In my career as a psychotherapist, I have seen more people complaining about not being able to fall asleep than about any other psychological issue. While any psychological distress may cause sleep difficulties, difficulty in falling asleep alone does not mean someone is suffering from a psychological or psychiatric illness. A variety of reasons can cause insomnia, and sometimes there is no reason at all. I do not want to get deep into the neurochemical and cognitive aspects of not being able to fall asleep. But, it suffices to say that stress, psychological or psychiatric disturbance, physical health, and sleep hygiene all play an important role in a person's ability to fall asleep or an inability to do the same.
Popping sleeping tablets is often glamorized and glorified, but it has never been a panacea. In fact, tablets that assist in putting people to sleep usually have several side effects and should not be taken for years, even though most admit that they have been using them for decades. Doctors are often left with no choice but to prescribe anti-anxiety tablets or certain antidepressants in order to help people sleep better.
With that in mind, I was pleased to learn that Merck's (MRK) insomnia drug has showed positive results. Suvorexant, the investigational insomnia medicine was studied over a period of 12 months and the results have been very satisfactory. The study was also one of the longest and continuously dosed trials that a sleep medication has ever received. The study made use of placebo controlled trials as well. Patients who were on a regimen of Suvorexant for 12 months and were given a placebo thereafter did not report clinically significant withdrawal symptoms and there was also no case of rebound insomnia. Instead, they just did not sleep all that well without Suvorexant. Basically, what the study indicates is that those who took Suvorexant for one year reported the same side effects and difficulties as those who were prescribed a placebo did. But, during the trials, those who were given Suvorexant experienced better sleep and could fall asleep easily.
Merck plans to go ahead and file a New Drug Application with FDA this year. If approved, Suvorexant would the first of a new class of drugs called "orexin receptor antagonists." Merck plans to file applications for approval in the European Union and parts of Asia as well. If this drug reaches the market successfully, Merck is sitting on a virtual gold mine. The drug in question may be the panacea for which millions of people all over the world have been searching, just to be able to sleep without having to experience undesired side effects.
If Suvorexant is given clearance, it will help people to avoid taking antipsychotics like olanzapine, antidepressants like mirtazapine and fluvoxetine, and benzodiazepines, which come with a number of side effects. Suvorexant will also negate the necessity for prescribing barbiturates which have far more serious side effects. Barbiturates have a high potential for abuse and addiction. The success of Suvorexant will have long term implications for Merck and its investors. If the drug is cleared by the FDA, Suvorexant could turn out to be the most widely sold drug in Merck's catalogue.
Alprazolam, marketed as Xanax by Pfizer (PFE), is currently the most popular medicine that people use to fall asleep. It is a short-acting benzodiazepine that has anxiolytic properties. Merck's Remeron or mirtazapine is an antidepressant that not only improves mood but also helps people sleep more. It has often been criticized because it causes excessive drowsiness. A few clients of mine had to be weaned off mirtazapine and prescribed a different antidepressant, as excessive drowsiness became a real issue. Clonazepam, marketed by Roche (ROG) is a more preferred benzodiazepine as it acts for a long time and has fewer side effects than either alprazolam or mirtazapine. But, what we need to understand is that none of these hypnotics (chemicals that induce sleep) are effective cures for insomnia.
One of Pfizer's experimental drugs, bapineuzumab, failed to help Alzheimer's symptoms in a study. But, it was reported that the drug might be helpful for early use. Johnson & Johnson (JNJ) on the other hand received flak from a male patient who grew breasts after using its Risperidal, an antipsychotic medicine. The medicine is also prescribed to schizophrenics in larger doses when they find it difficult to fall asleep. Johnson & Johnson settled the case on the first day of trial. Bristol-Myers Squibb (BMY) has had a hard time pleasing its investors too, after its Hepatitis C drug, BMS-986094 failed in drug trials. A patient died tragically after using its BMS-986094. Eli Lilly's (LLY) much publicized Alimta-Avastin combo also failed and it is not going to help patients with lung cancers, according to a report. This report has adversely affected the company in the short run. Looking at the various scenarios affecting Merck's competitors, it goes without saying that Suvorexant is something that will make investors happy in the short and long run.
Merck traded at $44.33 in the second week of September. With a market cap of $135.01 billion and an enterprise value of $136.33 billion, Merck is in a strong position to face its competitors. The company has a profit margin of 13.93% and an operating margin of 22.97%. With a return on assets of 6.56% and a return on equity of 11.86%, Merck is a definite buy. The company has a total cash of $17.45 billion and a total debt of 18.98 billion, which seems like a cause for concern. But, I am sure Suvorexant will help Merck to increase its revenue and also build consumer and investor confidence in the short and long terms.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.