Merck 3Q13 – Biosimilar glargine in development; Januvia franchise down 1% worldwide, 8% in the US; ertugliflozin enters phase 3 – October 29, 2013

Executive Highlights

  • Total Januvia franchise sales declined 1% from 3Q12; US sales fell 8%, driven by a 2% drop in script volume, likely driven at least in part by the SGLT-2 launch by J&J, and a ~$60 reduction in customer inventory and.
  • Merck’s biosimilar insulin glargine was brought to light for the first time in a public forum during Q&A; a few clinical studies are underway comparing it to Sanofi’s Lantus.
  • Merck and Pfizer advanced their SGLT-2 inhibitor candidate ertugliflozin into phase 3 testing, and believe the candidate could be well suited for a FDC with Januvia.

Merck CEO Ken Frazier led the company’s 3Q13 financial update yesterday. Global Januvia (sitagliptin) franchise sales totaled $1.4 billion, down almost one percent as reported (up 2% operationally) from 3Q12 and 11% from 2Q13 – a continuation of the franchise’s slowing growth in 1H13. Janumet (sitagliptin/metformin) performed substantially better than Januvia monotherapy; global sales of the former grew 9% (to $442 million), while sales of the latter fell 5% (to $927 million). The Januvia franchise’s performance in the US was particularly disappointing: sales fell 8% year-over-year and 13% sequentially to $702 million. Management expressed its frustration with the results, underscoring, “None of us are pleased with Januvia’s performance in the United States.” Merck attributed much of the decline to a ~$60 million reduction in customer inventory, but acknowledged that total script (TRx) volume fell by 2%. Merck is continuing to try to lure patients from sulfonylureas or encourage patients to use Januvia as a second-line therapy after metformin instead of a sulfonylurea, while also working to slow the encroachment of new competitors on Januvia. International sales for the Januvia franchise in 3Q13 were up 8% (15% operationally) but down 10% sequentially to $670 million. Management was optimistic about the franchise’s outlook outside the US, where competition is still an issue but the DPP-4 inhibitor class is seeing stronger overall volume growth. Growth was especially strong in Europe and emerging markets. However, Merck’s direct sales in Japan were negatively affected by currency exchange rates. Japanese sales were further negatively impacted by the fact that Merck only records revenue from its Japanese distribution partner Ono Pharmaceutical in 2Q and 4Q each year. We note that in our previous reports on Merck, we had believed that Merck’s only source of Japanese revenue was from Ono (and, thus, that it only reported Japanese revenue in 2Q and 4Q) – we have since learned that Merck also sells Januvia directly in Japan outside of its Ono partnership. Thus, some of Januvia’s revenue stream comes from and is impacted by the Japanese market each quarter.  

A key question asked during Q&A concerned Merck’s development of a biosimilar insulin glargine, MK-1293, and the construction of an insulin manufacturing facility in Virginia. It appears that Merck has been conducting trials comparing this candidate to Sanofi’s Lantus, but management quickly declined to comment on efforts in this area when asked. Merck does indeed have at least one trial publicly registered (on NHS’s website) comparing MK-1293 to Sanofi’s Lantus and evidence that it has two more ongoing trials comparing the two agents (details below). Public minutes from an ethics committee in New Zealand state that MK-1293 has the same amino acid sequence, physio-chemical properties, and formulation as Lantus. We have not been able to substantiate whether Merck has indeed built an insulin facility. If true, it demonstrates a large investment on Merck’s part into the insulin market, especially given the high costs of developing a biosimilar.

Merck announced that ertugliflozin, the SGLT-2 inhibitor it is co-developing with Pfizer, began phase 3 testing. Management spoke briefly but explicitly about the potential of an ertugliflozin/sitagliptin fixed-dose combination, although such a product is years away (while Lilly/BI’s empagliflozin/Tradjenta [linagliptin] combination could be submitted as early as 2014). also indicates that Merck and Pfizer are conducting a phase 1 study on ertugliflozin in type 2 diabetes patients with mild to moderate renal impairment – we presume Merck/Pfizer are preparing for likely questions from regulators on renal safety. Management briefly discussed MK-3102, the company’s once-weekly DPP-4 inhibitor candidate, characterizing it as an important compound that may facilitate earlier initiation on DPP-4 inhibitor therapy — we presume Merck means that an easier once-weekly administration would promote early adherence, but we wonder if MK-3102 also has other special properties. Merck continues to pursue a pediatric indication for Januvia and Janumet, which we see as an important effort given the relative lack of pharmacotherapies for pediatric type 2 diabetes patients. The company is also running three phase 3 and 4 studies in an effort to secure reimbursement in China. No updates were provided on the company’s SmartCells glucose-responsive insulin program or MK-6096, a phase 2 candidate for painful diabetic neuropathy.

