Merck Stock Up On Molnupiravir, But Don't Get Too Excited
Summary
- Molnupiravir results are striking for very early treatment, but this doesn't compare with vaccination; the time window for effect is short and the trial was mostly with unvaccinated people.
- Merck has a Phase 3 trial testing if molnupiravir can prevent infection of a person exposed to someone infected with COVID-19.
- The commercial opportunities for COVID-19 remain primarily in the vaccine area; molnupiravir will have a role, but will it move the needle for Merck in the longer term?
krblokhin/iStock Editorial via Getty Images
There is a lot of excitement about Merck (NYSE:MRK)/Ridgeback Biotherapeutics success with molnupiravir pills as an early stage COVID-19 treatment. Here I review where molnupiravir fits in the COVID scene. The results are exciting and Merck’s share price is up almost $10 since mid-September, from $72 (ex-dividend) to a peak at $82 in the first week of October, but I don’t see this product as company changing. Molnupiravir will help, but vaccines and social distancing/masks are still the way we shall navigate through the pandemic.
Results of interim analysis of MOVe-OUT Phase 3 trial
Trials get stopped for various reasons. On the downside it is because those treated are not benefiting or being disadvantaged, while on the upside trials get stopped because the results are so strong that those getting the placebo are clearly disadvantaged. In the latter case you know you have success. The trick with drug trials is to design the trials to have best chance of success, because failed trials are setbacks that are costly to come back from. Merck tweaked its trials for molnupiravir to increase its chances of success in April.
Merck updated two Phase 2/3 trials for molnupiravir in April 2021. One trial, MOVe-IN, which involved hospitalised patients, indicated that there was unlikely to be a clinical benefit and so this trial was terminated. Anti-virals don’t work if COVID-19 gets established.
The second trial, MOVe-OUT, involved outpatients and the indications were that early treatment was likely to produce clinical benefit, so this trial was continued but with some modifications. A higher dose was included as the trial moved to Phase 3. In addition patients less than 5 days after symptoms commenced were included (previously it was less than 7 days after symptom onset) and a requirement was for patients to have at least one risk factor for progression to severe disease (eg older patients, those with obesity, diabetes and heart disease).
The modified global Phase 3 trial MOVe-OUT had planned to enrol 1,850 patients (1:1:1:1 of 200mg, 400mg, 800mg and placebo taken twice daily for 5 days). The study had 173 locations, with populations comprising 55%, 23% and 15% patients from Latin America, Europe and Africa respectively. This means that few patients were from the US, although 15 US states had study sites.
Interim analysis of the trial results from 775 patients treated were so encouraging (risk of hospitalisation was halved, no deaths recorded with treated patients) that Merck stopped recruitment (although it was largely completed) and plans were expedited to seek EUA (Emergency Use Authorization) in the US as soon as possible, along with applications with regulatory agencies worldwide. Monulpiravir was effective for Delta, Gamma and Mu variants.
Molnupiravir is not the magic bullet but it has a role
Molnupiravir is an antiviral which acts as a RNA-dependent RNA-Polymerase inhibitor. This messes up replication of viruses like SARS-CoV-2. Because of this mode of action, molnupiravir is likely to inhibit most SARS-CoV-2 variants.
SARS-CoV-2 (and especially the delta variant) is an aggressive viral infection that, in susceptible people, rapidly gets out of control. So Merck and Ridegback Biotherapeutics switched goals to address early stage disease, before hospitalisation.
Another reason for the change of direction was that molnupiravir is available in tablet form and hence it doesn’t require close supervision for treatment in the way that IV infusion requires. This is a huge advantage over injected antivirals like Gilead’s (GILD) remdesivir because molnupiravir is just a pill and it works before the infection gets fully established. This means that expensive and clumsy hospital or clinic treatments (as happens for a slow intravenous infusion) are not needed.
