Merck says study confirms efficacy of Erbitux drug

FRANKFURT (Reuters) - Merck KGaA said on Wednesday a Phase II trial provided further evidence that its cancer drug Erbitux was particularly effective at fighting bowel tumors whose cells did not undergo a certain type of genetic mutation.

The German drugs and chemicals maker said that 53 percent of patients who did not have a mutation of the so-called KRAS gene saw their tumors shrink versus just 36 percent in the group of patients with a mutated form of the gene, in line with previous findings.

The study is the third providing consistent data on the efficacy of Erbitux as an initial treatment of metastatic bowel cancer, Citi Investment Research analyst Mark Dainty said in a note to clients, reiterating his "buy" recommendation on Merck.

Merck had said last year that KRAS plays a vital role in the way Erbitux works, creating a debate among healthcare experts and investors on the net effect of the findings on Erbitux' future sales.

Initially, Merck suffered a drop in Erbitux prescriptions for patients with the gene mutation, which was only partially offset by increased use of Erbitux in patients with the unmutated, or wildtype, version.

Healthcare insurers also had been slow to approve reimbursement for the latter patient group in new bowel cancer indications, analysts said.

"While fourth-quarter delays in reimbursement negotiations may create near-term disappointment on Erbitux, these are now complete in the key EU countries except Italy and we expect Erbitux use to accelerate in 2009," Citi's Dainty said.

Erbitux is Merck's most promising drug and the second-best selling after its multiple-sclerosis drug Rebif.

The company expects sales of Erbitux, based on the active ingredient cetuximab, to reach about 600 million euros ($795 million) in 2008, up from 470 million euros in 2007.

It sees revenues of more than 1 billion euros, or blockbuster status, for the drug early in the next decade.

Merck shares were down 0.4 percent at 66.40 euros at 1513 GMT, while the benchmark DAX index was down 4 percent.

Erbitux was originally discovered by U.S. biotech company ImClone, now a subsidiary of Eli Lilly. ImClone sold the marketing and development rights to the drug outside the United States and Canada to Merck.

($1=.7547 Euro)

(Reporting by Ludwig Burger; Editing by Hans Peters)