Merck (MRK) recently announced its decision to opt out from its collaboration agreement with Portola Pharmaceuticals for a blood clotting candidate, betrixaban.
Betrixaban, which recently completed phase II development, is an oral Factor Xa inhibitor anticoagulant which is being studied for the prevention of stroke in patients with atrial fibrillation (SPAF). Merck’s decision was based on an evaluation of its pipeline.
Agreement Dated Back to 2009
Merck and Portola had signed the collaboration agreement in July 2009. On the signing of the agreement, Merck paid $50 million to Portola. Besides this, the company was liable to pay an additional $420 million on the achievement of development, regulatory and commercialization milestones.
Moreover, Merck would also have to pay double-digit royalties on worldwide sales of the candidate. Merck would also have been responsible for all development and commercialization costs.
Anticoagulant Market Highly Competitive
The anticoagulant market is highly competitive with players like Bristol-Myers Squibb Co.’s (BMY) Plavix, Eli Lily & Co.’s (LLY) Effient, AstraZeneca plc’s (AZN) Brilinta and Boehringer Ingelheim’s Pradaxa. Moreover, companies like Johnson & Johnson/Bayer (JNJ/BAYRY), Pfizer/Bristol-Myers (PFE) have late-stage anticoagulant candidates in their pipeline.
In fact, earlier this year, Merck itself provided disappointing news on another anticoagulant candidate in its pipeline. Merck announced that an increase in intracranial hemorrhage was associated with its anticoagulant candidate, vorapaxar, in patients with a history of stroke. The increase in bleeding associated with vorapaxar could make it challenging for the candidate to take share once approved.
Neutral on Merck
We currently have a Neutral recommendation supported by a Zacks #3 Rank (short-term Hold rating). Merck is currently facing issues such as patent expirations of key drugs, EU pricing pressure, US health care reform and pipeline setbacks. We believe the company will have to resort to cost-cutting initiatives to drive the bottom-line. Meanwhile, some of the company’s recent launches should start contributing significantly to the top line in the forthcoming quarters.
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