You must treat early or it won’t work…there is the trick. Perhaps it will end up as a very successful drug because it will be widely prescribed as a precautionary treatment, especially for patients regarded as at risk from severe complications/hospitalisation. A problem is that hospitalisations going forward are likely to be dominated by the unvaccinated, who often are vaccine sceptics and may not believe that COVID is a significant threat. These people may present late for molnupiravir treatment because they anticipate that there won’t be a problem.
On the other hand there is a substantial at-risk population who will be vigilant and likely users of molnupiravir.
A final caveat about molnupiravir. In the clinical trial protocol I did not see any reference to vaccination status of the participants. Unvaccinated people are much more likely to be infected, hospitalised and die. I assumed that the trial would only involve unvaccinated people, as these patients have a worse prognosis than the unvaccinated, but this is not clear from the protocols. However, 70% of the participants came from Latin America and Africa which have low vaccination rates.
Since we are moving to a time when most people will have been vaccinated, it will be interesting to see data on the impact of molnupiravir treatment on vaccinated people. It seems likely that the striking effects seen in the current trial might be more muted in a fully vaccinated population.
Making molnupiravir broadly available
Given all of the above, Merck clearly understood that there were good results coming for the molnupiravir treatment and so, at their risk, they commenced scale up of manufacture. As a result, 10 million courses of treatment will be available by the end of 2021. Merck has an agreement with the US Government to supply ~1.7 million courses upon EUA approval by the FDA. Merck is also working with other Governments around the world to supply molnupiravir pending regulatory authorization. Australia will purchase 300,000 treatment doses. A tiered pricing structure based on World Bank criteria will be used. I suspect that molnupiravir won’t be cheap and this might impact use for vaccinated patients that are at low risk of serious illness.
Molnupiravir as a preventative
Merck has another Phase 3 clinical trial (1332 participants) in progress testing molnupiravir (800mg twice daily for 5 days) treatment of adults who reside with a person infected with COVID-19. The hypothesis is that this treatment will prevent the person from acquiring COVID-19 through day 14. This trial was commenced August 11 2021 and has a completion date April 3, 2022. The trial has 85 locations in 21 US states, Argentina, Brazil, Colombia, France, Guatemala, Hungary, Japan, Romania, Spain, Turkey and Ukraine.
If successful this could broaden the market for molnupiravir.
Molnupiravir is not a vaccine replacement
A really important point that some in the market might have missed, is that an oral antiviral for treating early COVID-19 (in the case under discussion here molnupiravir) is NOT a substitute for vaccination. The reasons that hospitals are not being overrun currently with the rise of the delta variant is because of successful vaccination leading to less infection than there would be otherwise and those vaccinated people who get COVID being much less likely to need hospitalisation and being at risk of death.
I have little doubt that molnupioravir will be a commercial success in pill popping US (and probably everywhere else). However I doubt that it will have the same impact on Merck’s business that the mRNA technology is having on Pfizer’s (although Pfizer’s share price still doesn’t reflect this).
It will be really unfortunate (and dangerous) if the approval of molnupiravir leads to slowing of vaccination efforts.
Merck
In my article in June I was positive about prospects for molnupiravir but I didn’t think that this would be enough to move the needle substantially for Merck. I’ve expanded on my reasons above. Others have argued that Merck is due for an upwards revaluation as it has been a laggard in recovering from COVID-19 shutdowns. The early response to news about molnupiravir has been effusive with significant share price increase, although that comes on the stock being ex-dividend. Clearly the molnupiravir announcement has been a trigger for renewed interest in Merck, which is probably justified for a number of reasons. However, I don’t see molnupiravir as being a bigger story for Merck than Pfizer’s (PFE) deep dive into mRNA technology in the vaccine success, and the amazing returns from that (and more to come).
Perhaps the excitement about molnupiravir reflects the US obsession with popping a pill to fix a disease problem.
mRNA vaccine technology
Pill popping and failure to understand the revolutionary benefits of vaccines to prevent COVID might be responsible for the recent declines in BioNTech (BNTX) (down 19% over the past 5 trading sessions) and Moderna (MRNA) (down 20.3% over the past 5 trading sessions) share prices. Watch this space as this could be an emerging buy opportunity to get a (late) position in the mRNA vaccine revolution, which has a long way to run (and it will go beyond COVID-19). Pfizer (down 2.6% over 5 days) has been less impacted than the early stage mRNA vaccine companies.
