The Afternoon Report: Killing Merck's Pain?
Drug maker Merck is hoping it can reenter a lucrative market for arthritis painkillers, but comments from regulators today suggest it faces long odds, just as a number of analysts suspected.</br></br>Merck's Arcoxia, like the company's shelved Vioxx, is a Cox-2 inhibitor, designed to reduce the gastrointestinal damage that other painkillers may cause. However, The Food and Drug Administration said in a memo posted on its Web site that new drugs in that class should fill an unmet medical need for patients who have no other "relatively safer" means to manage their arthritis pain. The agency also noted that it "remains uncertain" as to whether most Cox-2 drugs deliver their purported gastrointestinal benefits -- it said only Pfizer's Celebrex, which remains on the market, has been shown to reduce bleeding. Vioxx was yanked off the market in 2004 after it was linked to increased cardiovascular risks, and Merck soon found itself facing thousands of lawsuits from consumers. (The drug maker has vowed to fight each claim, and it has had a mixed record in state and federal trials so far.) Under great political pressure, the FDA put "black box" warnings on Cox-2 inhibitors in 2005. Since then, Merck has been looking for a way to recover at least some of the $2.5 billion in annual sales Vioxx produced in 2003, its last full year on the market.</br></br>An outside panel of medical experts will vote Thursday on whether they think Arcoxia, which is already being sold by Merck overseas but fetched relatively small sales of just $265 million last year, should be given the green light by the FDA. The agency isn't bound to follow the experts' advice, though it frequently does. Many Wall Street analysts believe that Arcoxia's chances for approval are slim. Jason Napodano of Zack's Equity Research sees "a near-term U.S. launch of Arcoxia as highly unlikely." He thinks that regulators, who took a lot of heat over their approval of Vioxx and other Cox-2 inhibitors after word of the heart risks emerged, will be ill-inclined to stick their necks out on the drugs this time. "We believe the FDA would be highly criticized for approving Arcoxia given the past cardiovascular risks seen with the class and the new hypertension and edema risks" shown in a trial of the drug, Mr. Napodano noted. Many analysts aren't even bothering to build Arcoxia into their projections for Merck.</br></br>Merck remains upbeat about its outlook and even recently bumped up its profit estimates for this year. Though it's eager to replace its lost Vioxx sales, the drug giant isn't putting all of its eggs in one basket. It boasts a strong roster of newer drugs which should help to offset the large piles of cash that the company is shoveling into Vioxx litigation, as well as the loss of patent protection on the blockbuster cholesterol fighter Zocor. Among those medications is Gardasil, a vaccine for the cervical-cancer causing human papillomavirus. Merck ditched a much-criticized campaign to make Gardasil vaccinations mandatory for young girls, but Mr. Napodano thinks that it "will be a blockbuster for Merck" anyway. Wall Street also has high hopes for just-approved diabetes drug Janumet. Jami Rubin of Morgan Stanley, who lifted her price target on Merck from $53 to $55 today, projects it will fetch $2.8 billion in sales by 2011. Merck, which reports earnings next week, saw it shares rise slightly today, to around $46 a share, just shy of its 52-week high of $46.55.</br></br>---