Merck stock plunges after FDA rejects drug
TRENTON, N.J. (AP) - April 29, 2008 Monday's rejection of Cordaptive, which Merck had touted as a
key drug to energize its cholesterol franchise, was unexpected and
the reasons remained unclear, analysts said. Merck gave little
detail, but said it plans to submit additional data on the drug to
the FDA.
"We're trying to get a better understanding from the FDA about
what we would need to do to respond to the issues that they
raised," Merck spokesman Ron Rogers said.
The FDA has become increasingly cautious about approving drugs
with possible safety problems since the 2004 withdrawal of Merck's
former blockbuster painkiller Vioxx due to increased heart attack
and stroke risks, a trend analysts noted Tuesday.
Shares of Whitehouse Station, N.J.-based Merck were down $4.50,
or 9.8 percent, at $37.39 in afternoon trading; shares fell 5
percent in after-hours trade after Merck announced the FDA decision
Monday evening.
Lehman Brothers cut its Merck price target, the level it expects
shares to reach in 12 months, from $58 to $53, and Citigroup
lowered its target from $49 to $44. Goldman Sachs cut its target
from $50 to $48, and lowered its earnings per share forecast by
increasing amounts the next few years, reaching a 23-cent reduction
in 2012.
"We believe that the headwinds of the cholesterol franchise
slowdown, vaccine (sales) weakness in the last two quarters and
this pipeline disappointment are significant," Goldman Sachs
analyst James Kelly wrote to investors.
Merck's former cholesterol blockbuster, Zocor, lost billions in
annual sales after it faced generic competition in 2006. The
company and partner Schering-Plough of Kenilworth, N.J., jointly
sell two other cholesterol drugs, Vytorin and Zetia; Vytorin
combines Zetia and Zocor.
Sales of Vytorin and Zetia have fallen somewhat amid
Congressional probes and accusations that, to protect their
revenues, the companies delayed results of a study that showed
Vytorin worked no better than much-cheaper Zocor.
Cowan & Co. analyst Steve Scala wrote that the FDA likely turned
down Cordaptive over safety concerns with laropiprant, an agent in
the drug to inhibit facial flushing - redness, burning and
tingling. Laropiprant is used to counter that unpleasant, sometimes
temporary side effect of the main ingredient, an extended-release
form of B vitamin niacin.
"It is possible that a larger safety database will be
necessary," Scala wrote. In the worst case, Scala said the FDA
could require results from a 20,000-patient study of whether the
drug prevents heart attacks and strokes. That data is not likely to
be available until 2012.
WBB Securities analyst Steve Brozak said the rejection will cost
Merck possibly years and probably tens of millions of dollars to
try to get the drug approved.
Brozak said Cordaptive's rejection is "much, much, more
problematic" than FDA's rejection Friday evening of an allergy
drug developed jointly by Merck and Schering-Plough Corp. That drug
combines prescription allergy and asthma pill Singulair - a
top-selling Merck product that could face generic competition in
2012 - and Schering-Plough's Claritin, a former prescription drug
now sold over-the-counter.
"We only recommend (Merck) for long-term investors," Leerink
Swann analyst Seamus Fernandez wrote, noting that the Cordaptive
rejection throws in doubt Merck's plans to ask FDA later this year
to approve another drug that combines Cordaptive's active
ingredient with generic Zocor.
Rogers, the Merck spokesman, said it still intends to seek
approval for that drug.
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