The exterior view of the entrance to Merck headquarters in Rahway, New Jersey, on February 5, 2024.
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Merck reported third-quarter revenue and adjusted earnings on Thursday that beat expectations as the company posted strong sales from its top-selling cancer drug Keytruda, recently launched treatments and its animal health business.
But Merck's vaccine, which prevents cancer caused by HPV, the most common sexually transmitted infection in the U.S., posted another quarter of lower-than-expected sales. Sales of the Gardasil vaccine fell 11% compared to the same period last year.
The pharmaceutical giant lowered its full-year revenue forecast to a range of $63.6 billion to $64.1 billion from a previous forecast of $63.4 billion to $64.4 billion.
Merck also cut its adjusted earnings forecast to a range of $7.72 to $7.77 per share, from a previous forecast of $7.94 to $8.04 per share. This updated outlook reflects a one-time charge of 24 cents per share related to business development agreements with Curon Biopharmaceutical and Daiichi Sankyo.
Shares of Merck fell nearly 3% on Thursday.
Here's what Merck reported for the third quarter compared to Wall Street's expectations, based on an analyst survey from LSEG:
- Earnings per share: $1.57 adjusted vs. $1.50 expected
- Revenue: $16.66 billion versus expected $16.46 billion
Merck posted third-quarter net income of $3.16 billion, or $1.24 per share. In comparison, net income in the year-ago period was $4.75 billion, or $1.86 per share.
Excluding acquisition and restructuring costs, Merck earned $1.57 per share in the three-month period.
The company reported third-quarter revenue of $16.66 billion, up 4% from the same period last year.
The findings come as Merck is making significant progress in preparing for Keytruda's patent expiration in 2028. Losing exclusive rights to the drug will likely lead to a decline in sales and force the company to draw revenue from other sources.
Merck has a handful of new deals and major drug launches in its books that will help it offset those losses. This includes Winrevair, a drug approved in the US in March to treat a progressive and life-threatening lung disease.
And Capvaxive, a vaccine designed to protect adults against a bacteria called pneumococcus that can cause serious illness and lung infections, was approved in the U.S. in June.
The company's pipeline of late-stage drugs has nearly tripled in the past three years or so to more than 20 unique products, Merck CEO Rob Davis said during a conference call Thursday.
He said this will lead to a significant number of drug and vaccine launches over the next five years, most of which have “blockbuster-plus potential”. Blockbuster drugs generate at least $1 billion in annual sales.
Pharmaceutical unit beats estimates
Merck's pharmaceutical division, which develops a wide range of drugs, posted third-quarter sales of $14.94 billion, up 5% from the same period last year.
The company's immunotherapy drug Keytruda posted revenue of $7.43 billion in the quarter, up 17% from the year-ago period. Analysts had expected Keytruda sales of $7.33 billion, according to StreetAccount estimates.
This increase was due to higher uptake of Keytruda in early-stage cancers and strong demand for the drug against metastatic cancers that spread to other parts of the body.
Gardasil had sales of $2.31 billion. Merck said the decline was primarily due to lower demand in China compared to the same period last year. This was partially offset by higher sales in the US
That's below the $2.51 billion analysts were expecting, according to StreetAccount.
Davis said the company is “heavily focused” on the China market and is moving forward with its commercialization partner Zhifei to increase Gardasil promotional and patient education efforts.
“We expect these efforts will result in increased patient activation and demand, but as we said, this will take time,” Davis said.
Davis said Merck was confident in Gardasil's long-term prospects given that less than 10% of the eligible population worldwide has been vaccinated. The company expects to reach its goal of global Gardasil sales of $11 billion by 2030.
After approval in March, Winrevair reported third-quarter revenue of $149 million. Analysts had expected sales of $127 million.
About 1,700 people received a Winrevair prescription during the quarter, bringing the total number of new patient prescriptions since the drug's launch to 3,700, Merck CFO Caroline Litchfield said during the call. The company estimates that about 80% of these patients receive the actual drug.
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The company's type 2 diabetes drug Januvia posted sales of $482 million, down 42% from the same period last year. Merck said the decline was primarily due to lower drug prices in the U.S. as well as competition from generics in several countries.
According to StreetAccount, analysts had expected sales of $610 million.
Januvia is one of 10 drugs that are the subject of ongoing Medicare pricing negotiations, a policy aimed at making expensive drugs more affordable for seniors. Those price negotiations, a key provision of President Joe Biden's Inflation Reduction Act, will end in early August.
Sales of Merck's antiviral Covid pill Lagevrio also fell 40% to $383 million in the quarter.
However, according to StreetAccount, this beat analysts' expectations with revenue of $124.2 million.
Merck's animal health division, which develops vaccines and medications for dogs, cats and cattle, posted third-quarter sales of $1.49 billion. This is 6% more than in the same period last year and is slightly above the expectations of analysts surveyed by StreetAccount.
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