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Were Investors Pleased with Merck’s Diabetes Portfolio in 2016?

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Januvia and Janumet  

Januvia and Janumet are two of Merck’s (MRK) blockbuster drugs in the diabetes franchise. These drugs are used to lower blood sugar levels in patients with type two diabetes. The combined sales for these drugs were ~$6.1 billion for 2016, a ~1.6% increase as compared to $6.0 billion for 2015.

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What makes Januvia and Janumet special?  

Januvia and its combination version Janumet are DPP-4 inhibitor drugs. DPP-4 is an enzyme dipeptidyl peptidase-4. This enzyme removes incretin from the human body in normal cases for people without type two diabetes. However, people with type two diabetes require these DPP-4 inhibitors in order to prevent low blood sugar and weight gain.

Januvia has a very high share in Japan, as DPP-4 inhibitors have more patient days of therapy than other treatments, and Japan has always been a very fast uptake market for DPP-4 usage.

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).

Contribution of Januvia and Janumet  

Januvia and Janumet together contributed about 15.3% of total revenues for 2016, a ~0.1% increase as compared to 2015 in terms of contributions. Further, these drugs are expected to contribute over 15.5% of total revenues for 2017.

To divest the risk, investors can consider ETFs like the First Trust Morningstar Dividend Leaders ETF (FDL), which holds 4.9% of its total assets in Merck and 6.7% in Pfizer (PFE).

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