Financial Update

  • In 3Q13, sales of the Januvia (sitagliptin) franchise were down 0.8% (up 2% operationally) year-over-year (YOY) to $1.37 billion. Sequentially, sales were down 11% as reported. These results continue the franchise’s slowing growth from 1Q and 2Q of this year, in which YOY growth was -1% and 5%, respectively. For reference, franchise sales were up 23% for full-year 2012. Total sales in 2013 so far total $4.2 billion, pacing the franchise for an annual total of $5.6 billion, slightly shy of its $5.7 billion total in 2012.
    • Though it is murky comparing Januvia’s growth to other DPP-4 inhibitors, due to its substantially larger base, it appears that Januvia’s comparators are making inroads into Merck’s share of the DPP-4 inhibitor market. Novartis’ revenue from sales of the Galvus (vildagliptin) franchise rose 37% YOY in 3Q13 to $316 million (though this was from a substantially lower base than Januvia’s YOY comparison), the highest YOY growth figure for the franchise since 1Q12 (for more information on Galvus’s growth, please see our Novartis 3Q13 report at BMS reported during its recent 3Q13 update that its share of worldwide Onglyza (saxagliptin) sales grew 19% YOY to $211 million (for more information on Onglyza’s market uptake, please see our BMS 3Q13 quick take at
    • The variability of global Januvia revenue is due in part to Merck’s payment schedule from its Japanese distributor Ono Pharmaceutical. As a reminder, Merck only records sales from its Japanese co-marketing partner Ono Pharmaceutical in 2Q and 4Q of each year. Thus, revenue is superficially high every 2Q and 4Q, and low in 1Q and 3Q. It is our understanding that in 2Q13 Merck recorded ~$80 million in sales from Ono. If those sales were evenly distributed between 2Q13 and 3Q13, instead of sales dropping 11% from 2Q13 to 3Q13, they would have been down 3%.
      • For clarification, we previously believed that Merck only received revenue from Japan through Ono Pharmaceutical and that Japanese foreign exchange therefore did not impact its 1Q and 3Q results. We have since learned that while Merck does only receive revenue from Ono Pharmaceutical in 2Q and 4Q it also directly sells Januvia in Japan. Thus, part of Januvia’s revenue each quarter is impacted by the Japanese market – not just 2Q and 4Q when Ono purchases its supply, as we previously thought. Ono’s payment calendar does still have an impact on apparent global (as demonstrated above) and international growth (as detailed below).
  • Janumet (sitagliptin/metformin) performed substantially better in 3Q13 than Januvia monotherapy. Globally, Janumet sales rose 9% YOY to $442 million; whereas, Januvia sales fell 5% to $927 million. Janumet’s performance was better in both the US and internationally, and stronger in terms of both YOY and sequential growth. Janumet’s strength continues a trend seen in 1H13: in 1Q13, global YOY growth for Januvia and Janumet was -4% and 4%, respectively, and in 2Q13 the results were 1% and 15%, respectively. We do not find this trend particularly surprising, as fixed-dose combinations (FDCs) confer a number of advantages for patients, including greater efficacy, ease of administration, and a reduction in co-pays.
  • US Januvia franchise sales fell 8% YOY to $702 million, a result management characterized as disappointing. 3Q13 marked the largest YOY drop in domestic sales since Merck domestically launched Januvia in 2006. Sequentially, US sales were down 13% against a challenging comparison (2Q13 sales were up 22% sequentially). In closing its prepared remarks, management stated, “None of us are pleased with Januvia’s performance in the United States.”
    • For comparison, BMS reported, during its recent 3Q13 update, that its share of Onglyza (saxagliptin) sales in the US were up 6% YOY but were down 21% sequentially (for more details on Onglyza’s results, please see our BMS 3Q13 Quick Take at for more details).
    • By magnitude, the largest detractor from domestic sales growth was a ~$60 million reduction in customer inventory. Merck’s domestic revenue seems to have been rather volatile so far in 2013. The franchise experienced a $70 million inventory reduction in 1Q13 (which dropped US YOY growth 10 percentage points) followed by a $30 million inventory benefit in 2Q13 (which boosted domestic YOY growth by about four percentage points). Had the reduction in customer inventory not occurred in 3Q13, sales would have remained relatively flat from 3Q12. Merck explained during its 2Q13 update that inventory movements on the order of $30 million to $50 million are difficult to anticipate, as they represent only about half a day of Januvia franchise sales. As a result, Merck excluded channel movements from its continuing guidance for US growth (for more details on Merck’s 2Q13 results and management’s explanations for the shifts seen, please see for more details).
