=Bristol-Myers (BMY) : cancer blockbuster didn't do so well in a trial of lung-cancer patients

(source: Bloomberg; September 28, 2019)
Bristol-Myers Squibb Co.’s blockbuster oncology drug showed tepid results in a trial of lung-cancer patients, in what investors may read as a setback in the competitive market drugs that unleash the immune system to attack tumors.

The trial compared chemotherapy treatment against a cocktail of Bristol-Myers’s Opdivo and a low dose of its drug Yervoy. Patients who got the new, expensive drugs lived an average of 17.1 months, compared with 14.9 months on chemotherapy.

Bristol-Myers’ chief rival in the market for so-called immunotherapy drugs is Merck & Co. Merck’s immunotherapy drug Keytruda has been the winner in the lung-cancer market and is on pace to become a $10-billion-a-year product. Lung cancer is the deadliest tumor type, killing 154,000 Americans each year.

“Keytruda has set a high enough bar that it will be challenging” for Bristol-Myers’ combination therapy to compete in the non-small cell lung setting, said Cantor Fitzgerald analyst Louise Chen in a note to investors on Monday before the Opdivo-Yervoy data released.

Bristol-Myers’ head of oncology development Fouad Namouni said the Opdivo-Yervoy combination reflects the first dual therapy to demonstrate “superior overall survival over chemotherapy” in non-small cell lung cancer. But patients in the trial who got Bristol-Myers’ drugs only lived about two months longer than those who got chemotherapy. The results are being presented at European Society for Medical Oncology Congress in Barcelona on Saturday.

The company is also presenting positive data at the meeting on the use of Opdivo and Yervoy in patients with advanced melanoma, the first tumor type the drugs were approved to treat. After five years, 52% of advanced melanoma patients given both drugs were still alive, compared with 44% treated with Opdivo alone and 26% on Yervoy only.

Bristol-Myers suffered a setback in July when a combination of Opdivo and chemotherapy didn’t extend the lives of patients with non-small cell lung cancer in a statistically significant way over chemotherapy on its own. Chief Executive Officer Giovanni Caforio has said that Opdivo will face pressure in 2020 in light of recent trial results and increasing competition.

In January, Bristol-Myers announced a $74 billion deal with Celgene Corp., an effort to expand its on-the-market products and grow its pipeline.

=KalVista Pharmaceuticals (KALV) enters collaboration agreement with Merck (MRK)

KalVista Pharmaceuticals will collaborate with Merck to develop treatments for a complication of diabetes.

• Headquarters: Massachusetts
• Founded: 2004
• kalvista.com

KalVista Pharmaceuticals enters collaboration agreement with Merck (MRK); Merck to pay $37 mln upfront payment, additionally take 9.9% stake through private placement at $8.50/share

The co announced that it has entered into a collaboration agreement with Merck (MRK) for KVD001, the Company's investigational intravitreal injection candidate currently in development for potential treatment of diabetic macular edema, as well as future oral DME compounds based upon plasma kallikrein inhibition

• Under the terms of the agreement, KalVista has granted to Merck certain rights including an option to acquire KVD001 through a period following completion of the Phase 2 proof-of-concept trial that KalVista intends to commence later this year. KalVista also has granted to Merck a similar option to acquire investigational orally delivered molecules for DME that KalVista will continue to develop as part of its ongoing research and development activities. As consideration for the agreement, Merck will pay to KalVista a $37 million non-refundable upfront fee. KalVista is further eligible to receive payments associated with the exercise of the options by Merck and the achievement of milestones for each program that potentially total up to $715 million. KalVista also will receive tiered royalties on net sales for therapeutic candidates commercialized under this agreement. KalVista will fund and retain control over the planned Phase 2 clinical trial of KVD001 as well as development of the investigational oral DME compounds through Phase 2, unless Merck exercises its options earlier.
• In addition to the collaboration, KalVista has entered into a separate $9.1 million private placement transaction with Merck under which Merck has acquired 1,070,589 shares of KalVista, representing a 9.9% ownership stake, at a price of $8.50 per share. This private placement closed concurrent with execution of the Option Agreement.

