Merck KGaA (MKGAF) recently announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) recommended against the approval of cladribine for the treatment of relapsing-remitting multiple sclerosis (MS), citing safety concerns.
The committee’s negative opinion against approving cladribine was based on its belief that the benefits to the MS patients from the drug do not outweigh the risks that they will be exposed to on taking the drug.
The CHMP’s adverse recommendation comes as a rude shock to Merck KGaA, given the fact that cladribine was recently approved by the Australian and Russian regulatory bodies for the treatment of relapsing-remitting MS. The drug is marketed as Movectro in these countries.
In July, the US Food and Drug Administration (FDA) granted priority review status to cladribine for the treatment of relapsing-remitting MS. The regulatory body’s decision on the approvability of the drug is expected in the fourth quarter of 2010.
We believe Merck KGaA might appeal to the EMA to re-examine the CHMP’s recommendation before taking a decision on the future of cladribine.
We currently have a Zacks #1 Rank (short-term Strong Buy rating) on Merck KGaA. Though we view the negative stand from the CHMP as a major setback for the company, we believe that Merck KGaA’s continuous investment in R&D, marketing and new product launches should help sustain earnings growth for the next few years.
We are also of the opinion that the acquisition of Millipore reduces the company’s dependence on pharmaceutical and liquid crystals sector and helps build its specialty chemicals and performance life sciences portfolio.
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