    • Total prescription (TRx) volume for the Januvia franchise fell 2% in 3Q13. This is in comparison to 1% prescription growth in 2Q13nad ~4% in 1Q13. In 1Q13, Merck noted that the YOY prescription comparison was difficult due to strong growth the previous year (~11-16%) thanks to Januvia gaining share from TZDs. The hope had been that as the year went on and the comparison became easier, the volume growth outlook would improve. During Merck’s 2Q13 update and yesterday, however, management emphasized that this would be an important trend to reverse moving forward, given that TRx is a much stronger correlate of long-term performance than sales figures (due to the impact of factors such as channel movements on quarterly sales totals).
      • Part of the decrease in TRx is because Januvia is slowly but steadily losing DPP-4 inhibitor market share to BMS/AZ’s Onglyza (saxagliptin), BI/Lilly’s Tradjenta (linagliptin), and Takeda’s Nesina (alogliptin), which collectively took approximately 4% of share from Januvia between 2Q12 and 2Q13 — for more details on this, please see page 5 of our 2Q13 Diabetes and Obesity Industry Roundup for details on the DPP-4 inhibitor market at However, management characterized this slight reduction in share as “expected” given the introduction of new players to the DPP-4 inhibitor arena, and stated competitors’ share growth has, for the most part, started to level off. Management also highlighted that Januvia still holds 70-75% of the US DPP-4 inhibitor market.
      • The other driver of the decline in Januvia’s script volume is that the overall branded oral diabetes market is relatively flat. As a result, Merck feels it is important focus more on market growth than market share. Merck is standing by the its strategy of luring patients from sulfonylureas, or promoting the use of Januvia as an add-on to metformin instead of adding a SFU, as the best ways to ensure growth of the overall class. As background, Merck’s tone around this strategy intensified during its 2Q13 update, when management stated, “all of our focus is now on sulfonylurea utilization.” Merck explained that SFUs’ market share was of greater import because the flow of conversions from TZDs had dried up. Management noted during yesterday’s Q&A that this effort was not as successful as they initially hoped, and that its sales force had become slightly “distracted” by market share competition. Merck now has representatives dedicated to growing the DPP-4 inhibitor class by moving share from sulfonylureas to Januvia. We see DPP-4 inhibitors as certainly having better safety profiles than SFUs (which are associated with increased hypoglycemia, weight gain, and potentially with increased mortality); we believe it is the two classes’ cost differential that is preventing Merck from being more successful in this endeavor. That Merck remains confident in this strategy, in our minds, gives us hope that the company will make inroads into the SFU market in the future. In the meantime, we certainly understand generic medications are necessary for patients; we hope to see more on SFUs and better understand the profile with the GRADE study.
      • During Q&A, management discussed future factors that could have an impact on Januvia’s TRx share. Management noted that positive CVOT data on DPP-4 inhibitors will help the entire class, and reminded listeners that TECOS (Januvia’s CVOT) will read out in late 2014. Merck believes that its once-weekly DPP-4 inhibitor candidate MK-3102 (discussed in more detail below) will be a very important compound and could potentially facilitate earlier initiation on DPP-4 inhibitors, thereby growing the class. Additionally, although SGLT-2 inhibitors represent an alternative to DPP-4 inhibitors as far as monotherapy goes, longer term, SGLT-2 inhibitor/DPP-4 inhibitor fixed dose combinations (FDCs) appear extremely promising. While Merck intends to develop the SGLT-2 inhibitor ertugliflozin both as monotherapy and as a FDC with sitagliptin, longer term, we feel by far the bigger part of the value will be in the combination.
