For the once invincible pharmaceutical giant Merck & Co. Inc. (MRK), having endured a triple whammy - generic competition, sales erosion following safety concerns of drugs, and regulatory setbacks, 2008 has definitely been a tough year. Not to mention the stock has lost about 54% of its value thus far this year and at last count was at $26.13.
Here are some of the major events that adversely affected the health of Whitehouse Station, New Jersey-based Merck this year.
Fosamax Comes Off Patent
With Merck's blockbuster osteoporosis drug Fosamax losing patent in February 2008, sales of the drug have fallen off a cliff due to the entry of generic versions. Global sales of Fosamax (including Fosamax Plus D) plunged 51% to $354 million for the third quarter of 2008 from the comparable quarter a year before.
Fosamax sales (including Fosamax Plus D), which totaled $3 billion in 2007, are projected to range between $1.4 billion and $1.7 billion in 2008, with further erosion in sales in the coming years. The drug accounted for 12% of Merck's total revenue last year.
Singulair Under FDA Scanner
In March, Merck's asthma drug Singulair became the subject of FDA investigation, following reports linking the drug to serious adverse side effects like behavioral changes and suicidal thoughts. The investigation is currently underway.
However, leaders of the American Academy of Allergy, Asthma, and Immunology, or AAAAI and the American College of Allergy, Asthma & Immunology, or ACAAI, argue that no data from well-designed studies indicates a link between Singulair and suicide.
Last year, Singulair raked in $4.3 billion in sales, up 19% from 2006, and represented 18% of company's total sales. In the third quarter of 2008, sales of Singulair rose a marginal 1% to $1.03 billion.
ENHANCE Detracts
The combined sales of Merck's cholesterol drugs, Vytorin and Zetia have taken a hit ever since the results of a study dubbed ENHANCE revealed in January that though Vytorin lowers bad LDL cholesterol, it did not provide any significant benefit over generic Zocor in reducing the risk of heart disease or stroke.
Vytorin is a one-pill combination of Merck's Zocor, a statin, which is now available in generic version and a non-statin called Zetia, developed by Schering-Plough Corp. (SGP) and co-marketed by Merck. Vytorin was approved by the FDA in 2004. Zocor lost drug exclusivity in June 2006.
The ENHANCE study was completed in 2006, but the results were revealed only in 2008. The conduct of Merck and Schering-Plough in promoting Vytorin and delaying the release of trial results are being probed by the U.S. Department of Justice. About 140 civil class action lawsuits alleging that Merck and Schering-Plough promoted Vytorin and Zetia by making false claims have been filed since the beginning of the year.
Though doctors have not stopped prescribing Vytorin and Zetia, they are recommending the drugs mostly as a fallback therapy (as the last resort) for patients when other cholesterol-lowering drugs have failed.
U.S. prescriptions of Vytorin and Zetia have fallen significantly, resulting in their sales going south. In the third quarter of 2008, the combined global sales of Zetia and Vytorin were $1.1 billion, representing a 15% decrease from the year-ago quarter. Merck splits these sales with its partner Schering-Plough.
Worldwide sales of Zetia, marketed as Ezetrol outside the United States, were $534 million in the third quarter of 2008, a decrease of 12% from the previous year's third quarter.
SEAS Study - Ripples Run Deep
As if the controversy surrounding Vytorin is not enough, the drug is also embroiled in safety concerns. The results of a study dubbed SEAS (Simvastatin and Ezetimibe in Aortic Stenosis), which was designed to test whether aggressive LDL-cholesterol lowering with Vytorin was effective in treating patients with aortic stenosis, have raised questions about the safety of the drug.
According to the trial results released in July, there was a higher incidence of cancer in patients taking Vytorin, compared with the placebo arm. In the Vytorin arm 4.1% of patients died of some form of cancer, -- more than the 2.5% of patients who died in the placebo arm.
However, interim data from two ongoing trials namely SHARP (Study of Heart And Renal Protection) and IMPROVE- IT (IMProved Reduction of Outcomes: Vytorin Efficacy International Trial) evaluating Vytorin have showed no increased risk of cancer in patients receiving the drug. The SHARP study is expected to be completed by 2010, while IMPROVE-IT is scheduled for completion in 2012.
