Merck’s Alimentary & Metabolism Drug Sales Have Likely Peaked

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Merck

Merck’s (NYSE:MRK) Alimentary & Metabolism drugs account for around 10% of the company’s value, according to our estimates. The key drugs in this segment are Januvia and Janumet. We don’t expect any significant growth for both these drugs in the near term, and believe that the sales have likely peaked. The patent exclusivity for these drugs expire in 2022, and the combined revenues will likely be in the range of $5.5 -$6.0 billion in the near term. However, in the long run, we expect the segment revenues to decline after patent expiration, as the drugs will face biosimilar competition. Apart from these two drugs, Merck has developed new drugs – Lusduna and Ertugliflozin, which will likely aid the segment revenue growth in the coming years, and offset some of the declines from Januvia and Janumet in later years. We have created an interactive dashboard on Merck’s Alimentary & Metabolism segment – A Quick Snapshot of Merck’s Alimentary & Metabolism Drugs Segment. You can adjust the revenue and margin drivers to see the impact on the company’s overall revenues, earnings, and price estimate.

Januvia And Janumet Sales Likely To Remain Around The Current Levels

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Global sales of Januvia, Merck’s inhibitor for the treatment of type 2 diabetes, increased from $2.39 billion in 2010 to $3.7 billion in 2017. However, the sales declined by 4% in 2017 due to growing competition. This suggests that the drug’s sales may have already peaked, and incremental growth is going to be hard to come by. Also, Januvia and Janumet face competition from SGLT2 (Sodium-glucose co-transporter-2) inhibitors, such as Johnson & Johnson’s Invokana, which is gaining market share. As such, any significant growth from the current levels is unlikely. We thus forecast $3.6 billion for Januvia Sales and around $2.2 billion for Janumet sales in 2018 and 2019. We expect generic versions of Januvia and Janumet to hit the market by 2022, thus affecting their sales for that year and beyond.

Merck currently has two new compounds in this segment – Ertugliflozin and Lusduna. While Lusduna received tentative approval by the U.S. FDA in July 2017, Ertugliflozin received the U.S. FDA approval in Dec 2017 for type 2 diabetes. Ertugliflozin was also approved in the EU earlier this year. These two drugs are expected to offset some of the expected revenue loss from Januvia and Janumet in the later years.

 

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