    • Management stated that Januvia saw a small benefit from price in 3Q13, but continued to experience significant rebate and pricing pressure. Merck characterized the domestic DPP-4 inhibitor market as “very competitive,” which is especially true now that there is a fourth player (Takeda’s Nesina) is in the ring. Given that the currently available DPP-4 inhibitors are similar in terms of efficacy and safety profiles, pricing is one of the few tools companies have at their disposal to drive volume growth; that said, we believe Merck is likely remaining pretty tough on pricing. Still, during Q&A, management noted that Januvia has ~80% access in managed care (a “very strong” formulary position), and that Merck will continue to be aggressive in terms of rebates and discounting to maintain the product’s formulary position. This statement could portend reductions in net effective prices moving forward; it is difficult to know how Merck will balance the tension between pricing and higher volume.
  • International Januvia franchise sales of $670 million in 3Q13 grew 8% YOY (15% operationally) against a fairly easy comparison (3Q12 sales rose 14%, making it the weakest quarter of 2012 – that growth in view of 3Q13 would be quite positive, of course). Sequentially, sales were down 10%; however, the sequential decline was 4% when one adjusted for revenue being received from Ono in 2Q13 and not 3Q13. The stark difference between YOY and sequential growth is largely attributable to the spike in ex-US sales seen in 2Q12, when sales were up 17% sequentially. Merck drove good volume growth in all major geographic regions, and maintained its ~70% share of the global DPP-4 inhibitor market. Management cited particularly strong growth in Europe and emerging markets; however, the 3Q13 press release mentioned disappointing results in Japan due to foreign exchange.
    • Merck’s outlook for Januvia outside the US was more positive than its domestic outlook. Although Merck is very gradually bleeding share to newer players in the ex-US DPP-4 inhibitor market (as in the US), management forecast good growth, noting that the class continues to grow outside the US and Merck is well positioned as the DPP-4 inhibitor market leader. By our calculations, the DPP-4 inhibitor class grew 39% internationally during 2012, compared to the domestic market, which grew 23% — for more details, please see our 2Q13 Diabetes and Obesity Industry Roundup at    
    • The recent German retrospective comparative analyses of DPP-4 inhibitors were not discussed during the call. As background, the German G-BA (the body tasked with making judgments on comparative effectiveness that are used to determine reimbursement) recently ruled that Januvia and Janumet have “hints of an additional benefit” compared to SFUs in terms of lowering blood glucose. The label may sound lackluster, but relatively speaking it was a major win for Merck, as the G-BA ruled that Novartis’ Galvus (vildagliptin) and BI/Lilly’s Trajenta (linagliptin) had “no additional benefit,” and would therefore be subject to reference pricing. Subsequent to receiving its decision Lilly/BI decided not to launch Trajenta in Germany. The G-BA ruled that BMS/AZ’s Kombiglyze (saxagliptin/metformin FDC) had “hints of an additional benefit,” but Onglyza (saxagliptin) received a “no additional benefit” ruling. Januvia sales in Germany stand to increase if the G-BA’s decisions hold as Novartis may withdraw from the market if Galvus would be subject to reference pricing.
  • Despite the mixed financial results for the Januvia franchise in 3Q13, management characterized the underlying market demographics as being very strong. Around the world, type 2 diabetes is a growing epidemic, and many governments (including the US’) are highly concerned with the growing expenditures associated with diabetes. Merck sees itself as well positioned for future success, given that it has retained over 70% market share in the increasingly competitive and challenging DPP-4 inhibitor field.
  • Management did not comment on past concerns about incretin therapies and pancreatic disease. As a reminder, in 3Q13, the EMA’s CHMP issued a press release stating that current data does not adequately support an association between incretin-based therapies and pancreatic adverse events. In response, Merck released a response emphasizing that it will continue monitoring the safety of Januvia. For details on these press releases, please see our July 30, 2013 Closer Look at


