Merck Looks Beyond First-In-Class Only As It Seeks To Bolster R&D Productivity

With three large outcomes studies to read out interim or final results, 2012 is likely to be a pivotal year for Merck’s R&D, even as it rebalances its traditionally first-in-class emphasis to a hybrid model that also embraces best in class.

Merck & Co. Inc. has been rebalancing its R&D portfolio to mix more best-in-class molecules into its historic emphasis on first-in-class molecules. Several years into the effort, about 50% of its lead optimization resources in discovery are now dedicated to “best-in-class” programs, executives said during the company’s Nov. 10 R&D day.

While most biopharmaceutical companies aspire to a diversified pipeline, Merck’s enunciated focus marks a departure from recent trends in the industry, as companies have been gravitating toward first-in-class opportunities that offer clear innovation. The timing of this trend is coincidental with the patent expiration of many of the blockbuster drugs that typified competitive pharmaceutical marketing.

The shift seems in line with Merck’s investment in biosimilars, as the big pharma increasingly looks not necessarily to always be the most innovative or first, but to be best from a net present value and branding perspective.

The shift seems in line with Merck’s investment in biosimilars, as the big pharma increasingly looks not necessarily to always be the most innovative or first, but to be best from a net present value and branding perspective. It’s one of several strategies Merck is undertaking to drive sustainable, positive return on investment in R&D, and throughout the company to “generate an improved return on everything we do,” said CEO Ken Frazier. Other parts of that push include expanding in key emerging markets, seizing opportunities in animal health and consumer care, and managing costs.

These initiatives come as Merck faces the loss of exclusivity of a key drug, Singulair (montelukast), in August 2012, with no new products in the near term that will come close to replenishing the $5 billion brought in by the respiratory medication. Management expects eight new drug applications in 2012 through 2013 and seven in 2014, but those include line extensions or have vulnerabilities that temper Wall Street’s enthusiasm for them – either they are small opportunities, entering crowded therapeutic areas, or are associated with complicated clinical trials that ran into previous regulatory problems (Also see "Merck Enters The Alzheimer’s Disease Race, Plans Filings For Five New Drugs" - Pink Sheet, 11 Nov, 2011.).

In R&D, the need for a re-think is particularly acute. Roughly estimated at 17% in 2011, Merck’s R&D budget as a percentage of sales remains in line with the industry average, and its long-term productivity is better than some of its peers. But the return on investment on that spend is not satisfactory, so the company, without undertaking a radical overhaul, is taking steps to improve the numbers, executives say.

Near-term, the solution relies on a combination of spending cuts and portfolio prioritization, with a high bar for programs to proceed. These approaches are not new, but they are now supported by rigorous discipline, said Kim, who whipped through a description of Merck Research Laboratories’ vetting process, which ranks projects against each other based on their contribution to net present value and cumulative net present costs. And despite comments by Frazier earlier this year staunchly defending Merck’s R&D spending levels, even as competitors instituted broad cuts, Merck’s own annual R&D costs are down by more than $600 million from late 2009 through year-end 2011, while investment in key programs is growing – in other words, fewer programs are getting more money, Kim said.

Still, Merck hasn’t embraced corporate-wide organizational restructuring of R&D along the lines of Sanofi, AstraZeneca PLC, GlaxoSmithKline PLC, or even Pfizer Inc., all of which – in addition to cutting plants, labor and other costs – have all embarked on new models for vetting and funding projects, centered in new geographies (Also see "Pfizer's Global R&D Network: Rapid Integration Means Doing More With Less" - Pink Sheet, 11 Nov, 2009.) and (Also see "AstraZeneca Rebuilds R&D Amid Growing Near-Term Pressures" - In Vivo, 1 Jun, 2011.).

Despite the industry trend, “I don’t think there’s a need for dramatic reinvention of R&D,” Kim told a group of reporters following the analysts’ meeting. “I think many [of the new] experiments will [prove to] be counter- productive. A big part of the problem in the industry comes back to lack of priorities in R&D. Our scientists are great at innovation, but we are not good at stopping things without a high probability of success. … There is need for cultural change, which is not easy for scientists, and for moving to science-based business decisions. When we frame it this way, our scientists are getting better at doing this.”

There’s still room for serendipity in lab work, particularly in the discovery phase, but as the molecule progresses and more is known about it, good fortune plays less of a role in decision making and metrics such as estimated probability of success become more explicit.

Best-In-Class Is Expected To Have Higher Probability of Success

The hybrid approach of mixing best-in-class programs with first-in-class programs will play a key role in boosting long-term metrics, but it has required a “major mindset change within the research labs,” Kim said. Of course relying on best in class raises risks of offering poorly differentiated me-toos that payers, investors and regulators don’t want (Also see "Merck's Cordaptive: Just Another Cholesterol Combo, or More?" - In Vivo, 1 Apr, 2008.). That said, he emphasized, best in class does not mean “simply follow-ons.”

