Merck's Januvia, animal health products slump; shares off

Mon Oct 28, 2013 1:36pm EDT
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By Ransdell Pierson

(Reuters) - Merck & Co Inc (MRK.N: Quote) reported lower sales of its Januvia diabetes treatment, fresh evidence its biggest product is losing ground to newer drugs, and also spooked investors with falling quarterly sales of its animal health products.

The company's shares dropped 2.6 percent, or $1.19, to $45.33 in afternoon trading.

Merck's animal health brands, which typically prop up results, suffered a 2 percent sales decline in third quarter, hurt by the recent decision to suspend marketing of its Zilmax weight-gain feed supplement amid concerns it was causing lameness in cattle.

"The fundamentals of the business remain solid despite what we saw in the quarter," Chief Executive Ken Frazier told analysts on a conference call, referring to the animal health unit.

Global sales of Januvia fell 5 percent in the quarter to $927 million. Combined sales of the pill and a related drug called Janumet fell 1 percent to $1.4 billion, versus 5 percent growth in the prior quarter, and marked a return to declines in the first quarter.

"It looks like Januvia might be plateauing," said Morningstar analyst Damien Conover, adding the trend could continue to put pressure on Merck's profits as it strives to develop new medicines.

ISI Group analyst Mark Schoenebaum said combined U.S. sales of Januvia and Janumet were $91 million short of Wall Street estimates, and may force Merck to back off its earlier prediction that the Januvia franchise will grow by the "mid-single-digit" percentage range this year in the United States.

Januvia sales have grown by leaps and bounds since the drug was approved in 2006 - the first member of a new class of oral diabetes treatment called DPP4 inhibitors.   Continued...