Merck Takes Major Write-Down on Hepatitis C Drug

Merck acquired uprifosbuvir after purchasing Idenix Pharmaceuticals Inc. for $3.85 billion.

Merck & Co. will write down most of what it paid for the experimental drug, uprifosbuvir, after reevaluating opportunities and prices in the market for hepatitis C medications.

The pharmaceutical giant will take a charge of $2.9 billion, or $1.9 billion after taxes, pushing it to a loss of $0.22 a share for last year’s fourth quarter. Kenilworth, New Jersey-based Merck had previously reported a profit of $0.42 a share for that period.

Merck acquired uprifosbuvir, a nucleotide prodrug, in its $3.85 billion purchase of Cambridge, Massachusetts-based Idenix Pharmaceuticals Inc. in 2014. Since then, Merck’s “best estimate” of the drug’s current value has plunged to $240 million, according to its February 23 filing with the US Securities and Exchange Commission. The company is assessing options for uprifosbuvir’s clinical development and monitoring the situation for further impairment, citing ``recent changes to the product profile.’’

Merck isn’t the first company to suffer diminished expectations amid competition for drugs that treat the liver-attacking hepatitis C virus. Gilead Sciences Inc., based in Foster City, California, said in early February that sales of its hepatitis C products fell to $3.2 billion in the fourth quarter from $4.9 billion in the 2015 period. Declines in two of its mainstays, edipasvir/sofosbuvir (Harvoni) and sofosbuvir (Sovaldi), were partially offset by sofosbuvir/velpatasvir (Epclusa), which the company introduced in 2016.

Merck and its rivals have been eager to develop and acquire new medications to counter hepatitis C, which can cause death from liver cancer and cirrhosis. Antiviral drugs can cure 90% to 100% of patients with the virus, the US Food and Drug Administration (FDA) estimates. However, worldwide access to hepatitis C diagnosis and treatment remains low. More than 200 million people are infected with hepatitis C, a global incidence rate of 3.3% of the population, according to the C. Everett Koop Institute at Dartmouth College in Hanover, New Hampshire.

Until a few years ago, fighting the virus required long treatment times and injections that could cause debilitating reactions¾then antiviral pills were developed. They reduced side effects and increased cure rates while cutting treatment times from as long as one year to as little as eight to 12 weeks. The FDA approved Gilead’s Sovaldi in 2013; Harvoni followed in 2014. AbbVie, based in North Chicago, Illinois, began carving out its own portion of the hepatitis C market. Merck’s elbasvir/grazoprevir (Zepatier), a once-daily, fixed-dose combination tablet, was approved by the FDA and the European Commission last year. The company expects launches to continue across the European Union through early 2017.

Thanks to the growing number of successful drug options, doctors have a variety of choices when prescribing hepatitis C medications. To win business, companies are competing to offer attractive prices. At the same time, the number of patients needing care is decreasing because of the drugs’ effectiveness. That’s eating into sales.

In February, market leader Gilead cited rising competition, fewer market starts, and shorter treatment durations for expected hepatitis C sales of $7.5 billion to $9 billion this year. That’s less than Gilead’s $14.8 billion of hepatitis C sales for 2016 and a plunge of more than half from the $19.1 billion in 2015.

The SEC filings were provided by Merck and the news release was provided by Gilead.

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