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Merck (MRK - Analyst Report) suffered another pipeline-related setback recently with the US Food and Drug Administration (FDA) cancelling an advisory panel meeting for sugammadex. Merck is looking to get sugammadex approved for the reversal of neuromuscular blockade (NMB) induced by rocuronium or vecuronium.

Merck said that the FDA cancelled the Anesthetic and Analgesic Drug Products Advisory Committee (AADPAC) meeting which was scheduled to be held on Jul 18. The agency said that it needs more time to evaluate the results of a recently completed inspection of a clinical trial site. The site is one of four sites where a hypersensitivity study was conducted as per the FDA’s requirements.

Merck is currently in discussions with the FDA regarding the path forward. The delay in sugammadex’ approval is disappointing. We note that Merck had failed to gain US approval for sugammadex earlier in 2008. At that time, the FDA had asked for additional data related to hypersensitivity reactions and bleeding events.

Sugammadex, however, is marketed in 40 countries other than the US under the trade name Bridion. Bridion sales were $261 million in 2012, up 29.9%.

The delay in sugammadex’s US approval is the second regulatory setback for Merck this month. Earlier this month, Merck had received a complete response letter (CRL) from the agency for its insomnia candidate, suvorexant.

Merck currently carries a Zacks Rank #4 (Sell). With Singulair losing exclusivity in the US as well as the EU, we expect the top- and bottom-line to remain under pressure. The decline in Januvia sales in the first quarter of 2013 is also a matter of concern.

Other headwinds remain in the form of unfavorable currency movement and pipeline setbacks. We believe the company will look towards cost-cutting initiatives and share buybacks to drive the bottom-line.

At present, companies like Aegerion Pharmaceuticals, Inc. (AEGR - Analyst Report), Sarepta Therapeutics, Inc. (SRPT and Medivation, Inc. (MDVN - Analyst Report) look attractive. All three are Zacks Rank #1 (Strong Buy) stocks.

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