Merck‘s (NYSE:MRK) efforts to fend off revenue losses from a patent cliff, suffered a huge setback as its cholesterol drug Tredaptive failed to meet its primary endpoint in the HSP2-Thrive study. According to the results, Tredaptive did not reduce risks of heart attacks, strokes, the need for revascularizations (procedure for new, additional, or augmented blood supply) or death from cardiovascular diseases more than conventional cholesterol lowering statins. Tredaptive is a drug to lower LDL-cholesterol or ‘bad’ cholesterol and raise HDL-cholesterol, or ‘good’ cholesterol.
Adding to the disappointment were serious side effects that patients on the pill had developed.  Following the disappointing results, Merck now, will not seek FDA approval for the drug even as the European Medicines Agency (EMA) is reviewing the results to decide the drug’s fate going forward. The EMA had approved the drug in 2008. 
Tredaptive Failure: A Major Setback For Cardiovascular Franchise
Merck has had a decent presence in the cardiovascular drugs market through 2010-11, with drugs like Zetia, Vytorin, Zocor and Cozaar/Hyzaar in its portfolio. However, its major drugs Cozaar/Hyzaar, which garnered over $2 billion in 2010, the most in the cardiovascular franchise at that time, lost patent exclusivity in large markets including the U.S. and Europe in late 2010, hurting the drug maker. And we expect total cardiovascular sales (excluding pipeline drugs) to decline going forward due to a number of factors.
Questions around the efficacy of Zetia and Vytorin (a combination of Merck’s own Zocor and Zetia) have been raised several times.  While both of these drugs have proven to be effective in lowering cholesterol, there is little statistically significant evidence that they reduce chances of heart attacks, strokes and other cardiovascular problems, and may not add major benefits to statins like Pfizer‘s (NYSE:PFE) Lipitor, a conventional treatment for reducing cholesterol.
Merck has not been able to answer these questions yet, though it is conducting a large study called IMPROVE-IT to restore confidence, which should be concluded by June 2013.  These concerns led to a decline in prescriptions of Vytorin in the U.S., and as such, we expect it to continue barring a positive outcome of the ongoing study.
The drug maker was banking on FDA approval for Tredaptive to fend off an expected decline in revenues. Merck had earlier unsuccessfully applied for U.S. FDA approval back in 2007, and despite impressive results in earlier trials,  the FDA asked it to wait for the outcome of HSP2-Thrive. The drug, with FDA approval, was expected to contribute more than $500 million in revenues in peak sales. With the failure of Tredaptive in clinical trials and Merck’s decision to not move forward, we have accordingly adjusted our forecast for cardiovascular franchise to lower the drug’s potential sales.
No Reprieve From Other Experimental Drugs In Near Term
After the failure of Tredaptive, Merck is now left with Vorapaxar, a blood thinner, which could see the light of the day in 2013. However, at this point it is unclear whether it will receive approval or not due to some concerns raised by clinical studies.  Merck will now seek approval for its use in preventing cardiovascular events instead of a broader use, including patients with a history of stroke. This has capped the revenue potential from the drug. Still, an approval would bring in much needed revenues to the cardiovascular division.
Anacetrapib seems to be the most promising candidate in Merck’s cardiovascular franchise. Anacetrapib is one of the few CETP inhibitors (a new type of treatment targeting coronary heart diseases), currently undergoing clinical trials and has produced impressive results in early stage results of phase III DEFINE trial, which is determining the safety and efficacy of the drug.  A separate phase III study, called REVEAL, will soon begin to see if it reduces the risk of major coronary events in patients with a history of heart and vascular diseases. 
The recent termination of Roche Holdings‘ (PINK:RHHBY) cholesterol drug Dalcetrapib, gives Anacetrapib the opportunity to gain a larger share of the addressable market.  While the drug is not likely to receive FDA approval anytime soon, it could be launched just before Zetia and Vytorin lose their patent exclusivity in 2017, and we expect the drug to see a strong uptake soon after the launch.
We have lowered our price estimate for Merck to $49, about a 20% premium to the current market price.Notes:
- Merck Announces HPS2-THRIVE Study of TREDAPTIVE™ (Extended-Release Niacin/Laropiprant) Did Not Achieve Primary Endpoint, Merck, Dec 20 2012 [↩]
- European Medicines Agency starts review of Tredaptive, Pelzont and Trevaclyn, European Medicines Agency, Dec 21 2012 [↩]
- Study questions Vytorin and Zetia in heart disease treatment, The Washington Post, Nov 16 2009 [↩]
- No Answers Yet From Key Trial Of Merck Cholesterol Drugs, Forbes, March 28 2012 [↩]
- ‘Tredaptive’® (Nicotinic Acid/Laropiprant) Authorised In The European Union: New Lipid-Modifying Therapy To Treat LDL-C, HDL-C And Triglycerides, Medical News Today, July 23 2008 [↩]
- Merck will seek approval of 2 heart drugs in 2013, Businessweek, August 2012 [↩]
- Safety of Anacetrapib in Patients with or at High Risk for Coronary Heart Disease, the New England Journal of Medicine, Dec 16 2010 [↩]
- REVEAL: Randomized EValuation of the Effects of Anacetrapib Through Lipid-modification, Clinicaltrials.gov [↩]
- Roche abandons potential blockbuster cholesterol drug, fiercebiotech.com, May 7, 2012 [↩]