Conclusion
It is always interesting for investors to digest what it is that triggers share price shifts.
Merck’s major share price rise on announcement about positive results for molnupiravir in treating early COVID is a hard to fathom result, which is paralleled (in reverse) with Pfizer’s indifferent share price increase after literally rivers of cash have engulfed it with success of the BioNTech/Pfizer Comirnaty mRNA vaccine. As I have surmised in this article, maybe this is about US focus on popping pills (as opposed to vaccines), rather than the likely effect on the bottom line of Merck. Merck’s molnupiravir will be a successful product and probably make good money for Merck, but it is not company defining in the same way that Pfizer’s adoption of mRNA technology is.
There is a way to go with the pandemic; delta is a problem and who knows when the next variant will come along. Coping with the SARS-CoV-2 pandemic has 4 components i) vaccines, ii) nasal sprays for prevention/very early treatment, iii) early treatment once infection is established (symptoms), iv) dexamethasone for end stage disease (which hopefully will become very rarely needed). We need all of these levels of treatment.
The vaccines are in good shape and the revolutionary mRNA vaccine technology means that new vaccines can be developed quickly. The early stage treatment looks like it will be filled with molnupiravir, although I remain sceptical that this will be more than a niche (but critical) application due the explosive viral replication that happens with SARS-CoV-2. You have get treatment fast or it won’t work. Dexamethasone, the treatment of last resort, has saved many lives. The missing link is a nasal spray that acts as additional protection to a mask, although I’m on the record that there is a product, Starpharma’s (OTCQX:SPHRY) Viraleze, which is available in Europe and India. It looks like Merck might be considering molnupiravir as a nasal spray too.
COVID-19 is a major new pandemic disease. It was first identified at the end of 2019 and before the end of 2021 the elements are in place to contain it; this demonstrates the remarkable developments in the biomedical area in recent years. The key winners are the mRNA technology companies BioNTech and Moderna which have transformed vaccine technology as well as produced vaccines to cover the globe (a job well on the way but with a lot more upside). Pfizer’s share price is yet to show the true benefits of working with BioNTech to commercialise Comirnaty, although its balance sheet for 2021 is amazing! And Merck just might end up thanking molnupiravir for getting investors to pay attention. Ridgeback Biotherapeutics is private (will it go public?) and there is unloved Starpharma’s Viraleze nasal spray. But the last laugh might go to investors who missed the rise of BioNTech and Moderna and who might get a belated investment opportunity if there is a sustained correction as a result of molnupiravir’s rise. Biotech is full of such perverse outcomes.
I am not a financial advisor but I’ve been in the biotech industry long enough to have some perspective about major events in the industry. I hope my commentary helps you and your financial advisor to consider how to benefit from treatments involving COVID.
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of SPHRY, PFE either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
Recommended For You
Comments (95)
Merck’s is unaware of the mother lode it uncovered.
Annalisa Tito, Antonio Colantuono and as tested with Lozenges by University of Milan June 2020 medclinres.org/...
But, since you are on a finance site can you list your holdings in your Portfolio if you have one? Performance results, etc. Thanks Keith.
Annalisa Tito, Antonio Colantuono
yup.
1. Is this drug teratogenic or potentially oncogenic? Needless to say 30 days follow-up doesn’t cut it in this regard
2.will the FDA have concerns about global use of a drug that increases genetic mistakes, and hence genetic variability in Covid-19. This is the type of agent we use in microbiology labs to induce variants and drug resistance. This could even lead to gain of function mutations. Especially likely in real world use, where dosage compliance is always imperfect Thoughts?
Most people will choose teratogenicity, to permanent mask wearing and permanent social distancing. The most vaccinated countries have rising cases and deaths…go figure.