Description

KalVista Pharmaceuticals, Inc., formerly Carbylan Therapeutics, Inc., is a clinical-stage pharmaceutical company. The Company is focused on the discovery, development, and commercialization of small molecule protease inhibitors for a range of diseases. The Company has developed a portfolio of small molecule plasma kallikrein inhibitors targeting hereditary angioedema (HAE) and diabetic macular edema (DME). The Company is developing a plasma kallikrein inhibitor, which is administered directly into the eye. The Company is engaged in advancing several product candidates developed from its portfolio into early clinical trials. The Company is progressing additional oral candidates towards regulatory preclinical studies. The Company's HAE product candidate, KVD818, is an inhibitor of plasma kallikrein. The Company has initiated clinical testing of KVD818 in a Phase I clinical trial. It has completed an open-label single ascending dose Phase I trial in DME patients with KVD001.

Key stats and ratios

	Q3 (Jul '17)	2017
Net profit margin	-5133.33%	-1236.90%
Operating margin	-5680.21%	-1485.31%
EBITD margin	-	-1482.65%
Return on average assets	-60.70%	-40.82%
Return on average equity	-68.09%	-46.14%
Employees	14

=Incyte (INCY) and Merck (MRK) present progression-free survival data from ECHO-202 Trial

Incyte and Merck present progression-free survival data from ECHO-202 Trial 

• Incyte (INCY) and Merck (MRK) announced updated data from the ongoing Phase 1/2 ECHO-202 trial evaluating epacadostat, Incyte's selective IDO1 enzyme inhibitor, in combination with KEYTRUDA (pembrolizumab), Merck's anti-PD-1 therapy, in patients with advanced melanoma.
• Among all patients with advanced melanoma, including treatment-nave and treatment-experienced, data showed an overall response rate of 56% in patients treated with the combination of epacadostat and KEYTRUDA; median progression-free survival was 12.4 months, with PFS rates of 65% at six months, 52% at 12 months, and 49% at 18 months.
• Results were generally consistent across dosing schedules of epacadostat combined with KEYTRUDA, including epacadostat 100 mg BID, the epacadostat dose being studied in the Phase 3 ECHO-301 trial.

=Merck (MRK) wins tentative FDA approval for Lusduna

Merck & Co. said today that it has won tentative FDA approval for its follow-on biologic basal insulin Lusduna™ Nexvue™ (insulin glargine injection).

The approval is tentative because Sanofi has sued Merck, contending that Lusduna infringes on patents for its marketed diabetes treatment Lantus® (insulin glargine).

Under the Hatch-Waxman Act, the filing of that lawsuit in September 2016 automatically blocks the FDA from issuing a final approval for up to 30 months, or if the U.S. District Court in Delaware rules in favor of Merck, whichever comes sooner.

The FDA also granted provisional approval for Merck to market the treatment under the trade name Lusduna Nexvue, once it reaches the market. The FDA accepted Lusduna for review in August 2016.

“The tentative approval of Lusduna Nexvue is an important milestone, bringing us closer to offering this medicine to patients,” Sam Engel, M.D., associate vp, Merck clinical research, diabetes, endocrinology, and women’s health, said in a statement.

The FDA approval comes six months after Lusduna won European Commission marketing authorization on January 4 as a biosimilar drug referencing Lantus, for treatment of diabetes in patients aged at least 2 years.

Lantus lost patent exclusivity in the U.S. and Europe in 2015. Since then, Sanofi has reported sales declines for the drug. Lantus finished the first quarter having generated €1.226 billion ($1.425 billion) in net sales, down 14% from the year-ago quarter.

For all of 2016, Lantus sales fell 12.1% year-over-year, to €4.761 billion ($5.537 billion).

In the U.S. alone, Lantus sales fell 20.9%, to €690 million (about $803 million)—reflecting lower average net price, patients switching to Sanofi’s next-generation basal insulin formulation Toujeo® (insulin glargine injection), and formulary exclusions by United Healthcare and CVS, Sanofi said in releasing Q1 results on April 28.

Lusduna was the second Lantus biosimilar to win European approval; the first was Eli Lilly’s Basaglar® (insulin glargine injection).

