Merck & Schering-Plough: More Nails in Vytorin’s Coffin

“Lowering cholesterol doesn’t mean you prevent heart attack, stroke, and death. People don’t die of cholesterol, they die of these events. We have to know whether drugs actually reduce the things we really care about, which is heart attack, stroke, and other complications of heart disease.” - Dr. Steven Nissen, Chief of Cardiology at The Cleveland Clinic to CNBC’s Mike Huckman

Yesterday shares of Merck (MRK) dropped $6.56 to $37.95, and Schering-Plough (SGP) fell $5.06 to $14.41, after a panel of cardiologists at the American College of Cardiology conference said the companies jointly marketed cholesterol drug Vytorin should only be prescribed as "a last resort."

Vytorin is a combination of Schering’s Zetia and Merck’s Zocor. (Zocor is available in generic form as simvastatin.) The two companies tout that Vytorin lowers cholesterol and triglycerides, while de-emphasizing that plaque increased in many patients taking Vytorin in the companies Enhance study. Joint venture sales for Vytorin were $5.2 billion in 2007. Lehman (LEH) estimates scripts are down 20% between the January 14, 2008 release of the Enhance study information and Sunday’s cardiology conference.

And the hurdles to keep Vytorin financially profitable are growing. Yesterday Senator Grassley, the ranking Republican of the Senate Finance Committee, released a letter citing email messages between Dr. Kastelein, a cardiologist the companies hired to be the lead investigator of the Vytorin Enhance trial. The emails show that Dr. Kastelein felt the delay in the companies presenting the study’s results were “to hide something.” As Senator Grassley points out in his letter, the federal government has spent “hundreds of millions of dollars” for Vytorin which costs $100+ per month vs. a generic statin. (Let alone the healthcare cost if plaque-filled arteries from taking Vytorin create cardiac events!) Or, as Harlan Krumholz, the Yale cardiologist and cardiology conference panel leader told Bloomberg: “It could also be that Zetia is just an expensive placebo and its principal harm is it drains precious resources from our healthcare system.” The House Energy & Commerce Committee and the New York Attorney General are also investigating the companies’ questionable practices regarding Vytorin.

Deepak Khanna, general manager for Vytorin told The Wall Street Journal that "’Our sales force and medical-affairs group have been well prepared about what this study is and how to talk about it.’ The companies plan to aggressively take their case to managed-care plans and pharmacy-benefit managers who make decisions affecting the use of prescription drugs.” Merck and Schering are also discussing when to restart Vytorin advertising.

Schering derives almost 60% of its profits from Vytorin and Zetia. This was a key driver in S&P yesterday placing Schering’s long term ratings on credit watch. Their other big sellers are Nasonex (nasal allergies) and Remicade (for inflammatory disorders affecting the immune system, such as rheumatoid and psoriatic arthritis, Chron’s disease and ulcerative colitis). Schering doesn’t plan on doing an acquisition as the company is still paying for its $16 billion purchase of Organon Biosciences. Schering’s only positive is that it will be awhile before many of its major products face patent expiration.

S&P left Merck’s rating unchanged due to its more diverse pipeline. However, numbers can be deceiving. Yesterday Merck suspended further patient enrollment in its 900 participant study of Cordaptive, a cholesterol drug awaiting FDA approval. Merck is using the same method to measure patient response that it used in the Vytorin Enhance trial.

As I said in “The Drug Numbers Game”, “More negative information and/or investigation may surface on Vytorin in February and March which will probably culminate in October/November 2008.” Adverse transits from Saturn (limitations/regulation), Uranus (shocks/surprises), and Pluto (massive loss), affect Schering’s stock chart, especially this month, and June/July 2008.

Despite the ad revenues, there have been media stories criticizing cholesterol as a big pharma marketing phenomenon. Business Week put Cholesterol on the Cover, and a February 12 Wall Street Journal story looked at the growing medical evidence that your brain needs cholesterol.

Medical trends tend to operate in extremes. As the evidence continues to grow that lowering cholesterol not only fails to prevent cardiac events, but also may be contributing to the rise in memory disorders, “what’s your number?” will refer to your IQ instead of cholesterol. Uranus (revolution) moves from its current transit of Pisces (drugs) to Aries (the mind), opposes Saturn (old ways) and squares Pluto (transformation) in July 2010. Scientists may finally have physical proof to explain the placebo effect, that the mind is able to physically affect the body.

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