Merck Strikes First in Hep C Drug Battle

WHITEHOUSE STATION, NJ (TheStreet) -- The U.S. approval Friday of Merck's(MRK) hepatitis C drug Victrelis was expected. More surprising was the drug's "best case" label that will help Merck better compete in the new hepatitis C treatment market.

The U.S. Food and Drug Administration approved Victrelis with a broad label that basically gives Merck what it wanted, which is to leave decisions about how best to use the hepatitis C drug in the hands of physicians. The downside for Merck to this broad discretion on Victrelis' label is that doctors may have too many complicated dosing options.

Vertex Pharmaceuticals(VRTX) could exploit any confusion caused by Victrelis' label. Vertex's hepatitis C drug Incivek is expected to receive U.S. approval later this month with a more straightforward and easy-to-understand dosing schedule. Vertex's Incivek is also more potent, curing a greater percentage of hepatitis C patients compared to Merck's Victrelis, at least according to the respective clinical trials run by both companies.

The stakes are high in the new hepatitis C treatment market. Approximately 3.2 million Americans are infected with the viral disease that attacks and progressively destroys the liver. Most people infected with hepatitis C don't know they have the disease and aren't diagnosed until liver damage occurs, which can take years.

The old gold-standard treatment regimen for hepatitis C -- 48 weekly injection of interferon and daily doses of oral ribavirin -- cured about 40% of patients. Adding Victrelis to that regimen will shorten treatment duration for some and improve cure rates to more than 60%. Likewise, Vertex's Incivek will also shorten treatment and boost cure rates to as high as 80%.

The looming marketing battle between Merck and Vertex is worth billions of dollars in new hepatitis C drug sales.

For now, at least, Merck has the market to itself -- the prize for being first to approval. Victrelis will cost $1,100 per week, which means patients and insurers will pay between $26,000 and $48,000 for Victrelis, depending on the length of treatment. This price doesn't include the cost of interferon and ribavirin, which adds another $25,000 to $35,000, again, depending on duration of treatment.