Merck Spends Big on New Hepatitis C Drugs
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Although Gilead’s Sovaldi has taken over the HCV marketplace with $2.3 billion in sales in its first quarter, Merck has made the bold choice of spending billions of dollars to acquire new Hepatitis C treatment drugs.
By announcing its acquisition of Idenix for $3.85 billion in cash, Merck has stepped up and paid a 238 percent premium over Idenix’s closing price at the beginning of June. A bold move, since it reveals the belief by the Merck executive team in the HCV marketplace and its potential to grow as more people get tested.
The treatment of hepatitis C is in the midst of an incredible transformation as researchers develop new drugs that have proven effective in combating the disease. Over 170 million people worldwide are estimated to be infected with the liver-damaging virus. Fueled by protease inhibitors that cut the virus off from essential proteins that enable it to reproduce in the human body, the newer medicines have higher cure rates. Beyond this, the latest drugs also have fewer side effects and shorter treatment durations than the much maligned former treatment regimen of Pegylated Interferon.
Roger Perlmutter, the head of Merck’s research and development operation, explained the philosophy behind the acquisition in an interview with Forbes. "Let’s recognize that there are on the order of 170 million people who have hepatitis C infection," Perlmutter said. "You’re not going to treat a substantial fraction of the world’s infections in a few years. It’s just impossible.”
With three drugs in development to treat hepatitis C, most notably a nucleotide inhibitor in early-stage trials called IDX21437, the value of Idenix is completely defined by its Hepatitis C treatment innovations. Merck hopes to combine IDX21437 with its two experimental oral treatments currently in clinical trials, a protease inhibitor called MK-5172 and a NS5A inhibitor called MK-8742. Taken together, these two high-profile drugs received a "breakthrough therapy" designation from the U.S. Food and Drug Administration.
In a recent mid-stage clinical trial, Merck's two-drug combo cured 98 percent of previously untreated patients with genotype 1. Historically, genotype 1, known as the American genotype for its prevalence in the U.S. population, has been both the most common and hardest to treat. In existing studies, the Idenix drug has shown effectiveness against almost all the HCV genotypes without the medical risks and side effects that have plagued other drugs in its class. Merck must be hoping that the trinity of the three drugs combined will allow it to corner the market in the future on all the different genotypes, allowing for worldwide treatment potential.