Merck & Co. (MRK) will consider making acquisitions as part of its strategy to develop the next generation of hepatitis C treatments, the drug maker's research chief said Tuesday.

The search for better hepatitis C drugs has produced some eye-popping deals in the drug industry recently, including Gilead Sciences Inc. (GILD) planned $11 billion purchase of Pharmasset Inc. (VRUS) and Bristol-Myers Squibb Co.'s (BMY) agreement to acquire Inhibitex Inc. (INHX) for $2.5 billion.

Merck last year began selling a new hepatitis C drug, Victrelis. But Merck and its rivals are developing newer regimens they hope will be more effective and part of all-oral regimens, eliminating an injectable drug that is part of the current standard of care.

Peter Kim, president of Merck's research division, told investors at the J.P. Morgan health-care conference here Tuesday that an experimental hepatitis C drug, MK-5172, will be the "cornerstone" of an eventual all-oral therapy for hepatitis C. It is currently in mid-stage testing.

He said Merck could take any of three approaches to pursue an all-oral regimen. It may pursue combining MK-5172 with other experimental drugs in earlier stages of testing at Merck whose mechanisms of action Merck hasn't yet disclosed.

Or, it could collaborate with other companies by combining MK-5172 with other drugs in development, including a "potential acquisition of assets that might be out there." If it's not possible to collaborate, Merck would study MK-5172 in combination with other new drugs when they reach the market, Kim said.

Asked if Merck would pursue a so-called "nucleotide"--the class of drugs developed by Pharmasset and Inhibitex--Kim said Merck was "looking into that," and will address that topic at a future date.

While Merck considers expanding its hepatitis C portfolio, rival Vertex Pharmaceuticals Inc. (VRTX), which sells the new treatment Incivek, is content with its stable of experimental hepatitis C treatments.

Jeffrey Leiden, who will become Vertex's chief executive next month, said in an interview "we have our pipeline, and we're very happy with it." Vertex is in mid-stage testing of VX-222 and last year licensed two nucleotides in early stages of testing.

Separately, Merck Chief Executive Kenneth Frazier said the company had resumed standard shipping for shingles vaccine Zostavax. Production problems in recent years have resulted in shipping delays to customers.

-By Peter Loftus, Dow Jones Newswires; 215-982-5581; peter.loftus@dowjones.com

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