Pipeline Updates

  • Merck’s potential biosimilar insulin glargine, MK-1293, was acknowledged for the first time in a public forum during Q&A. An analyst asked management to comment on the biosimilar insulin glargine it is developing and the insulin facility that Merck had purportedly finished building in Virginia. Management quickly and strongly indicated that it would not comment on either topic. We were able to find evidence that Merck is developing a biosimilar insulin glargine (detailed below); however, we found no public record either affirming or refuting that Merck has an insulin facility in Virginia.
    • Merck has at least one trial of MK-1293 publicly registered. On the website of the NHS’ National Research Ethics Service we found a study profile for a five year trial evaluating the safety, tolerability, and PK/PD of MK-1293 in relation to Sanofi’s Lantus. The trial is a single center, double blind, randomized, two-way cross-over study. The profile does not indicate if participants are to have type 1 or type 2 diabetes, nor does it indicate the trial’s current status (the post can be found at The study’s contact is Dr. Anthony Priestley. In 2011 when the trial was posted, Dr. Priestley was the Medical Director of ICON’s Clinical Pharmacology Unit (Manchester, UK). ICON is a clinical research organization (CRO) that conducts non-clinical development and early-phase clinical research.
    • Additionally, the website of P3 Research indicates that this New Zealand-based clinical research company is currently conducting two trials comparing MK-1293 to Lantus. One of the studies is in people with type 1 diabetes and is one year long (the website with this trial is The other study is in people with type 2 diabetes and is six-months long (the website with this trial is Both trials are listed as currently ongoing.  
    • Evidence suggesting that MK-1293 is indeed a biosimilar insulin glargine comes from public minutes from an April 2013 meeting of New Zealand’s Southern Health and Disability Ethic Committee. The minutes indicate that MK-1293 and Lantus have the same amino acid sequence, physio-chemical properties, and formulation. The committee reviewed two trials requests Merck submitted, one comparing MK-1293 with Lantus in people with type 1 diabetes, and another in people with type 2 diabetes – it is not clear if these are the same trials that are now being conducted by P3. The committed provisionally approved both trials, pending receipt of 1) what MK-1293’s expected benefits are compared to Lantus, 2) assurance of the independence of the trials’ Data Monitoring Committees, and 3) amendment of the information sheet and consent form to account for suggestions made by the committee (specific suggestions not listed). The minutes from this committee meeting can be downloaded at,d.Yms&cad=rja
    • The analyst who asked about MK-1293 in Q&A also remarked that Merck has finished building an insulin facility in Virginia. We did not find any information to support or refute this. If true, it represents a very large investment on Merck’s part to enter the insulin market. We assume the building of such a facility also relates to Merck being highly invested in its glucose-sensitive insulin, SmartInsulin, as we suspect such a facility could produce both insulin glargine and SmartInsulin. Merck has repeatedly listed SmartInsulin as one of its most highly prioritized and most exciting agents in early stage development.
    • We are curious what differentiating features MK-1293 might have from Lantus or other “biosimilar” insulin glargines in development. Sanofi’s U300 insulin glargine formulation (submission expected 1H14) has a flatter PK/PD profile compared to Lantus and provided 21% reduction in nocturnal hypoglycemia compared to Lantus in phase 3. Its U300 concentration also allows for a smaller injection volume. Lilly/BI have not yet released data on their new insulin glargine formulation (submitted in the EU as a biosimilar, and timing/pathway for US submission uncertain, but management has previously guided for 2013 US submission). Biocon/Mylan’s biosimilar glargine is expected to enter phase 3 in 2013 for a possible 2015 launch in “large, semi-regulated” markets.
    • Several other companies are also developing novel basal insulin analogs. Novo Nordisk’s ultra-long-acting Tresiba is marketed outside of the US and may be resubmitted to the FDA in 2016 or 2017. Lilly is also working on a phase 3 novel basal insulin analog, LY2605541, for which it expects internal data readouts in 2013 and public topline data disclosure in 2014.
  • Merck announced the initiation of phase 3 testing for ertugliflozin, the SGLT-2 inhibitor candidate it is developing in collaboration with Pfizer. Management stated that the candidate has favorable pharmaceutical properties — we have not seen recent data on ertugliflozin so we are uncertain exactly what properties are being referenced. At Medical Disease Drug Development 2012, Dr. Vincent Mascitti (Senior Director, Global R&D, Pfizer, New York, NY) presented data demonstrating that ertugliflozin provided good efficacy during a phase 2 trial: an average A1c reduction of 0.8% from an unknown baseline and an average weight loss of ~2.5 kg [5.5 pounds; 3% of the body weight of the cohort]. At the time, Dr. Mascitti emphasized ertugliflozin’s high selectivity and favorable safety profile as possible differentiating factors (for more details on these results, please see page 25 of our MDDD full report at We will be interested in seeing whether these results are confirmed in phase 3 testing. If submitted and subsequently approved after phase 3, ertugliflozin would enter a fairly crowded marketplace: J&J’s Invokana (canagliflozin) is already on the market in the US, BMS/AZ’s Forxiga (dapagliflozin) is available in the EU and was resubmitted to the FDA this summer, Lilly/BI filed empagliflozin in the US and EU in March, Merck/Astellas/Kotobuki filed ipragliflozin in Japan (Merck and Pfizer’s partnership on ertugliflozin does not include Japan), and Lexicon and Novartis also have SGLT-2 inhibitors or SGLT-1/SGLT-2 dual inhibitors in late stages of development.
