Germany's Merck Group shares drop 10% after scrapping trial of promising cancer drug

By Louis Goss

Merck Group, the German pharmaceutical company, saw its Frankfurt-listed shares fall 10% on Tuesday morning after the company said it had decided to call off a Phase III trial of its cancer drug Xevinapant, in an unexpected turn that threatens to undermine confidence in the company's research abilities.

The Darmstadt, Germany-based company is unrelated to the US-based Merck & Co.

The Darmstadt-headquartered company said late on Monday that it had discontinued its Phase III TrilynX trial of Xevinapant in patients with head and neck cancer after an analysis by an independent panel concluded the drug would be unlikely to meet its primary goal of extending event-free survival in participants.

"While we are disappointed by these results, we remain steadfast in our commitment to develop transformative medicines within our oncology portfolio for areas of high unmet need," Merck's global head of research and development, Danny Bar-Zohar, said in a statement.

Shares in Merck Group (XE:MRK), listed on the Frankfurt Stock Exchange, fell 10% on Tuesday having gained 5% in the year-to-date.

Analysts at Jeffries, led by Brian Balchin, had previously predicted Xevinapant might achieve peak sales of EUR1.4bn and had forecast just a 5% likelihood that the late-stage TrilynX trial of the drug would fail.

Jeffries' analysts added that Merck's failed trial could now see investors start "calling into question the company's R&D abilities, particularly given the recent Evobrutinib study failure," which saw the Phase III trial of the multiple sclerosis drug called off in December 2023,.

Merck Group, which is separate from the American company Merck & Co also known as Merck Sharp & Dohme (MSD) outside the U.S, first acquired the rights to develop and commercialize Xevinapant from Swiss biotech Debiopharm International SA in March 2021, through a deal that saw it pay EUR188 million upfront and agree to pay a further EUR710 million in milestone payments.

The German pharma giant is expected to write-off the majority of its EUR188 million payment to Debiopharm as Jeffries' analysts said they expect the company will also record about a EUR60 million impairment in relation to termination of the study in the second quarter of this year.

Xevinapant was designed to enhance traditional cancer treatments by blocking a group of proteins - called inhibitors of apoptosis (IAP) - that prevent cancerous tumor cells from dying during chemoradiation therapy.

The promising drug was being trialed in patients with hard-to-treat unresected locally advanced squamous cell carcinoma of the head and neck, in combination with chemoradiotherapy and was given Breakthrough Therapy status by the U.S. Food and Drug Administration in 2020.

-Louis Goss

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06-25-24 0735ET

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