Two More Legacy Schering-Plough HCV Ideas Leave The New Merck Fold

The Schering-Plough deal brought New Merck one or two smallish positive surprises -- but it also delivered more than its share of disappointing drug candidates. [Think here of Vorapaxar, Asenapine, Vicriviroc and Bridion -- to name just a few.]

So, with the slightly-surprising performance of Victrelis in the Hep C space (slowly catching up with Vertex's Incivek), it makes sense for New Merck to try to monetize some of the second fiddles Schering-Plough held, in the next-gen Hep C space. Yesterday, New Merck did just that -- and avoided additional R&D cash burn to boot.

From the Microbiotix press release, then:

. . . .Microbiotix gains worldwide rights to develop, manufacture and commercialize MBX-700 and MBX-701 (formerly SCH 900942 and SCH 900188), two non-nucleoside inhibitors of the hepatitis C virus NS5B polymerase. MBX-700 is in Phase I clinical testing and MBX-701 is currently in preclinical development.

Merck is eligible for milestone payments during development stages of the candidates, and for royalty payments from any resulting products. Specific terms of the agreement were not disclosed. MBX-700 and MBX-701 are designed to inhibit the replication of the hepatitis C virus by acting on the NS5B polymerase, a clinically validated target that is essential for viral genome replication. In vitro studies have shown MBX-700 to be among the most potent HCV NS5B polymerase inhibitors. . . .

This is a smart move for New Merck -- as it already has several more promising on-market, and in-trials candidates, underway in the Hep C space.

And, if Whitehouse Station turns out to be wrong about these legacy Schering-Plough polymerase inhibitors (for Hep C inhibition), New Merck will still get a share of the revenue, while having avoided perhaps $100 million in cash research, development and clinical trials costs -- to find out what they actually can do.

This sort of deal is exactly what Mr. Frazier meant -- speaking at Goldman Sachs yesterday -- would be his signature: thoughtful in- and out-licensing. Well-played, sir.