Merck, Schering Shares Hit by Cholesterol Drug Fallout
Shares of Schering-Plough and Merck plunged Monday after doctors at a prominent medical meeting recommended patients try older cholesterol drugs before the companies' newer medicines.
Schering-Plough shares dropped more than 25 percent Monday, while Merck shares fell more than 15 percent, as analysts cut their sales forecasts for the companies shared drugs, Vytorin and Zetia.
The value of Vytorin and Zetia, which generate about $5 billion in combined annual sales, has been questioned since the results of a controversial study were released in January.
A panel at the American College of Cardiology meeting on Sunday recommended that doctors first put patients on a high dose of a statin — an older cholesterol treatment — and then try other drugs before using Vytorin or Zetia.
At least two brokerages — Goldman Sachs and Lehman Brothers — downgraded their ratings on shares of Schering-Plough, while others cut their earnings forecasts for the companies on expected lower use of the products, which are sold by the companies in a joint venture.
Goldman Sachs analyst James Kelly downgraded Schering-Plough shares to "neutral" from "buy," citing uncertainty around the cholesterol franchise, which is more important to Schering than Merck.
Kelly previously said Schering's U.S. cholesterol business would fall 20 percent this year and recover in 2010. But, he said in a research note, "we are now moving to a more prolonged fall," with U.S. cholesterol drug sales down 24 percent in 2008, 20 percent in 2009 and 10 percent in 2010.
Credit Suisse analyst Catherine Arnold characterized the panel discussion as "ezetimibe-bashing," referring to the generic name for Zetia. Vytorin combines Zetia with Zocor, Merck's older statin.
"A Vytorin/Zetia recovery will take more patience," Arnold wrote in a research note.
Adding to the negative sentiment was positive news from rival AstraZeneca , which announced Monday that it was stopping a clinical trial of its blockbuster chloesterol figher Crestorbecause of the clear benefits of the medicine compared to a placebo.
Through Friday's trading, Schering shares had fallen nearly 30 percent since the results of the study were released, while Merck shares had dropped about 27 percent. The American Stock Exchange Pharmaceutical index, a barometer of mostly large drug stocks, is off 16 percent over that time.
Study: Cordaptive Beats Out Niaspan
Separately, researchers said Monday that Merck's Cordaptive pill to raise "good" HDL cholesterol caused less facial flushing in a study than Abbott Laboratories' Niaspan treatment, but with certain increased side effects.
Merck's experimental drug contains an extended-release form of the vitamin niacin to raise levels of HDL.
It also contains a chemical called laropiprant to stop flushing, a dilation of blood vessels that causes redness and an unpleasant burning sensation on the neck and face.
Flushing is a common side effect of niacin-based drugs, and the biggest reason many patients stop taking current products, including Niaspan.
Results from the late-stage study of Cordaptive suggest the problem was largely averted and could boost interest in HDL-raising therapy, Merck said.
Although overall other side effects were similar among patients taking Cordaptive and Niaspan, those taking the Merck drug had elevations in liver enzymes — a potential sign of toxicity — and diabetics had to adjust their medicines due to an impact on their blood sugar.
Dr. Michael Koren, a Jacksonville, Fla., cardiologist who led the study, said none of the side effects was worrisome, although patients were taken out of the study if they developed elevated liver enzymes.