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Merck & Co.’s Segmental Performance in 1Q17

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May. 23 2017, Updated 11:35 a.m. ET

Merck’s 1Q17 revenue

As we saw in the previous parts of this series, Merck & Co. (MRK) reported a 1.0% rise in its 1Q17 revenues to $9.43 billion. That rise consisted of a 3.0% operational growth, substantially offset by a 2.0% negative impact of foreign exchange.

The above graph shows Merck’s segmental performance for each quarter since 1Q15. The company has operations in more than 100 countries, with ~55.0% of its revenues from international markets, which leads to a significant impact of foreign exchange.

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Pharmaceutical segment

The Global Human Health division (or the Pharmaceutical segment) is the highest revenue-generating segment, contributing more than 86.0% of Merck’s total revenues in 1Q17. This segment includes various franchises such as oncology, vaccines, hospital acute care, diabetes, other primary care, and women’s health.

The Pharmaceutical segment has several blockbuster drugs, including Januvia, Janumet, Zetia, Isentress, Vytorin, Gardasil, and Proquad/Varivax. However, a few of the blockbuster drugs such as Remicade and Cubicin have lost exclusivity, and revenues for these drugs have fallen significantly over the last few quarters, thus impacting overall revenue growth.

The diabetes portfolio is exposed to competition from Novartis’s (NVS) Galvus and Bristol-Myers Squibb’s (BMY) and AstraZeneca’s (AZN) Onglyza. The cardiovascular drugs are exposed to competition from AbbVie’s (ABBV) Niaspan and Pfizer’s (PFE) Lipitor.

Animal Health segment 

The Animal Health segment’s contribution rose to ~10.0% of total revenues for 1Q17, driven by increased revenues from companion animal products and aqua and swine products.

To divest the company-specific risks, you can consider the iShares US Healthcare (IYH), which holds 6.1% of its total assets in Merck & Co.

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