A Big Break For Merck? What The Wags Say...

Last night, Merck issued some surprising news about an experimental drug being developed to treat osteoperosis. A Phase III trial was ended early after the study of more than 16,000 patients, which began in 2007, met its primary efficacy outcomes, although the Data Monitoring Committee noted that safety issues remain in certain selected areas and a previously planned blinded extension trial will be needed to sort these out (

The complete results will not be known for awhile, but the news was greeted as a pleasant surprise by investors, who have been cautious about the Merck pipeline and drove its stock up more than 4 percent by midday today. The new drug, called odanacatib, could become a much-needed successor to Fosamax, another osteoperosis drug in the bisophosponate class that generated $3 billion in annual sales before its patent expired four years ago.

So what do the wags say? ISI Group analyst Mark Schoenebaum sent an investor note with the not-so-subtle title: "Wow! Something Went Right!" He wrote that "the early stopping of the trial indicates the data is better than most expected. Expect peak sales expectations to rise. We are keeping ours at $1.6 billion unadjusted for now, but this could go up if (the) drug really does look better than bisphosphonates, which is now plausible given (the) early stop."

Now, though, the focus will shift to the unanswered safety issues. In his own investor note, Sanford Bernstein analyst Tim Anderson writes that is unclear whether there are specific safety issues that need to be ruled out. "Until clarity is provided on this, investors will likely remain uncertain on odanacatib's ultimate commercial potential," he write, although he adds that committee decision implies that safety issues "must be manageable in the context of what odanacatib can delivery on efficacy."

However, he also adds that comparing odnacatib fracture data with existing meds will become important, since the Phase III trial compared the drug only to a placebo. And there were no head-to-head comparisons in Phase II or III studies. "Therefore, for odanacatib to be a major commercial success," he writes, "it will have to have robust enough fracture data such that on a side-by-side comparison to other products, it stands above the competition."

Noting that Merck "helped pioneer" this therapeutic category when Fosamax was launched in the 1990's, he suggests that Merck is well positioned to make odanacatib a commercial success and forecasts sales of $418 million in 2016 and $1.5 billion in 2020, assuming the drug is launched in 2014. Merck would be competing with Eli Lilly, Novartis and Amgen, for instance, in this market.

Meanwhile, Leerink Swann analyst Seamus Fernandez is upbeat. He writes in an investor note that a 40 percent-plus reduction in hip fracture rates is possible, based on historical data from Fosamax and Prolia, which is sold by Amgen. "Assuming no concerning safety issues, (his consultants) believe odanacatib's excellent tolerability profile would make it the drug of choice in the 20 percent to 30 percent of patients intolerant to bisphosphonates," he writes. "They also note increasing concerns around the long-term safety of generic bisphosphonates."

As for safety, he has this to say: "A historical concern with other cathepsin K inhibitors has been risk of skin thickening, but our understanding of the Phase II data is that Merck has not seen evidence of skin thickening and believes this issue may be related to off-target effects of other drugs. Many potential safety issues also likely would need to be followed-up for any new mechanism, including safety issues related to other osteoporosis drugs that tend to emerge after three years of follow-up." These include thigh-bone fractures or osteonecrosis of the jaw.

Finally, Credit Suisse analyst Catherine Arnold noted that "our understanding of the trial design and the market lead us to believe that odanacatib’s fracture reduction rates are at least in line with the standard of care, with potential to be higher... Considering the significant market need and aging population, upside scenario (which is more likely now) could add about $2 billion to our base-case peak (sales) estimate."

bone pic thx to woodleywonderworks on flickr