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Drug Larder Emptying at Merck

It halts trials on a diabetes candidate after tumors are found in mice.
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Merck

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suffered its second late-stage clinical failure in a week, discontinuing a phase III trial of a diabetes candidate after discovering a rare form of cancer in mice who got the treatment.

The Whitehouse Station, N.J., pharmaceuticals giant said it's telling investigators involved in clinical trials of the treatment, called MK-767, to contact patients to stop their participation in the studies.

Last Friday, Merck ended trials of a much-anticipated depression candidate after phase III trials suggested it didn't work. The clinical halt was said at the time to be Merck's first phase III trial discontinuation in 10 years.

"Drug discovery is a risky and complicated business with more disappointments than successes," the company said late Thursday. "We are continuing our commitment to diabetes research and currently are studying a DP-IV inhibitor for diabetes. We plan to enter Phase III with this investigational compound in mid-2004 and, if those studies are successful, expect to file for approval by the end of 2006."

The loss of the diabetes drug led

Morgan Stanley

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to drop Merck from equal-weight from overweight Friday morning. The brokerage, which maintained a $51 price target on the stock, called MK-767 one of Merck's more promising drugs and said its failure could raise question about similar drugs being developed by

Bristol-Myers

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and

AstraZeneca

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.

Merck was recently down $1.11, or 2.5%, to $44.05 on the Instinet premarket session.