In the U.S., however, Lusduna Nexvue was not approved by the FDA under its biosimilar pathway, but under the agency’s 505(b)2 pathway, created by the Hatch-Waxman Amendments of 1984, in part to avoid duplication of studies performed earlier on previously approved reference or listed drugs. The 505(b)2 pathway allows the FDA to consider data that were not generated by the NDA applicant.

Lusduna Nexvue, formerly known as MK-1293, was developed by Merck with partial funding from Samsung Bioepis, a joint venture of Samsung and Biogen. Merck and Samsung Bioepis began collaborating on biosimilars in 2013, then expanded their alliance to diabetes treatments  the following year.

=Merck (MRK) receives positive opinion from CHMP

Merck confirms that the CHMP has adopted a positive opinion recommending approval of KEYTRUDA (pembrolizumab), the company's anti-PD-1 therapy, for the treatment of certain patients with locally advanced or metastatic urothelial carcinoma, a type of bladder cancer: Specifically, KEYTRUDA is recommended for the treatment of locally advanced or metastatic urothelial carcinoma in adult patients who have received prior platinum-containing chemotherapy, as well as adult patients who are not eligible for cisplatin-containing chemotherapy. The recommendation will now be reviewed by the European Commission for marketing authorization in the European Union. A final decision is expected in the third quarter of 2017.

Merck to buy Cubist Pharmaceuticals (CBST) for $7 Billion

Merck & Co. (MRK:US) is in talks to acquire Cubist Pharmaceuticals Inc. (CBST:US), a maker of antibiotics, in a deal valued at more than $7 billion, a person familiar with the matter said.

Merck would pay about $100 a share, and an agreement could be announced as early as next week, the person said. An offer in that range would represent a 34 percent premium over Cubist’s closing share price yesterday.

Cubist (CBST) - monthly chart

MRK - monthly chart

Cubist has said it plans to introduce four new drugs by 2020 to combat bacterial infections that are resistant to other treatments because of overuse. The rising threat of drug-resistant bugs has spurred public health authorities to urge companies to invest in new antibiotics, a field drugmakers had largely abandoned to focus on more profitable therapeutic areas such as cancer or hepatitis C.

Merck Chief Executive Officer Ken Frazier, 59, has said the second-biggest U.S. drugmaker was trying to make small- to midsize acquisitions (MRK:US) in areas that would complement its stable of treatments. The company wasn’t interested in megadeals that are “very time consuming and distracting to what we’re here to do, which is invest in new medicines,” Frazier told Bloomberg News in July.

Merck Chief Executive Officer Ken Frazier 

Steve Cragle, a spokesman for Whitehouse Station, New Jersey-based Merck, and Julie DiCarlo, a Cubist spokeswoman, didn’t respond to requests for comment.

Merck had cash (MRK:US) and equivalents of $14.3 billion at the end of September and total debt of $27.8 billion, according to data compiled by Bloomberg.

Best-Selling Drug

Cubicin, Cubist’s top drug, was approved in 2003 by the U.S. Food and Drug Administration for serious skin infections. Its use was expanded in 2006 to include bloodstream infections. Cubicin generates more than 80 percent of Cubist’s sales (CBST:US), which the Lexington, Massachusetts-based company has forecast will reach $2 billion by 2017.

Cubist’s products may complement Merck’s own infectious disease program. One of its experimental drugs, called relebactam, received fast-track status from the FDA in September, meaning the agency will accelerate the approval process. Relebactam works by inhibiting beta-lactamase, an enzyme produced by some bacteria that can cause resistance to widely used antibiotics, including penicillin.

Relebactam also received designation as a Qualified Infectious Disease Product, which would give it five extra years of market exclusivity when approved.

Endocyte stock nearly doubles on cancer drug news

NEW YORK — Shares of Endocyte nearly doubled in value Friday after European Union regulators said the company's drug Vynfinit should be approved as a treatment for ovarian cancer, and Endocyte said the drug helped slow the progression of lung cancer in a midstage trial.

The stock reached an all-time high of $33.70, and closed up $13.53, or 92%, at $28.17.

