Merck Stops Covid-19 Vaccine Program Due To Disappointing Data


Merck & Co. has decided to stop the development of its two COVID-19 vaccine candidates following “inferior” immune responses. Shares slipped about 1% in Monday’s morning trading session.

Specifically, Merck (MRK) will discontinue the development of vaccine candidates V590 and V591, and instead focus on a research strategy to advance two SARS-CoV-2/COVID-19 therapeutic candidates, MK-4482 and MK-7110. The US drugmaker said that the decision was based on findings from the Phase 1 studies for the vaccine candidates, which showed that the immune responses were inferior to those observed following natural infection and those reported for other COVID-19 vaccines.

Merck announced that it will record a charge in the fourth quarter of 2020 due to ending the COVID-19 program. The charge will be included in the company’s generally accepted accounting principles (GAAP) results, but is not expected to have an impact on its non-GAAP results.

“We are resolute in our commitment to contribute to the global effort to relieve the burden of this pandemic on patients, health care systems and communities,” said Merck Research Laboratories president Dean Y. Li.

Merck emphasized that the drugmaker will continue to advance clinical programs as well as the production for the two investigational medicines, MK-7110 and MK-4482 (molnupiravir).

Molnupiravir, which is being developed in partnership with Ridgeback Bio, is an oral antiviral, that is currently being tested in Phase 2/3 clinical trials in both hospital and out-patient settings. The primary completion date for the Phase 2/3 studies is May 2021, with initial efficacy data expected in the first quarter of 2021.

MK-7110 is a potentially first-in-class recombinant fusion protein that modulates the inflammatory response to SARS-CoV-2. Interim results from a Phase 3 trial found a greater than 50% decline in the risk of death or respiratory failure in patients hospitalized with moderate to severe COVID-19. Full results from the study are expected in the first quarter of 2021.

Last month, Merck announced a $356 million agreement to supply the US government with 60,000-100,000 doses of MK-7110 upon Emergency Use Authorization (EUA) from the US Food and Drug Administration (FDA).

Merck shares have dropped almost 9% over the past year and the stock scores a Strong Buy analyst consensus based on 6 Buys versus only 1 Hold. Meanwhile, the average analyst price target of $96.57 implies 19% upside potential over the coming 12 months.

Following the news, Mizuho Securities analyst Mara Goldstein maintained a Buy rating on the stock with a price target of $100, calling Merck’s decision an “unexpected move.”

“While this move was not necessarily anticipated and thus the shares could be weak on the news, other than a charge to EPS, we do not see an impact as we had not incorporated these programs into our valuation,” Goldstein wrote in a note to investors. “But the discontinuations of the programs and focus on the therapeutics is a strong statement by newly installed R&D chief, Dr. Dean Li, for a visibly swift and decisive action, albeit based on a negative outcome to focus efforts and R&D dollars appropriately.” (See MRK stock analysis on TipRanks).

Moreover, MRK scores a perfect 10 on TipRanks’ Smart Score, indicating that the stock has a strong chance of beating market expectations.

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