Merck & Co. ($MRK) is running low on options after a federal appeals court Thursday again declined to back four patents that would have held at bay for 5 more years generics of the antibiotic Cubicin, the drug that was key to its $9.5 billion buyout of Cubist. Next up may be an appeal to the U.S. Supreme Court.
In a three-sentence statement, the Kenilworth, NJ-based drugmaker, said Thursday that a federal appeals court upheld a fifth patent, but that one expires next June anyway, potentially leaving only months before copies from Hospira and others could launch. The court invalidated four other patents that expire in 2019 and 2020. The company says it is "considering its next steps, which may include seeking further review" at the federal circuit level or the Supreme Court.
The initial ruling came last December, just hours after Merck announced the deal to buy Cubist. Merck CEO, Ken Frazier immediately assured investors all was fine and that the deal would provide them with "both incremental and long-term value."
Perhaps, but the math on the deal is much different without exclusive sales of Cubicin, Cubist's best-selling drug by far, for the next 5 years. Analysts have said that without exclusivity for Cubicin, Merck may have overpaid for Cubist by $2 billion to $3 billion.
Merck should get the $1 billion revenue bump for 2015 that it projected from the deal. In the first 9 months, Cubicin had revenues of $805 million, up 7% from its sales for Cubist last year, $325 million of that in the third quarter. And if it wins pediatric exclusivity, that would hold off generics till almost the end of the year.
Now Merck will be looking for Zerbaxa, a new antibiotic approved by the FDA shortly after the initial patent loss news, to do as much as possible to make up Cubicin's lost revenue. Analysts expect the antibiotic for treating infections caused by Gram-negative bacteria to bring in about $560 million in 2018 sales.
It is not the only hard-to-swallow news that Merck has served up recently about generic competition. In its Q3 earnings report last month, it said that sales of blockbuster Remicade, were off 13% to $442 million in the last quarter as highly discounted biosimilars in Europe stole market share. Overall, Merck's third-quarter revenue declined to $10.1 billion from $10.6 billion the same period last year, but earnings were up on lower costs, including operating cuts and a big decline in restructuring charges. The company slightly raised its EPS guidance for the year, to $3.55 to $3.65 from $3.45 to $3.55.
- here's Merck's statement