Endocyte and its partner Merck said a panel of European Union regulatory advisers recommended that Vynfinit be approved as a treatment for recurrent ovarian cancer in adult women whose disease isn't responding to platinum-based chemotherapy. The panel's recommendation also covers two imaging agents that are intended to help identify patients who could be helped by Vynfinit.

Vynfinit, or vintafolide, is designed to target a receptor that appears on cancer cells but doesn't exist on most other cells. The drug is intended to be used with the chemotherapy treatment doxorubicin.

EU regulators should make a final decision on the drug within three months, said Cowen and Co. analyst Simos Simeonidis. He expects them to approve Vynfinit and said the drug should be launched shortly thereafter. He rates Endocyte shares "Outperform."

The companies also said patients with lung cancer lived longer or saw a slower progression of their disease if they were treated with Vynfinit and doxorubicin. The midstage trial compared those drugs to standard treatment in 199 patients with non-small cell lung cancer.

This would be the first approved drug for Endocyte Inc., based in West Lafayette, Ind. Merck and Endocyte announced a partnership in April 2012. Merck paid Endocyte $120 million upfront, and Endocyte stands to receive more than $1 billion if Vynfinit is successfully developed as an approved treatment for multiple types of cancer.

Shares of Merck lost 93 cents to finish at $54.66.

Potential blockbuster drugs awaiting launch

Although many say the drug industry is entering the "post-blockbuster era" as mega-sellers such as Lipitor lose their patents, there are drugs in the pipeline expected to pass the traditional blockbuster benchmark of $1 billion in global annual sales.

Here's a preview of four of them, expected to launch in the next 12 months, that have attracted much interest from Wall Street.

Sovaldi: Gilead Sciences' (GILD) hepatitis C treatment, formerly known as sofosbuvir, is one of the most anticipated new drugs in the industry in quite some time. Everyone and his mother expect the FDA to approve it by its Sunday deadline, thanks to the strong safety and efficacy data produced in its clinical trials.

Analysts are modeling an already-blockbuster $1.7 billion in sales next year, climbing to $8 billion in 2018, making it one of the best-selling drugs in the world.

Expectations are so high because Sovaldi promises substantial improvement on existing treatments for a serious disease. It's both more effective and has fewer side effects than the standard regimen of pegylated interferon, and it can be swallowed rather than injected.

The only live question at this point is where Gilead will price the drug. ISI Group analyst Mark Schoenebaum's informal survey of buy-side analysts last month found an average estimate of $85,000 for 12 weeks of treatment, but sell-side estimates have been running as high as $100,000. The price depends partly on how the FDA chooses to label the drug, which remains to be seen.

Nivolumab: Bristol-Myers Squibb (BMY) has been taking a go-big-or-go-home approach with this drug, conducting some 25 clinical trials in various types of cancers.
Most of those trials won't be complete for a while yet, but Wall Street is holding out hope that its so-far excellent data on squamous non-small-cell lung cancer — one of the deadliest and most stubborn forms of the disease — will support an FDA filing in early 2014, followed by approval late in the year.

The FDA has granted fast-track designation for that label, as well as for advanced melanoma and kidney carcinoma. Current consensus is modeling $57 million in sales next year, ballooning to $4.7 billion by 2020. Since nivolumab will likely be combined with another Bristol drug, Yervoy, joint sales could bring the company $6.9 billion a year, according to Schoenebaum's survey.

New Class Of Drugs
Nivolumab is in a new class of drugs called PD-1 inhibitors, which have attracted much interest in the industry.

Morningstar analyst Damien Conover told IBD that the drugs help the patient's immune system recognize which cells in the body are cancerous, thereby aiding the natural defenses. "This has been talked about from a theoretical standpoint for decades, and we really haven't seen drugs do this well except maybe Yervoy," he said.

Merck (MRK) and Roche (RHHBY) are also working on PD-1 inhibitors that are doing well in early testing. This means more potential competition, but Conover says their performance validates the underlying mechanism and boosts his confidence that nivolumab will make it to market.

• Idelalisib: This cancer drug captured a few headlines in October when maker Gilead halted its late-stage trial of chronic lymphocytic leukemia (CLL) early because the efficacy was so good it didn't need to go any further.
More details of the study will be revealed at the annual American Society of Hematology conference this weekend, but analysts are optimistic about a 2014 launch. RBC Capital Markets' Michael Yee wrote in a Nov. 18 note that he expects idelalisib to be approved for the smaller indolent non-Hodgkins lymphoma indication by the second half of next year, and probably for CLL by year-end.

