Merck's Cancer Candidate Encourages

Merck & Company Inc. ( MRK - Analyst Report ) and partner Ariad Pharmaceuticals Inc. ( ARIA - Snapshot Report ) recently presented encouraging detailed data from a late stage study (SUCCEED) of cancer candidate ridaforolimus.

The companies presented the data at the 2011 annual conference of the American Society of Clinical Oncology (ASCO). Top line data from the randomized, placebo-controlled, double-blind study were presented earlier in the year.

The study evaluated the candidate in patients suffering from metastatic soft-tissue or bone sarcomas under the US Food and Drug Administration’s (FDA) Special Protocol Assessment (SPA) program. The patients had favorably responded to chemotherapy previously.

Sarcomas, which refer to a group of cancers, can affect any body part primarily in any of the two forms -- bone tumors and soft-tissue sarcomas. Data from the study revealed treatment with ridaforolimus prolonged survival without the disease progressing compared to those in the placebo arm.

We remind investors that Ariad granted Merck exclusive rights to develop, manufacture and commercialize ridaforolimus for treating various forms of cancer under the amended agreement of May 2010. Ariad is eligible to receive milestone and royalty payments under the amended agreement. The exclusive rights to Merck replaced the co-exclusive rights shared by the two companies under the original agreement of 2007.

Encouraged by the promising results of the SUCCEED study, Merck, which has the right to file for marketing approval of ridaforolimus, intends to do so in the US and Europe later in the year.

We believe that if ridaforolimus manages to reach the market ultimately then it would boost revenues of the partners, since the market for metastatic sarcoma has a huge unmet need and patients suffering from this fatal disease have limited treatment options.

Our Recommendation

Currently, we have a Neutral long-term stance on Merck. The company carries a Zacks #3 Rank (Hold rating) in the short-run. We have a similar long-term stance on Ariad. The company carries a Zacks #4 Rank (Sell rating) in the short-run.