Merck Stock Depends on Januvia More Than Ever

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Merck (NYSE: MRK  ) stock has become dependent on its diabetes drug Januvia over the past couple of years for revenue growth. The franchise made up 12% of Merck's sales in the first quarter and probably a larger percentage of its bottom line.

Three for one
Januvia comes in three versions. The base drug is called Januvia, but it's also available as a fixed-dose combination with a couple of generic drugs used by diabetics. Janumet contains Januvia and merformin. Juvisync combines Jaunvia with simvastin.

Sales of Jaumet were about half that of Januvia, which given the size of Junuvia is still a substantial boost to revenue. Janumet, by itself, is on pace to rack up $1.6 billion in sales this year.

Juvisync, which was approved in 2011, doesn't appear to be nearly as popular. Merck doesn't even bother to break out sales. The difference lies in the fact that simvastin isn't actually a diabetes drug; it's Merck's cholesterol-lowering drug Zocor, which went off patent awhile ago. While it's not hard to see why doctors would want to treat high cholesterol in diabetics when it's present, not all diabetics have high cholesterol.

Januvia faces direct competition from Bristol-Myers Squibb (NYSE: BMY  ) and AstraZeneca's (NYSE: AZN  ) Onglyza, which is in the same DPP-4 class of drugs. Onglyza got off to a slow start, but the companies didn't give up pushing into Merck's stronghold on the oral diabetes market. The effort seems to be paying off. First-quarter sales of Onglyza were up 17% in the U.S., thanks to 8% higher prescriptions and a price boost. Worldwide sales of the drug, which goes by Kombiglyze elsewhere, were up 25% as the drug launched in new regions.

In addition to direct competition from DPP-4 drugs, Januvia faces competition from other drugs. Takeda's Actos is available as a generic, and while it is arguably an inferior drug in terms of risk/benefit, the lower copay for generics can be a big driver of prescriptions.

Johnson & Johnson (NYSE: JNJ  ) recently introduced a diabetes drug with a new mechanism of action called Invokana. In the short term, the new pathway will give doctors pause, and the drug will probably be prescribed when Januvia and other oral diabetes drugs stop working. But as doctors start to get more comfortable with Invokana, it certainly has the potential to take market share away from Januvia.

Side effects
What's helped Januvia grow in to a megablockbuster is the relatively mild side effects the drug produces. Doctors hate prescribing a drug to a patient and then having to deal with calls or returns to the office with complaints about side effects.

Given the relatively clean side-effect profile, recent reports that Januvia might be causing pancreatitis and potentially pancreatic cancer are troubling. If the preliminary findings pan out, the side effects could put pressure on sales.

Why Januvia is so important to Merck stock
Jaunivia is now Merck's top-selling drug after the former top-selling drug, Singulair, recently went off patent protection. In the first quarter, the drop in Singulair sales produced a $1 billion hole that had to be filled. The easiest way to fill that hole is through growth of the top-selling drug. Given the challenges outlined here, I'm not sure Januvia is up for the challenge.

Without revenue growth, you can't expect Merck stock to move higher.

At least there's still a dividend
If you're on the lookout for high-yielding stocks outside of the health care sector, The Motley Fool's special free report "Secure Your Future With 9 Rock-Solid Dividend Stocks" outlines the Fool's favorite dependable dividend-paying stocks. Grab your free copy today by clicking here.

Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 30, 2013, at 3:33 PM, cdb5556 wrote:

    "Worldwide sales of the drug (Onglyza), which goes by Kombiglyze elsewhere, were up 25% as the drug launched in new regions."

    Actually, Kombiglyze is the combination of Onglyza with Metformin.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2517020, ~/Articles/ArticleHandler.aspx, 10/1/2016 6:52:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 9 hours ago Sponsored by:
DOW 18,308.15 164.70 0.91%
S&P 500 2,168.27 17.14 0.80%
NASD 5,312.00 42.85 0.81%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/30/2016 4:01 PM
MRK $62.41 Up +0.50 +0.81%
Merck and Co. CAPS Rating: ****
AZN $32.86 Down -0.19 -0.57%
AstraZeneca CAPS Rating: ****
BMY $53.92 Up +0.05 +0.09%
Bristol-Myers Squi… CAPS Rating: ****
JNJ $118.13 Up +0.86 +0.73%
Johnson and Johnso… CAPS Rating: *****