Standard Review for Merck Candidate

Merck ( MRK - Analyst Report ) and partner ARIAD Pharmaceuticals, Inc., ( ARIA - Snapshot Report ) recently announced that the US Food and Drug Administration (FDA) has accepted their new drug application for oncology candidate, ridaforolimus.

The companies are looking to get ridaforolimus approved for the treatment of metastatic soft-tissue or bone sarcomas in patients who have responded favorably to chemotherapy. The FDA granted the candidate standard review.

Ridaforolimus Under Review in the EU

Ridaforolimus is currently under review in the EU. In August 2011, Merck and Ariad had announced that ridaforolimus has been accepted for review by the European Medicines Agency.

Exclusive Agreement with ARIAD for Ridaforolimus

Merck has an exclusive license and collaboration agreement with ARIAD for ridaforolimus. Merck has full control of the development and worldwide commercialization of ridaforolimus. ARIAD received a $50 million upfront fee and is entitled to receive payments based on the achievement of regulatory and sales milestones.

ARIAD will also receive royalties on global net sales of ridaforolimus. While Merck is responsible for the development and worldwide commercialization of ridaforolimus in oncology, ARIAD has co-promotion rights to ridaforolimus in the US.

Neutral on Merck

We currently have a Neutral recommendation on Merck, which carries a Zacks #3 Rank (short-term Hold rating). While headwinds remain in the form of patent expirations of key drugs, EU pricing pressure, US health care reform, and pipeline setbacks, some of the company’s recent launches should start contributing significantly to the top line in the forthcoming quarters. Meanwhile, the Remicade/Simponi settlement has removed a major overhang from the shares. Moreover, the approval of Victrelis was a huge positive for the company.