Merck and Gilead Will Collaborate On Long-Acting HIV Therapy - MarketWatch

Merck and Gilead will combine two drugs to make a long-acting HIV therapy.

The drug companies Merck and Gilead Sciences said Monday that they would collaborate to develop and market a long-acting HIV drug made up of two therapies—one made by Gilead, the other by Merck.

The companies said they would develop oral and injectable therapies that combine the drugs, Gilead’s lenacapavir and Merck’s islatravir, and plan to begin a trial of the oral therapy in the second half of this year.

Merck (ticker: MRK) shares were up 1.3%, and Gilead (ticker: GILD) shares were up 1% on Monday morning.

“This collaboration …is an important step forward in our strategy to harness the full potential of islatravir for the treatment of HIV,” said Merck CEO Kenneth Frazier in a statement.

Last week, Gilead presented positive interim data on a Phase 2/3 trial of lenacapavir in patients who had received the drug every six months. Currently, HIV patients on antiretroviral therapy generally take their medication daily.

In a note Monday morning, Cantor Fitzgerald analyst Louise Chen said she sees “the potential for multi-billions of dollars in sales.”

“The agreement brings together potentially complementary medicines in late-stage development with the goal to provide innovative, long-acting treatments in HIV,” Chen wrote.

Analysts have voiced enthusiasm for islatravir. In a March 8 note, Citi Research analyst Andrew Baum said investors weren’t giving enough credit to Merck for islatravir. “We continue to believe that the market materially underappreciates the potential of islatravir given its profile and ultra-long half-life,” Baum wrote.

Gilead’s lenacapavir has also drawn analyst excitement. In a Feb. 5 note, Cantor Fitzgerald analyst Alethia Young wrote that lenacapavir “could drive significant long-term growth in the prevention market,” and that the company thinks “it has the potential to be the next major backbone for the GILD franchise.”

Gilead shares are up 5.7% so far this year, and down 10.7% over the past 12 months. The stock trades at 8.7 times earnings expected over the next 12 months, below its 5-year average of 9.5 times earnings. Of the 32 analysts who track Gilead covered by FactSet, 14 rate it Buy or Overweight, 16 rate it Hold, and two rate it Sell.

Merck, meanwhile, is down 8.8% so far this year, but up 6.7% over the past 12 months. The stock trades at 11.3 times earnings expected over the next 12 months, below its 5-year average of 14.9 times earnings, according to FactSet. Of the 20 analysts who cover the stock tracked by FactSet, 15 rate it Buy or Overweight, while five rate it Hold.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com