1 Hidden Blockbuster Lurking in Merck's Pipeline?

Merck (NYSE: MRK  ) already markets Isentress, one of the most widely used medications for the treatment of HIV, but it has another drug in its pipeline that may also become a blockbuster someday, too.

Doravirine, also known as MK-1439, is currently in mid-stage trials, and if they prove successful, Merck could have an HIV drug that will be dosed alongside Gilead's (NASDAQ: GILD  ) Truvada, the second most prescribed HIV therapy.

Source: Merck.

First, a bit of background
HIV remains a life-threatening illness affecting 35 million worldwide and in the United States, more than 1 million people are living with the disease and another 50,000 are diagnosed with it every year.

Despite significant advances in the treatment of HIV, thousands still die from the disease every day. According to the World Health Organization, or WHO, more than 1.5 million people died from HIV globally in 2012.

The reasons behind the higher rate of diagnosis and death outside the United States are complicated and tied to access and adherence to life-extending drugs like Merck's Isentress and Gilead's Truvada. In some countries, social stigma prevents early testing, and in other countries, poverty prevents patients from getting and staying on these medications. Of the 28 million people the WHO estimates would benefit from taking antiretroviral medications globally, only about 10 million are taking them.

Source: World Health Organization.

That suggests a huge need and correspondingly large opportunity for countries and drugmakers to innovate on both access and efficacy.

Innovating new treatments
The ability to quickly diagnose and begin treatment with next generation therapies has significantly delayed the onset of AIDS, the advanced stage of the disease, and has helped transform HIV into a chronic disease in the United States. Between 1996 and 2005, for example, the average life expectancy after an HIV diagnosis more than doubled to 22 years.

That advance has come in part from combining a slate of anti-HIV medicine that each work differently from one another to help delay the onset of AIDS.

Antiretroviral drugs are broken out into five different classes based on their method of action: NRTIs, NNRTIs, protease inhibitors, entry/fusion inhibitors, and integrase inhibitors.

Source: Express Scripts

Merck's Isentress is an integrase inhibitor. It was the first of this class to win FDA approval, and the drug works by blocking the integrase enzyme, which prevents the HIV virus from adding its DNA to the DNA of a patient's CD4 cells, a protein found on the surface of immune cells.

Isentress' first to market advantage has made it one of the top-selling HIV medications, commanding 7.5% of the market and ranking fourth among prescribed HIV drugs. Last year, Isentress sales totaled $1.6 billion, up 9% from 2012.

While Isentress is an integrase inhibitor, Merck's up-and-coming MK-1439 is an NNRTI. NNRTI drugs block the reverse transcriptase enzyme that helps HIV reproduce, but unlike NRTIs like Gilead's Viread, which block reverse transcriptase by targeting genes, NNRTIs block it by targeting the enzyme directly.

If MK-1439 eventually makes its way through regulators, it will compete against Johnson & Johnson's (NYSE: JNJ  ) Edurant and Intelence, Bristol-Myers'  (NYSE: BMY  ) Sustiva, and Gilead's multi-drug fixed combination drugs Atripla and Complera.

Edurant won FDA approval in 2011 after showing it worked similarly to Bristol's Sustiva (which loses U.S. patent protection in 2015) with fewer side-effects, and sales of Edurant jumped 88% from a year ago to $81 million in the first quarter.

Source: Merck.

Edurant's success demonstrates that the market will reward drugs in the class that work as well, with fewer side effects, than prior generation NNRTIs, but Merck may be more interested in the potential to combine the drug in a fixed-dose treatment with Gilead's leading compounds. Gilead's Atripla, which includes Sustiva, and Complera, which includes Edurant, notched sales of $780 million and $250 million in the first quarter for Gilead, respectively.

To that end, Merck is studying MK-1439 for use alongside Truvada and up against Sustiva. If that trial succeeds, then a Truvada plus MK-1439 combination could prove quite successful.

Fool-worthy final thoughts
According to the Centers for Disease Control, one third of those diagnosed with HIV in 2010 were also diagnosed with AIDS within one year. That suggests these patients had been living undiagnosed with the disease for years.

Clearly, we need to do better at diagnosing people earlier, so states like New York are committing to strategies designed to not only increase testing, but boost access and adherence to medication.

The focus on early testing and adherence has Express Scripts estimating that spending on HIV medication will grow by 16% in 2015 and 13% in 2016. If that forecast holds up, it could eventually bode well for MK-1439, but only if results from its mid-stage study are positive. Investors should get insight into that soon given that the trial's estimated primary completion date is this November.

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  • Report this Comment On July 14, 2014, at 5:20 PM, pac1investor wrote:

    MRK is that giant company that offers myriad of solutions in all aspects of human and animal treatments. One truly hidden blockbuster company that deserves partnership with MRK to more than boost its pipeline, or one such company yet to unfold and be discovered by wealthy investors and giant pharma's is---IsoRay (ISR)

    IsoRay Medical Company (NYSEMKT:ISR) is one under-the-radar growing medical company and innovator in seed brachytheraphy and medical isotope applications, just today announced the first Cesium-131 seed treatment in Peru of Glioma brain tumor located near the brainstem.

    While others still continue with their anti-cancer treatments in clinical trials, IsoRay is already FDA cleared and holds CE mark for international sales for its anti-cancer products for treatment of brain cancer, prostate cancer, lung cancer, ocular melanoma cancer, colorectal cancer, head and neck cancer and other cancers throughout the body. Indeed, IsoRay (ISR) is nauseatingly undervalued at $2.88/share $156mil mkt cap. It should be, I believe, $28.80 a share instead---or in the very near term.

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Todd Campbell

Todd has been helping buy side portfolio managers as an independent researcher for over a decade. In 2003, Todd founded E.B. Capital Markets, LLC, a research firm providing action oriented ideas to professional investors. Todd has provided insight to a variety of publications, including SmartMoney, Barron's, and CNN/fn.

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