Merck’s Stock Gets A Boost From Osteoporosis Drug Trials

Merck (NYSE:MRK) got a major boost as outside monitors recommended that its late-stage trails of osteoporosis drug Odanacatib be stopped early because data has already proven the drug’s efficacy in reducing bone fractures. ^[1] The news comes at an opportune time for the company as, of late, the drug maker witnessed trial successes drying up significantly even though it is among the largest R&D spenders and has been relentlessly focusing on R&D over the years. Merck’s stock has sky rocketed nearly 10% in the past few days.

We are in the process of updating our model and price estimate for the company to reflect the recent developments.

Check out our complete analysis of Merck

Many were skeptical about the company’s growth drivers due to the absence of a successful pipeline of drugs to make up for the revenue losses from Singulair, which is set to lose patent exclusivity in August 2012. The favorable results have strengthened investor confidence in the company’s drug pipeline, which has another insomnia drug, Suvorexant in its list. Odanacatib and Suvorexant could turn into blockbuster drugs for Merck in time, if approved soon. Many are estimating Odanacatib to clock as much as $3 billion dollars in revenues, going forward.

The drug, however, may cannibalize the company’s sales for another drug Fosamax, which is used for treating similar conditions. Fosamax has been associated with a range of side effects, including stomach ache, muscle pain, rare thigh bone fractures and jaw decay.

While the news has brought some much-needed breather for Merck, the company has several Phase II and III trials under discussion and, given its past record of rolling out ground-breaking medications, we wouldn’t rule out Merck launching successful drugs in the future. It plans to advance its pipeline and file three other major products (apart from Odanacatib and Suvorexant) for approval between 2012 and 2013. This includes:

a) Bridion (sugammadex): a potential first-in-class neuromuscular reversal agent in the U.S.
b) V503: an investigational vaccine to help protect against certain HPV (Human Papilloma-virus) associated cancers
c) Tredaptive (Extended release niacin/laropiprant): an investigational extended release niacin plus laropiprant for the treatment of atherosclerosis (hardening of the arteries) in the U.S.

It is also comforting to know that less than 20% of the company’s 2011 revenues are subject to generic competition over the next two years (mainly due to Singulair going off-patent in 2012).

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1. Merck osteoporosis drug, company pipeline win more respect, Reuters, July 13, 2012 [↩]