Monday, December 12, 2011

2011 Alliance of the Year Nominee: Merck/Roche

It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.

The May 2011 approvals of the first two direct-acting antiviral drugs against hepatitis C virus provided us with an unusual opportunity to watch a head-to-head marketing battle in a reinvigorated blockbuster market. Merck & Co. hit the market first with Victrelis, its HCV protease inhibitor, which was approved May 16. And before rival Vertex could launch Incivek only a week later, Merck had already called in the cavalry.

On May 17 Merck said it had partnered with Roche -- a longtime rival (of Schering-Plough, anyway) that bested it in the first big HCV marketing battle over long-acting interferon therapy -- to both promote Victrelis and to examine future HCV drug combinations.

It wasn't quite "dogs and cats living together, mass hysteria!" Gatekeeper-Keymaster action, but for folks in pharmaland, it was pretty close. Then again, the deal makes perfect sense. And when marketing enemies become friends, underscoring the emerging trend of pharma-pharma collaboration, the importance of a strong start in a rapidly evolving HCV market, and pre-market drug combo testing, DOTY gets all tingly.

The financials of the deal were not disclosed, but a Merck spokesperson confirmed that the Roche partnership does not "alter the economics of Victrelis for Merck." In exchange for its marketing muscle, Roche gets to hedge against the probable decline of its Pegasys interferon franchise while its reps gear up for the eventual launch of Roche's own direct anti-virals (Roche's latest-stage compounds, the protease inhibitor danoprevir and the polymerase inhibitor RG7128 -- the latter partnered with Pharmasset -- are in Phase II).

More importantly to pique DOTY's interest, Merck and Roche are working together to test combinations of not-yet-approved HCV drugs. There are dozens of molecules in the clinic whose developers hope to hit on combinations that avoid the need to use interferon and cure HCV patients more quickly and efficiently than standard therapy. That regimen now typically involves an interferon, ribavirin, and either Merck or Vertex's pioneering PIs (more probably Vertex's, which thus far holds a commanding lead in the second massive HCV commercial battle).

That Merck and Roche realize the benefits of teamwork as a substitute for an entirely home-grown or acquired compound portfolio isn't surprising, but this kind of deal remains all too rare.  That this kind of peer dealmaking remains an exception to the rule -- even in the exciting but increasingly crowded worlds of HCV or, say, oncology -- suggests the companies that embrace it most quickly will have a lingering edge.

And so we offer the alliance DOTY nod to two old foes. Their detente is unlikely to last forever, but in the fast-paced world of HCV drug development, where Phase II assets can command billions, it might just save each company from obscurity.

kreg.steppe photo via flickr, used under creative commons license

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