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CRL for Merck's Suvorexant

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The US Food and Drug Administration (:FDA) recently issued a complete response letter (CRL) for Merck’s (MRK) insomnia candidate, suvorexant.

According to the agency, a 10 mg dosage should be the starting dose of suvorexant, which has shown efficacy at doses of 10 mg – 40 mg in elderly as well as non-elderly adults. The FDA said that the 15 mg and 20 mg doses should be used only in those patients who need a higher dose.

The FDA also noted in the CRL that patients already taking concomitant moderate CYP3A4 inhibitors should use a 5 mg dose of suvorexant.

Merck said that the FDA also determined that the safety data on the 30 mg and 40 mg dosages of suvorexant were not sufficient to support approval.

Based on a review of the CRL, Merck said that it does not expect the agency to require additional studies on the 10 mg dosage. However, the company believes it will have to conduct manufacturing studies for this dosage. As far as the 5 mg dosage is concerned, Merck will discuss with the FDA the need to conduct additional studies.

Approval would have made suvorexant the first orexin receptor antagonist to reach the market. However, we note that the insomnia market is highly competitive and genericized especially given the presence of generic versions of Sanofi’s (SNY) Ambien.

Merck currently carries a Zacks Rank #4 (Sell). With Singulair losing exclusivity in the US as well as the EU, we expect the top- and bottom-line to remain under pressure. The decline in Januvia sales in the first quarter of 2013 is also a matter of concern. Other headwinds remain in the form of unfavorable currency movement and pipeline setbacks. We believe the company will look towards cost-cutting initiatives and share buybacks to drive the bottom-line.

At present, Novo Nordisk (NVO) looks well-positioned with a Zacks Rank #2 (Buy). Another company that looks well-positioned is Santarus, Inc. (SNTS) – the company carries a Zacks Rank #1 (Strong Buy).

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