Merck Stock Plunge: Blockbuster Drug Facing Extinction?

Last Updated: 6. Dezember 2023By

Record rally in Frankfurt, the Dax rushes from one all-time high to the next – but today there will be no corks popping in the Merck headquarters in Darmstadt. Quite the contrary: The pharmaceutical giant reported a severe setback.

Weak study results: Merck’s MS-hopeful on the brink of extinction? A medication for the treatment of multiple sclerosis, which for a long time has been one of the biggest hopes in Merck’s pharmaceutical pipeline, is failing to live up to its ambitions. In the clinical phase III study, the active ingredient was unable to achieve the desired results.

Investors reacted with horror and sent the Merck share price plummeting on Wednesday like a hot potato. With double-digit losses of around 13 percent by mid-day, the paper plunged to the bottom of the Dax – and this on a day when the leading index was already conquering new highs again.

Also Bayer recently with a violent setback The circumstances are reminiscent of Bayer. The pharmaceutical competitor from Leverkusen suffered a similar setback a few weeks ago and discontinued a phase III study prematurely, also here it was about a potential blockbuster drug, for which billions of euros in sales were expected. The Bayer share then recorded the sharpest crash in its history.

The development of new drugs is always associated with high risks for the pharmaceutical industry. Research is not only time consuming and expensive, but can also fail at the last minute and render all previous efforts and investments useless, as has now happened within a very short time both at Bayer and at Merck.

Expiring patents increase economic pressure In addition, the patents for medicines are time-limited. So if the patent protection for a successful new drug expires, it needs at least one new blockbuster in the portfolio to make up for the loss of sales, as has now happened with Bayer and Merck.

It takes years to bring new active ingredients to market maturity. Many projects fail already in an early stage. Those who make it to the decisive phase III study are usually charged with great hopes – from researchers and affected patients, but also from the management and shareholders.

New glyphosate ruling against Bayer – share still in plus No wonder then that investors from Merck reacted more than snootily to the bad news. And also at Bayer there were again negative headlines: Another legal dispute before a US court was decided against the Leverkuseners. The jury sentenced the company to pay 3.5 million dollars to a woman who attributed her cancer to the weed killer glyphosate.

The problems were brought to the house by Bayer itself with the takeover of the US seed and fertilizer manufacturer Monsanto a few years ago, since then the company has been fighting through thousands of civil and criminal proceedings in the USA and is repeatedly sentenced to pay high amounts. Nevertheless, the Bayer share was able to benefit from the general tailwind on the floor and rose by almost 2 percentage points by the afternoon.