A Close Look at Merck & Co.s Valuation after 1Q17 Earnings PART 7 OF 8

Merck & Co.s (MRK) immunology franchise includes the drugs Remicade and Simponi. Remicade is a drug for the treatment of inflammatory disorders. Merck markets Remicade in Europe, Russia, and Turkey. Johnson & Johnson (JNJ) has the marketing rights for Remicade in a few countries outside Europe.

Remicade revenues fell ~34.0% to $229.0 million in 1Q17 compared to $349.0 million for 1Q16. That was mainly due to the entrance of generic competitors and biosimilars following the loss of exclusivity in European markets. The drug lost its exclusivity in European markets in February 2015. Remicade revenues have fallen consistently since the loss of exclusivity, and Merck expects Remicade revenues to fall further as new patients prefer biosimilars over Remicade.

Simponi is a once-monthly drug for the treatment of certain inflammatory diseases. Merck markets Simponi in Europe, Turkey, and Russia. The revenues for Simponi fell ~2.0% to $184.0 million in 1Q17 compared to $188.0 million in 1Q16.

Mercks cardiovascular franchise includes the drugs Zetia, Vytorin, Liptruzet, and Adempas. The blockbuster drugs Zetia and Vytorin are used to lower the LDL (low-density lipoprotein) cholesterol levels in the blood.The combined revenues for these drugs fell 35.0% to $575.0 million in 1Q17 compared to $889.0 million in 1Q16.

Liptruzet reported growth in revenues to $49.0 million in 1Q17 compared to $23.0 million in 1Q16. Adempas reported revenues of $84.0 million in 1Q17 compared to $33.0 million in 1Q16.

To divest the risk, you can consider the SPDR S&P Pharmaceuticals ETF (XPH), which holds ~4.6% of its total assets in Merck & Co. XPH also holds 5.1% of its total assets in Eli Lilly (LLY), 4.6% in Johnson & Johnson (JNJ), and 4.5% in Pfizer (PFE).

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Merck's Immunology and Cardiovascular Franchise in 1Q17 - Market Realist