Merck braces for revenue shortfall amid patent losses

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A dedicated Januvia sales force may have nudged sales of the diabetes blockbuster 1% to $1.1 billion for the quarter ended in June, when compared to the same period last year. But that wasn't enough to offset an overall second-quarter sales decline of 11%, to $11 billion, compared to the prior-year period.

Management told investors Tuesday they expect 2013 revenues will be 5%-6% less than those of 2012. “We are navigating significant patent expiration,” CEO Kenneth Frazier said during an earnings call.

EVP of Human Health Adam Schechter told investors that pricing, demand and inventory levels contributed to US Januvia sales rising 9% domestically (1% due to volume, 4% to pricing, 4% to inventory) and said Merck accounts for 75% of the DPP-IV market. He said generics aren't an issue for Januvia's Europe sales, because the medication is typically deployed after metformin, but says it doesn't mean DPP-IV drugs will have an easy time.

Sales of immunotherapy treatment Remicade rose by 3% for the quarter, to $527 million, compared to the same prior-year period, while increased male use of the HPV vaccine Gardasil helped sales of the drug increase by 18% compared to the same period last year.

The Gardasil uptick follows last week's CDC report that the HPV vaccination rate among American girls is slipping, and recent findings indicate that the human papilloma virus is linked to throat cancer. Japan, meanwhile, has dialed back its HPV vaccination program after a spate of safety concerns.

Sales of patent-less Singulair plummeted 80%, to $281 million, compared to the same period last year, part of a series of patent losses which includes migraine medication Maxalt, allergy medication Clarinex and hair-enhancement product Propecia. The company loses the patent for its GERD medication Nexium next year.

The company hinted at what's ahead, but the details are about as foggy as they were in June when Merck passed off reports about a reorg as “part of our existing strategy.” Reports from the Wall Street Journal, for example, noted that then-new R&D head Roger Perlmutter cut senior managers who headed up new drugs.

Perlmutter said Merck's plan is to “narrow our focus,” and the company will pursue only “products with unambiguous meaningful clinical impact.” Perlmutter said he is going to continue to focus on efficiency, and will remove “some layers of decision making” to help things along. He would not point to specifics, saying that the company has been made flatter and will continue to do so, but Perlmutter told Goldman Sachs analyst Jami Rubin that he did not expect there will be “big, enormous changes.”

Merck said it was also scaling back its R&D and SG&A spend. This quarter, SG&A was $60 million less than the same period last year, and R&D was $140 million lower.

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