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Performance of Merck’s Diabetes Portfolio in 1Q17

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Diabetes portfolio

Merck & Co.’s (MRK) diabetes portfolio includes two blockbuster drugs—Januvia and Janumet. These drugs are used for lowering the blood sugar levels in patients with Type 2 diabetes. The combined sales for these drugs were ~$1.3 billion for 1Q17, a ~5.0% fall from $1.4 billion in 1Q16.

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Januvia and Janumet

Januvia and Janumet, its combination version, are DPP-4 (dipeptidyl peptidase 4) inhibitors. These drugs are used to lower blood sugar levels in people with Type 2 diabetes. The drugs reported a 5.0% fall in revenues in 1Q17, mainly due to pricing pressure, the timing of customer purchases in US markets, and lower prices in the European and Japanese markets. The fall was partially offset by higher volumes in US markets, Asia Pacific, and Latin America. The drugs compete with Bristol-Myers Squibb’s (BMY) and AstraZeneca’s (AZN) Onglyza and Novartis’s (NVS) Galvus.

Merck has also developed Janumet XR, a combination drug of Januvia (sitagliptin) and extended-release metformin HCl (hydrochloride). The drug is a once-daily medicine for lowering blood sugar levels in people with Type 2 diabetes.

Januvia and Janumet together contributed about 14.1% of the company’s total revenues for 1Q17. However, according to Wall Street analyst estimates, these drugs are estimated to contribute more than 15.0% of total revenues for 2017.

To divest the risk, you can consider the PowerShares Dynamic Pharmaceuticals ETF (PJP), which holds ~4.9% of its total assets in Merck & Co. PJP also holds 5.1% of its total assets in Bristol-Myers Squibb (BMY), 4.6% in Allergan (AGN), and 4.9% in Pfizer (PFE).

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