Drug Development

With hep C franchises languishing, Merck’s MK-3682 goes from blockbuster to bomb

A little less than three years after acquiring the hepatitis C drug MK-3682 (uprifosbuvir) in its $3.85 billion buyout of Idenix, Merck’s prospects in the field have cooled dramatically, and its once great hopes for the drug have been reduced to nearly nothing.

After the market closed on Thursday, Merck says it is taking a pre-tax $2.9 billion “intangible asset impairment charge” for the drug and reducing it on the books to a marginal $240 million — and even that may not last long.

Its 8-K filed today at the SEC notes:

The Company determined that recent changes to the product profile, as well as changes to its expectations for pricing and the market opportunity, taken together constituted a triggering event that required the Company to evaluate the uprifosbuvir intangible asset for impairment. Utilizing market participant assumptions, and considering different scenarios, the Company concluded that its best estimate of the current fair value of the intangible asset related to uprifosbuvir was $240 million….The Company continues to evaluate options with respect to the uprifosbuvir clinical development program and will monitor the remaining $240 million intangible asset for further impairment.

Back in 2014 when Merck bought Idenix, hep C was one of the hottest diseases in biopharma. New cocktails in development at the market leader Gilead as well as AbbVie had made the field a dealmaker’s paradise, and asset valuations soared. Even in late 2015 Merck was talking up the drug, used in a cocktail aimed at faster cures.

Today, though, hep C has been painlessly cured with a number of very effective, and increasingly cheap cocktails. Gilead’s fortune is expected to melt away by as much as half this year, as competition and cure rates have begun to eviscerate a flagship portfolio. And Merck’s great expectations are a bust.

According to Leerink, Merck execs pointed out last night that “a declining addressable patient population and a more difficult pricing environment since the Idenix acquisition.” But there is also a question about timing now, as Merck’s development program has been seriously delayed.

Merck has been informed by regulators that it will need to complete separate trials, and show an added benefit, with the triple, over its high dose doublet of MK3682 + MK8408. This suggests that company will need to wait for data from the high-dose doublet (which is further behind in Phase 2) and delays the timing of the triple materially.

That doesn’t mean, though, that the pharma giant is stopping any of the ongoing trials for the drug. Late Thursday Merck sent me a statement saying that the write down had nothing to do with the drug’s efficacy or safety. Merck added:

We’ve had a commitment to hepatitis C for several decades.   Enrollment in the current clinical trials for uprifosbuvir will continue. We also remain encouraged by our progress with the launch of ZEPATIER, including our ability to gain access across public and private payers in the United States and initial uptake in the European Union and Japan.


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