Merck is edging away from its strict go-it-alone policy and sidling up a little closer to Schering-Plough in a series of deals - the most recent of which is a co-promotion agreement with Schering-Plough for the Phase III cholesterol absorption inhibitor ezetimibe.

Under a May 23 agreement, "the companies will jointly pursue the development and marketing of ezetimibe" as monotherapy and in combination with Merck's Zocor (simvastatin).

The agreement indicates a minor adjustment in Merck's loner strategy. The company has maintained its intention to avoid the distractions of mergers despite a period of upcoming patent expirations.

During its annual meeting with securities analysts in December, Merck indicated that it also intended to steer clear of co-promotion agreements.

"We have determined that we do not want to do co-promotion agreements," CEO Raymond Gilmartin said. "We prefer to own the product through a licensing agreement...and have it for the complete life cycle of the product. We think that is a more long-term, economically successful strategy" (¹ Also see "Merck Maintains Merger-Free Philosophy; Co-Promotions Also Ruled Out" - Pink Sheet, 13 December, 1999.).

Merck's public disavowal of interest in mergers may have made it a more attractive partner for Schering-Plough, which is trying to maintain its independence going into the Claritin patent expiration. Schering would presumably be less willing to work with a partner it viewed as a potential hostile suitor.

Schering has been building some other less publicized ties to Merck. The Merck-Medco/Reader's Digest prescription discount plan announced in April, for example, features a prominent formulary position for Schering's product line (² Also see "Medco "YOURxPLAN" Preferred List Includes 13 Schering Drugs, Cenestin" - Pink Sheet, 24 April, 2000.).

Merck's large cholesterol-marketing organization, with Zocor and the first HMG-CoA reductase inhibitor Mevacor, will give Schering-Plough an immediate platform to launch ezetimibe. For Merck, the agreement helps shore up its position versus Pfizer's Lipitor and the threat of up-coming super-statins and could create an extended life for the simvastatin franchise.

Ezetimibe (SCH 58235) began Phase III trials this year as once-daily monotherapy and as add-on therapy to a variety of HMG-CoA reductase inhibitors. Schering presented Phase II data on ezetimibe at the American College of Cardiology meeting in March.

A pooled analysis of two 12-week placebo-controlled studies in a total of 329 patients found that ezetimibe 5 mg reduced LDL cholesterol by 15.7%, raised HDL by 2.9% and lowered triglycerides by 5.8%. A 10 mg dose lowered LDL by 18.5%, raised HDL by 3.5% and lowered triglycerides by 4.9%. Both doses achieved statistically significant superiority to placebo on the LDL and HDL endpoints.

Preliminary data suggest that the effect of ezetimibe is additive to the effect of statins, Schering-Plough said. As part of the partnership, the two companies will begin work on a fixed-dose combination of simvastatin and ezetimibe.

Under a second partnership agreement, Merck and Schering-Plough will collaborate on a fixed dose combination formulation of loratadine (Claritin) and montelukast (Singulair) for once-daily treatment of allergic rhinitis and asthma.

Merck had been developing the Singulair/loratadine combo on its own (the project was moving into Phase III). Schering's basic compound patent expires in 2002.

Schering claims additional patent protections for Claritin based on a metabolite patent running into 2004 and a patent claiming "antihistaminic fluoro substituted benzocycloheptapyridines" that runs until 2008.

In the absence of an agreement between the two companies, Merck would presumably have faced litigation before it could bring the montelukast/loratadine combo to market. The Singulair patent runs until 2010. The agreement also gives Merck a stake in Schering's efforts to obtain Claritin patent extensions.

In the cholesterol field, Schering's product could help evergreen the Zocor line. The simvastatin patent expires in 2005, while ezetimibe is patented until 2015. Each partnership will have a separate general manager and a small staff, Schering-Plough explained. The separate Merck and Schering marketing and manufacturing operations will handle commercialization of the products.

Merck/Schering Ezetimibe Deal Is Part Of Growing Ties Between Firms

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