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Investment Overview for Merck (NYSE:MRK)
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Key drivers of Merck's value that present opportunities for upside or downside to the current Trefis price estimate for Merck:
Nasonex & Other Anti-Infectives
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Merck's Nasonex and Other Anti-Infectives Sales : In May 2011, the FDA approved Victrelis (boceprevir), the company’s innovative new oral medicine for the treatment of chronic hepatitis C. Victrelis has been launched in the United States and in 13 international markets: Brazil, Canada and 11 markets in the EU including France, Germany, the United Kingdom and Spain. Sales of Victrelis were $31 million for the third quarter of 2011 and were $53 million for the first nine months of 2011. The strong launch of Victrelis and continued uptake figures present a potential upside of 1-2% to the Trefis price estimate.
Zocor & Other Cardiovascular Drugs
- Merck's Cardiovascular Sales: MK-0524A is a drug candidate that has the ability to lower LDL-cholesterol (“bad” cholesterol), raise HDL-cholesterol (“good” cholesterol) and lower triglycerides with minimal flushing. High LDL-C, low HDL-C and elevated triglycerides are risk factors associated with heart attacks and strokes. We expect MK-0524 compounds to generate an additional $3-4 billion in revenues by the end of the Trefis forecast period. Delays in regulatory approvals or less than satisfactory results from clinical trials can affect these revenues significantly. A drop of even 10% in revenues expected from these molecules presents a downside potential of nearly 2.5% for the Trefis price estimate.
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Merck is currently the world's second largest pharmaceutical company after Pfizer in terms of revenues. The company delivers innovative health care solutions through its prescription medicines, vaccines, biologic therapies, animal health and consumer care products which it markets directly and through its joint ventures. The firm's operations are managed through the company's four main divisions, namely Pharmaceutical, Animal Health, Consumer Care and the Alliances division.
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The biggest contribution to the value of the stock comes from the Anti-Infectives division. This is explained by the following reasons.
Isentress delivers promising results
Worldwide sales of Isentress, an HIV integrase inhibitor for use in combination with other anti-retroviral agents for the treatment of HIV-1 infection in treatment-naïve and treatment-experienced adults, were $1.1 billion in 2010, $752 million in 2009 and $361 million in 2008. Sales growth in both periods reflects positive performance in the United States as well as internationally resulting from continued uptake since launch.
Gardasil gaining popularity
In September 2012, a different vaccine will be used in the HPV vaccination program to protect girls from cervical cancer across schools in the UK, according to the UK Department of Health.
Following a competitive tendering exercise, Gardasil, supplied by Sanofi Pasteur MSD, a joint venture of USA’s Merck & Co. and France’s Sanofi, will be the vaccine used in the next school year, switching from the current supplier, GlaxoSmithKline’s Cervarix.
Vaccines pipeline shows positive results
European Medicines Agency (EMA) has granted marketing authorization to 'Victrelis' (boceprevir), the first licensed product in a new class of medicines to treat hepatitis C.
New vaccines specially in the Phase 3 stage like V503, V212 & V 419 are promising compounds expected to generate nearly $200-300 million in additional revenues by the end of the Trefis forecast period.
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Launch of new drugs
Merck has exciting new drug launches in the pipeline which are expected by the end of 2012. These include Odanacatib (Osteoporosis), Tredative(cholesterol), Anacetrapib(cardiovascular) and the highly awaited MK-0524 series of compounds.
Loss of patents impacting sales
By the end of 2013 over 10 blockbuster drugs are expected to lose patent exclusivity which includes Singulair. These branded drugs are set to lose over $100 billion in revenues in the next few years and thus companies such as Merck will need to develop new drugs to offset these losses.
Growing threat of generic products
The fast growing pharma market in emerging economies or referred to as the 'Pharmerging' economies have the capability and technical prowess to manufacture generic versions of blockbuster drugs.
These generic drugs are often sold at prices that are substantially cheaper then their branded counterparts, thereby severely affecting big pharma's ability to generate profits in the long run.
