Merck's Sneak Attack

Merck unveiled a new cost-savings plan in an attempt to assuage the fears of investors panicked by the thousands of Vioxx lawsuits the drug giant is facing. But the embattled company also announced a drug to prevent heart attacks that could pose a major headache for rival Pfizer. The moves highlight how quickly Richard Clark, who has been Merck's (nyse: MRK - news - people ) chief executive for only six months, is moving to repair the drugmaker. The big question is whether his efforts will be enough. Merck announced an additional $1 billion in cost savings through 2010, bringing the total cost-savings to as much as $5 billion, and argued that it will be able to grow sales by 4% to 6%. Earnings per share will begin to grow again in 2007, but those numbers exclude special items. That leaves open the possibility that some of Merck's earnings projections could be overly optimistic. The company also reiterated its plan to fight all of the 9,000 Vioxx lawsuits that have so far been filed in court. The new heart drug is an entry into what could be the biggest drug market left in the treatment of cardiovascular disease--the race to raise HDL, or good cholesterol, which prevents heart attacks in big population studies. Pfizer (nyse: PFE - news - people ) is paying $800 million to develop an HDL-raising combo that some predict could become one of the world's best-selling drugs. In one study, a synthetic version of HDL actually cleared cholesterol plaque out of the arteries, an unprecedented result. But Pfizer's big bet faces a new threat from Merck. For years, doctors have used niacin, a B-vitamin that can raise HDL and cut triglycerides, heart attack-causing particles of fat in the blood. But many patients cannot take niacin, because it causes a facial-flushing side effect. Merck has developed a new drug that counters this side effect, making it possible for patients to take higher doses of niacin. The drug, code-named MK-0254, could be filed in 2007, about the same time as Pfizer's entrant. Forbes.com has previously reported that Merck was involved in niacin-based research (see: "Can Good Cholesterol Cure Big Pharma?"). Recently, niacin use is in resurgence thanks to Niaspan, a sustained-release version from Kos Pharmaceuticals (nasdaq: KOSP - news - people ). The preparation increases HDL by 20% or more and cuts triglycerides by 25%. It has given Kos a market value of more than $1 billion and helped founder Michael Jaharis become a billionaire. But flushing may still be a problem. Merck says that 90% of patients experience the side effect, and that only 10% of prescriptions are written at the 2-gram dose, the target for therapy. With this new drug, more patients may be able to raise their HDL. For Pfizer, that could complicate its plans. Pfizer is aiming to raise HDL by an entirely new mechanism that could be even more powerful than Niacin. In mid-stage studies, Pfizer's combination of its new drug, torcetrapib, with its blockbuster cholesterol-lowering medicine Lipitor has raised HDL by a whopping 60%. But torcetrapib is no sure thing--some doubters say that raising HDL in this new way just won't be as good. Moreover, Pfizer is expecting imaging studies showing the effect of the Lipitor-torcetrapib combo on artery plaques to be unveiled in 2006 or 2007. It hopes that the U.S. Food and Drug Administration will allow those studies to be the basis for approving the drug. But another HDL-raising entrant could complicate that plan, especially if torcetrapib raises blood pressure as it has in some early studies. Moreover, it could cause complications for Pfizer's plan to sell torcetrapib only in combination with Lipitor, which is already drawing the ire of some doctors who want to be able to prescribe it with any cholesterol-lowering drug they want. Novartis (nyse: NVS - news - people ), Roche and Eli Lilly (nyse: LLY - news - people ) are also known to be developing HDL-raising drugs. Merck also unveiled a promising AIDS drug, which works by inhibiting the ability of the HIV virus to mix its genetic information with that of a patient's cells, and Merck's first cancer drug, targeted against cutaneous T-cell lymphoma.