Pharmacyclics' (PCYC) ibrutinib will probably have a head start on the CLL market, since the FDA has already approved it for mantle-cell lymphoma, and is reviewing it for CLL.
Nonetheless, analysts expect idelalisib to ramp quickly. Consensus calls for just $26 million in sales next year, jumping to $1 billion by 2017.

• Apremilast: Will apremilast really be a blockbuster? That depends on whom you ask. Celgene (CELG) has guided $1.5 billion to $2 billion in 2017 sales for the drug, which is currently under FDA review for psoriatic arthritis. The launch is expected in the first quarter.

Though Celgene plans to add psoriasis to that label, Wall Street has still mostly been unconvinced, since psoriasis trial data released in June did not seem to offer a substantial improvement on existing treatments. Current consensus calls for 2017 sales of just $872 million.

Psoriasis treatment usually involves multiple drugs, ranging from cheap steroids to pricey biologics like AbbVie's (ABBV) giant Humira.

Celgene's case for apremilast rests on finding a golden middle ground. "I think Apremilast is going to have a unique profile," CFO Jacqualyn Fouse told Deutsche Bank's BioFEST conference this week. "We need to have a great benefit-cost profile, and we think that we do."

Lilly scraps an Alzheimer's drug

Once again, Eli Lilly has suffered a setback trying to find a useful drug to combat Alzheimer’s. Last year, a pair of late-stage trials for an injectable drug called solanezumab failed to meet primary endpoints in patients with mild-to-moderate disease (look here).  The results ended hopes of quickly seeking regulatory approval, although another late-stage trial is now under way in patients with mild symptoms (see this).

** charts : daily, weekly, monthly **

 

 Now, Lilly has ended a mid-stage trial of yet another medication – a beta-amyloid precursor protein site-cleaving enzyme, or BACE, inhibitor – after finding cases of abnormal liver tests. The move is a disappointment because these oral treatments are thought to hold promise, especially after injectables targeting the beta-amyloid protein, which forms brain plaques thought to be responsible for Alzheimer’s, have sputtered. Besides solanezumab, Pfizer ended such a program (back story).

The Lilly compound, however, never generated significant attention. What has been more closely tracked is a BACE inhibitor being developed by Merck, which recently began a Phase II/III study with patients who suffer from mild-to-moderate Alzheimer’s. In announcing its bet last December, Merck noted this is the first drug with this type of mechanism to advance to this stage of clinical research (back story).

Looking beyond the Lilly failure, “we think the more important question here is what does this mean for Merck’s BACE inhibitor,” writes ISI Group analyst Mark Schoenebaum in a note. “While we suspect on first blush that the read across to Merck’s compound is probably minimal, we acknowledge that we cannot totally rule out the possibility that Merck’s compound will also suffer similar results.”

Indeed, beyond putting an end to what had been a horse race between the two drugmakers, there is now going to be concern about a great unknown – was the safety issue confined to the Lilly compound or might this be a sign that such problems exist with all BACE inhibitors? Sanford Bernstein analyst Tim Anderson suggests there had already been hints about problems with the Lilly drug.

“There had been some rumbling in the drug industry about Lilly’s compound, potentially, having a safety issue, which led them to (choose) a lower dose that could have explained the slightly weaker level of beta-amyloid lowering compared to Merck’s compound,” he writes in an investor note. “We asked Lilly directly about this at one point and they denied knowing any safety issues.”

In its statement, Lilly maintained that the abnormal liver tests seen were not related to “the BACE mechanism” and the drugmaker insists it remains interested in developing BACE inhibitors and will reassess this particular program. The suggestion is that the BACE class, as a whole, is not the issue. If true, that is welcome news for Merck, as well as AstraZeneca, Roche and Takeda Pharmaceuticals (more here).

Indeed, Merck may now have “a solid lead above anyone else,” Anderson continues, noting that results from its Phase II trial, which only examines safety, are due later this year. However, this also means that efficacy will not be known until Phase III studies are completed, which he says will not be out until 2017 or so.

