Merck & Co Inc. Earnings Call Nuggets: Animal Health and Consumer, JANUVIA Competitive Dynamics

On Friday, Merck & Co Inc (NYSE:MRK) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Animal Health and Consumer

Jami Rubin – Goldman Sachs: Ken just a first one for you. In calling out the strong performance of Animal Health and Consumer, are you saying that you are committed to keeping these businesses, or are you considering or would you consider monetizing these assets, which would more than likely trade at much higher multiples than where Merck currently trades, as we’ve seen with a recent disposal on this business? My second question is to Adam. Adam, there was clearly a lot of very exciting data presented at EASL last week in Barcelona, which would suggest a very high bar to compete in an all oral hepatitis C regimen. In light of that, can you just elaborate again on your plans for MK-5172, many of your competitors have been busy collaborating and partnering and we have seen a less of that activity with you. But if you can just sort of put that into perspective?

Merck Earnings Cheat Sheet>>

Kenneth C. Frazier – President and CEO: What I would say is that first of all, we as I said a few minutes ago, we are pleased with the assets that we have in the company’s business portfolio and we believe that both Animal Health and Consumer Care complement our Human Health business and contribute to the top and bottom line growth, and you saw this quarter Consumer Care grew 7%, Animal Health grew 8%. So I think what we’re trying to do around here, is focus on creating long-term shareholder value and we believe that both Animal Health and Consumer Care can help contribute to that. For us though, I think we believe that our R&D pipeline is the most undervalued and underappreciated part of our business and we are committed to unlocking the value that we believe that pipeline represents and data from important clinical trials that are coming due in 2012 and 2013 should help in that regard. So once again, what we are trying to do is to create long-term shareholder value. We look at our assets and we try to determine, where we can create the most value going forward. Jami, with regard to your question. So first of all, there was a lot of interesting assets in HCV as the science continues to move forward and as you look for shorter better tolerated more effective therapies, it was actually exciting at Easel for sure and what Easel did, showed us that there’s a need for multiple mechanisms and that there is room for improvement. Our hepatitis C strategy in the short-term is to maximize VICTRELIS. It’s remarkable to think that we can now get up to 70% cure rate and thinking just several years ago that cure rate was closer to 35%, so we basically doubled the cure rate, but we’re also aggressively pursuing new more convenient and interferon-free therapies, we’re focusing on MK-5172 in combination with other internal candidates , so you saw NS5A data in phase 1, but we’re also looking for partnerships with others. So it goes to develop an all oral regimen, we want to maximize SVR, shorten duration of therapy and minimize side effects and we believe that 5172 has a great profile and it could be the partner protease inhibitor of choice for oral combination regimens and we don’t comment on our business development, but as you can imagine, we’re in discussions with multiple potential opportunities.

JANUVIA Competitive Dynamics

Chris Schott – JP Morgan: Just two questions here. May be first talking about the JANUVIA competitive dynamics. I guess we haven’t seen a lot of large categories particular primary care with multiple competitors where you get one asset holding the vast majority of market share, same time we haven’t seen a lot of attraction from (indiscernible), we have seen the Alogliptin delay. I guess, longer term, do you think Merck can hold this high level of share in the category, or do we inevitably see a shift to a less consolidated market share position over time? The second question is on ISENTRESS, how are you thinking about competitive dynamics, as we look out a few years, with a potential once-daily product coming to market? Do you believe, you can continue to grow this franchise longer term, if that one (indiscernible) I guess, with comparable efficacy is approved or just how are you thinking about that product kind of progressing over time?

Kenneth C. Frazier – President and CEO: Thanks for the crisp question Chris, and I will say that long term, I do believe that Merck can continue to hold a very strong part of the DPP-4 market, despite having multiple competitors, and Adam will give you his views as to exactly why that’s the case?

Adam H. Schechter – President, Global Human Health: I think the first thing to note is, that we do have a 75% share of the DPP-4 class, and if you look at the U.S., we have an 80% share, in Japan we are about 70% a share. In some markets, we already have five competitors in that class, and we are still able to maintain our share. I think that positions are very comfortable with the efficacy profile and the safety profile of JANUVIA. If you look at the data that we have, that shows that JANUVIA maximizes the mechanism, they really see that the efficacy you can get from this mechanism, you can see from JANUVIA. When you combine that with the safety profile, you have to ask why would there be a need to use anything other than JANUVIA. The other key thing is that, (Sofanarias) still have 37% patient days of therapy. So it represents a very big opportunity for us to continue to move into other classes, and continue to have strong DPP-4 growth. Therefore I think the future potential is still very-very strong, and that’s what makes me excited about 3102 in our pipeline, because I believe, ultimately, when you move to a once-weekly DPP-4 inhibitor, that could even penetrate into other classes, such as (Sofanaria) even more. So we remain excited, we remain committed and we have significant support that we put behind JANUVIA.

Kenneth C. Frazier – President and CEO: We are going to Phase III in that in 3102 this year.

Adam H. Schechter – President, Global Human Health: We didn’t address ISENTRESS. So ISENTRESS remains a very important product and when you think about ISENTRESS, the amount of efficacy data that we have, the safety data that we have, the drug interaction data that we have, it all is very important, particularly as more and more HIV patients are living longer and I have co-morbidities, so it’s now about 70% of patients have co-morbidities while they are on ISENTRESS. I think a BID drug in this class will be okay because many of these patients are taking multiple drugs already, but in addition to that you have to trade off the long-term safety, efficacy and tolerability data you have with ISENTRESS for a newer drug with the lot of unknowns, so I believe trading of once-a-day versus a very well-known product that has a long history is not something that we’re concerned about particularly with the Quad, we think that having two drugs in the Quad of boosting agents that hasn’t been utilised or a new integrase inhibitor versus staying with ISENTRESS which has such a long data with it, will continue to be successful with ISENTRESS.