Merck & Co. (MRK) recently entered into an exclusive global agreement with Hanwha Chemical Corporation for the development and commercialization of a biosimilar version of Enbrel (etanercept).
Terms of the Deal
Under the terms of the agreement, Merck and Hanwha will collaborate on the development and commercialization of HD203, which is a part of Hanwha’s portfolio. Merck will be responsible for the development and manufacturing of the candidate.
Moreover, Merck will commercialize HD203 in all territories excluding Korea and Turkey; Hanwha has retained marketing rights for these countries.
While detailed financial terms were not disclosed, Hanwha will receive an upfront payment from Merck and will also be entitled to receive payments based on the achievement of technology transfer and regulatory milestones. Besides this, Hanwha will receive tiered royalties on sales.
Candidate Represents Significant Potential
Amgen’s (AMGN) Enbrel is approved for several indications including moderate to severe rheumatoid arthritis, moderate to severe plaque psoriasis, psoriatic arthritis, ankylosing spondylitis and moderately to severely active juvenile idiopathic arthritis.
Amgen has a collaboration agreement with Pfizer Inc. (PFE) for marketing Enbrel in the US and Canada. The rights to market and sell Enbrel outside the US and Canada are with Pfizer. Enbrel sales came in at $3.5 billion in 2010.
HD203 is a good addition to Merck’s biosimilars portfolio and represents significant commercial potential if developed successfully. HD203 is currently in a randomized double-blind active-controlled parallel group phase III study in Korea.
The study is being conduced to evaluate the equivalence in efficacy and safety of HD203 and Enbrel in combination with methotrexate in patients with rheumatoid arthritis. Studies are yet to commence 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 Merck is facing headwinds 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.
The recent approval of Victrelis is a major boost for the company. Moreover, the Remicade/Simponi settlement has removed a major overhang from the shares.
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