Merck : New sleeping pill poised to hit US markets

WASHINGTON — An experimental sleeping pill from US drug company Merck is effective at helping people fall and stay asleep, according to reviewers at the US Food and Drug Administration, which could soon approve the new drug.

But the experts warned of dangerous side effects at high doses -- including residual sleepiness during the day and, in a small number of subjects, suicidal thoughts -- according to their report posted Tuesday.

The FDA has convened a group of independent experts for Wednesday to make recommendations to the agency on whether to authorize the medication for the US market.

The FDA is not required to follow the recommendations of the panel, but generally does so.

The drug, Suvorexant, also known as MK-4305, is a new class of sleeping pill, which works by blocking "wakefulness-promoting orexin neurons" from working, thus helping the body transition to sleep.

Merck has proposed a dose of 15 milligrams for people over 65 and 20 milligrams for those under 65, with doses up to twice as high recommended for those whose symptoms persist.

But the FDA noted clinical trials indicated a dose of just 10 milligrams was safe and effective, and it planned to ask the independent panel to consider recommending all patients start with this smaller dose and whether it should ask Merck to study if doses under 10 milligrams might also be effective.

In January, the FDA asked the pharmaceutical companies behind Ambien and other similar sleep aids to reduce their recommended dosages after studies showed an increased risk of daytime sleepiness and related car accidents.

The FDA notably required the companies to cut by half the recommended doses for some sleeping pills for women -- whose bodies apparently metabolize the drugs more slowly.

Blockbuster drugs for 2013

Big drug makers have alluring pipelines for this year – here's our list of the most promising treatments with potential sales of $1 billion and up.

The heyday of blockbuster drug discoveries may be gone, but 2012 turned out to be the best year in recent memory for new drug approvals, offering the promise of help for patients and big sales opportunities for drug makers.

The U.S. Food and Drug Administration gave the green light last year to 39 new drugs, for diseases that include cancer, HIV and cystic fibrosis, the highest number of approvals since the mid-1990s.

The outlook for 2013 is almost as sunny. Regulators are on track to approve as many as 36 novel drug compounds able to generate U.S. sales of $9 billion in 2018, says Michael Latwis, director of corporate research for Decision Resources.

It isn't easy to predict which drugs will beat expectations by enough to boost the stocks of a pharmaceutical giant. Barrons.com picked five candidates that have a high probability of getting regulatory approval in 2013 and advancing the treatment of a serious illness. They each have the potential to deliver annual sales of more than $1 billion – in layman's terms, to become blockbusters. Even at a pharmaceutical giant such as Merck & Co. (ticker: MRK), with annual sales of more than $45 billion, that's real money.

Of course, the FDA is unpredictable. And while more Americans may afford prescriptions under the Affordable Care Act, even innovative therapies can flop if insurers don't pay, doctors don't prescribe and patients don't use. Just look at the disappointing sales of the obesity drug Qsymia, and the 50% drop in drug maker Vivus's (VVUS) share price since July.

Other companies have had better luck. Of the five drugs highlighted by Barrons.com last year, the FDA approved four in 2012: The blood thinner Eliquis, Kalydeco for cystic fibrosis, tofacitinib for rheumatoid arthritis and the HIV medication known as the Quad.

Here's our list of five of the most promising new drugs for 2013, and their top-line potential.

BG-12

BG-12 isn't the first oral treatment for multiple sclerosis. But big expectations for the drug have pushed the stock price for Biogen Idec (ticker: BIIB) 120% higher over the past two years, and shares now trade at $146, or 22 times forward earnings.

BG-12 delivered robust results in clinical trials and few side effects. That gives it a leg up over Gilenya, a rival oral therapy from Novartis (NVS) now facing safety worries.

Biogen also sells the injectable multiple sclerosis drugs Avonex and Tysabri. Oral medications are easier to take and can cut treatment costs by eliminating the need to buy equipment used to administer intravenous drugs.

Critics say early estimates for BG-12's are too aggressive. Still, annual sales could reach $4 billion by 2019, says Cowen & Co. analyst Eric Schmidt.

