Global Insight Perspective | |
Significance | The Gaboxadol failure is a major blow to both companies' late-stage pipelines. It was hoped that the compound would be submitted for U.S. FDA approval this year. |
Implications | Lundbeck will be hit worst, as the company is particularly short of late-stage products. Although Merck is still struggling with the effects of its 2004 Vioxx disaster, it is better placed to focus resources on other late-stage candidates. |
Outlook | It seems unlikely that Lundbeck will be able to find a new drug candidate to generate growth without some sort of merger or acquisition deal. Meanwhile, other competitors in the insomnia market will be cheered by Gaboxadol's failure—particularly Sanofi-Aventis and Azko Nobel, who have alternative investigational sleep products waiting in the wings. |
Disappointing Phase III clinical trial data on Gaboxadol, which the two companies have been co-developing since 2004, have prompted a decision to halt studies, with Reuters quoting "disappointing effectiveness and worrisome side effects", while late-stage trials reportedly revealed side effects such as "dizziness, headaches, hallucinations and vomiting". Evidence of adverse psychiatric events at just twice the recommended dose also raised significant safety concerns. Phase III trials of Gaboxadol also failed to demonstrate desired effectiveness in lower doses. Ultimately, the two companies have concluded that results indicate that the overall clinical profile for this product does not support further development.
The failure of this investigational treatment at such a late stage is a major blow to both firms; it had been hoped that the product would be filed for approval at the U.S. FDA in mid-200, boosting revenues for both companies in 2008. However, the smaller Danish company is likely to prove much less resilient to the setback than its larger U.S. partner. The company recently reported a 30% year-on-year (y/y) fall in 2006 net profits; the poor performance was due largely to a reduction in royalties from U.S marketing partner Forest Laboratories for Lexapro (escitalopram). The company has been relying largely on its new Parkinson's disease treatment, Azilect (rasagiline), to boost sales, but is in urgent need of a new product launch to drive growth. It had been expected that Gaboxadol would have enough market appeal to generate annual sales of at least US$500 million by 2012.
Although Merck's late-stage pipeline looks in much better shape then that of Lundbeck, this U.S drugs giant is still fighting to fill a huge US$2.5-billion-a-year void caused by the withdrawal of its arthritis blockbuster, Vioxx (rofecoxib), in 2004. The Gaboxadol failure is certainly a major setback for Merck's late-stage pipeline, but the company is better positioned to accelerate the development and commercialisation of other late-stage candidates across a broad spectrum of disease areas including obesity, cardiovascular medicine and HIV/AIDS—such as investigational compounds MK-518 (HIV/AIDS), MK-524A (cholesterol). Merck's operating profits were down by 37% y/y in 2006, but the firm’s new cervical cancer vaccine, Gardasil (human papillomavirus; HPV), and its oral diabetes drug, Januvia (sitagliptin), are currently generating new revenue streams for the company, and the firm's relatively robust drug portfolio should help to support high investment in R&D (research and development) over the next few months.
Outlook and Implications
Although Lundbeck's Chief Executive Claus Braestrup told Dow Jones the firm plans to use resources previously allocated to Gaboxadol for other pipeline candidates, this drug's failure leaves the Danish company's late-stage pipeline looking dangerously empty; with no significant new revenue growth drivers on the near horizon, it seems unlikely that Lundbeck will have the financial resources to steer earlier-stage products through to commercialisation without a strategic move that involves some kind of merger and acquisitions (M&A) activity. Although this late-stage setback is also a major blow to Merck, the U.S. company is much better placed to move on and trust in several other promising candidates. Meanwhile, Gaboxadol's failure will bring some cheer to competitors in the insomnia market, including Eli Lilly and Hypnion's 5HT2A antagonist, Somaxon Pharmaceuticals' (U.S.) Silenor (doxepin) and investigational insomnia compounds eplivanserin (Sanofi-Aventis) and mirtazapine (Azko Nobel).