, has the most potential. The drug, if approved, will be the first new mechanism of action for migraines since 1991, said Peter Kim, president of Merck Research Laboratories. The drug would be the second migraine treatment for Merck; it has been selling Maxalt (rizatriptan) for more than a decade, during which time sales rose to $467 million in 2007; they have since jumped 11 percent through the first nine months of 2008.
Talcagepant could reach sales of $328 million in the U.S. by 2012 and $440 million worldwide, rising to $572 million and $821 million, respectively, by 2014, according to EvaluatePharma, which compiles forecasts of pharmaceutical products based on analysts' consensus estimates.
In contrast, analysts expect that the two filings projected for next year - rolofylline for acute heart failure and the Zetia/atorvastatin combination - are likely to be smaller opportunities. Based on a 2010 launch, rolofylline could achieve U.S. sales of about $42 million and worldwide sales of $173 million by 2014, while the cholesterol combination, if launched in 2011, could reach sales of $80 million in the U.S. and $104 million worldwide by 2014, says EvaluatePharma. Sales of the latter are shared by a joint venture between Schering Plough and Merck, so Merck would only receive 50 percent of the sales.
Talcagepant's Novel MoA Yields Fewer Side Effects, Similar Efficacy to Triptans
Talcagepant blocks a receptor to the calcitonin gene-related peptide (CGRP), a substance in the brain that becomes elevated during migraines. Migraines have a huge unmet need because patient response to medication often varies and fewer than 20 percent of people with migraines are treated with current standard of care, triptans, Kim said.
Nevertheless, talcagepant faces a challenge because triptans have been the dominant front-line therapy for migraines for more than a decade, and doctors are comfortable with them. In addition, generic triptans are available.
Merck's Phase III studies, presented earlier this year at the American Headache Society and other scientific meetings, show that talcagepant has similar efficacy to AstraZeneca's Zomig (zolmitriptan). Talcagepant, however, appears to have fewer adverse effects. Triptans can cause chest pain, pressure, asthenia and throat tightness, among other side effects; they are also vasoconstrictors, which are contraindicated in patients with cardiovascular or peripheral vascular disease.
Since talcagepant is not a vasoconstrictor, it has less potential to cause cardiovascular-related side effects, points out Jeremy Spivey, a research analyst at market research firm Cutting Edge. Also, it does not antagonize the serotonin system and therefore is not likely to cause serotonin syndrome, an infrequent, but serious, side effect of triptans. Thus, patients on serotonin-based antidepressants who can't take triptans are likely candidates for talcagepant, he points out.
That may not be enough to convince payers that the drug is worth the extra cost for most patients, but, in response to analysts' questions, Kim said that Merck believes its ongoing clinical studies program will elicit data about the cost-benefits in certain patient groups of talcagepant over triptans.
Pursuing Isentress for Treatment-Naive HIV
Beyond new products, the company is moving forward with aggressive lifecycle management of its key franchises, including pursuing the expansion of eligible patients to include larger groups of Gardasil through adult women and males, and expanding the indication of Isentress to treatment-naive patients.
Isentress, a first-in-class integrase inhibitor for HIV-1 infection approved in 2007 for treatment-experienced patients, is one of the firm's stronger recent launches. The company doesn't break down its sales, but analysts say it could generate nearly $400 million in 2008, up from $41 million in 2007.
Merck filed a supplemental NDA on Dec. 12 seeking to use Isentress in combination with other HIV treatments in treatment-naive adults - an indication the firm said could triple the number of patients eligible for the drug. The user fee has been set for July 2009.
Phase III studies show viral loads dropped significantly more rapidly with Isentress than with Bristol-Myers Squibb's Sustiva (efavirenz), which Kim said is among the fastest agents to get declines in viral load. A rapid decrease in viral load is associated with better long- term prognosis, he noted. Isentress also has fewer cardiovascular and neurological side effects than efavirenz.
Of course, none of these efforts are assured. In 2007, the company had an upbeat business meeting, in which it discussed double-digit CAGR EPS between 2005 and 2010, excluding restructuring charges, and CAGR revenues of 4-6 percent between 2005 and 2010, including contributions from the Merck-Schering Plough joint venture. It also disclosed plans to file two NDAs - for Cordaptive and taranabant. Both fumbled.
- Wendy Diller
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