The FDA is investigating the potential association between Vytorin and increased risk of cancer and the safety review is not anticipated to be complete until spring 2009.
Vytorin's share of the overall cholesterol market, which was 9% in January declined to 6.6% in July*. Zetia and Vytorin combined, which accounted for 15.2% of the overall cholesterol market in January, fell to 11.7% in July* (*The latest month for which data is available).
Gardasil - Worth A Shot?
Sales growth of Merck's Gardasil vaccine appears to have hit the wall. Gardasil was approved by the FDA in 2006 for use in females 9-26 years of age to prevent cervical cancer, precancerous genital lesions and genital warts due to HPV (human papillomavirus) types 6, 11, 16 and 18. About 70% of cervical cancers and 90% of genital warts are caused by the above-mentioned four HPV types.
Last year, Gardasil notched up $1.5 billion in sales. For the third quarter of 2008, total Gardasil sales fell 4% to $401 million, while sales of the vaccine in the U.S. tumbled 16% to $276 million.
In June, the FDA turned thumbs down on Merck's request for approval of Gardasil for women between ages 27 and 45, saying that there are issues that preclude approval of the supplement within the expected review timeframe.
Gardasil is recommended as a three-dose regimen and each dose costs about $120. An editorial in the August 21 issue of the New England Journal of Medicine raises questions not only on the overall effectiveness of Gardasil in the protection against cervical cancer, but also on the vaccine's cost-effectiveness, compared to regular and consistent screening such as Pap smears.
The vaccine's potential side effects have also been gracing the headlines for quite sometime. As of June 30, 9,749 cases of "adverse events" associated with Gardasil administration were reported, of which 94% were deemed non serious and 6% deemed as serious. The nonserious events included injection site pain, headache, nausea, fever and fainting. The serious adverse events included 20 deaths. Other adverse side effects included blood clots and several cases of Guillain-Barre syndrome, an autoimmune disease that can lead to paralysis.
However in October, the CDC (Centers for Disease Control and Prevention) and the FDA determined that the HPV vaccine is safe to use and effective, based on the available information. The FDA also concluded that there is no evidence that Gardasil caused the deaths or led to Guillain-Barre. But some physicians are still skeptical about the vaccine's safety.
Amid a swirl of controversy over the vaccine's safety and efficacy, and regulatory setback, Merck pared its 2008 full-year sales forecast for Gardasil to $1.4 billion - $1.6 billion from its initial estimate of $1.9 billion - $2.1 billion.
FDA Sneezes At Combo Allergy Drug
At times, the hype surrounding combination pills seems to run far ahead of their clinical benefit, igniting a firestorm of controversy. In April, a combination allergy pill that would have combined Merck's Singulair and Schering-Plough's Claritin into one tablet, was rejected by the FDA. Claritin is now also sold in generic versions, while Singulair's patent is not set to expire until 2012.
Cholesterol Drug Falls Flat
The month of April saw yet another of Merck's drug failing to pass the FDA muster -- the company's investigational cholesterol drug Cordaptive. The drug candidate also called MK-0524A was long touted as a key addition to Merck's arsenal of cholesterol drugs with potential sales of $2 billion.
Though the knockdown of Cordaptive by the FDA came as a surprise to some, given the regulator's cautious approach on approving new drugs without extensive data, the rejection of the drug was not so unexpected, according to some physicians. Cordaptive is a combination of Merck-developed extended-release Niacin and Laropiprant. However, the drug was approved in Europe in May.
Though the FDA did not reveal the reasons for rejecting the drug, analysts believe the drug's modest test results and unknown long-term effects led to the rejection. Following the FDA's objection to Cordaptive brand name, Merck changed it to Tredaptive. A week after Tredaptive failed to win the FDA approval, Merck announced it is slashing 1,200 U.S. sales jobs.
However, Merck has not completely given up on MK-0524A (Tredaptive) and it remains optimistic of the results of a cardiovascular outcomes study called THRIVE (Treatment of HDL to Reduce the Incidence of Vascular Events), which is scheduled for completion in January 2013. The THRIVE study, which is evaluating MK-0524A, is being conducted by Oxford University and is funded through a grant from Merck.
