Merck (MRK) Earnings Report Q1 2023
note on Thursday reported first-quarter sales and adjusted earnings that beat Wall Street expectations, despite a sharp drop in sales of its Covid antiviral treatment molnupiravir.
Sales of molnupiravir collapsed to $392 million during the period, down 88% from the $3.2 billion reported for the first quarter of 2022. Merck said the decline was primarily due to lower sales in the US, UK, Japan and Australia.
The company reported total revenue of $14.5 billion for the quarter, down 9% year over year. But excluding the Covid drug, Merck said its sales were up 11%.
Here’s what Merck reported versus Wall Street expectations, based on a poll of analysts by Refinitiv:
- Earnings per share: Adjusted $1.40 versus $1.32 expected
- Revenue: $14.49 billion versus $13.78 billion expected
Merck stock closed more than 1% higher on Thursday. Shares are up more than 3% for the year, putting the company’s market value at more than $292 billion.
The pharma giant posted net income of $2.82 billion, or $1.11 per share. That compares to $4.31 billion, or $1.70 per share, for the same period a year ago.
Excluding certain items, Merck’s adjusted earnings per share for the period were $1.40. This includes charges of 52 cents related to Merck’s acquisition of cancer drug developer Imago BioSciences last year.
The Rahway, NJ-based company raised its 2023 revenue guidance to between $57.7 billion and $58.9 billion, slightly ahead of the $57.2 billion to $58.7 billion it provided earlier in February. The increased projections include sales of molnupiravir of approximately $1 billion.
The company also raised its full-year adjusted earnings outlook to $6.88 to $7.00 per share from a previous guidance of $6.80 to $6.95 per share.
The guidance does not reflect any financial impact from Merck’s proposed acquisition of biotech company Prometheus Biosciences earlier this month, the company noted. Merck said the deal is expected to close in the third quarter of 2023.
Merck’s Covid treatment molnupiravir first came to market after the Food and Drug Administration approved the pill for certain adults in December 2021. Once hailed as a breakthrough treatment for Covid-19, Merck signed multiple contracts to supply millions of courses of the drug to the US government and other nations.
But Merck and drug manufacturers such as Pfizer, Modern And Johnson&Johnson have braced themselves for a drop in Covid-related sales this year as the world emerges from the pandemic with less reliance on blockbuster vaccines and treatments.
Molnupiravir weighed on sales of Merck’s pharmaceuticals business, which fell 10% to $12.7 billion compared to the first quarter of 2022. Excluding molnupiravir, pharmaceutical sales increased by 14%.
Merck said diabetes treatments also drove the sales decline. Sales of sitagliptin and a related diabetes drug fell 29% to $880 million, mainly due to generic competition in several international markets and lower demand and prices in the U.S
But Merck’s pharmaceutical unit saw higher sales of Gardasil, Merck’s vaccine that prevents cancer caused by HPV. The company said revenue for the shot rose 35% to $2 billion, reflecting strong demand outside the US, particularly in China.
Sales of blockbuster antibody treatment Keytruda also rose 20% in the quarter to $5.8 billion. Keytruda is used to treat different types of cancer, including certain types of breast cancer and skin cancer.
Caroline Litchfield, Merck’s CFO, said Thursday when announcing the company’s results that the drugmaker expects continued strong growth from Keytruda. However, she noted that Keytruda’s pricing “is an increasing headwind,” especially as Merck rolls out new indications for the drug in key European markets.
The company has been under pressure to reduce its reliance on Keytruda, which is expected to lose patent protection in 2028. Merck highlighted some of its efforts to cushion this patent loss and expand its drug pipeline during the conference call.
Dean Li, President of Merck Research Laboratories, highlighted the acquisition of Prometheus Biosciences. He said the deal will bring a promising experimental treatment for ulcerative colitis and Crohn’s disease that will expand Merck’s footprint in immunology.
“By combining Prometheus’ deep understanding of inflammatory bowel disease and Merck’s deep expertise in developing and implementing biomarkers, we hope to usher in a new era in immunology where patients receive the right therapy based on a precision medicine approach,” said Li during the call.
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