Merck’s Insomnia Drug Could Fend Off Patent Cliff

Merck (NYSE:MRK) is gearing up to file an approval application for its experimental insomnia drug, suvorexant, as phase III studies revealed that the drug helped insomnia patients fall asleep faster and stay asleep longer. Also, about 90% of the patients didn’t feel sleepy the day after they took the drug, which is a big advantage for the drug.

The data may encourage the company, which has been struggling with the drug trial successes. Separately, Merck is worried about the patent expiry of Singulair in August 2012 because of the absence of a successful pipeline of drugs to make up for revenue loses from Singulair. The favorable results will only strengthen the company’s promising drug pipeline, which has another drug odanacatib (for osteoporosis) in its list. They both could turn into blockbuster drugs for Merck in time, if successful.

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The company, however, may find it difficult to make inroads into the competitive sleep drug market. After the patent expiry of the major insomnia drug, Ambien, many generic versions have entered into the market. ((Merck preps FDA app after racking up positive PhIIIs on new sleep drug, fiercebiotech.com, June 13, 2012))

Nonetheless, Merck has several Phase II and III trials under discussion and, given its past record of rolling out ground-breaking medications, we don’t rule out Merck launching successful drugs in the future.

We currently have a $41 Trefis price estimate for Merck, which stands nearly 5% above the market price.

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