    • Notably, Merck once again spoke explicitly about the potential of ertugliflozin/sitagliptin fixed-dose combinations. Management cited the combination as a way to enhance the relevance and growth of Januvia in the future, and stated that ertugliflozin’s properties could be conducive to a FDC. An ertugliflozin/sitagliptin FDC is still years away, while Lilly/BI’s phase 3 empagliflozin/linagliptin FDC is on track for a potential regulatory submission in late 2014 (for more details on the latter combination, please see our report of Lilly’s Investor Community Meeting at, and BMS/AZ’s Forxiga/Onglyza could be submitted in 2015.
    • Currently, there is one phase 3 trial for ertugliflozin listed on (Identifier: NCT01958671). The 52-week multicenter study is composed of a 26-week placebo-controlled phase and a subsequent 26-week active-control phase (metformin as the comparator). Merck and Pfizer plan to enroll approximately 450 type 2 diabetes patients in the study, which is scheduled to finish in August 2015. We imagine that Merck and Pfizer will register additional phase 3 trials in coming months.
    • In late September, Merck and Pfizer registered a phase 1 study of ertugliflozin in type 2 diabetes patients with renal impairment. The study will enroll 40 type patients with mild to moderate renal impairment and is scheduled to finish in June 2014 ( Identifier: NCT01948986). We presume that Merck and Pfizer are preparing for questions from regulators on renal safety. J&J’s Invokana (canagliflozin) and BMS/AZ’s Forxiga (dapagliflozin) require dose adjustments or are contraindicated in patients with moderate to severe renal impairment, while phase 3 results indicate that BI/Lilly’s empagliflozin is safe (albeit slightly less effective) in patients with moderate renal impairment. Renal safety could represent an area of potential differentiation for SGLT inhibitors - earlier this month, Lexicon announced that its SGLT-1/SGLT-2 dual inhibitor candidate LX4211 was effective and safe in patients with stage 3-4 chronic kidney disease (for our take on the data, please read item #3 of our October 1, 2013 Closer Look at
  • Management briefly discussed MK-3102, the company’s once-weekly DPP-4 inhibitor candidate. Merck sees MK-3102 as an important compound that could facilitate earlier treatment on DPP-4 inhibitors. However, no updates were provided on the candidate’s phase 3 program during the call or in the supplemental presentation materials.
    • Merck has 11 phase 3 studies for MK-3102 registered on The first estimated primary completion is set for April 2014, and the last (a CVOT) set for October 2017. These studies, listed in order of time to primary completion, are 1) MK-3102 compared to Januvia and placebo in Japanese patients with type 2 diabetes ( Identifier NCT01703221; active, not recruiting); 2) MK-3102 as a second-line add on to oral therapy compared to placebo in Japanese patients with type 2 diabetes (NCT01697592; active, not recruiting); 3) MK-3102 vs. placebo as a third-line add-on to metformin and a sulfonylurea (NCT01704261; recruiting); 4) MK-3102 vs. glimepiride as an add-on to metformin (NCT01682759; recruiting); 5) MK-3102 vs. sitagliptin as an add-on to metformin (NCT01841697; recruiting) 6) MK-3102 as first-line monotherapy vs. placebo (NCT01717313; recruiting); 7) MK-3102 in people with moderate or severe chronic kidney disease or kidney failure on dialysis (NCT01698775; recruiting); 8) MK-3102’s safety and efficacy as an add-on to metformin vs. placebo for 24 weeks and then vs. sulfonylurea for 80 weeks (NCT01755156; recruiting); 9) MK-3102 safety and efficacy in patients age 18 to 45 (NCT01814748; recruiting); 10) cardiovascular outcomes associated with MK-3102 use (NCT01703208; recruiting); and 11) MK-3102’s safety and efficacy versus glimepiride in patients who cannot take metformin (NCT01863667). This last study is interesting, as it lines up with Merck’s stated goal of moving patients from sulfonylureas to DPP-3 inhibitors; unfortunately, the expected end date was postponed to April 2017 (from a planned date of October 2016 during Merck’s 2Q13 update).
    • As background, results of a discrete-choice experiment on oral antihyperglycemics (sponsored by Merck) were presented at ADA this year: the results of the market research do not necessarily bode well for MK-3102. Dr. Brett Hauber (RTI Health Solutions, Durham, NC), who directed the study and presented the results, shared that 67% of patients (especially the young and treatment naïve) preferred once-weekly to daily administration, but that the average patient was only willing to pay $5.86 more per month for a once-weekly agent. We wonder if payers might be willing to pay more than an addition $5 per month, if once-weekly administration is associated with improved adherence and therefore better real world efficacy. We suspect Merck believes this is the case, since we think that Merck will find it unpalatable to market the agent at only $5 more per month. Additionally, we anticipate that Merck might target the young and treatment naïve when it launches MK-3102, who may be willing to pay more out of pocket for the once-weekly administration. Indeed, targeting younger groups may help MK-3102 capture a demographic for whom resistance to once-daily treatment represented a barrier to Januvia uptake. For more information on Dr. Hauber’s presentation, please see page 10 of our ADA 2013 Report at
  • Merck is also developing a candidate for painful diabetic neuropathy (MK- 6096). The field of diabetic neuropathy has been relatively active of late, with the launch of NeuroMetrix’s Sensus transcutaneous electrical nerve stimulator (TENS) device in January and the approval of J&J’s Nucynta ER (extended-release tapentadol) for this indication last year. indicates that a phase 2 study on the candidate was completed in April – results have not yet been made available ( Identifier: NCT01564459). For more details on this trial, please see our Merck 1Q13 report at

