Merck's Antidepressant Setback Shows Risks in Drug Research
Bloomberg News
January 23, 1999, 5:42 p.m. ET
Merck's Antidepressant Setback Shows Risks in Drug Research
Whitehouse Station, New Jersey, Jan. 23 (Bloomberg) -- Merck
& Co., the world's biggest drugmaker, will be under more pressure
to find new blockbuster pills after dropping an experimental
antidepressant once touted as a potential rival to Eli Lilly &
Co.'s Prozac, analysts said.
Merck fell 7 5/16 to 139 yesterday on news it wouldn't move
a compound, which affects a brain chemical called substance P, to
more advanced testing as an antidepressant. Instead, Merck will
test the compound MK-869 for use against nausea associated with
chemotherapy. Merck also will look at a less advanced compound as
a possible antidepressant.
MK-869 was seen as one of the brightest prospects in Merck's
research program, a $2 billion-a-year enterprise considered among
the best in the world. Facing the loss of patents by 2001 on four
drugs that top $5 billion in combined annual sales, Merck built
expectations for MK-869. If it worked as expected, MK-869 could
have rivaled drugs with more than $1 billion in annual sales.
''This will remind people that this is not a risk-free
business, '' said Jeffrey Chaffkin, an analyst with PaineWebber
Inc., who has a ''neutral'' rating on Merck. ''There are
failures. It is not an easy ride.''
Priced for Perfection
Given the drug industry's recent string of successes, some
investors may have lost sight of that, analysts said. They may
have come to expect the kind of gains that new blockbuster drugs
have delivered for Pfizer Inc., Warner-Lambert Co., Eli Lilly &
Co. and Schering-Plough Corp. in the past several years.
Tuesday, Pfizer reported that fourth-quarter profit rose 42
percent to $711 million, or 54 cents a share, as it introduced
anti-impotence pill Viagra in Europe. The success of Viagra and
other Pfizer pills, such as the antidepressant Zoloft, boosted
the company's stock 48 percent in the past year to 115 3/4.
''These drug stocks are priced for perfection, so even a
minor setback such as (Merck's Friday news) can cause a potential
setback for the share price,'' said Jack Lamberton, an analyst
with HSBC Securities.
Yet, setbacks may be the only thing that can be counted in
drug research.
Merck's announcement yesterday followed a similar Friday
afternoon surprise from Monsanto Co. a week earlier. Monsanto
said Jan. 15 that it dropped two late-stage heart drugs. The
Merck and Monsanto drugs were in what the U.S. Food and Drug
Administration calls ''Phase III,'' the last and most extensive
set of tests done in humans before applying for FDA approval of a
drug.
Expanding Research Programs
Drugmakers test and reject scores of compounds that never
even make it to testing in humans, let alone the most advanced
stage of clinical trials, said John LaMattina, who leads Pfizer's
basic drug research.
''Ninety percent of the time, you fail,'' LaMattina said in
an interview last month. ''If you are unsuccessful 85 percent of
the time, then you are doing a spectacular job.''
To increase the odds, drugmakers are expanding their
research programs as quickly as they can. Construction projects
have made it tough to find parking spaces at Merck's eastern
Pennsylvania laboratories and Pfizer's in eastern Connecticut.
Rival drugmakers such as Bristol-Myers Squibb Co. also have plans
to hire more scientists in the hunt for new medicines.
Still, drugmakers may not find the wave of blockbuster
medicines in their own labs. They all are looking at the late-
stage research of smaller rivals and of biotechnology companies
and make agreements to sell what they hope will be the next big
pill.
Although Merck has tended to rely on its own research for
new products, the company does have the money to make licensing
agreements. In 1998, Merck sold its share of a joint venture to
DuPont Co. for $2.6 billion. It also agreed to a restructuring of
a similar alliance with Astra AB that could give Merck at least
$4.4 billion by 2008.
''They have to do something to get new products,''
PaineWebber's Chaffkin said. ''They are going to have to find
something to replace (MK-869) in their pipeline.''
--Kerry Dooley in the New York newsroom (212) 318-2300 with |
