Merck CEO Kenneth Frazier got right to the point during the early minutes of Wednesday’s first-quarter earnings call. “We fell short of our expectations for top-line performance,” he said of the drug maker, which saw sales fall 9%, to $10.7 billion, compared to the same quarter last year, when sales were $11.7 billion.
The lackluster quarter wasn’t just due to falling patents—the company lost exclusivity for asthma medication Singulair, migraine treatment Maxalt, allergy treatment Clarinex and hair-loss medication Propecia—but also to the rate at which sales of these items tumbled.
EVP and President of global human health Adam Schechter said the “rate and level of erosion” among these brands was more rapid than the company anticipated.
Singulair sales plummeted 75% during the quarter, to $337 million, compared to $1.3 billion for the same period last year; Maxalt’s dove 74% to $40 million, compared to $156 million; and Clarinex’s fell by 55% to $61 million, from $134 million.
Diabetes was also a sore point. Januvia sales fell 4% quarter-on-quarter, to $884 million, compared to $919 million for the same period last year, while Janumet sales rose 4%, to $409 million, compared to $392 million.
Schechter said Januvia sales fell as wholesalers whittled down their inventory stockpiles and told analysts that sellers will probably keep their stocks at these reduced levels. Execs also indicated the diabetes market is becoming more of a turf war: the company has upped prices like its peers, but those jumps have been diluted by a need to offer greater rebates and discounts.
The company is also working to hang on to its diabetes foothold by throwing greater resources behind it, including training and reassigning US sales personnel to front only the Januvia franchise. “We have to continue to talk with physicians and show the benefit you can get by adding Januvia to metformin,” Schechter said.
The company moved to extend its diabetes reach through its recent alliance with Pfizer, which would pair Merck’s Januvia, a DPP-IV drug, with Pfizer’s SGLT-2 inhibitor. The deal gives Merck double-exposure in the space—first, with Pfizer’s SGLT-2 and then as an SGLT-2 add-on. Schechter noted that Merck’s DPP-IV presence will remain important because specialists use SGLT-2s after DPP-IVs, so it’s a matter of expanding scope, rather than displacing older therapies for newer ones.
The Pfizer discussion also added some context to Merck’s broader pipeline strategy. R&D chief Roger Perlmutter said that even though he’s just two weeks into his latest role, he already sees opportunities to maximize the company’s research presence, and that includes outside deals, like the Pfizer diabetes alliance and the recent hep. C Bristol-Myers Squibb collaboration. “Let’s be clear, that no matter how good your research organization is…the majority of great research is done elsewhere.” He said this was true not just of Merck but of the industry as a whole.
