Merck's hep C drugs to lose breakthrough status; earnings top estimates

A research lab at Merck
John Tlumacki | The Boston Globe | Getty Images

Merck on Wednesday said the U.S. Food and Drug Administration intends to rescind its "breakthrough therapy" designation for its experimental combination treatment for hepatitis C because of other recently approved treatments.

Merck, in its fourth-quarter earnings report, said it plans to discuss the matter with the FDA, and still expects to seek U.S. approval for the treatment in the first half of 2015. It consists of a protease inhibitor called MK-5172 and a so-called NS5A inhibitor called MK-8742 that together had received the "breakthrough therapy" designation from the FDA.

The reversal of fortune for Merck's treatment follows recent approvals of potent new treatments for the liver disease from Gilead Sciences and AbbVie.

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Merck in June announced it would ramp up its involvement in the lucrative hepatitis C market by buying Idenix Pharmaceuticals for $3.85 billion and combining the two companies' most promising drugs to produce a faster, more effective cure for hepatitis C. It agreed to pay $24.50 per share, more than three times Idenix's price before the deal was made public.

Merck reports mixed results
Merck reports mixed results

Idenix had three drugs in development to treat hepatitis C, most notably a pill in early-stage trials called IDX21437. Like Gilead's new drug Sovaldi, it is a nucleotide inhibitor—or "nuc"—that blocks a protein needed by the hepatitis C virus to replicate.

Merck has hoped to eventually combine IDX21437 with MK-5172 and MK-8742.

Merck reported slightly disappointing quarterly sales and predicted 2015 earnings below analyst forecasts, citing the negative impact of the stronger dollar, as most of its U.S. rivals have done in making their own cautious forecasts.

Merck said it expects full-year 2015 earnings of $3.32 to $3.47 per share, excluding special items, with foreign exchange factors crimping earnings by 27 cents per share. Wall Street had predicted $3.49 per share.

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The second-biggest U.S. drugmaker on Wednesday said it earned $7.32 billion, or $2.54 per share, in the fourth quarter. That compared with $781 million, or 26 cents per share, in the year-earlier period.

Excluding special items, the company earned 87 cents per share. Analysts, on average, expected 85 cents per share, according to Thomson Reuters I/B/E/S.

Company revenue fell 7 percent to $10.48 billion, trailing Wall Street expectations of $10.5 billion, held back by lower sales of its Remicade arthritis drug, now facing competition abroad from cheaper generics.

Sales would have fallen 4 percent if not for the stronger dollar, which lowers the value of sales abroad, when converted back into U.S. currency.