Company Analysis - Merck Serono
Serono - what a catch!
Serono has come a long way since Professor Cesare Serono founded the biopharmaceutical company in 1906. Despite maintaining its roots in human infertility, Serono also recognised the need to diversify its product portfolio, and now develops and markets drugs in the fields of human growth, immunology, cardiology and virology. Products such as Gonal-F (follitropin alfa) are strongly associated with Serono's historical infertility focus; this recombinant human follicle stimulating hormone, which was first launched in 1996, is now a market leader in the treatment of female infertility.
Serono's success in new therapeutic areas is evident in its multiple sclerosis franchise. Serono's top-selling blockbuster product, a recombinant interferon β-1a (Rebif) is the number one product for the treatment of multiple sclerosis outside the US, and the fastest growing US MS treatment, with nine month sales figures to September 2006 of US$1,063.3 million. Such revenues were no doubt attractive to Merck KGaA, and also provided an excellent route into the US market. Rebif also has potential outside the MS market, having been approved for the treatment of hepatitis-B and -C virus infections, as well as being in Phase III clinical trials in a number of cancer indications. Serono, in collaboration with Teva, is also looking at the potential for oral treatment options for MS sufferers, an unmet medical need, which should improve patient compliance. Oral cladribine, currently in Phase III trials, has US fast-track status for use in relapsing MS, and according to our data has an 80% chance of success (launch) with expected peak annual sales of $US 515 million.
Serono's presence in the hormonal product arena is also prominent. Its recombinant human somatotropin was first launched as Saizen for the treatment of growth hormone deficiency in 1989, and as Serostim, it is the only growth hormone therapy approved for the treatment of HIV-related unintentional weight loss.
At the end of 2006, Serono had 38 drugs in its R&D pipeline, compared with Merck KGaA's 27 drug candidates (Graph 2). And with 11 preclinical drug candidates and 18 clinical-stage compounds, Serono's pipeline will significantly bolster Merck KGaA's product portfolio, producing an extensive, therapeutically-diverse pipeline. The proportion of compounds in each phase of development was fairly consistent between both Merck KGaA and Serono's pipelines; however, the therapeutic areas that these drugs fit into show quite a different distribution (Graph 3); confirming Merck KGaA's business strategy to expand in therapeutic diversity.
Of particular importance is the addition to Merck KGaA's pipeline of immunological, hormonal, genitourinary, and neurological therapies, as well as a number of biotechnology products. By broadening its focus, Merck KGaA has positioned itself to better capitalize its prospects as a successful pharmaceutical company.
