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Merck Rallies on Prospects for Bone Drug


An osteoporosis treatment was effective in a company study, giving investors hope for a potential blockbuster product.

MINYANVILLE ORIGINAL If investors weren't paying attention to an osteoporosis drug being developed by the pharmaceutical giant Merck (MRK), they are now.

Shares of the big drug maker rose more than 4% to $42.93 in midday trading Thursday after the company said its experimental therapy odanacatib was effective in reducing the risk of bone fractures in osteoporosis patients who have gone through menopause. The stock, up 14% on the year, is trading at its highest level since 2008.

The drug worked so well that researchers conducting the company study recommended the trial be halted. The late-stage study -- the last of three usually needed to win US approval for a drug -- included more than 16,000 women. Researchers concluded the study can be closed "due to robust efficacy and a favorable benefit-risk profile." Merck plans to file for US approval in the first half of next year.

Osteoporosis isn't a hot drug category. Generic competition and safety concerns about the class of drugs known as bisphosphonates would seem to make the category unattractive to big drug companies looking for the next blockbuster. Branded therapies include Merck's Fosamax, Warner Chilcott's (WCRX) Actonel, Roche's (RHHBY) Boniva, and Novartis' (NVS) Reclast.

However, the problems with the current market for such treatments is exactly why there's an opportunity, says Credit Suisse analyst Catherine Arnold.

"A closer look at the underlying dynamics reveal a significant opportunity for a novel, potentially safe agent (like odanacatib) entering the market," Arnold says in a recent note to clients.

If safety concerns about osteoporosis drugs were eased and generic prescriptions were converted to branded drugs, the worldwide market potential may be close to $10 billion a year, Arnold estimates. An aging population in the US and other markets would bode well for growth, she adds.

Arnold estimates that Merck's drug can be at least a $1 billion product if approved. The company, which already knows the market for such therapies, would benefit initially from a lack of new branded treatments, she says.

As with any drug, there are concerns about odanacatib's potential side effects. Merck says researchers noted safety issues over the drug and this, of course, is a detail investors will want to monitor closely. Merck says final results of the study will be ready for scientific presentations and a journal publication sometime next year. Odanacatib is a drug known as a cathepsin K, or cat-K, inhibitor. Cat-K is an enzyme that can delay bone healing.

Twitter: @brettchase

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