by Barry Cohen | November 28, 2011 8:49 am
The nearly $6 billion Merck (NYSE:MRK) has agreed to pay to settle its Vioxx issues with both the U.S. government and with patients will look like a drop in the bucket if the company’s rich pipeline can live up to its potential.
Earlier this month at its annual R&D day, the Whitehouse Station, N.J.-based drug giant shared details with analysts and others about the programs and plans designed to give the company a much-needed boost. Investors will be the first to agree that Merck needs a shot in the arm. They’re growing impatient watching the former “Most Admired Company” tread water during the past few years.
At Friday’s close of $33.16, Merck is trading a few dollars below its share price of two years ago. One small consolation for investors is that the company is increasing its annual dividend to $1.68 per share, which translates to a healthy yield of more than 5%.
The company’s lackluster stock performance hasn’t been lost on management. At the R&D extravaganza, CEO Kenneth Frazier acknowledged that investors can’t be expected to wait for the company to achieve its long-term ambitions.
“I want you to know we intend to perform in the short term,” he said, according to an article on Xconomy.
To make good on Frazier’s promise, in the next two years Merck plans to seek U.S. approval for eight new medicines. They include drugs for chronic insomnia, hardening of the arteries, osteoporosis and reversal of anesthesia, plus an improved version of its blockbuster cervical cancer vaccine Gardasil.
In addition, the company has six novel candidates in various stages of development being evaluated for the treatment of atherosclerosis (anacetrapib), type 2 diabetes (MK-3102), prevention of herpes zoster (V212), psoriasis (MK-3222), hepatitis C infection (MK-5172) and Alzheimer’s disease (MK-8931).
All told, Merck has 19 candidates in late-stage human testing for a broad range of diseases.
Of course, new drugs are no guarantee of success. Look no further than 2011, in which Merck had gained FDA approval for five drugs. One of the most highly touted was the company’s hepatitis C treatment, Victrelis, which has been left in the dust by Incivek from Vertex (NASDAQ:VRTX).
Merck research head Peter Kim told analysts that two of the company’s experimental drugs — anacetrapib and MK-8931 — have the potential to usher in a new era of patient care. In a small trial study of 1,623 at-risk patients, the administration of anacetrapib in conjunction with regularly prescribed statins showed a 40% decrease in LDL, or harmful cholesterol, as well as a massive 138% increase in HDL, or “good” cholesterol. The drug currently is in Phase III testing with 30,000 high-risk patients and probably will be filed after the study is completed, sometime after 2015.
Merck also is enthusiastic about MK-8931’s potential in Alzheimer’s disease, one of the biggest market opportunities available. The compound inhibits an enzyme known as BACE1 that is implicated in the amyloid plaques that are linked with progression of the memory-robbing disease. The drug is scheduled to be tested in a mid-stage trial beginning next year.
As of this writing, Barry Cohen was long MRK.
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