Merck Gets Good News On New Heart Attack Therapy

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Merck (NYSE: MRK  ) may soon have a new addition to include in its arsenal of drugs that could benefit its cardiovascular (CV) business. The news did not favorably impact shares and the stock price actually dropped slightly on the news.

The blood clot preventing drug vorapaxar, which will hit the market under the name Zontivity if it gains approval, received a positive review from an FDA advisory committee. FDA approval could mean "significant benefits" for patients with a history of heart attacks but no history of stroke. The drug is expected to reduce blood clots in patients, as well as arterial and vein diseases. Vorapaxar presents a new therapy option for the approximately 190,000 Americans that have suffered recurrent heart attacks.

One safety concern that was noted with the drug was an increased risk of bleeding. Upon closer examination, it was noted that the differences between vorapaxar and a placebo were minor, in terms of the risk of fatal bleeding. The review concluded that the drug should be approved as an additional therapy to reduce the risk of CV death, heart attack, and stroke .

Merck expecting FDA approval
Merck recently announced changes to its short-term and long-term strategiesat the JPMorgan Healthcare Conference last week, which included preparing for possible regulatory approval of vorapaxar. Most of the changes announced are part of the company's effort to streamline its business and reduce operating expenses. 

Approval of blood thinner vorapaxar would add a third drug to Merck's cardiovascular business, which in fiscal 2012, included cholesterol drugs Zetia and Vytorin. Both drugs had combined sales in 2012 of $4.3 billion, 9% of total sales of $47.3 billion for year.

While Zetia has seen rising sales since 2010, Vytorin's sales have been declining during the same time period. Merck noted that Zetia's sales volume has grown overseas, while U.S. volume declines have been offset through better pricing. Vytorin has seen growth in certain international markets, but its worldwide sales in 2012 dropped 7 %.

Competitors deal with patent expirations
Growing its cardiovascular business is also a goal of Bristol-Myers Squibb (NYSE: BMY  ) . The company had significant revenue losses during fiscal 2012 from the loss of exclusivity of its heart attack drug Plavix and blood pressure therapy Avapro/Avalide. For Plavix alone, sales were $7 billion in 2011 and in 2012, the year of exclusivity loss, sales fell to $2.5 billion. By the end of 2012, the company had set up $173 million in reserves to deal with the lower sales attributed to Plavix and Avapro/Avalide. It also restructured its alliance with Sanofi, the co-developer of Plavix and Avapro/Avalide .

Bristol-Myers' current CV business includes Plavix, Avapro/Avalide and Elliquis, used to prevent strokes in patients with heart defects. The FDA approved Elliquis in December 2012; it earned $2 million in overseas sales in 2012 and $75 million through September 2013. The company is currently studying seven new CV therapies for possible development .

And Merck isn't the only pharmaceutical company simplifying its business, GlaxoSmithKline (NYSE: GSK  ) names a simpler operating model as one of its "three strategic priorities ." During 2012, the company's CV therapy class ranked third in highest worldwide sales within the pharmaceuticals segment, with a market share of 13.4%.

GlaxoSmithKline's CV segment, which the company combines with its urogenital therapies, had flat sales during 2012. Sales of anticoagulant Arixtra and hypertension therapy Coreg were negatively affected by their patent expiration or generic competition. During 2012, the pharmaceuticals segment declined 2%, a turnaround from 2011's constant exchange growth rate of 8%. For the nine months ended Sept. 30, 2013, the CV area reported declines of 10%. The company is currently working on several new CV therapies -- darapladib is in a Phase III trial to treat atherosclerosis and four other drugs are currently in Phase I and II trials .

My Foolish conclusion
If the FDA grants Merck approval of its new heart attack therapy, it will be a welcomed addition to the company's CV business. Merck is currently trading at 15 times 2014 earnings, and the stock is trading at a discount to many of its peers. Bristol-Myers Squibb is trading at a rich valuation, and almost resembles a biotech stock at this multiple. Merck looks to be more reasonably priced for value-focused investors.

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