Earlier this month, Merck (MRK 0.49%) announced positive results from a clinical trial of its cholesterol-lowering drug candidate MK-0616.
With the massive size of the cholesterol-lowering drug market, these results beg the question: Could MK-0616 be the next hit drug for the pharmaceutical company? Let's take a closer look at the results of Merck's phase 2b clinical trial to assess the prospects of the drug candidate.
A potent drug for a common condition
Hypercholesterolemia is a disorder in which low-density lipoprotein (LDL) levels (bad cholesterol) in the blood are elevated. It's estimated that approximately 73 million adults in the U.S. are affected by the condition. Hypercholesterolemia often presents with no symptoms, but it causes fat to collect in your arteries. This is why the condition can lead to a high risk of atherosclerotic cardiovascular disease events (like heart attacks and strokes), which are the leading worldwide cause of death.
While statin treatments are the first-line treatment for this condition, they don't always help patients lower their cholesterol to guideline-recommended levels. That's why there is a tremendous need for additional treatment options for hypercholesterolemia.
One of those treatment options could eventually be MK-0616, which belongs to a new drug class called proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitors. PCSK9s are a protein made in the liver that determine how many LDL receptors you have to remove LDL cholesterol from the blood. High PCSK9 typically results in high cholesterol, so by regulating PCSK9 levels, PCSK9 inhibitors lower cholesterol.
Merck enrolled adult patients with hypercholesterolemia into a phase 2b clinical trial to receive either a once-daily oral dose of 6 milligrams (mg), 12 mg, 18 mg, or 30 mg of MK-0616, or placebo. Compared to placebo, all doses of MK-0616 significantly reduced LDL. LDL reductions ranged from 41.2% in the 6 mg dose group to 60.9% in the 30 mg group at week eight. These results demonstrate that the medicine is highly effective at helping patients lower their cholesterol who haven't otherwise been able to on statins or with dietary adjustments.
Image source: Getty Images.
The sales potential is sky-high
MK-0616 will make a positive difference in the lives of potentially millions of patients if it is ultimately approved. But how much of a lift could this provide to Merck's sales?
The growing prevalence of hypercholesterolemia is bound to translate into higher demand for treatments. This is why the market research firm Growth Plus Reports anticipates that the global cholesterol-lowering drug market will grow from $30 billion in 2021 to $64.6 billion by 2030.
MK-0616 will face competition from established PCSK9 inhibitors like Amgen's Repatha. But due to the drug's efficacy, Credit Suisse analyst Trung Huynh believes that MK-0616 will generate peak sales of $5 billion for Merck. Given that this is approximately an 8% share of the global cholesterol-lowering drug market, this seems to be a reasonable peak sales estimate in my opinion.
A $5 billion boost in sales is enough to move the needle for even the most dominant of pharmaceutical companies. This is true even for Merck, since analysts are predicting the company will generate $58.2 billion in sales in 2023. And with more than 160 programs currently in phase 2 or phase 3 clinical trials, Merck's future is quite bright outside of MK-0616.
Merck offers growth at a cheap valuation
Thanks to Merck's exceptionally deep drug pipeline, analysts are forecasting that the company will deliver 10.5% annual earnings growth over the next five years. This is superior to the drug manufacturers industry average earnings growth outlook of 7%.
Yet, Merck trades at a forward price-to-earnings (P/E) ratio of 12.5. That's a bit below the industry average forward P/E ratio of 12.9, which is what makes the stock a compelling buy for investors seeking strong growth prospects at a discounted valuation.
