UPDATE 2-Merck says hepatitis C drugs to lose breakthrough status
By Ransdell Pierson
Feb 4 (Reuters) - Merck & Co on Wednesday said the U.S. Food and Drug Administration intends to rescind its "breakthrough therapy" designation for the company's experimental combination treatment for hepatitis C because of other recently approved treatments.
Merck, in its fourth-quarter earnings report, said it plans to discuss the matter with the FDA, and still expects to seek U.S. approval for the treatment in the first half of 2015. It consists of a protease inhibitor called MK-5172 and a so-called NS5A inhibitor called MK-8742 that together had received the "breakthrough therapy" designation from the FDA.
Shares of the second-biggest U.S. drugmaker slumped 2.3 percent in premarket trading.
The setback for Merck's treatment follows recent approvals of costly oral treatments for the liver disease from Gilead Sciences Inc and AbbVie that have wiped out all signs of the virus in more than 90 percent of patients after eight or 12 weeks.
In the face of such potent rival medicines, Merck in June announced it would ramp up its involvement in the lucrative hepatitis C market by buying Idenix Pharmaceuticals Inc for $3.85 billion and combining the two companies' most promising drugs to produce a faster, more effective cure for hepatitis C. It agreed to pay $24.50 per share, more than three times Idenix's share price before the deal was made public.
Idenix had three drugs in development to treat hepatitis C, most notably a pill in early-stage trials called IDX21437, which Merck has renamed MK-3682. Like Gilead's Sovaldi, it is a nucleotide inhibitor - or "nuc" - that blocks a protein needed by the hepatitis C virus to replicate.
Merck is conducting a mid-stage trial to study combinations of MK-3682 and MK-5172 (grazoprevir) with either MK-8742 (elbasivir) or another drug called MK-8408. It hopes to begin larger late-stage trials later this year.
"We do not see this affecting the development of the combo," said JPMorgan analyst Chris Schott, referring to the potential loss of the special "breakthrough" designation, which provides a gloss of specialness to drugs and can speed up an FDA review.
Gilead introduced Sovaldi in late 2013 at a cost of $1,000 a pill, and reported fourth-quarter sales of $1.73 billion for the drug. Gilead later introduced Harvoni, a new pill combining Sovaldi with another treatment, and it captured sales of $2.11 billion in the quarter.
After AbbVie launched its Viekira Pak treatment late last year, it and Gilead have fought for market share by offering rebates to group payers.
Gilead estimated that 141,000 Americans have been started on one of its hepatitis C products so far, and it expects 250,000 to be treated this year. As many as 3.2 million people in the United States are estimated to be infected with the hepatitis C virus, which can lead to severe liver disease.
STRONG DOLLAR HURTS
Merck on Wednesday reported slightly disappointing fourth-quarter sales and predicted 2015 earnings below analyst forecasts, citing the negative impact of the stronger dollar, as most of its U.S. rivals have done in making their own cautious forecasts.
Merck said it expects full-year 2015 earnings of $3.32 to $3.47 per share, excluding special items, with foreign exchange factors crimping earnings by 27 cents per share. Wall Street had predicted $3.49 per share.
The company said it earned $7.32 billion, or $2.54 per share, in the quarter. That compared with $781 million, or 26 cents per share, in the year-earlier period.
Excluding special items, the company earned 87 cents per share. Analysts, on average, expected 85 cents per share, according to Thomson Reuters I/B/E/S.
Company revenue fell 7 percent to $10.48 billion, trailing Wall Street expectations of $10.5 billion, held back by lower sales of its Remicade arthritis drug, now facing competition abroad from cheaper generic drugs. Sales would have fallen 4 percent if not for the stronger dollar, which lowers the value of sales abroad, when converted back into U.S. currency. (Reporting by Ransdell Pierson; Editing by W Simon and Paul Simao)
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