Merck Loses Big Money on HCV Drug

Merck & Co., Inc. recently announced that it will write-down the value of uprifosbuvir, the experimental drug, after the company reevaluates opportunities and prices in the market for hepatitis C (HCV) medications.

Kenilworth, New Jersey-based Merck will take a loss of $0.22 a share from last year’s fourth quarter. This will account for a total loss of $2.9 billion, or $1.9 billion after taxes. The pharmaceutical giant had previously reported a profit of $0.42 a share for that period.

In 2014 Merck acquired Idenix Pharmaceuticals Inc., which is based in Cambridge, Massachusetts for $3.85 billion. With this purchase, Merck acquired uprifosbuvir, the nucleotide HCV prodrug. Since this purchase, Merck’s “best estimate” of the drug’s current value has plunged to $240 million, according to its February 23 filing with the US Securities and Exchange Commission. The company is assessing options for uprifosbuvir’s clinical development and monitoring the situation for further impairment, citing “recent changes to the product profile.”

Merck isn’t the first company to suffer diminished expectations amid competition for drugs that treat the liver-attacking viral infection. Gilead Sciences Inc., based in Foster City, California, said in early February that sales of its HCV products fell from $4.9 billion in 2015, to $3.2 billion in the fourth quarter in that same period. Declines in two of its mainstays, edipasvir/sofosbuvir (Harvoni) and sofosbuvir (Sovaldi), were partially offset by sofosbuvir/velpatasvir (Epclusa), which the company introduced in 2016.

Merck and its rivals have been eager to develop and acquire new medications to counter HCV infection, which can cause death from liver cancer and cirrhosis. Antiviral drugs can cure 90% to 100% of patients with the virus, the US Food and Drug Administration (FDA) estimates. However, worldwide access to HCV diagnosis and treatment remains low. More than 200 million people are infected with HCV, a global incidence rate of 3.3% of the population, according to the C. Everett Koop Institute at Dartmouth College in Hanover, New Hampshire.

Until a few years ago, fighting the virus required long treatment times and injections that could cause debilitating reactions¾then antiviral pills were developed. They reduced side effects and increased cure rates while cutting treatment times from as long as one year to as little as eight to 12 weeks. The FDA approved Gilead’s Sovaldi in 2013; Harvoni followed in 2014. AbbVie, based in North Chicago, Illinois, began carving out its own portion of the HCV market. Merck’s elbasvir/grazoprevir (Zepatier), a once-daily, fixed-dose combination tablet, was approved by the FDA and the European Commission last year. The company expects launches to continue across the European Union through early 2017.

Thanks to the growing number of successful drug options, doctors have a variety of choices when prescribing HCV medications. To win business, companies are competing to offer attractive prices. At the same time, the number of patients needing care is decreasing because of the drugs’ effectiveness. That’s eating into sales.

In February, market leader Gilead cited rising competition, fewer market starts, and shorter treatment durations for expected HCV sales of $7.5 billion to $9 billion this year. That’s less than Gilead’s $14.8 billion of HCV sales for 2016 and a plunge of more than half from the $19.1 billion in 2015.