The selected molecules “have the clear additional requirement that we offer meaningful differentiation from the first molecule in the class.” Best-in-class programs directed at mechanisms with established proof of concept in humans “obviously have a higher probability of success than first-in-class programs that do not have proof of concept in humans, and are therefore expected to provide a higher ROI,” Kim said. “Today, every discovery program must have an explicit intent either to be a best-in-class product or to be a first-in-class product for a particular mechanism.”

The hybrid approach of mixing best in class with first in class will play a key role in boosting long-term metrics, but it has required a “major mindset change within the research labs,” Kim said.

Merck is taking other steps to improve its R&D productivity, including forming an experimental medicines department in 2006 to build expertise in imaging and molecular profiling biomarkers, and a modeling and simulation department in 2010, which uses mathematics-based support to help with go/no-go decisions; between 2009 and 2011, these tools were used in 22 early “go” decisions and 22 early “no go” decisions.

And more fundamentally, the company whittled down its disease priority list from 39 to 11 shortly after it completed its acquisition of Schering-Plough in 2009 [See Deal]. About 70% of Merck’s research spending in the pre-proof-of-concept stage is targeted towards the priority list, while another 30% is available for opportunities as they arise.

Among the best-in-class molecules proceeding in development is an anti-interleukin 23 antibody program for patients with moderate to severe psoriasis. Existing therapies, such as Johnson & Johnson’s Stelara (ustekinumab), treat the inflammation but also suppress the immune system because they bind to both IL-12 and IL-23. MK3222, on the other hand, binds only to IL-23. It is currently in Phase IIb development, with expectations to start Phase III in 2012.

Also aimed at best-in-class with an expected 2012 filing date in the U.S. is a vaccine for human papillomavirus, V503, which incorporates the same antigens as Merck’s Gardasil (HPV Quadivalent types 6,11,16 & 18, recombinant vaccine), and additional antigens against five other cancer-causing HPV types. This increases the protection against HPV from 70% to more than 87%, said Kim.

And the pan-genotypic HCV Ns3/4z protease inhibitor MK-5172 showed significant viral suppression in patients infected with genotypes 1 or 3 (5-log fold) and a high barrier to resistance in a seven-day monotherapy trial; moreover, preclinical data support its efficacy against 2, 4, 5 and 6. The drug, which recently entered Phase IIb studies, appears to have high potency in patients who have failed standard of care therapies, said Roger Pomerantz, global head of infectious diseases, who becomes Merck’s new head of licensing and external research as of Dec.1 when current head David Nicholson retires (Also see "Merck Makes Hepatitis C A Priority" - Pink Sheet, 11 Nov, 2011.).

The drug could become a potential anchor for an oral combination regimen for HCV, Barclays Capital analyst Tony Butler wrote in a follow-up note, pointing out that the company is actively seeking internal and external combination options for this agent. To maintain a competitive edge, he added, Merck would need to “accelerate the process for developing a Phase II/III oral combination trial strategy.”

Three Large Outcomes Studies To Read Out In 2012

Key to getting Merck’s R&D productivity back on track, however, will be results of three large outcomes studies due to read out interim or final results in 2012: two high-profile cardiovascular trials, IMPROVE-IT and HPS2 THRIVE, and a lower profile but important study of the osteoporosis drug odanacatib. In addition, interim data from REVEAL, the recently started outcomes trial of anacetrapib, Merck’s CETP (cholesteryl ester transfer protein) inhibitor, should shed further light on that all-important compound.

Despite the rocky progress, Merck continues to invest heavily in cardiovascular candidates that require large outcomes trials, and management indicated its continued commitment to the space (Also see "Chart: Merck's Major CV Trials" - Pink Sheet, 10 May, 2010.). Merck’s atherosclerosis franchise contributes about 20% of earnings and more than 10% of its current equity value, according to David Risinger of Morgan Stanley (Also see "Merck Taking Aggressive Approach To Cardiovascular Development" - Pink Sheet, 5 Jan, 2009.).

The outcomes trial IMPROVE-IT compares Merck’s troubled blockbuster Vytorin (ezetimibe/simvastatin) to simvastatin alone in patients with acute coronary syndrome, with an interim analysis planned for the first quarter of 2012, when 75% of the pre-specified primary events have occurred. The study should end in 2013. Given Vytorin’s rocky history, analysts are cautious on the results, with some predicting probability of failure as high as 60%.

The 25,000-patient Tredaptive (long-acting niacin/laropiprant) outcomes trial, HPS2 THRIVE, is expected to conclude in late 2012, with a filing for hypercholesterolemia anticipated in 2013, said Michael Mendelsohn, SVP of cardiovascular research. This drug, if approved, has potential for peak sales of $1.5 billion by 2017 after a slow ramp up, predicts Leerink Swann.

