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Analyst Blog

Merck (MRK - Analyst Report) recently announced that its resubmitted new drug application (NDA) for its ezetimibe and atorvastatin combination has been acknowledged by the US Food and Drug Administration (FDA). Merck intends to submit regulatory applications for the combination therapy in other countries as well.

The FDA had issued a complete response letter (CRL) to the company for this combination therapy for the treatment of primary or mixed hyperlipidemia last year. However, with the NDA being resubmitted, Merck now expects a final response from the FDA in the first half of 2013.

Merck has another FDA decision coming up later this year. The company, which submitted an NDA for its insomnia candidate - suvorexant, should receive a response from the FDA regarding the approvability of the candidate in the second half of 2013.

Merck said that the FDA’s Controlled Substance Staff will review the suvorexant NDA. Once it is approved, the Drug Enforcement Administration (DEA) will assess and assign the schedule for the drug before it is launched.

Suvorexant belongs to a new class of medicines called orexin receptor antagonists which target and block orexins. Approval would make suvorexant the first orexin receptor antagonist to reach the market. However, we note that the insomnia market is highly competitive and genericized especially given the presence of generic versions of Sanofi’s (SNY - Analyst Report) Ambien.

Neutral on Merck

We currently have a Neutral recommendation on Merck, which carries a Zacks #3 Rank (Hold). While headwinds remain in the form of the Singulair genericization, EU pricing pressure, unfavorable currency movement, US health care reform, the Remicade/Simponi transition and pipeline setbacks, some of the company’s recent launches should start contributing significantly to the top line in the forthcoming quarters.

Large-cap pharma companies that currently look better-positioned include Novo Nordisk (NVO - Analyst Report), Sanofi and Novartis (NVS - Analyst Report). All three companies carry a Zacks #2 Rank (Buy).