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About a third of American adults have high LDL cholesterol -- that's the bad kind -- but less than half of adults with high LDL seek treatment, according to the Centers for Disease Control and Prevention.
I smell an investment opportunity.
There's just one problem: Generics abound
While there's an opportunity to increase the market for cholesterol drugs, it's likely going to come from generic drugs. Both Merck's (NYSE: MRK ) Zocor and Pfizer's (NYSE: PFE ) Lipitor are available as cheap generics.
Sure, the generic-drug companies could benefit from increasing demand, but the products are just a small portion of their overall revenue. Buying for their copycat versions of Zetia and Lipitor isn't exactly an investment thesis.
AstraZeneca's (NYSE: AZN ) Crestor, which is in the same class as Zocor and Lipitor, is still under patent protection, but having to compete with generics is putting pressure on sales. Pfizer had the same issue with U.S. sales of Lipitor when generic versions of Zocor were introduced. Crestor will remain a megablockbuster for some time, but I wouldn't buy AstraZeneca for it.
That leaves Merck's (NYSE: MRK ) Zetia, which works to lower cholesterol through a different mechanism. In fact, Zetia has been combined with Zocor to form Vytorin, and with Lipitor to create Liptruzet. The three pills have a good shot at substantial growth, but only after the readout of the Improve-It trial, which is testing Vytorin against Zocor to see if adding Zetia not only reduces cholesterol further but also decreases heart-related events such as heart attacks and strokes.
The trial is scheduled to finish up in September 2014. The Zetia franchise made up 9.6% of Merck's sales in the first quarter, so it could have major implications on Merck's stock price in either direction.
In the works
PCSK9 is the newest target that seemingly every company is going after.
Sanofi and Regeneron Pharmaceuticals (NASDAQ: REGN ) have one that's codenamed REGN727/SAR236553. In a phase 2 trial, it reduced bad LDL cholesterol by up to 67.9% compared with a 10.7% reduction in patients receiving placebo.
Amgen's (NASDAQ: AMGN ) PCSK9 inhibitor called AMG 145 seems to have comparable efficacy, reducing bad cholesterol by up to 66% in patients already taking a statin.
Pfizer, Roche, and Alnylam Pharmaceuticals also have drugs targeting PCSK9.
There's obviously lots of competition, and the data are a little too early to pick a winner yet. We'll have to wait for a phase 3 data to figure out which drug works the best.
Just as importantly, we'll need to see which drug is the safest. The companies will initially test the drugs in patients with dangerously high cholesterol levels, but the huge sales will obviously come from the larger population whose cholesterol levels are only slightly elevated. Since that population isn't as sick, safety will be a higher priority. A drug that has fewer side effects might top the sales charts even if it isn't the most efficacious.
This titan of the pharmaceutical industry stumbled into 2013 and continues to battle patent expirations and pipeline problems. Is Merck still a solid dividend play, or should investors be looking elsewhere? In a new premium research report on Merck, The Fool tackles all of the company's moving parts, its major market opportunities, and reasons to both buy and sell. To find out more click here to claim your copy today.