Like most Big Pharma stocks, Merck (NYSE:MRK) has endured a bumpy ride this decade due to the loss of exclusivity on key drugs (affably known as the patent cliff) and a general increase in competition.
Despite these challenges, Merck has one rock that it continues to lean on: Januvia (which is known as Janumet in overseas markets). Januvia/Janumet is Merck's $6 billion per year oral diabetes medicine, a DPP-4 inhibitor. Januvia/Janumet is specifically designed for type 2 diabetes, and works by lowering blood sugar in patients when it gets too high.
Merck leans on its rock
In recent quarters, growth for Januvia/Janumet has reaccelerated -- and rightly so.
First, the Trial Evaluating Cardiovascular Outcomes with Sitagliptin (the scientific name for Januvia), or TECOS, was presented in June at the Scientific Sessions of the American Diabetes Association and simultaneously published in The New England Journal of Medicine, showing that Januvia met its primary endpoint of not increasing major cardiovascular events as it relates to hospitalization or heart failure compared to the placebo. This study was meant to reassure physicians and consumers that long-term use of Januvia wasn't going to harm their cardiovascular system (and it was also a post-marketing requirement from the Food and Drug Administration).
Though Merck has generally been scaling back its spending, that's not the case when it comes to oncology research and Januvia/Janumet. Merck opened the floodgates to its marketing team to strengthen the Januvia/Janumet brand against competing therapies and a new class of diabetes drugs known as SGLT-2 inhibitors, which work in the kidneys, as opposed to the liver or pancreas. Specifically, this drug class blocks the absorption of glucose in the kidneys, allowing type 2 diabetics to excrete excess glucose through their urine.
In Merck's most recent quarter, the company announced that Januvia/Janumet sales grew by 9% on an operational apples-to-apples basis once currency fluctuations were removed, growing to just shy of $1.6 billion.
But could one study unseat all of Merck's recent progress and spending on Januvia/Janumet?
Is this the end of the line for Januvia/Janumet?
On Thursday, Eli Lilly (NYSE:LLY) and partner Boehringer Ingelheim announced that they had achieved positive top-line results for their SGLT-2 inhibitor Jardiance in a cardiovascular outcomes study known as EMPA-REG OUTCOME.
The study involved more than 7,000 adult type 2 diabetes patients who were considered to be at a high risk of a cardiovascular event, such as a non-fatal heart attack, non-fatal stroke, or even a fatal cardiovascular event. What the initial results showed was that Jardiance was superior to the current standard of care with regard to cardiovascular event risk reduction. It was the first time a diabetes drug had demonstrated a cardiovascular event risk reduction in a long-term cardiovascular outcomes study.
As global VP of medicine for Boehringer Ingelheim stated:
"Approximately 50 percent of deaths in people with type 2 diabetes worldwide are caused by cardiovascular disease. Reducing cardiovascular risk is an essential component of diabetes management."
Eli Lilly and its partner plan to present detailed results from the study on Sept. 17 at the European Association for the Study of Diabetes' annual meeting.
So what does this all mean? It could imply a shift away from DPP-4 inhibitors like Januvia/Janumet and toward Jardiance, which could emerge as the premier SGLT-2 inhibitor in what's becoming a crowded field, featuring Johnson & Johnson's Invokana and AstraZeneca's Farxiga among others in the United States.
This shift would be aided by statistical data in the clinical studies that led to the approval of SGLT-2 inhibitors, which showed that SGLT-2-targeting drugs have a welcome side effect of causing weight loss in patients. Because obesity is a somewhat common occurrence for type 2 diabetes patients, the prospect of weight loss is a bonus for consumers and physicians. In contrast, DPP-4 inhibitors like Januvia/Janumet are weight-neutral.
Before you dismiss Januvia, keep this in mind
However, before you dismiss Januvia/Janumet and DPP-4 inhibitors as yesterday's news, you may want to keep these two finer points in mind.
First, in May the FDA warned in a press release that patients taking SGLT-2 inhibitors may develop a serious condition known as ketoacidosis, or a buildup of blood acids that requires hospitalization. While not advising patients to stop taking SGLT-2 inhibitors in any way, the FDA did make it clear that additional examinations were forthcoming after 20 cases of acidosis were identified between March 2013 and June 6, 2014. The FDA noted that it had received other reports of ketoacidosis after June 6, 2014, but it will need to analyze the data and a potential correlation between SGLT-2 inhibitors and the development of ketoacidosis before commenting further.
Secondly, and perhaps most importantly, we really don't know a lot about Eli Lilly and Boehringer Ingelheim's data on Jardiance yet. We have no idea as to the magnitude of outperformance over the placebo, and we haven't been given any data as of yet on what the side effects were like (if any) in the Jardiance arm and placebo group. We'll have these answers in a few weeks, but there's no feasible way to predict whether or not Jardiance is going to show Januvia/Janumet and other DPP-4 inhibitors the door without first seeing the full set of EMPA-REG OUTCOME data.
If you're currently a Merck shareholder, you have every right to be a bit unnerved by this news. However, it's far too early to consider selling your stake (or buying into Merck, for that matter) until we have more context as to how much Jardiance outperformed the placebo, and what its safety profile looked like on a comparable basis. Additionally, I'd say that it would be unlikely that physicians would drop DPP-4's like Januvia/Janumet in the blink of an eye. If Januvia/Janumet is to lose market share, it's probably going to be a somewhat gradual decline.
For now, I'd circle Sept. 17 on your calendars and prepare for what could be a transformative day for Merck, Eli Lilly, and their respective shareholders.