Important note: Information in this article was accurate in 1997. The state of the art may have changed since the publication date.
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Wall Street Journal - December 4, 1997
Robert Langreth
Merck is facing a raft of patent expirations of many of its blockbuster products in the years 2000 and 2001. Moreover, the company's new drugs for cholesterol, hypertension, AIDS and osteoporosis are facing or will soon face major new competitors. Significantly, Merck's top-selling product, the cholesterol drug Zocor, is losing market share to a more potent competitor.
But Raymond Gilmartin, chief executive officer, told a gathering of analysts here yesterday that introductions of major new drugs during the next few years will more than offset sales growth lost to competition and patent expirations.
Merck shares rose $3.375 to close at $98 each in New York Stock Exchange composite trading yesterday.
Merck disclosed it was developing an entirely new type of drug for depression, anxiety and other psychiatric disorders that could benefit millions of people who don't respond to existing psychiatric drugs. The new drug blocks the action of substance P, a brain chemical known to be involved in pain, but not previously shown to be relevant to psychiatric disorders in humans.
Early-stage human tests have revealed the drug to be as effective as existing antidepressants, but with fewer side effects, according to Edward Scolnick, Merck's research chief. Since it works by a different mechanism than other drugs, it might be combined with existing Prozac-style antidepressants for even greater efficacy, Dr. Scolnick said, and it may also prove to be useful in schizophrenia and bipolar disorder. "This is a breakthrough discovery [that may] dramatically change therapy for several major psychiatric diseases," Dr. Scolnick said.
Merck's most important drug in the short term may be its baldness drug Propecia, a low-dose version of the company's Proscar drug for enlarged prostates. Some analysts have predicted the drug, the first pill ever for baldness, will be a blockbuster. Merck told analysts that approval was "imminent" for Propecia, and said it will cost roughly $45 to $50 a month. However, some analysts questioned whether men would stick with it for long periods of time once they found out it was only moderately effective.
Merck said it was comfortable with analysts' estimates of earnings of $3.80 to $3.84 a share in 1997, and $4.35 to $4.53 a share in 1998. The company said it expects its growth rates to remain competitive with other top pharmaceuticals companies through 2002.
Company officials added that Zocor's slide in market share is slowing, and they were optimistic that additional marketing claims for the drug that were recently approved by regulators would allow Merck to stop Zocor's decline altogether. Mr. Gilmartin acknowledged, however, that the company made a mistake in not seeking these marketing claims sooner.
Merck's AIDS drug Crixivan is capturing 50% of the world-wide market despite several competitors, according to executives. The company plans to apply for approval for a more convenient, twice-daily formulation of the drug in at least two years, which could give it an advantage over other drugs.
The company said it expected to file for approval of a new arthritis drug called Vioxx by the end of next year, which is expected to relieve arthritis symptoms without causing ulcers like most existing anti-inflammatory drugs. Executives downplayed a brewing patent battle over the drug with Monsanto Co. 's Searle pharmaceuticals unit, which is developing a competing medicine.
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