We remain eager to hear about progress in the company’s SmartCells glucose-responsive insulin program, given its exciting potential for both type 1 and type 2 diabetes patients. We believe that SmartInsulin (the specific candidate) remains in preclinical development. As a reminder, Merck acquired SmartCells in December 2010 - for more on that acquisition, please see our coverage of the deal at


Development Updates: Sitagliptin

  • Merck did not provide any updates on Merck’s ongoing pursuit of a pediatric indication for sitagliptin and associated co-therapies. There is a definite need for more pharmacotherapy options in pediatric type 2 diabetes care, given that the only major, on-label option available now is metformin. More specifically, we believe that a DPP-4 inhibitor would likely be a good fit for pediatric populations, given its relatively easy administration. However, as Dr. Philip Zeitler (University of Colorado, Aurora, CO) pointed out at this year’s Keystone conference, clinical trials in pediatric type 2 diabetes generally struggle due to poor enrollment. Dr. Zeitler hypothesized that many to all of the pediatric trials in type 2 diabetes will fail to demonstrate significant efficacy due to this poor enrollment. We hope that Merck’s scientific team finds a way around this obstacle.
    • Three active studies are investigating the use of Janumet (also known as MK-0431A), in pediatric populations. A phase 1 study ( Identifier: NCT01557504) assessing the pharmacokinetics and swallowing tolerability of the candidate is currently recruiting. It is scheduled to end in November 2013. Two phase 3 trials investigating the safety and efficacy of Janumet are also recruiting: the first tests the basic formulation, and is scheduled to end in December 2017 (Identifier: NCT01472367); the second uses metformin extended release, and has a scheduled primary completion date of January 2016 (Identifier: NCT01760447).
    • Merck is also conducting a phase 3 study investigating the safety and efficacy of Januvia as an initial monotherapy for children with type 2 diabetes. The trial ( Identifier: NCT01485614) is currently recruiting, and is estimated to end in November 2017 (moved up from the 2Q13 deadline of July 2018). An indication for sitagliptin as a first-line therapy will likely be a tougher sell to payers than an indication for an FDC with metformin, given that most people with type 2 diabetes (pediatric and adult) start on the much cheaper metformin, though it could an important option for children who do not tolerate metformin.
  • Merck’s pipeline also reflects its interest in gaining reimbursement in China, which has the largest number of people with type 2 diabetes in the world. Early meta-analyses indicate that DPP-4 inhibitors might have significantly greater efficacy in East Asian populations than in Caucasian populations, with an average A1c differential of 0.24%. If confirmed by future studies, this finding could enhance the potential of Merck’s DPP-4 inhibitor in this market.
    • To the best of our knowledge, three ongoing trials are investigating the use of sitagliptin in China. The studies will not only provide valuable data on the efficacy and safety profiles of sitagliptin in Chinese populations, but will also include comparators that are more frequently prescribed in China (such as SFUs and acarbose). One phase 3 study aims to evaluate the safety and efficacy of adding sitagliptin to stable-dosage insulin therapy with or without metformin ( Identifier: NCT01590797; recruiting). A second phase 3 study will investigate the usage of sitagliptin as an add-on to SFU treatment, again with or without metformin (NCT01590771; recruiting). The first study is scheduled to end in August 2014, the second in July 2014. A phase 4 study will test the safety and efficacy of adding glimepiride, gliclazide, repaglinide, or acarbose to Janumet (sitagliptin/metformin FDC) therapy (NCT01709305). The study is scheduled to run until May 2015. We are interested in knowing why Merck is testing a number of existing drugs as add-ons to the chief therapeutic candidate, and not the other way around. The decision may anticipate the need for patients to be placed on additional agents given the modest efficacy of the DPP-4 inhibitor class and the progressive nature of type 2 diabetes.
  • Other active sitagliptin trials include: TECOS (sitagliptin’s CVOT, estimated to end in December 2014; Identifier: NCT00790205), a phase 3 study of a sitagliptin/simvastatin FDC in type 2 diabetes patients (NCT01678820; recruitment completed; scheduled primary completion in November 2013), and a study assessing the safety and efficacy of the drug in type 2 diabetes patients who have recently undergone a gastric bypass operation (NCT01512797; recruiting; scheduled completion in April 2015).


Questions and Answers

Q: Is 2014 shaping up to be a better or worse year from a rebating and discounting standpoint for Januvia relative to 2013? I believe a fourth competitor was coming into the mix as contracting was being done for 2013.

A: If you look at where we are today, we have about 80% access in managed care. We have a very strong formulary position, and we believe
that we will have a similarly strong formulary position in 2014 with greater than 80% access. And as to rebates
and discounting, we’ll continue to be aggressive in the marketplace; we’re going to maintain a
very strong access position for Januvia in 2014.

