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Weekly Healthcare Notes: Roche Holdings Strong Pipeline & Merck's Lawsuit Sets Precedent
2/8/2013 3:11:00 PM
The past week has been a handful of events for the healthcare sector impacting many healthcare companies under our coverage. Roche Holdings ( RHHBY ) touched new highs after its investigational oncology drug Obinutuzumab (GA101) met its primary endpoint in first stage of a phase III study. Meanwhile, Merck ( MRK ) lost an important trial involving its osteoporosis drug Fosamax that has the potential to impact the outcome of about 4,000 other similar trials relating to the drug.
Roche is proving investors' perception of it having one of the strongest oncology drug pipeline amongst pharma companies true (Read Roche Defends $47 Value With Strong R&D Pipeline ). One of its blockbuster potential drug Obinutuzumab (GA101) has exhibited strong efficacy in improving progression-free survival in chronic lymphocytic leukemia (a type of blood and bone cancer) patients. In first stage of a phase III study called CLL11, the drug in combination with a chemotherapy, significantly reduced the risk of disease worsening or death compared to chemotherapy alone in previously untreated patients. Further, an additional analysis suggested that the experimental drug could show superior efficacy compared with Roche's own MabThera/Rituxan as first line treatment for the condition.
In December, the drug maker's HER2-positive metastatic breast cancer drug Perjeta also exhibited very strong efficacy in extending overall survival of previously untreated patients over its own Herceptin, a chemotherapy and placebo. All the positive news flows have led the recent rally in the drug maker's share price. We are revising our price estimate for Roche Holdings to reflect the full year earnings and recent developments.
In a setback, Merck lost a lawsuit for not posting warnings about the risks of its osteoporosis drug Fosamax up front. So far the amount of $285,000 arising as part of the judgement is too small to impact the drug maker financially. However, the concern is that some are calling this case a bellwether one that could influence the settlement talks involving more than 4,000 similar lawsuits involving the drug. These lawsuits contend that the osteoporosis drug causes patients' jawbones to deteriorate, and the drug maker failed to warn patients on the drug.
If the judgment influences outcome of other lawsuits, which is being speculated currently, potential settlements could reach the billions, which could have a meaningful impact on Merck's share price. The company, however, has won 5 out of the 7 similar lawsuits that have been tried in the past, and thus the probability of Merck settling for all the cases are pretty low. However, any outcome will not impact its ongoing business as the drug has already lost patent protection in 2008 and sales have been declining since then. And, we already model continued decline in revenues from the drug going forward.
We are revising our price estimate for Merck to reflect full year results and recent developments.
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