Merck (NYSE:MRK) has recently announced that it will partner with Endocyte (NASDAQ:ECYT), an Indiana based bio-pharmaceutical company which develops therapies for the treatment of cancer and other serious diseases. Separately, one of Merck’s drugs used for the treatment of baldness has been found to cause sexual side effects. The FDA suggested that Merck change its labels disclosing potential sexual side effects in men who take them. Merck is one of the largest big pharma companies with operations in 4 segments namely, pharmaceutical, animal health, consumer care and alliance segment. It has a market cap of $115 billion and competes with other healthcare companies like Pfizer (NYSE:PFE), Johnson & Johnson (NYSE:JNJ) and Abbott Labs (NYSE:ABT).
Partnership with Endocyte
Merck is about to lose its patent for its allergy and asthma drug, Singulair, and as a result it is pushing towards bringing new drugs to the market. As an attempt, Merck has partnered with Endocyte, which is developing Vintafolide, a promising drug for late stage ovarian cancer. It has already paid $120 million upfront to Endocyte for developing and marketing the drug. And it has committed another $880 million of payments on milestone achievements. Merck is also planning to evaluate the drugs effectiveness for other cancer types. This will earn revenues for the oncology segment of Merck and improve its market share and should also offset the loses due to Singulair. Oncology and Respiratory drugs contribute nearly 2.4% and 6.3% to the $41.15 Trefis price estimate for Merck.
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Baldness Drug causing Erectile Dysfunction
Merck markets two drugs Proscar and Propecia that contain an active ingredient Finasteride. Finasteride has been linked with potential sexual side effects like erectile dysfunction. The FDA has asked for label changes for both drugs to notify the adverse side effects to the consumers. Merck reports revenues from these two drugs under the Legacy Pharma, Animal & Cons. Health Division, which contributes nearly 22% to the company value. If sales from these two drugs drop, Merck will lose market share in this segment which could impact its share price.