Merck (NYSE:MRK) and Schering-Plough (NYSE:SGP) are like those two kids in preschool who have to do everything together. Still, who can blame them? Their partnerships have been making both companies lots of money.
One of the newest ventures, which began in 2000, submitted a New Drug Application to the FDA for a drug to treat allergic rhinitis -- commonly known as hay fever. The drug is a combination of Schering-Plough's CLARITIN and Merck's SINGULAIR.
The drugs work well in combination because they have different modes of actions. CLARITIN is an antihistamine, while SINGULAR inhibits a signaling molecule that leads to the buildup of mucus in the lungs and airway. Not surprisingly, in clinical trials, the combination of drugs improved congestion better than CLARITIN or SINGULAIR alone.
It's hard to know which company will benefit most from the combination drug if it's approved. If patients switch from CLARITIN -- or, even better, generic versions of the drug -- Schering will benefit greatly, since the margins on the new drug will almost certainly be higher than its OTC drug. But I doubt a large percentage of CLARITIN users will switch, since the cost of the insurance co-payment for the new drug will likely be higher than the OTC version. There will, however, be a population of patients whose symptoms aren't completely suppressed by the drug. Those patients will likely seek out their doctor to complain about their symptoms, and they may be given a prescription for the new combination drug.
Merck will have a much easier time getting patients to switch, because SINGULAIR patients are used to having to go to the pharmacy to pick up their drugs. Merck's main advantage is that it can get patients off of SINGULAIR, which will go off-patent in 2012. It's probably also hoping to capture more of the allergy market from Sanofi-Aventis' (NYSE:SNY) Allegra and Pfizer's (NYSE:PFE) Zyrtec.
The companies have also joined together to market two very popular cholesterol fighters, Zetia and Vytorin. Like that venture, successful marketing -- both direct-to-consumer and to the doctors themselves -- of the allergy drug will determine the success of this joint venture. Those two cholesterol drugs have been the driving force for increased sales in both companies over the last few years. Hopefully, the newest venture will have the same effect on the companies' top-line growth.
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is an Inside Value recommendation. The Fool has a disclosure policy.
