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Changes in Merck & Co.’s Reported Business Segments in 2015

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Reported business segments  

Merck & Co. (MRK) has its products classified in two business segments—Pharmaceuticals and Animal Health. The company divested its Consumer Healthcare segment on October 1, 2014, to Bayer AG.

The above chart shows the performance during 3Q15 based on the reported business segments.

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Pharmaceuticals  

The Global Human Health, or Pharmaceuticals, segment generates the most revenue. It contributed nearly 85% of the total revenue in 2014. It accounted for ~88.6% of the revenue at $8.9 billion in 3Q15. This segment includes various franchises like oncology, vaccines, hospital acute care, diabetes, and other primary care and women’s health.

The Pharmaceuticals segment has ten blockbuster drugs with a yearly contribution of over $1 billion each. These drugs include Januvia, Janumet, Zetia, Remicade, Vytorin, Isentress, Gardasil, Singulair, Proquad or Varivox, and Nasonex.

The competitors for Januvia and its combination version Janumet are Onglyza—jointly made by Bristol-Myers Squibb (BMY) and AstraZeneca (AZN)—and Galvus from Novartis (NVS). The competitors for Zetia include Niaspan from AbbVie (ABBV) and Lipitor from Pfizer (PFE).

Animal Health  

The Animal Health segment contributed nearly 8% of the total revenue for 2014. This segment contributed ~8.1% of the segment sales at $825 million in 3Q15. During the third quarter, the segment’s revenue fell by ~7% compared to 3Q14. This included an ~14% negative impact of foreign exchange. Increased revenue from companion animal products including Bravecto and new aqua and swine products drove the segment’s growth.

Merck’s Animal Health segment competes with companies including Zoetis (ZTS) and Eli Lilly (LLY). Investors can consider ETFs like the VanEck Vectors Pharmaceutical ETF (PPH) or the Vanguard Healthcare ETF (VHT) to divest the risk.

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