Q: Regarding the Januvia franchise, can you provide more granularity on what you’re seeing in terms of volume and price, and where you expect your 70% share to go?

A: I’m going to start first at a high level and a global high level, which says and is clear that diabetes is a growing epidemic, that it is a significant concern in almost every market around the world including the US. And if you talk to any government, they would tell you that they’re very concerned about the growth of expenditures due to diabetic patients. So the market underlying demographics remain very strong.

If you look at the US, we had a decline of 8% year-over-year, but that was almost entirely due to customer inventory levels where we saw a greater than $60 million decrease. If you focus on TRx volume in the US, you saw about a 2% decline in volume. We did see a benefit from price, but with the continued pressure on rebates and discounts, we saw several percentage points that could be attributed to price.

When you think about guidance in the US, what you’re seeing is that it’s very difficult to predict the channel movements. Last quarter we had 9% growth, this quarter we had minus 8%, and that’s primarily due to the changes in wholesalers and channels. So what I am focusing on is putting the right resources behind Januvia in order to change the current TRx trend. I believe the most important thing to watch is the TRx trend. And what we need to do as we go into 2014 is to ensure that we don’t continue to see TRx volume losses.

The fact that we still have greater than 70% market share despite four DPP-4 inhibitors on the market tells you that we have a very strong position. We are losing a little bit of market share each month, but you would expect that with four competitors. The real key is that the DPP-4 market and the branded oral anti-diabetic market isn’t growing. Typically when you have four or five new branded products in the market, you see growth in the market and you see expansion of the market. We’re not seeing that right now in the US. So we have to focus on moving patients that are currently on sulfonylureas to Januvia or make sure that Januvia is seen as the likely next step after metformin, before sulfonylureas.

Outside the US it’s a very different story: we still have about 70% market share. We saw 15% growth YOY and, despite losing a little bit of market share in markets here and there, the overall market is continuing to grow. So with the market growth that we’re seeing outside the US, we’re still able to see very strong volume growth despite losing a small amount of market share.

Q: You said that the Januvia and Janumet script volume must grow. Given the SAVOR data from one of your competitors – which didn’t exactly enhance the outlook for the class – and given the competitive pressures, what is going to drive that TRx growth? Presumably it’s not marketing. You’ve got the SGLT-2 combination, but that’s still somewhat far off.

A: Currently, if you look at the IMS data, on a weekly basis we’re seeing about a 2% to 2.5% decline in TRx volume. And I would encourage you to focus on the TRx volume because that’s what is most closely correlated to overall sales. In order for us to grow for next year, what we have to do is see a change in that volume. If that volume continues to decline, obviously it’s going to be a problem for us to grow. I do think there are some things that we’re doing right now in order to help us find ways to grow. And I’ll give you a few examples.

Number one, we’ve spent a lot of our time defending our market share versus the competition. And I think we’ve done a very good job of defending our market share, by the fact that in the US, we have well over 70% share, and actually closer to 75% share of the DPP-4 class. What we have not been able to do is to get the class to grow by moving patients from sulfonylureas or to use DPP-4 inhibitors prior to sulfonylureas. I think that our sales forces have been distracted by focusing on market share. We now have representatives that are solely dedicated to focusing on market growth and trying to move share from sulfonylureas to Januvia. And I think that should help us. In addition to that, we’ve seen the impact of the new competitors, and I think for the most part they’ve begun to level off. So I think that now we can start to focus again away from market share and more market growth.

Regarding outcomes trials, I think that any positive outcomes trials in the DPP-4 inhibitor class should help the entire class. And as you may recall, our TECOS study will read out at the end of 2014. The other thing that we have on the horizon is MK-3102, which I believe will be a very important compound and potentially could help people start on a DPP-4 inhibitor even earlier than they do today. We also have an SGLT-2 inhibitor as well as an SGLT-2 combination with Januvia. So I believe the diabetes class is an important one for us today and it will be important for us in the future. Today it’s about maximizing Januvia and trying to move business from sulfonylureas over to Januvia. In the future, we’ll be able to utilize MK-3102 as well as the SGLT-2 inhibitor and its combination.

We are very focused on strengthening Januvia in the United States for all the reasons just stated. But it’s also important to remember that we have other sets of opportunities in our portfolio, including vaccines, immunology, HIV, and others.

Q: Could you provide an update on MK-1293, your insulin glargine me-too that was moving into late-stage testing? Are you moving forward or divesting it? And also, could you comment on the insulin facility that you recently completed building in Virginia?

A: We have been looking at a variety of different ways to assist in the therapy of patients with diabetes. We haven’t disclosed any information about how we might move forward in that area, so I really don’t have any comments about that.


--by Manu Venkat, Hannah Deming, and Kelly Close