Merck's new allergy pill faces stubborn skepticism on the eve of its FDA review

Tomorrow Merck ($MRK) will take its best shot at convincing a group of FDA advisers that its sublingual allergy pill Grastek deserves a place in the nation's pharmacies. But even if it wins the panel's endorsement for a formal agency approval, the pharma giant will once again find itself facing critics questioning its effectiveness and its ability to earn much money from it.

Grastek has garnered little attention and even less enthusiasm from analysts, though Merck insists that it has an innovative new approach to treating allergic rhinitis with a pill--replacing the current regimen of shots. The pharma giant in-licensed the therapy, which relies on an extract of timothy grass pollen, from ALK-abello, which sells it in Europe. And today Stallergenes, which is looking for an FDA OK for its own allergy pill, Oralair, will take the first turn in front of the FDA panel.

Merck is presenting data from a range of late-stage studies to back its application. The FDA internal review put out ahead of the panel discussion notes that at least one of the trials was not effective, but several showed a 20%-plus improvement in allergy symptoms compared to a placebo--not the shots that Merck wants to replace.

That comparison to a placebo might assist in Merck's undoing if it makes it to the market. As Andrew Pollack notes in his recent New York Times article on the new allergy pills, Merck will likely encounter some major resistance to the pills from doctors who earn a comfortable living providing a lengthy round of injections to patients. The Times piece notes that shots may still outperform the pills, giving providers a chance to argue against Grastek by promising better results.

The best case scenario for Merck was made by ISI's Mark Schoenebaum, who's projecting peak sales of $350 million. That's not nearly enough to break Merck's 7-year blockbuster drought, but it could provide a boost for a beleaguered R&D division that is now undergoing a restructuring under a new research chief. Schoenebaum has also noted that the consensus estimate on peak sales is a mere $130 million, which would barely make a dent against the onslaught of generic rivals.

The Times article also notes that a new approach by Circassia, a U.K. firm, could blow everyone away if its four-shot approach to allergies proves safe and effective in late-stage studies.

In many ways Grastek looks a lot like Merck's sleep drug suvorexant, which uses a new mechanism of action to ward off insomnia. The FDA recently sent Merck back to the research office with orders to refile an application that would start people off on a dose so low the company already wrote it off as a loser. And with generic competition in the field, suvorexant would face some well-established rivals. In Grastek, Merck found another product that won't change any minds over the deep-seated problems the company faces in both its R&D and marketing arms--provided it can win approval.

- here's the FDA review on Grastek (PDF)
- here's the New York Times piece
- here's Reuters article on Stallergenes