Canagliflozin

Canagliflozin could be the first of a new class of diabetes drugs to hit the U.S.

Known as an SGLT2 inhibitor, Johnson & Johnson's (JNJ) canagliflozin lowers blood sugar levels by increasing glucose excretion in the urine. And so far clinical trials show the drug works alone or with existing treatments, and helps patients lose weight.

Scheduled for approval in mid-2013, canagliflozin is J&J's first diabetes medication. But there are potential roadblocks: A similar drug from Bristol-Myers Squibb (BMY) and AstraZeneca (AZN) has been delayed due to safety worries.

Also, there are unpleasant side effects, including increased risk of urinary tract infections and raised cholesterol, says Barclays Capital analyst Tony Butler. Still, he sees sales reaching $1 billion by 2018.

Suvorexant

Merck hopes suvorexant could help 70 million sleepless Americans catch a few winks.

Merck's drug blocks chemical messengers called orexins that help keep the brain alert, letting patients fall asleep faster and stay asleep longer, while also minimizing grogginess the next morning. Another potential advantage: Studies suggest patients could use suvorexant longer than current therapies.

Insomnia is an enormous market, though littered with generics and the remains of failed efforts by other big drug makers.

Also, suvorexant may not be available until 2014 because, as a controlled substance, it requires assessment by the Drug Enforcement Administration. Still, Barclays's Butler sees sales in 2017 peaking at $1.5 billion.

T-DM1

T-DM1, developed by Roche (RHHBY), combines two old drugs to deliver a powerful one-two punch to cancer cells.

Called a "drug conjugate," it attaches a chemotherapy drug to the breast cancer therapy Herceptin. The Herceptin attacks HER2 proteins on the surface of the cancer cell, while also delivering a poisonous payload that enters the cell and kills it.

T-DM1 isn't a cure. In studies it did delay worsening of a form of breast cancer with fewer side effects than traditional chemotherapy. And its approval – expected in February -- could lay the groundwork for a potential series of new cancer treatments.

Meanwhile, T-DM1 sales could reach $2 billion by 2018, according to analysts from Cowen.

GS-7977

Also called sofosbuvir, GS-7977 is the wild card on our list. Though many expect FDA approval in early 2014, the market for hepatitis C drugs – at $5 billion and growing – may push regulators to act sooner.

Hepatitis C affects 180 million people globally, outpacing AIDs and HIV. The demand for better treatments has several big drug makers fighting to be the first to deliver an all-oral drug regime.

Gilead Sciences (GILD), with GS-7977, could win that race. In trials, the drug was superior to the current treatment regimen, which includes injections of the drug interferon. That fueled big hopes and helped Gilead's share price rise 80% last year.

Analysts at Cowen expect Gilead to file for FDA approval during the second quarter, and see annual sales reaching $4 billion by 2016, or 23% of the $17 billion top line Wall Street expects Gilead to generate that same year.

Of course, sales forecasts can be wildly optimistic, thus the old adage "buy the approval and short the launch." Government austerity in Europe is pressuring drug prices. And with increasingly complex compounds filling research pipelines, it's hard to handicap regulators.

If these five drugs can meet expectations, however, they could be just what the doctor ordered.

Five Drugs to Watch

Drug	Maker	What It Treats	Peak Yearly Sales*
BG-12	Biogen Idec	multiple sclerosis	$4 billion
canagliflozin	J&J	diabetes	$1 billion
suvorexant	Merck & Co.	insomnia	$1.5 billion
T-DM1	Roche	breast cancer	$2 billion
GS-7977	Gilead Sciences	hepatitis C	$4 billion

Sources: Barclays Capital, Decision Resources, Cowen

*Projections for BG-12 reflect 2019 sales. Canagliflozin and T-DM1 estimates reflect 2018 sales. Suvorexant projections reflect 2017 sales. GS-7977 estimates reflect 2016 sales.

Full Disclosure

• Barclays Capital and/or one of its affiliates has had investment-banking relationships with Johnson & Johnson and Merck & Co. during the past 12 months, according to disclosure statements from Barclays Capital. The firm has an Overweight rating on both stocks.

• Cowen & Co. has an Outperform rating on shares of Gilead Sciences, Biogen Idec and Roche Holdings.

