Merck stock popped Wednesday, pacing the Dow Jones industrials, after winning Food and Drug Administration approval for its new cardiovascular drug, Winrevair.
Formerly known as sotatercept, Winrevair treats pulmonary arterial hypertension, or PAH, a form of high blood pressure in the lungs. Merck paid $11.5 billion in 2021 when it bought Acceleron Pharma, the company that developed sotatercept. Now, it's hoping that bet will pay off with a looming revenue decline after cancer blockbuster Keytruda loses patent protection this decade.
UBS analyst Trung Huynh expects Winrevair to generate $650 million in sales this year, north of broader analysts' views for $462 million. Winrevair joins Johnson & Johnson's new PAH treatment, Opsynvi, which gained approval last week.
"Investors can breathe a sigh of relief given sotatercept's approval in PAH (Tuesday) comes with a squeaky-clean label (i.e., no black box and no REMS)," Bank of America analyst Geoff Meacham said in a report. A REMS, or a risk evaluation and mitigation strategy, is an FDA program that includes certain restrictions for drugs that have side-effect risks associated with them.
On the stock market today, Merck rallied 5% to 131.80.
Merck Stock's Cardiovascular 'Renaissance'
Sotatercept fits into a cardiovascular "renaissance" at Merck, Chief Medical Officer Eliav Barr told Investor's Business Daily in a 2022 interview. Patients with PAH often experience shortness of breath, dizziness and chest pressure. Eventually, the right side of the heart fails, he said.
Winrevair is the first drug that treats the underlying cause of PAH, Barr said in a March interview with IBD. Standard drugs help relax the blood vessels which thicken as the disease progresses. Winrevair, instead, rebalances the signals in the body that tell the blood vessels to narrow.
"It allows for a very significant change in the way in which the blood moves through the lungs," he said. This allows the blood to become properly oxygenated and travel throughout the body.
The effectiveness of drugs like Winrevair is often measured in what's known as the six-minute walking test. This test examines how far patients can walk over that time period. Patients who took the Merck drug on top of standard treatments added 41 meters to their six-minute walking distance, said Huynh, the UBS analyst.
Eight out of nine secondary metrics also showed statistically significant improvements. Patients who received Winrevair had an 84% lower risk of clinical worsening events or death over 24 weeks compared to the placebo recipients. This is "impressive given the short 24-week duration of the study" and should help drive uptake, Huynh said.
"We think reduction in clinical visits translates to a major quality of life benefit," he said.
Barr called the test results for Winrevair "groundbreaking."
"About 40% of people die within five years of diagnosis (of PAH), so they have a pretty high rate of hospitalization for needing lung transplants or other sorts of deterioration events that happen," he said. "This is a pretty transformational drug and our hope for this drug is that it will be adopted by the right patient at the right time."
Is This Merck Stock's Next Big Act?
In a January report, Mizuho Securities analyst Mara Goldstein said the market for PAH drugs is growing at a 6% compound annual rate. She expects it to be worth $9 billion a year by 2028. Physicians said they would use sotatercept upon approval.
"We see (Winrevair) as a blockbuster opportunity within PAH and reaching $2.4 billion in sales by 2029 with upside stemming from its use in other diseases and indications involving vascular remodeling," Goldstein said. She has a buy rating on Merck stock and raised her price target to 138 from 130.
Merck plans to charge $14,000 per vial of Winrevair. That puts the annual cost at $242,000 to $283,000 per person, according to various analysts' reports. There are about 40,000 people with pulmonary arterial hypertension in the U.S. and a roughly equivalent number in the major European markets, Merck's Barr said. The entire market is about 80,000 to 90,000 people.
Overall, Mizuho's Goldstein says Merck's late-stage pipeline could add a potential $13.6 billion in 2029 sales. The Street is also keeping tabs on MK-0616, an oral cholesterol treatment in the PCSK9 drug class.
The PCSK9 gene provides instructions for making a protein that regulates the amount of cholesterol in the bloodstream. Blocking that protein helps lower bad LDL cholesterol. The FDA has approved a series of injections that do the same, but they've struggled to gain steam.
Goldstein says Merck is facing a $2 billion-plus opportunity for its oral PCSK9 inhibitor "given the ramp for cardiovascular drugs." She expects sales to be $317 million in 2029.
'Really Severe Consequences'
Pulmonary arterial hypertension patients tend to get their diagnoses in their 30s or 40s. Five years from diagnosis, 43% of them will be dead, Merck's Barr said.
"It's a smaller group of patients," than other diseases, he said. "But it's a group of patients facing really severe consequences."
Merck is also testing Winrevair in patients with pulmonary arterial hypertension due to left heart disease. This is a common complication of left heart disease, which occurs when the left ventricle of the heart gradually weakens. Over time, the heart has to work much harder to pump blood.
Importantly, Winrevair is an injectable drug, so patients can receive it at home.
Merck stock has a middling IBD Digital Relative Strength Rating of 75 out of a best-possible 99. This means shares rank in the top one-quarter of all stocks when it comes to 12-month performance.
Shares ended Tuesday at the top of a buy zone after a back-and-forth breakout above a 119.65 buy point in a cup base, MarketSurge.com charts show. Wednesday's early move sent shares flying above the 5% chase zone.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
