Merck: As The Sun Rises For Keytruda, It Sets For Zetia/Vytorin
Executive Summary
Merck’s focus has shifted increasingly to Keytruda and immuno-oncology, while the company’s older stalwarts like Zetia, Vytorin and Januvia face pressure.
Merck & Co. Inc. apparently needs more than just the hot immuno-oncology asset Keytruda (pembrolizumab) to drive long-term growth. CEO Kenneth Frazier suggested the company is intensifying its business development initiatives to build out the pipeline during the company’s third quarter sales and earnings call Oct. 25.
The conversation during the call was largely dominated by Keytruda, which gained an important new indication in first-line non-small cell lung cancer from FDA on Oct. 24 and is becoming the increasing focus of Merck’s commercial and R&D initiatives. (Also see "Merck Says PD-L1 Testing Already On The Rise, Setting Stage For First-Line Launch" - Scrip, 25 Oct, 2016.)
But Merck is facing pressure on other parts of its business with mature drugs like Zetia, Vytorin and Januvia. Thus, business development remains an important priority for Merck.
“You should know we’re actively engaged and looking for ways of augmenting our pipeline,” Frazier said. Merck is looking primarily for “bolt-on” acquisitions, he added.
When asked if the changing dynamics in the immune checkpoint space and the opportunity for Keytruda to lead in lung cancer has changed the company’s approach to business development in any way, Frazier responded, “Not really. We need to augment our pipeline.”
Merck is bracing for the first generic competition to its lipid lowering brand Zetia (ezetimibe) in the fourth quarter, which will have a significant impact on revenues. Despite the potential of Keytruda and the broader immuno-oncology opportunity, Zetia/Vytorin (ezetimibe/simvastatin) remains Merck’s second-highest revenue-generating franchise behind the diabetes pill Januvia (sitagliptin).
Zetia/Vytorin generated $944m in revenues in the third quarter, while Januvia generated $1.55bn, a decline of 1%. Merck reported consolidated sales growth of 5% to $10.54bn, powered in part by sales of the human papilloma virus vaccine Gardasil, which grew 38% versus the prior year period to $860m. The increase was due to the timing of sales activity in the third quarter of 2015 related to the Pediatric Vaccine Stockpile by the US Centers for Disease Control and Prevention. Merck’s net income grew 19% to $2.18bn.
Pressure is mounting on Januvia too in the US, with payers pushing back increasingly in the competitive diabetes category. US Januvia sales declined 10% in the quarter versus the 2015 period, which the company attributed to a difficult comparison a year ago, because of a large buy-in.
“We have seen and expect to continue to see increasingly pricing pressure in the United States for Januvia, but we are pleased by the continued volume growth,” President of Global Human Health Adam Schechter said. Prescription trends remain strong in the US, with growth of 4%, according to Schechter.
“Formulary discussions for 2017 are nearly complete and we expect similar access in the United States for Januvia compared to what we’ve had this year,” he said.
Merck hopes to expand the diabetes business next year with an SGLT-2 inhibitor ertugliflozin in development with Pfizer Inc. Merck and Pfizer are on track to file ertugliflozin with FDA by the end of the year, Merck confirmed. The company plans to file two fixed-dose combinations as well, with Januvia and with metformin. (Also see "Merck/Pfizer's Latest SGLT-2 Data Support Attractive Ertugliflozin/Januvia Combo" - Scrip, 16 Sep, 2016.)
Frazier said he expects drug pricing pressure to remain a serious issue for the pharmaceutical industry. “We don’t think these environmental pricing pressures will ease,” he said. “That’s why we continue to focus on our strategy of investing in innovative R&D for products like Keytruda. We think those are the kinds of products that will help Merck weather the pricing risk and pricing pressure that we will be facing as an industry going forward.”