Merck stock jumped Monday after a drug it acquired for billions scored a "must-win" in patients with a rare blood pressure condition.
Evercore ISI analyst Umer Raffat called the drug, sotatercept, the most critical component of Merck's $11.5 billion acquisition of Acceleron Pharma. He called the study a "must-win" for Merck. In the study, dubbed Stellar, Merck added sotatercept on top of standard treatments for pulmonary arterial hypertension, or PAH. PAH is a form of high blood pressure in the lungs and right side of the heart.
The drug combination led to a significant improvement in how far patients could walk for six minutes, a measure of disease severity. As a result, Merck stock retook its 50-day moving average. The drug also resulted in improvements on eight out of nine secondary measures. Dean Li, president of Merck Research Laboratories, called the results "profound."
"The results observed in Stellar suggest that sotatercept has the potential to transform the treatment of patients with PAH," he said in a written statement. "We are moving with urgency on our regulatory applications to bring this investigational therapy to these patients."
On today's stock market, Merck stock advanced 3.3% to 90.48.
Merck Stock Eyes Breakout
Sotatercept works differently from standard drugs, which open the blood vessels. Instead, sotatercept targets a lung receptor involved in inflammation.
In addition to a statistically significant improvement in six-minute walking distance, adding sotatercept to standard drugs lengthened the amount of time before patients worsened or died. The results pushed Merck stock closer to a 95.82 buy point out of a flat base, according to MarketSmith.com.
Merck said sotatercept's safety was in line with prior studies. Evercore's Raffat says this likely included some incidents of cytopenia, lower-than-normal blood cells, but probably "nothing of major concern."
He notes the first sotatercept patent will expire in 2026. Additional patents and protections could prevent generics from hitting the market until the mid-2030s, he said.
Raffat has an outperform rating on Merck stock.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
