Merck KGaA has posted a major decline in earnings for the second quarter, due in part to an increase in its R&D spend and higher marketing costs, while a negative opinion in Europe on Erbitux for lung cancer is causing the stock to slide.

The Darmstadt-based group’s operating profit declined 42.4% to 184 million euros (net income fell 47.7% to 108.5 million euros), as its R&D spend climbed 23% to 341 million euros. Group revenues slipped 0.1% to 1.90 billion euros, while its Merck Serono unit contributed 1.31 billion euros, an increase of 6%.

Driving that growth were sales of the multiple sclerosis drug Rebif (interferon beta-1a) which rose 21% to 387 million euros, while the oncology agent Erbitux (cetuximab) were up 18% to 171 million euros. As for Merck’s other products, the beta blocker Concor (bisoprolol) franchise was down 3% to 111 million euros, while its Glucophage (metformin) diabetes products were flat at 78 million euros.

Sales of the fertility treatment Gonal-f (follitropin) fell 6.6% to 114 million euros, while the thyroid treatment Euthyrox (levothyroxine) contributed 39 million euros, up just 0.7%.

Chairman Karl-Ludwig Kley said that “it is clear to see that the world remains in the midst of the economic crisis. Merck is also feeling its effects but to a lesser extent than many companies”. In fact, he added, “we are able to continue investing in the development of innovative products that will secure our future”.

Appeal over rejection of Erbitux?
However, Merck shares are sliding this morning (down 11.7% to 64.83 euros at 9am), due in part to the results and the surprising news of a negative opinion issued by the European Medicines Agency’s advisors on Erbitux.

The EMEA’s Committee for Medicinal Products for Human Use has rejected Erbitux in combination with platinum-based chemotherapy for the treatment of patients with epidermal growth factor receptor-expressing, advanced non-small cell lung cancer. Merck Serono said it respects the decision “and will work closely with the CHMP to find ways to make Erbitux available to lung cancer patients” but the firm is evaluating “potential appeal options” requesting that the agency “re-examine data demonstrating clinical relevant benefits to patients”.

The company said it is “convinced Erbitux will play a major role in NSCLC as it is the first and only compound in clinical development in more than 10 years to increase overall survival in a patient population including all histologies”. The drug is currently approved for colorectal, as well as head and neck cancers.

Cladribine filed in EU for MS
On a positive note, Merck is hoping to steal a march on competitors after filing its investigational multiple sclerosis pill cladribine with regulators in Europe.

The German firm has submitted a marketing authorisation application to the European Medicines Agency for cladribine and says it could become “the first orally administered disease-modifying therapy available for patients with MS”. The filing is based on data from the two-year, 1,326-patient CLARITY Phase III study which demonstrated that cladribine significantly reduced annualised relapse rates in patients with relapsing-remitting MS compared with placebo.

Over two million people worldwide suffer from MS and approved drugs are administered by injections. A tablet would represent a major breakthrough and analysts have suggested that cladribine could be a blockbuster to replace Merck's big-selling MS drug Rebif (interferon beta-1a).

The drug is expected to be filed in the USA as well during this quarter and the Darmstadt-headquartered will be hoping that cladribine hits the market before other investigational oral compounds get to the regulators. Leading the pack are Novartis' FTY720 (fingolimod) and Teva Pharmaceutical Industries' laquinimod, while Biogen Idec recently acquired the non-US rights to Acorda Therapeutics’ investigational MS drug Fampridine-SR (4-aminopyridine).