CHMP Stands Negative on MKGAF Drug - Analyst Blog

Merck KGaA (MKGAF) recently said that the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHMP) upheld its negative recommendation related to the approval of cladribine for the treatment of relapsing-remitting multiple sclerosis (MS).

In September last year, the CHMP had first recommended against the approval of cladribine for the treatment of relapsing-remitting MS on its belief that the benefits reaped by MS patients from the drug do not outweigh the risks that come with it. Thereafter, Merck KGaA requested the EMA, in October 2010, for a re-examination of the adverse recommendation issued by the CHMP.

The CHMP's negative opinion came as a shock for Merck KGaA given the fact that cladribine is approved in Australia and Russia for the treatment of relapsing-remitting MS. The drug is marketed as Movectro in these countries.

Moreover, the US Food and Drug Administration (FDA) extended the review period of cladribine by three months in November 2010. The prescription drug user free act date, which was earlier set for November 28, 2010, has now been postponed to February 28, 2011. The regulatory body said that it needs more time to fully review the additional information provided by Merck KGaA on cladribine.

Our Take

We currently have a Zacks #3 Rank (short-term Hold rating) on Merck KGaA. Though we view the negative stand from the CHMP as a major setback for the company, we believe that Merck KGaA's continuous investment in R&D, marketing and new product launches should help sustain earnings growth for the next few years.

Meanwhile, we note that the MS market is highly competitive given the presence of players like Teva Pharmaceuticals Industries Ltd. (TEVA), Biogen Idec Inc. (BIIB) and Elan Corp. (ELN).