Merck Osteoporosis Candidate Scores

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Merck (MRK) recently received good news on the pipeline front with the Data Monitoring Committee (:DMC) for its post-menopausal osteoporosis candidate providing a favorable opinion about an ongoing phase III study.

Odanacatib, a cathepsin K (cat-K) inhibitor, is being evaluated in a phase III randomized, placebo-controlled study for the reduction of the risk of fracture in post-menopausal women with osteoporosis.

The DMC conducted a first planned interim analysis for efficacy and said that the study should be closed early considering the strong efficacy and favorable benefit-risk profile. The DMC, however, noted that certain safety issues remain which should be followed up.

While Merck intends to close the study, it will go ahead with its plan to conduct a blinded extension trial which will allow the company to follow up on safety issues.

With the phase III study being closed, Merck intends to file for US, EU and Japanese approval in the first half of 2013.

The early closure of the phase III study based on strong efficacy is a major positive for Merck. The company is facing a major patent expiry in 2012 with Singulair, which accounted for approximately 11.4% of total revenues in 2011, likely to witness significant sales erosion post August 2012. We expect a significant decline in Singulair revenues later this year.

Therefore, any positive development on the pipeline front bodes well for the company. We expect to hear more on the safety issues of odanacatib once the final analysis is completed and results are out in 2013. Odanacatib is one of five regulatory filings targeted by Merck in 2012 and 2013. Once launched, odanacatib will face competition from products like Amgen’s (AMGN) Prolia.

We currently have a Neutral recommendation on Merck, which carries a Zacks #3 Rank (short-term Hold rating).

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