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Merck's (MRK) Stock Up on Januvia Patent Win Against Viatris

Merck’s MRK stock was up 3.5% on Thursday after a U.S. district court ruled in its favor in a patent infringement lawsuit against Viatris VTRS related to sitagliptin. Sitagliptin is the active ingredient in Merck’s diabetes medicines, Januvia, Janumet and Janumet XR.    

Viatris is looking for FDA approval for its generic versions of Januvia and Janumet in the United States.

The lawsuit involves two patents, one (7,326,708) covering the phosphate salt of sitagliptin and the other (8,414,921) covering the co-formulation of sitagliptin and metformin found in Janumet. While the phosphate salt patent is set to expire on Nov 24, 2026, the co-formulation patent will expire on Jan 21, 2029. The U.S. District Court for the Northern District of West Virginia ruled in Merck’s favor by saying that Viatris infringed on these patents.

Merck’s stock has risen 14.2% this year so far against a decrease of 6.5% for the industry.

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Earlier, the U.S. Patent Office issued a ruling in Merck’s favor in 2021 in an Inter Parties Review filed by Viatris challenging sitagliptin’s salt patent. Viatris has filed an appeal in the Court of Appeals 

Separately, Merck has signed settlement agreements with multiple generic companies to allow them to launch their generic version of Januvia/Janumet in May 2026 or earlier under some circumstances.

Januvia/Janumet (diabetes) recorded sales of $1.23 billion in the second quarter of 2022, rising 3%, excluding the impact of currency. The drugs lost market exclusivity in China in July and are set to lose market exclusivity in the European Union in September. This may lead to generic entry hurting international sales significantly. However, the patent win in the United States may delay the generic entry in the country for a while now.

Zacks Rank & Stocks to Consider

Merck currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are Morphic MORF and Agenus AGEN, both carrying a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, estimates for Morphic’s 2022 loss per share have narrowed from $3.38 to $1.80. Loss estimates for 2023 have narrowed from $3.91 to $3.62 during the same period. Shares of Morphic have lost 43.2% in the year-to-date period.

Earnings of Morphic beat estimates in three of the last four quarters and missed the mark just once, witnessing a surprise of 48.29%, on average.

Estimates for Agenus’ 2022 bottom line have narrowed from a loss of 89 cents to 70 cents in the past 60 days. Loss estimates for 2023 have narrowed from 64 cents per share to 60 cents per share over the same time frame. Agenus’ stock is down 30.4% in the year-to-date period.

Earnings of Agenus beat estimates in three of the last four quarters while missing in one. The stock delivered a four-quarter average negative surprise of 12.02%.

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