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Why Merck's Hair Loss Drug Could Make Its Income Statement Go, Um, Limp

Merck (MRK) is experiencing some rough PR issues on its hair-loss drug Propecia following a study that suggests up to 15 percent of men taking the drug might experience some form of sexual dysfunction. For years, the warning label on Propecia has said that only 2 percent of men might experience erectile dysfunction while using the drug, and if users stop taking the pills everything returns to normal:

A small number of men had sexual side effects, with each occurring in less than 2% of men. These include less desire for sex, difficulty in achieving an erection, and a decrease in the amount of semen. These side effects went away in men who stopped taking PROPECIA because of them. In addition, these side effects decreased to 0.3% of men or less by the fifth year of treatment.
But the new study, in the Journal of Sexual Medicine, suggests the rate of dysfunction is a lot higher and that in some cases men are permanently hobbled by erectile dysfunction or loss of libido even after stopping the drug. The study dovetails with a recent BBC report on one 26-year-old man who claims the drug ruined his life.

He's not the only one. A quick search of hair-loss comment boards shows that plenty of men have had the same experience: They grew hair but lost their sex lives:

i am now 32, and i have all my hair!! yet, all this time, i had thought...i'm just getting older, things are not working quite as well. in fact, thinking back, i had lost my morning erections a long time ago and had pretty lousy quality erections otherwise. i recently had experiences with a new sexual partner that made me question whether this medicine was harmless or not, and then reviewed some of the medical literature. i then went to speak to my own doctor and he was certain it was the propecia.

... the more i read, the more i realize that although i am thankful for the past 12 years of hair, i basically emasculated myself for the past 12 years too, and thats frightening.

None of this is proof-positive, of course. But it does focus attention on the fact that in Sweden, health authorities require Propecia to carry a warning that sexual side effects of the drug may be irreversible. That's a much more serious warning than the one the drug carries in the U.S.:

And in Brazil some researchers recommend using the drug to treat dangerous priapism in sufferers of sickle-cell anemia.

These issues, while titillating, are not trivial. Merck earns about $400 million a year in revenue from Propecia. The company is increasingly dependent on that cash stream as Propecia's patent exclusivity lasts through 2013. The company just halted development of vorapaxar, a blood-thinner, after tests showed it was too dangerous. That drug was estimated to potentially earn more than $1 billion in revenues by 2015, according to analyst Tim Anderson at Bernstein Research. Merck could lose another massive product, the rheumatoid arthritis drug Remicade, which sells $1.3 billion a year, if an arbitration ruling expected in the next few weeks goes the wrong way. That ruling could potentially say that Merck's merger with Schering-Plough triggered a contract agreement with Johnson & Johnson (JNJ) that allows J&J to take full possession of Remicade in the event of a change of control at Schering.

If U.S. authorities were to follow the Swedish, and if Merck lost Remicade to J&J, then its income statement would start to look rather limp, rather quickly.


Image by Flickr user joelk75, CC.
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