This big dog still hunts

This big dog still hunts

This morning Merck (NYSE:MRK) reported third quarter results and to paraphrase Mark Twain the reports of Januvia’s death were a bit premature. The diabetes drug world has been buzzing since Lilly (NYSE:LLY) released data from the Jardiance cardiovascular study, results which by any measure were spectacular. Many speculated that in light of this data that usages of DPP4’s would decline.

Frankly Diabetic Investor never felt this way noting that we believed that while usage of SGLT2’s would increase we did not see physicians switching patients from a DPP4 to an SGLT2. Our basic feeling is that the impact on DPP4 usage would be limited and not material. The simple fact is DPP4’s have broad acceptance combined with strong formulary position. Lastly if there is to be an impact on DPP4 usage it will be seen in the coming quarters as the Lilly data came out late in the third quarter. Still we don’t see usage of DPP4’s being overly impacted.

When it comes to this category the big dog is Januvia and this dog still hunts. According to Merck sales of the Januvia franchise reached $1.57 billion for the quarter versus $1.44 billion last year–partly because of customer buying patterns. Analysts had been expecting $1.48 billion.

This continued success for the Januvia franchise is also more bad news for AstraZeneca (NYSE:AZN) and shows the uphill battle for their DPP4 Onglyza. Just as Sanofi’s (NYSE:SNY) earnings call on Thursday has become an important event so too has November 5th when AstraZeneca reports their third quarter results. Ironically Astra like Sanofi is facing major issues with their diabetes franchise, issues which we don’t see going away anytime soon.

At one time we speculated that Sanofi and Astra should combine their respective diabetes franchises. That the combination of products would give this new unit a chance to compete with Lilly and Novo Nordisk (NYSE:NVO). However given recent events this combination no longer looks attractive as both franchises are facing major issues. This would be like combing the Titanic and the Lusitania, two once mighty ships both of whom now at the bottom of the ocean just for different reasons.

Looking ahead the question for Merck is can they maintain the Januvia juggernaut long enough so that their diabetes pipeline reaches the market.  Based on what we saw today the answer so far is this big dog still hunts and isn’t quite ready to retire.