Lack of approval for Biosimilars by FDA
At present the Food & Drug Administration Authority (FDA) does not have a process to grant approvals for Biosimilars.
Though its hard to say when such a process would be initiated, the potential impacts would be severe for any big pharmaceutical firm, as Biologics seem to be the last bastion of long term profits for big pharma.
Globalization of healthcare reforms
Governments around the world are trying to rein in fiscal spending in order to manage their budget deficits.
Since healthcare costs are one of the biggest components of any national budget, it is expected that an increase in healthcare legislation and reforms around the world will hurt revenues for the entire pharmaceutical sector.
Trefis Forecast Rationale for Nasonex & Other Anti-Infectives Sales
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This represents the revenues generated worldwide by Merck’s anti-infectives drugs.
We collated historical revenues from some of Merck's biggest brands like Nasonex, Isentress Gardasil and Clarinex along with expected additional revenues from pipeline products.
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${forecast} were more than $6 billion in 2009, and increased to just above $10 billion in 2011 following the acquisition of Schering-Plough.
We expect ${forecast} in this division to top $12.5 billion in 2014 followed by a gradual decline till the end of the Trefis forecast period.
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Trefis considered the following factors for its forecast:
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- Isentress delivers promising results
- Worldwide sales of Isentress, an HIV integrase inhibitor for use in combination with other anti-retroviral agents for the treatment of HIV-1 infection in treatment-naive and treatment-experienced adults, were over $1 billion in 2011. Sales growth in recent periods reflects positive performance in the United States, as well as internationally, resulting from continued uptake since launch.
- Gardasil gaining popularity
- Since September 2012, Gardasil is being used in the HPV vaccination program to protect girls from cervical cancer across schools in the UK, according to the UK Department of Health. This reflects a switch from GlaxoSmithKline’s Cervarix. Continuance of such switch in other countries will drive the sales growth.
- Vaccines pipeline shows positive results
- The U.S. FDA and European Medicines Agency (EMA) has granted marketing authorization to 'Victrelis'
- New vaccines, especially in the phase 3 stage like V503, V212 & V419. are promising compounds expected to generate nearly $200-300 million in additional revenues by the end of the Trefis forecast period.
- Tremendous opportunities to succeed
- Notable lack of new drug launches in recent years, particularly amongst anti-fungal and anti-bacterial products presents a great opportunity for Merck to tap.
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- Key brands losing patent protection
- Some of Merck's biggest brands within this segment are set to lose patent protection in U.S. by the end of the current decade which will thus impact revenues.
- Crixivan - 2012 (compound) / 2018 (formulation)
- Cancidas - 2013 (compound) / 2015 (composition)
- Invanz - 2016 (compound) / 2017 (composition)
- Nasonex - 2014 (use/formulation) / 2018(formulation)
- Nasonex may develop a cold by 2014
- Global sales of Nasonex, an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms, were $1.2 billion in 2011.
- Loss of patent exclusivity for use/formulation in 2014 will significantly affect revenues going forward
- Primaxin revenues going downhill
- Sales of Primaxin, an anti-bacterial product, decreased 12% in 2011 to $536 million and declined 11% in 2010 to $610 million. These results reflect competitive pressures and supply constraints.
- Patents on Primaxin have expired worldwide and multiple generics have been approved in Europe. Accordingly, the company is experiencing a decline in sales of this product and the company expects the decline to continue.
- Increased competition to hurt
- Competition from other branded drugs and other forms of treatment options as well as the presence of some generic competition will put downward pressure on prices and effectively reduce revenue growth.
Back to Company OverviewHow Does Trefis Modelling Work?
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. When historicals are available, we explain how we got them at the bottom of the Trefis analysis section below.
Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast. The rationale for our projections is explained in the Trefis analysis section below.
How does my dragging the trendline on the chart impact the stock price?
- We use forecasts for business drivers to calculate forecasted Revenues and Profits for each division of the company.
- We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for the company.
See more on:
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