Investing in healthcare stocks

There is no industry as low-risk and as high-reward as health care.

From large-cap insurers and Big Pharma to beginning-stage biotech stocks and medical-waste small caps, there is tremendous opportunity out there in the health care sector.

Consider that Eli Lilly (NYSE: LLY) might have developed an Alzheimer’s treatment to keep dementia in its early stages from worsening. Consider that Merck (NYSE: MRK) might have a home run in its new brittle-bone drug that will prevent fractures in the elderly.

These are not only great developments for the health of Americans — they also are going to be big moneymakers going forward.

And beyond the growth in health care as baby boomers age and need more care, there’s also the recession-proof nature of the sector. After all, people don’t stop going to the hospital or cancel their prescriptions just because of a downturn in the stock market or the broader economy.

Here's a list of health care players hitting 52-week highs right now as proof of the breadth and power of the sector:

• Cubist Pharmaceuticals (NASDAQ: CBST): Small-cap biotech, +25% YTD
• Covidien (NYSE: COV): Blue chip that makes medical devices, +33% YTD
• Gilead Sciences (NASDAQ: GILD): Large-cap biomedical stock, +66% YTD
• HealthSouth (NYSE: HLS): Outpatient therapy and rehab company, +39% YTD
• Jazz Pharmaceuticals (NASDAQ: JAZZ): Small-cap biotech, +38% YTD
• Eli Lilly (NYSE: LLY): Big Pharma powerhouse, +15% YTD
• Medtronic (NYSE: MDT): Large-cap medical technology company, +13% YTD
• Merck (NYSE: MRK): Another Big Pharma player, +19% YTD
• Peregrine Pharmaceuticals (NASDAQ: PPHM): Clinical-stage biotech, +405% YTD
• Pfizer (NYSE:PFE): Pharmaceutical heavyweight, +14% YTD
• Sanofi (NYSE:SNY): Global drugmaker and a big Buffett stock, +23% YTD
• Steris (NYSE:STE): Small cap focused on medical waste, +19% YTD
• Tenet Healthcare (NYSE:THC): Health care services company, +22% YTD

Vertex, Merck Drugs Help More with Faster Cure for Hepatitis C

(Bloomberg.com) Vertex Pharmaceuticals Inc. and Merck & Co. said their experimental drugs for hepatitis C cured more patients than traditional treatment, and many people were able to take a shorter, less toxic course of therapy.

Two-thirds of patients given Vertex’s telaprevir were able to cut their treatment time in half to six months, and about 90 percent were cured, two studies funded by the Cambridge, Massachusetts-based company found. Nearly half of those given boceprevir in studies from Whitehouse Station, New Jersey-based Merck were able to reduce their treatment times to six months to nine months, with similar high rates of cure.

The findings presented today at the American Association for the Study of Liver Disease meeting in Boston will help usher in a new era of treatment for hepatitis C, doctors say. The chronic condition affects nearly 4 million Americans and 200 million people worldwide, according to the National Institutes of Health. The companies plan to file for U.S. regulatory approval of the drugs by the end of the year.

“The current standard of care is long and it’s not easy to take,” said Michael Charlton, director of the Mayo Clinic’s liver transplant program in Rochester, Minnesota. “The appeal of the new drugs is the shorter treatment, and you get there quicker with telaprevir,” he said in a telephone interview.

Standard Treatment

Hepatitis C often persists as a chronic condition that causes nausea, weakness and exhaustion as it destroys the liver over time. Interferon, the standard of care when paired with the generic drug ribavirin to increase potency, works by boosting the immune system. The yearlong treatment causes aches and pains similar to the flu that may last the entire year of treatment and cures about half of those who can tolerate it.

Roche Holding AG of Basel, Switzerland, sells a version of interferon under the brand name Pegasys, while Merck sells a form called PegIntron.

Telaprevir will capture about three-fourths of the demand for the new medicines, said Howard Liang, an analyst at Leerink Swann & Co. in Boston, in a telephone interview. The drug, which Vertex is developing with New Brunswick, New Jersey-based Johnson & Johnson, will generate about $2.6 billion annually by 2013, he said.