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Tuesday, October 17, 2006

What Will Januvia's Approval Add To Merck's Bottom-Line?

Merck (MRK) finally received approval for its Januvia (R) this morning. This pill is aimed to help Type II Diabetes patients help control their blood sugar levels. Merck (MRK) shares are trading essentially flat on a "sell the news" trade because this was largely anticipated.

Januvia is the first FDA-approved drug in the DPP-4 inhibitor class, and would be taken orally in a 100 mg pill once a day.

This is expected to be a Blockbuster drug for Merck, meaning it will have annual sales in excess of $1 Billion. Deutsche Bank projects that this could reach $2 Billion in annual sales alone by 2010. Natexis Bleichroeder has projected that this could see $1.6 Billion in annual sales by 2010. For a comparison to how this rates up, Wall Street expects Merck's revenues for 2006 to be about $21.3 Billion.

Each pill is expected to run just under $5.00 per dosage ($4.86), or $145.80 per month. Merck noted that there are 21 million people with diabetes in the US alone, and 90% to 95% are believed to be Type II diabetes. This is considered a holy grail for diabetic treatment because of the lack of side effects associated with many other comparable treatments.

The expected date that samples will start getting to doctors and pharmacies will be "in the near future" according to the company press release. Now Novartis (NVS) is on deck for its competing experimental drug Galvus, which is up for review as soon as next month.

MRK is trading essentially flat on the day, up only $0.04 at $43.80. Its 52-week trading range is $26.13 to $44.18; and its lowest close since September 1, 2006 is $40.64 on an adjusted basis; MRK's market cap is $95 Billion.

NVS shares are also down marginally, down $0.08 at $57.46; its 52-week trading range is $50.69 to $59.14; and its market cap is $135 Billion based on ADR and currency conversions.

Jon C. Ogg
October 17, 2006

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