Merck KGaA Drops Cancer Drug Development After Studies Fail

German drugmaker Merck KGaA said it won’t seek regulatory approval for its experimental cancer medicine evofosfamide after the treatment failed in the last stage of clinical tests.

The medicine didn’t help patients with pancreatic cancer or soft-tissue sarcoma live longer when combined with chemotherapy, Darmstadt, Germany-based Merck said in a statement Monday.

The decision is a setback for Merck, which has sought new drugs to boost its lineup, but not a dramatic one. The company said it’s "confident" in its pipeline and will re-allocate resources to other key programs. The stock showed little change in Frankfurt, falling less than 1 percent to 92.41 euros in Frankfurt. Partner Threshold Pharmaceuticals Inc., however, slumped 82 percent in New York.

“We viewed these studies, particularly in pancreatic cancer, as high risk, so today’s result is not a major surprise,” Johanna Walton and colleagues at Credit Suisse Group AG wrote in a note to clients. Analysts at Baader-Helvea had expected the medicine to garner peak annual sales of 500 million euros ($543 million). Others said they hadn’t issued a forecast for sales of the drug because the risk of failure was so high.

Chief Executive Officer Karl-Ludwig Kley is betting on the company’s acquisition of chemical firm Sigma-Aldrich Corp. to reduce Merck’s dependence on its pharmaceuticals unit after more than 10 years of failing to develop a new drug. The German conglomerate, which also makes products ranging from liquid crystals for screens to specialty chemicals and drugs to treat multiple sclerosis, named deputy CEO Stefan Oschmann in October to succeed Kley in April.

“It’s certainly not positive,” said Florent Cespedes, an analyst at Societe Generale in Paris. "Is it the end of the research in oncology for the company? Definitely not, because they have other golden bullets with the immuno-oncology program."

He pointed to Merck’s partnership with Pfizer Inc. last year that may bring in $2 billion. The most advanced drug in that collaboration, avelumab, won fast-track designation from U.S. regulators in October.

"The decision to discontinue any further development allows Merck to focus its R&D resources elsewhere and in particular on the immuno-oncology partnership with Pfizer," Barclays analysts wrote in a note to clients.