(Bloomberg) -- Merck KGaA tumbled following a second surprise failure of a promising medicine and new questions about how the German company’s health-care division can drive growth.
The stock fell 11% on Tuesday, the most since December, after the company said late Monday that it will discontinue development of the drug, xevinapant, for the treatment of head and neck cancer.
Merck is ending both a late-stage study that was nearing completion and a second trial from which some analysts were expecting results as soon as 2027.
It’s the second high-profile drug failure since December for Merck, a German conglomerate with three business units focused on developing medicines, providing raw materials and services to pharma companies and making electronics. The company’s first pipeline failure involved a once-promising multiple-sclerosis drug that showed poor efficacy in studies.
Similarly, an interim analysis of the ongoing xevinapant trial showed that it was unlikely to meet its efficacy goals, the company said.
The drug was expected to reach peak sales of €1.4 billion ($1.5 billion), Brian Balchin, an analyst at Jefferies, said in a note. Now, Merck will probably need to book a €60 million impairment charge in the current quarter and write off about €188 million in potential earnings, Balchin said.
Beyond that, Merck may need to reallocate capital from its life science and electronics divisions to rebuild its pipeline of experimental medicines and propel growth, Thibault Boutherin of Morgan Stanley said in a note.
Merck’s stock is roughly flat over the last 12 months. The Darmstadt, Germany-based company is unrelated to the US-based Merck & Co.
--With assistance from James Cone.
(Updates with share price chart.)
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