Vertex Eats Merck's Lunch
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In 1989, hepatitis C, (formerly called non-A, non-B) was first identified. At first it got little attention, but once HIV began to yield to a relentless pharmaceutical assault in the mid- to late-1990s, hepatitis C became the primary target for most antiviral research. And rightly so.

The blood-borne disease, caused by the hepatitis C virus (HCV) infects 3-4% of the world's population, roughly four-times that of HIV. There are almost 5 million people that are infected in the U.S. alone. Hepatitis C infection is characterized by a long asymptomatic period (often 2 decades), during which time the virus gradually destroys the liver. By the time symptoms are present, serious cirrhosis of liver has usually occurred. Further progression to hepatocellular carcinoma, and/or end-stage liver failure and death may also occur.

There was a treatment for the infection, however, it contained the immune booster interferon--notoriously difficult to tolerate, and the therapy was not sufficiently efficacious.

In a rather bizarre coincidence, 22 years after the virus was discovered, the FDA approved the first two specific HCV drugs within a week: Schering's (now Merck's) boceprevir (Victrelis), followed by Vertex's telaprevir (Incivek)-- one week later. Since both drugs are protease inhibitors, they are necessarily competitors, unlike in AIDS therapy, where a number of HIV drugs that work by different mechanisms (often from different companies) are taken together, sometimes in a single pill.

As hepatitis C research developed, telapravir was thought to be the better drug based on its superior potency. As such, it was also expected to be approved first, giving it a market advantage. This turned out to be wrong-- boceprevir, having caught up, erased that advantage, making it unclear which drug would win out. Many gave the edge to Merck, because of its size and superior marketing ability. Either drug had to be taken in addition to interferon, not in place of it.

Merck clearly had this in mind when they immediately announced that they were partnering with Roche, already a major player in the HCV field by virtue of its marketing of Pegasys, their brand of interferon. To make matters worse for Vertex, Merck sold PEG-Intron the only other interferon used for HCV, so the two companies together cornered the interferon market, leaving Vertex, a start-up biotech facing off against an HCV juggernaut. It looked like Goliath might win this one.

Or not. Third quarter sales of the two drugs came out this week, and they were startling. Merck's sales of Victrelis were an embarrassing $31 million. The number for Incivek was $420 million-- a bona fide blockbuster, especially for a small company.

It remains to be seen whether this trend continues, but I would not want to be the person responsible for recommending the takeover of Schering by Merck, especially if Victrelis was part of the equation. Round one goes to David.

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