Obesity Drug - Washed Out
Yet another investigational drug of Merck to bite the dust was Taranabant. The experimental anti-obesity drug Taranabant was yanked from development in early October as it had too many side effects. The phase III trial results of Taranabant showed that both effectiveness and side effects were dependent on dose levels, with greater efficacy and more adverse events in the higher doses. Basically, Merck wasn't able to find a right dose level that could sufficiently minimize the side effects, and provide significant weight loss.
Though Taranabant was considered a potential blockbuster, some analysts were wary of the drug's approval as it belonged to the same class as Sanofi-Aventis'(SNY) weight-loss drug Acomplia. In June 2007, FDA rejected Acomplia citing that the drug's benefits did not outweigh its risks.
Acomplia was approved in the EU (European Union) in 2006. With new data from post-marketing trials linking the drug to serious psychiatric disorders, Sanofi-Aventis on the recommendation of the EMEA, withdrew Acomplia from the European markets in late October. The drug had been on sale in the EU for over two-and-a half years.
Turnaround Mode - In Play
Following the Vioxx debacle, a high profile drug recall in September 2004, which left the company in shambles, Merck commenced its initial phase of cost reduction program in December 2005. The 2005 restructuring program, which was substantially complete at the end of the third quarter of 2008, eliminated 10,400 jobs.
The pharma giant continues to push a turnaround effort that has now extended into its second phase. As part of the 2008 restructuring plan, Merck expects to eliminate about 7,200 jobs - 6,800 active employees and 400 vacancies on a global basis by the end of 2011. About 40% of job cuts will occur in the United States. Merck plans to pare approximately 25% of its total number of senior and mid-level executives to streamline management layers across the company. As of September 30, Merck had approximately 56,700 employees.
The 2008 global restructuring program is slated for completion by the end of 2011 with the total pretax costs estimated to be $1.6 billion to $2.0 billion. Merck expects the 2008 program to yield cumulative pretax savings of $3.8 billion to $4.2 billion from 2008 to 2013. These are in addition to the cumulative pretax savings of $4.5 billion to $5.0 billion, which the company remains on track to achieve at the end of the 2005 - 2010 period.
Conclusion
With regulatory setbacks and patent expiration of one of its blockbuster drugs, it cannot be disputed that Merck suffered some of the biggest blows in 2008. To top it all, the demise of potential blockbusters like Taranabant and Cordaptive has tossed a wrench into the company's efforts to boost its bottom line.
However, it has not been all gloomy for Merck in 2008. Now that the FDA has expanded the usage of Gardasil vaccine to treat cancers of the vagina and vulva, which affect more than 5,000 women in the U.S. each year, Merck may see an uptick in Gardasil sales.
The company is also planning to seek approval for use of Gardasil in males, by the end of 2008. The results of a late-stage study released in mid-November, showed that Gardasil was 90.4% effective at reducing external genital lesions caused by HPV types 6, 11, 16 and 18 in men aged 16 to 26. Expanding the vaccine's indication is one sure-fire way to increase sales.
Another promising drug in Merck's roster is Januvia, which is used to treat type 2 diabetes. In the third quarter of 2008, Januvia's worldwide sales doubled to $379 million, compared to last year. Janumet sales rose five-fold to $101 million in the third-quarter from $19 million in the prior-year quarter. Janumet is a combination tablet, which combines two diabetes medications Januvia and Metformin in a single tablet.
According to a report released in October 2007 by research firms Decision Resources and Millennium Research Group, Merck may control 15% of the diabetes market in 2011, spurred by rapid uptake of Januvia. The drug is expected to become the second-leading blockbuster in the market, behind only Japan-based Takeda Pharmaceutical's Actos.
The bottom line is that it is time Merck brought new drugs successfully to the market in order to recoup the revenue that is being lost due to patent expirations, regulatory setbacks and waning sales of some of its major drugs.
According to data compiled by Thomson/FirstCall, 2 of the analysts who cover Merck give it a 'Strong Buy' rating, 4 give it a 'Buy' rating, while 9 have a 'Hold' rating on the stock.
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