After a long year and a half spent enduring the coronavirus pandemic, signs of normalcy are starting to show in many U.S. businesses and communities, thanks in part to pharmaceutical breakthroughs including vaccines. But even in a post-pandemic world of readily available vaccinations, COVID-19 patients will still exist and need treatment. After two previously failed attempts to develop new antiviral treatments, biopharma giant Merck (MRK 0.92%) has come up with something it believes will provide care for those in need.

Specifically, Merck has been collaborating with Ridgeback Biotherapeutics on a clinical development program for molnupiravir, an oral antiviral medication. Management is hoping this partnership will finally pay off in the form of an outpatient COVID-19 treatment.

In late 2020, Merck had to void a $365 million deal with the U.S. government when it could not provide the Food and Drug Administration (FDA) with supportive data after failed trials of a drug, referred to as MK-7110, that the company acquired as a result of the buyout of OncoImmune. Its newest attempt, molnupiravir, could potentially be a final effort on Merck's part to develop treatment aimed at newly diagnosed patients, after realizing that molnupiravir did not produce successful results with hospitalized patients.

Patient and doctor bumping elbows while wearing masks

Image source: Getty Images.

Serving the U.S.

Merck recently signed a $1.2 billion agreement to supply the U.S. government with 1.7 million courses of molnupiravir. (Each course is made up of 10 pills per patient, with one pill taken every 12 hours for five days.) That could certainly help kick-start revenue generation, with the caveat that the deal is contingent on molnupiravir receiving approval or emergency use authorization from the FDA.

In order to be ready for public launch upon approval, Merck has been investing in itself to support development and ramp up production of the drug with the expectation to make 10 million courses available by the end of this year. 

During phase 2 trials, molnupiravir displayed favorable results. It was most effective at its highest dosage of 800mg, at which point it showed signs of preventing coronavirus. The company is hopeful that phase 3 results, expected later this year, will provide sufficient support that molnupiravir can assist outpatients with mild to moderate cases of COVID-19, and allow for a speedy emergency authorization approval process.

Going global

Assuming U.S. approval, Merck has no intention of being satisfied with only local success. Pre-pandemic, the global antiviral therapy market was predicted to grow at a compound annual growth rate (CAGR) of 5.8% from 2019 through 2026. Since the COVID-19 outbreak, that projection has risen to a CAGR of 6.7% over the same time period, resulting in a projected market value of $80 million.

Merck remains committed to extending treatment through non-exclusive voluntary licensing agreements with generic manufacturers, and management plans to implement tiered pricing based on financial affordability in order to make molnupiravir available for 104 low- and middle-income countries. 

Is it a ticket to riches?

If the third time around is a charm for Merck, it will represent an opportunity to potentially minimize hospitalization due to COVID-19, save lives across the globe, and provide welcome news for families and the healthcare community. For investors, it will also provide an opportunity for much-needed revenue growth.

Merck's revenue in the first quarter was basically unchanged from the year before, and earnings have missed estimates for the past two quarters, while the stock price may be reflecting a lack of confidence among investors. Currently hovering at $75, the stock is the same price it was in November of 2018 -- nearly three years ago -- with only a short-lived spike of 15% in between.

For those looking at Merck as their pharmaceutical ticket to investment riches, it might be better to remain on the sidelines for now to see whether second-quarter financial results on July 29 provide reasons for confidence. After that it will be good to keep an eye out for phase 3 results later in the year, and any hint of FDA approval of molnupiravir.