Merck remains fully committed to the drug, despite the problems encountered earlier this year by the National Institutes of Health-funded AIM HIGH study of extended-release niacin alone in patients with well-controlled LDL cholesterol levels. Researchers found the drug had no effect on risk of cardiovascular events and stopped the trial 18 months early (Also see "More Disheartening News For Abbott Cholesterol Franchise: Niaspan/Statin Study Halted Due To Lack Of Added Benefit" - Pink Sheet, 26 May, 2011.).

HPS2 THRIVE differs substantially from AIM HIGH based on trial design and power, so Merck remains highly confident that HPS2 THRIVE will provide a definitive test of extended-release niacin’s utility in cardiovascular disease, said Mendelsohn. First, the Merck trial is about eight times the size of AIM HIGH and its management of LDL cholesterol also differed, with pre-randomization titration targeting an LDL less than 80 mg/dL and no adjustment of medication post randomization.

In contrast, AIM HIGH post-randomization titration allowed patients to achieve an LDL between 40 and 80 mg/dL. That adjustment to LDL after randomization brought the two treatment groups in line, making it harder to detect differences in outcomes between the arms. In addition, HPS2 THRIVE is powered at 95% to detect a 15% reduction in planned MACE endpoint, while AIM HIGH was powered at 85%, but to detect a larger 25% risk reduction, Mendelsohn argued.

Furthering The Case For Anacetrapib

While Merck didn’t have big news to report about its high-profile CETP inhibitor, anacetrapib, it provided additional early data about the drug, making a case for its enthusiasm, even as competitors – Roche and Eli Lilly & Co. to date -- also announced inroads into the space (Also see "Phase II Preview For Roche's Dalcetrapib May Give CETP Inhibition A Boost" - Pink Sheet, 23 Aug, 2011.). The drug lowers LDL cholesterol while raising HDL cholesterol, so far without exhibiting any of the safety signals that brought down Pfizer’s torcetrapib in late Phase III.

Merck has previously discussed anacetrapib’s profile, but additional preclinical data showing for the first time that the drug enhances reverse cholesterol transport, a crucial step in the anti-atherosclerosis process, and that the HDL it helps to produce is fully functional, with anti-inflammatory properties, helps to further explain the company’s commitment, said Mendelsohn. Researchers have questioned whether cholesterol drugs that work to raise HDL actually raise levels of the kind of HDL that has an impact on protection against atherosclerosis.

Anacetrapib differs from competitors’ drugs because of its strong specificity for the target and the lack of a bond with the CETP protein, Mendelsohn said. Moreover, inhibition of CETP is not time dependent and it demonstrates no evidence of off-target, covalent binding to non-CETP proteins, based on data published last year in the Journal of Lipid Research.

Reverse cholesterol transport cannot be reliably measured in humans and the detailed work on anacetrapib’s impact on RCT was measured in dyslipidemic hamster models. But clinical studies also support Merck’s enthusiasm for the molecule: the DEFINE trial, a major Phase III safety study in 1,623 patients with coronary heart disease at high risk of CAD, showed that anacetrapib had a substantial, positive effect on key lipids, with no differences in safety and side effects between it and placebo.

The 30,000-patient outcomes trial, REVEAL, started in May and will be the pivotal piece for an FDA filing, which is anticipated after 2015, once the event-driven trial matures. REVEAL randomizes patients with pre-existing vascular disease to anacetrapib 100 mg daily versus placebo; all patients are receiving atorvastatin. The outcome measured is a composite of coronary death, MI or coronary revascularization, with a study reaction planned for a median of four years. Interim analyses will be conducted at 2.5, 3 and 3.5 years.

A potentially important near-term driver for Merck is its osteoporosis drug odanacatib, a first-in-class oral therapy, currently in a 16,000-patient Phase III fracture outcomes study. If approved, odanacatib also will be entering a crowded and genericized market, but as a cathepsin K inhibitor, it has a different mechanism of action than competitors. In addition, it will have Merck’s commercial prowess in women’s health, and osteoporosis in particular, behind it.

Cathepsin K decreases bone resorption at a similar level as Merck’s now-generic Fosamax (alendronate), a bisphosphonate, but doesn’t stop bone formation, and therefore has potential to improve bone mineral density, cortical thickness, and bone strength, all of which could reduce fracture risk. The initial target would be 25% of post-menopausal women who have been diagnosed with osteoporosis and are bisphosphonate-intolerant. Leerink Swann analysts estimate sales could reach $625 million by 2017, if it gets on the market in 2014 – a far cry from the heyday of Fosamax, which at its peak generated billions of dollars a year in revenues for Merck.

The Phase III trial, which is fully enrolled, compares odanacatib to placebo and is about twice the size of the pivotal trial that Amgen undertook to get FDA approval of its osteoporosis drug Prolia (denosumab). A data monitoring committee met in September and recommended continuing the odanacatib trial as is, with plans for two interim analyses in 2012. Merck expects to file an NDA for the drug in 2013. If the fracture study is positive, the drug could get a fracture prevention indication in its label.