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Merck & Co. (MRK - Analyst Report) recently presented new data on its insomnia candidate, suvorexant, at the 21st Congress of the European Sleep Research Society (ESRS). Data from a 2-month discontinuation phase post a 12-month phase III study was presented.

It was found that patients who switched to placebo from suvorexant after 12 months, experienced greater difficulty in falling asleep (14.9 minutes longer) and staying asleep (21.6 minutes less) than the patients who continued to take suvorexant. The sleep difficulties experienced by patients who switched from suvorexant to placebo and patients who received placebo during the 12-month trial and continued to receive placebo during the discontinuation phase, were similar.

Importantly, there were no significant withdrawal symptoms or rebound insomnia observed in patients who switched from suvorexant.

In June 2012, Merck had announced new data from two pivotal phase III efficacy trials of suvorexant. Results showed that patients on suvorexant took less time to fall asleep and stayed asleep for a longer time period compared to placebo. Merck expects to file for approval by year end. The company expects the Controlled Substance Staff of the Food and Drug Administration (FDA) to evaluate the candidate before final approval.
 
If approved suvorexant will be enter the highly genericized insomnia market which includes generic versions of Sanofi’s (SNY - Analyst Report) Ambien/Ambien CR and Pfizer’s (PFE - Analyst Report) Sonata. Other products in this market include Dainippon Sumitomo Pharma’s Lunesta and Purdue Pharma/Transcept Pharma’s Intermezzo.
 
Our Recommendation

We currently have a Neutral recommendation on Merck, which carries a Zacks #3 Rank (short-term Hold rating). Merck is currently facing issues such as the patent expiration of Singulair, EU pricing pressure, US health care reform, the Remicade/Simponi transition and pipeline setbacks.

We believe the company will continue resorting to cost-cutting initiatives to drive the bottom line. Meanwhile, some of the company’s recent launches should start contributing significantly to the top line in the forthcoming quarters.

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