By Peter Loftus
Low-cost knockoffs of the arthritis treatment Remicade in Europe
hurt Merck & Co.'s second-quarter sales and earnings, a
harbinger of the pressure facing sellers of other costly
biotechnology drugs in the coming years.
Merck, which handles Remicade marketing in Europe, said the
company's sales of the drug declined 25% to $455 million for the
quarter, as European doctors prescribed copycat versions that cost
up to 45% less than the branded drug.
Companies including Hospira Inc. and Celltrion Healthcare
started selling Remicade knockoffs in major European markets in
February. It was a one of an expected wave of biosimilars, or close
copies of complex biotech drugs, as patents for blockbuster biotech
drugs begin to expire. Another milestone was the March regulatory
approval of the first U.S. biosimilar drug, a Novartis AG
biosimilar version of Amgen Inc.'s Neupogen treatment for cancer
patients.
Remicade was one of the earliest of a complex category of
biotechnology drugs when it was introduced in 1998, and is now
approved to treat a range of conditions including rheumatoid
arthritis and gastrointestinal disorders. Johnson & Johnson,
which handles marketing in the U.S. and some other countries,
recently reported second-quarter Remicade sales of $1.67 billion,
down 7.5%. There aren't yet any Remicade biosimilars in the U.S.,
but Celltrion has applied for regulatory approval to market
one.
Aside from Merck and J&J, biosimilar competition is expected
to pressure future sales at AbbVie Inc., whose flagship drug Humira
faces copycats as early as 2017. Some companies including Pfizer
Inc., Merck and Amgen Inc. are trying to play hands on both sides
of the table by selling both brand-name biotech drugs and
biosimilars.
Merck officials said Tuesday the company has had success
convincing European health systems and doctors to keep existing
Remicade patients on the drug. But new patients are being steered
to the biosimilars, Merck said.
"Over time we believe that as more new patients come into the
market we will lose market share," Adam Schechter, head of Merck's
drug-marketing unit, told analysts on a conference call.
J.P. Morgan analyst Chris Schott said he expects sales erosion
for Remicade to accelerate in Europe throughout the rest of the
year.
Competition from generic and now biosimilar drugs has
contributed to a multiyear sales slump at Merck, which last
reported an annual revenue increase in 2011. The company has
slashed costs, including by laying off thousands of employees, and
sold certain assets, including its over-the-counter drug
business.
The company has shifted its research spending to promising
projects like the cancer drug Keytruda, which went on sale last
year and generated $110 million in sales for the second quarter.
Merck said Tuesday the U.S. Food and Drug Administration has
accepted its application to market a new treatment for hepatitis C,
with a regulatory decision due in January 2016.
To expand its cancer-drug research, Merck said Tuesday it
acquired an Israeli drug developer, cCAM Biotherapeutics, for $95
million cash upfront plus potential payments of up to $510 million
if experimental drugs reach certain goals. cCam is developing drugs
designed to unleash the body's immune system against tumors.
But sales from newer drugs haven't yet been sufficient to
replace sales of older drugs lost to generic competition after
patent expirations. Aside from Remicade, Merck also reported a
decline in sales of the anti-cholesterol drugs Zetia and Vytorin,
partly due to the availability of generic Zetia in Canada. Merck
reported sales gains for diabetes drugs Januvia and Janumet, as
well as certain vaccines. Sales of animal drugs declined 4%.
Overall, Merck sales dropped 11% to $9.79 billion. Unfavorable
currency-exchange rates and the divestiture of the over-the-counter
business more than offset areas of growth like vaccines and the
antibiotic Cubicin, which Merck acquired with its January purchase
of Cubist.
Merck reported second-quarter earnings of $687 million, or 24
cents a share, down from $2 billion, or 68 cents a share a year
earlier. The latest quarter included foreign exchange losses of
$715 million related to Venezuela's currency devaluation, while the
year-earlier quarter included a gain of $741 million related to the
winding down of a partnership with AstraZeneca PLC. Excluding these
and other items, earnings would have risen to 86 cents a share from
85 cents a share.
Analysts were expecting earnings excluding items of 81 cents a
share, on $9.8 billion in revenue.
Merck boosted its forecast of 2015 earnings, excluding items, to
a range of $3.45 to $3.55 a share, from a prior range of $3.35 to
$3.48 a share.
Merck shares rose 0.1% to $57.06 in recent trading Tuesday
morning.
Write to Peter Loftus at peter.loftus@wsj.com
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