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CRL for Merck Again; Analysts Call for R&D Overhaul

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By Jennifer Boggs
Managing Editor

Less than three months after the FDA rejected insomnia candidate suvorexant, the agency issued a complete response letter (CRL) for another Merck & Co. Inc. drug, giving analysts and investors additional ammunition in the call for a “major restructuring” in the company’s R&D division.

The latest setback involves a bit of déjà vu. Sugammadex, a next-generation anesthesia reversal agent, originally received a not-approvable letter in 2008 – the drug then was owned by Schering-Plough Corp. prior to its merger with Whitehouse Station, N.J.-based Merck – with the FDA requiring a hypersensitivity study. Five years later, the agency has taken issue with the “operational aspects” of that hypersensitivity study in a CRL disclosed Monday.

Sugammadex is designed to reverse the neuromuscular blockade induced by rocuronium or vecuronium in anesthesiology procedures, and it’s the first in a class of medicines known as selective relaxant-binding agents, which could prove safer than traditional reversing agents. Data submitted by Schering-Plough were sufficient to convince regulators in Europe, which approved sugammadex as Bridion in 2008.

The drug, which pulled in sales of $261 million in 2012, currently is marketed in 50 countries outside the U.S.

Additional details from the FDA’s letter were not disclosed. “It was just received Friday,” said Merck spokeswoman Sarra Herzog, adding that the firm was evaluating its options and would determine a path forward “in the near future.”

Merck pointed only to the FDA’s decision in July to cancel the advisory committee meeting scheduled to discuss the sugammadex new drug application (NDA). “They had asked for additional time to conduct an inspection” of a clinical trial site in the hypersensivity study and now have raised concerns about the operation of that study, Herzog told BioWorld Today.

Analysts now have one more reason to level criticism at Merck’s R&D productivity, which has come under fire in recent years for increased R&D spending that has yielded fewer and fewer products. Recent failures include disappointing data in May from the Phase III program testing adenosine A2A receptor antagonist preladenant in Parkinson’s disease and the CRL issued in early July for suvorexant, with the agency stating that safety data do not support the insomnia drug at the higher – and therefore more efficacious – doses included in the NDA. (See BioWorld Today, May 28, 2013.)

Merck’s productivity woes are hardly unique. Astrazeneca plc, for instance, has disclosed sweeping changes in the past year aimed at improving R&D. It recently announced plans to relocate its small-molecule work to Cambridge, UK, as part of a restructuring effort expected to result in a total of 1 ,600 jobs cut. (See BioWorld Today, June 19, 2013.)

In May, Astellas Pharma Inc. disclosed plans to close additional U.S. units and make cuts to some of its internal operations, while simultaneously establishing a process aimed at enhancing innovation and screening external opportunities. (See BioWorld Today, May 15, 2013.)

It’s likely Merck will need to make some sweeping changes as well. And analysts are looking to the firm’s new head of R&D to take the lead on those efforts.

Perlmutter to Focus on Products

In mid-April, Roger Perlmutter was named executive vice president and president of Merck Research Laboratories, taking over from the recently retired Peter Kim. Perlmutter had spent some time at Merck prior to spending a decade heading up R&D at Amgen Inc.

On his return to the big pharma, he determined that the lab had become “mired in a set of processes” that made it difficult to advance programs quickly and cost-efficiently, he explained during a Morgan Stanley conference earlier this month. He said the first task would be “delayering” those processes and “streamlining decision-making.” The second would be to tighten the R&D focus to “certain unambiguously important programs.”

Perlmutter acknowledged it would be difficult to halt ongoing programs, suggesting it will take time before the refocused R&D operation to start boasting more successes. But Leerink Swann analysts predicted in a research note Monday that “we believe a major restructuring at [Merck] is inevitable” and could be disclosed by the end of this year.

A note from Leerink analyst Seamus Fernandez earlier this month indicated more explicit expectations. “While the magnitude of such a change is tough to predict, we believe anything less than $1 billion out of R&D by 2015 would disappoint.”

While Perlmutter did not outline any specific cost-cutting plans during his Morgan Stanley presentation, he emphasized his willingness to look externally for product opportunities and his preference for products over platform technologies. He said Merck would continue focusing on its lucrative vaccines business as well as its viral therapy programs, including an orally active hepatitis C program.

He also pointed to oncology as an important area, identifying lambrolizumab (MK-3475) as a top priority. That drug, an anti-PD-1 antibody, made a splash at the American Society of Clinical Oncology meeting in June, with interim overall response rates from a midstage trial in melanoma of 37 percent, with a 52 percent response rate seen in the arm receiving the highest dose. And so far it’s stacking up well against a potential competing program from Bristol-Myers Squibb Co.

Merck is advancing toward late-stage trials with lambrolizumab in melanoma and non-small-cell lung cancer.