What's Driving Merck's Valuation in 2017? PART 6 OF 9

Remicade, one of the top-selling drugs for the treatment of inflammatory disorders, is losing its market share after the loss of exclusivity in European markets in 2015. Merck (MRK) has reported a constant decline in Remicade revenues. Apart from Merck, Johnson and Johnson (JNJ) also has marketing rights of Remicadein certain countries outside Europe.

Remicade revenues fell ~29% to $1.3 billion in 2016 as compared to $1.8 billion for 2015. The fall was mainly due to the entry of generic competitors and biosimilars following the loss of exclusivity in European markets. Merck expects Remicade revenues to fall further in the future as new patients prefer biosimilars over Remicade.

Simponi is another drug in the immunology franchise. Simponi revenues rose 11% to $766 million in 2016 as compared to $690 million for 2015.

Zetia and Vytorin are blockbuster drugs from Mercks cardiovascular portfolio. Both of these drugs are used to lower the LDL cholesterol levels in the blood. The combined revenues for these drugs fell to $3.70 billion in 2016. Global sales were affected due to the loss of exclusivity of Vytorin in the US, while Zetia sales improved 1% for 2016 as compared to 2015.

The competitors for Zetia include Niaspan from AbbVie (ABBV) and Lipitor from Pfizer (PFE). To divest the risk, investors can consider ETFs like the Health Care Select Sector SPDR ETF (XLV), which holds 6.3% of its total assets in Merck.

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How Decline in Remicade Is Affecting Merck's Immunology Revenues - Market Realist