Merck's new PhIII hep C program may help repair a damaged R&D rep

In a matter of weeks Merck plans to move a closely-watched combination treatment for hepatitis C into a Phase III trial. The move will boost Merck's ($MRK) late-stage pipeline to 13 programs, giving new R&D chief Roger Perlmutter some additional evidence to back up a case that the leviathan outfit has finally shaken off the lethargy that led to a years-long drought of significant approvals, focusing on pioneering therapies that can carve out badly needed revenue.

Merck announced the move as it prepared to unveil a new round of high cure rates found among genotype 1 patients taking a combination of MK-5172 and MK-8742, a pair of drugs that the FDA picked for its breakthrough drug program, offering a potentially shorter path to the market.

"These additional clinical data for MK-5172 and MK-8742 build upon the clinical evidence collected to date across a broad spectrum of patients with chronic HCV," said Dr. Eliav Barr, the vice president for infectious disease at Merck Research Laboratories, in a statement. "Based on these data, we are pursuing a Phase III clinical program for these potentially important investigational medicines.

"I now think MRK is just 1 year behind Gilead in HCV," tweeted ISI analyst Mark Schoenebaum on Monday after looking over Merck's progress in a field he watches closely. "$MRK started Ph3 today that could lead to 1st approval late 2015. All oral probably."

Gilead has won the race to the market with the first oral therapy for hepatitis C, setting Sovaldi on the controversial path to becoming the first big oral blockbuster, commanding a price of $84,000. But there are a range of genotypes in hepatitis C that will require combo therapies for a cure, without the use of harsh interferon injections.

Merck is in a crowded pack of contenders. AbbVie ($ABBV) has its own breakthrough program for hepatitis C and Bristol-Myers ($BMY) is busy here as well as Gilead ($GILD) follows up with in-house combos. But after sticking with one of the top R&D budgets in the industry, Merck entered 2013 with little hard evidence that it could push big new drugs to an approval. A series of setbacks forced Merck to launch a reorganization that is still underway.

The pharma giant has a slate of drugs under review, but many of them have modest peak sales estimates tied to them, aside from its big PD-1 immuno-oncology drug MK-3475 and perhaps vintafolide, which is getting conditionally approved in Europe.

Another new Phase III program watched carefully by analysts and hurried along by a driven team of investigators is just what Merck and Perlmutter need most right now to help put the grim past behind the company and restore some of the lost luster to the R&D team's rep.

- here's the release