Merck Advances Licensing Agenda

Merck and H. Lundbeck A/S have signed a joint development and commercialization agreement under which Merck will gain exclusive U.S. rights to Lundbeck's gaboxadol, a GABA-A receptor agonist currently in Phase III clinical trials for sleep disorders.

Under the agreement, Merck will make an up-front payment of $70 million to Lundbeck and a total of as much as $200 million in milestone payments. Merck anticipates filing a New Drug Application with FDA between late-2006 and mid-2007. Lundbeck, which specializes in psychiatric medicine, will copromote gaboxadol and will receive a share of U.S. sales of the drug.

Industry analysts applaud the move as a sign that Merck, which suffered two late-Phase III trial failures in 2003, is serious about expanding its portfolio through licensing late-stage drug candidates. With Zocor (simvastatin), Merck's $5 billion-per-year cholesterol-reducing drug, coming off patent in June, and a late-stage pipeline dominated by low-profit-margin vaccines, Merck will look to gaboxadol for growth, comments David Moskowitz, a stock analyst at Friedman, Billings, Ramsey Group.

Analysts warn, however, that the $2 billion U.S. market for prescription sleep disorder drugs, now dominated by Sanofi-Synthélabo's Ambien (zolpidem tartrate) with a 65% share, is getting crowded. Sepracor's Estorra (eszopiclone) and Pfizer/Neurocrine's indiplon are both in Phase III clinical trials. An extended-release version of King Pharmaceutical's Sonata (zaleplon) is in Phase II trials.

At a recent meeting with analysts, Merck CEO Raymond V. Gilmartin emphasized the company's plan to pursue licensing and external alliances as opposed to mergers or acquisitions to advance its pipeline. The firm, which has notable alliances with GenPath Pharmaceuticals for cancer, Amrad for respiratory disease, and Neurogen for pain, completed 40 deals last year, compared with 10 in 1999.