Merck KGaA (MKGAF) recently announced that the US Food and Drug Administration (FDA) extended the review period of cladribine by three months. The prescription drug user free act date, which was earlier set for November 28, 2010, has now been postponed to February 28, 2011. The regulatory body said that it needs more time to fully review the additional information provided by Merck KGaA on the candidate.

Merck KGaA is seeking approval for the use of cladribine for the treatment of relapsing-remitting forms of multiple sclerosis (MS).

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 MS in September, citing safety concerns. The committee’s negative opinion was based on its belief that the benefits to MS patients from the drug do not outweigh the risks that they will be exposed to on taking the drug.

Merck KGaA requested the EMA in October for a re-examination of the adverse recommendation issued by CHMP. The CHMP’s negative opinion came as a rude shock to Merck KGaA given the fact that cladribine is approved in Australia and Russia for the treatment of relapsing-remitting MS. The drug is marketed as Movectro in these countries.

We currently have a Zacks #3 Rank (short-term Hold rating) on Merck KGaA. Though we view the extension of the review period for cladribine as a minor obstacle for the company, we believe that Merck KGaA’s continuous investment in R&D, marketing and new product launches should help sustain earnings growth.

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.

However, we note that the MS market is highly competitive with players like Teva Pharmaceuticals Industries Ltd. (TEVA), Biogen Idec Inc. (BIIB) and Elan Corp. plc (ELN) already in the market with MS treatments.

 
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