The exterior view of the entrance to Merck's headquarters in Rahway, New Jersey, on February 5, 2024.
Spencer Platt |
Merck reported second-quarter revenue and adjusted profit on Tuesday that beat Wall Street expectations, reflecting strong sales of its hit cancer drug Keytruda, as well as other treatments in its oncology and vaccines portfolio and a newly launched cardiovascular drug.
The pharmaceutical giant also raised its full-year revenue forecast to $63.4 billion to $64.4 billion as demand for key products, particularly cancer drugs, has increased. That's only slightly higher than the $63.1 billion to $64.3 billion forecast the company gave in April.
Merck lowered its adjusted earnings forecast to $7.94 to $8.04 per share from $8.53 to $8.65 per share. The updated forecast takes into account one-time costs of 26 cents and 51 cents per share for the acquisitions of Harpoon Therapeutics and EyeBio, respectively, Merck said.
Nevertheless, Merck shares closed about 9 percent lower on Tuesday as investors apparently pondered lower-than-expected sales of Gardasil, a vaccine that protects against cancer caused by HPV, the most common sexually transmitted infection in the United States. Merck cited supply problems in China, where a significant portion of the vaccine's international sales are made.
Here's what Merck reported for the second quarter, compared to Wall Street expectations, based on an analyst survey conducted by LSEG:
- Earnings per share: USD 2.28 adjusted versus USD 2.15 expected
- Revenue: $16.11 billion compared to expected $15.84 billion
The pharmaceutical company reported a net profit of $5.46 billion, or $2.14 per share, in the second quarter. In the same period last year, the company reported a net loss of $5.98 billion, or $2.35 per share. This also included costs related to the acquisition of Prometheus Biosciences.
Excluding acquisition and restructuring costs, the company earned $2.28 per share in the three-month period.
Merck reported sales of $16.11 billion for the quarter, up 7% from the same period last year.
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The results come at a time when Merck is preparing to offset losses from the expiration of the Keytruda patent in 2028 by signing some new contracts and bringing key medicines to market.
These include Winrevair, a drug approved in the United States in March to treat a progressive and life-threatening lung disease. Some analysts estimate that global sales of Winrevair could reach $5 billion by 2030.
This includes Capvaxive, a vaccine designed to protect adults against pneumococcal bacteria that can cause serious illness and lung infections. The vaccine was approved in the United States last month.
Sales of pharmaceuticals exceed estimates
Merck's pharmaceutical division posted sales of $14.41 billion in the second quarter, 7 percent more than in the same period last year. The division develops a wide range of drugs for different disease areas.
The company's immunotherapy drug Keytruda generated sales of $7.27 billion in the quarter, up 16 percent from the same period last year. Analysts had expected sales of $7.12 billion for Keytruda, according to estimates from StreetAccount.
The increase was due to increased use of Keytruda in early-stage cancer and strong demand in metastatic cancer, which spreads to other parts of the body, the company's chief financial officer, Caroline Litchfield, said during a conference call on Tuesday.
Gardasil posted sales of $2.48 billion, up just 1% from the second quarter of 2023. Merck said growth was driven by higher prices in the U.S. but was held back by lower sales in China due to delivery timing.
“As soon as we know more, we will evaluate future deliveries to our partner and work to restore their inventory to more normal levels,” Litchfield said.
According to StreetAccount, segment results were slightly below the $2.51 billion expected by analysts.
Winrevair reported second-quarter sales of $70 million following its approval in March. Analysts had expected the drug to generate sales of $59.4 million.
Merck estimates that about 40 percent of Winrevair sales are for doses given to U.S. patients, with the rest coming from distributors building up inventory of the drug, Litchfield said. She noted that more than 1,000 patients started Winrevair in the second quarter, largely due to prescriptions filled in April and May.
Meanwhile, type 2 diabetes drug Januvia posted sales of $629 million, down 27 percent from the same period last year. Merck said the decline was mainly due to lower demand and lower prices for the drug, along with competition from generics in several countries.
Januvia is one of 10 drugs that are the subject of ongoing Medicare price negotiations, a policy designed to make expensive drugs more affordable for seniors. Those price negotiations, a key provision of President Joe Biden's inflation-fighting bill, end in early August.
Sales of Merck's antiviral Covid pill Lagevrio also fell, by 46% to $110 million in the quarter, but that still beat analysts' expectations of sales of $81.5 million, according to StreetAccount.
Merck's animal health division, which develops vaccines and medicines for dogs, cats and cattle, reported second-quarter sales of $1.48 billion, up 2 percent from the same period last year and slightly less than analysts surveyed by StreetAccount had expected.
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