The exterior view of the entrance to Merck’s headquarters in Rahway, New Jersey, on February 5, 2024.
Spencer Platt | Getty Images
Merck on Thursday mentionted first-quarter revenue and adjusted earnings beat expectations as blockbuster cancer drug sees strong sales Keytruda and vaccine products.
The pharmaceutical giant also raised and lowered its full-year revenue and adjusted profit forecasts. Merck now expects 2024 sales to range between $63.1 billion and $64.3 billion, down from previous guidance of $62.7 billion to $64.2 billion.
The company expects full-year adjusted earnings of $8.53 to $8.65 per share, down from its previous forecast of $8.44 to $8.59 per share.
That outlook includes a one-time charge of about 26 cents per share related to Merck’s acquisition of Harpoon Therapeutics in January. The company develops immune-based cancer drugs. The guidance also includes a negative impact of 30 cents per share from currency changes.
Merck shares rose 4% on Thursday after the results.
Here’s what Merck reported for the first quarter compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $2.07 adjusted vs. $1.88 expected
- Income: $15.78 billion versus $15.20 billion expected
The company posted net income of $4.76 billion, or $1.87 per share, for the first quarter. That compares with net income of $2.82 billion, or $1.11 per share, in the year-ago period.
Excluding acquisition and restructuring costs, Merck earned $2.07 per share for the first quarter. Both adjusted and unadjusted earnings for the period include the charge related to the Harpoon deal.
Merck posted revenue of $15.78 billion for the quarter, up 9% from the same period last year.
These results come as Merck is making significant progress in preparing for Keytruda’s patent expiration in 2028. Losing exclusive rights to the drug will likely cause sales to drop, forcing the company to pull revenue elsewhere.
But Merck has a handful of new deals under its belt and major drug launches to help offset those losses. This includes Winrevair, a drug approved in the US last month to treat a progressive and life-threatening lung condition. Some analysts expect global sales of Winrevair could reach $5 billion by 2030.
Merck is seeing “high interest” in Winrevair from patient groups and a range of prescribers and is making “good progress” in providing access to the drug, Chief Financial Officer Caroline Litchfield said during an earnings call on Thursday. Several payers have already instituted coverage policies for the drug, he noted.
“We are confident in the successful launch of Winrevair in line with our previous expectations and look forward to providing updates on our progress,” said Litchfield.
Merck is also cutting costs as part of a new restructuring program it announced in February. These efforts are aimed at improving the production network of both its pharmaceutical and animal health businesses.
The company recorded $246 million in restructuring-related charges in the first quarter, which were excluded from its adjusted results.
Pharmaceutical division sales jump
Merck’s pharmaceuticals unit posted revenue of $14.01 billion in the first quarter, up 10% from the same period last year. This division develops a wide range of drugs for various disease areas, including oncology and infectious diseases.
Merck’s immunotherapy Keytruda, which is used to treat many types of cancer, has largely driven the growth. Keytruda generated revenue of $6.95 billion during the quarter, up 20% from the prior period.
Analysts had expected $6.71 billion in Keytruda sales, according to FactSet estimates.
Litchfield said the growth reflects increased uptake in patients with early-stage cancer and continued demand for treatment of metastatic cancers, which refers to when the disease has spread to a different part of the body than where it started.
Merck also reported an increase in sales of Gardasil, a vaccine that prevents cancer from HPV, the most common sexually transmitted infection in the US
Gardasil generated sales of $2.25 billion, up 14% from the first quarter of 2023. That’s in line with the $2.24 billion analysts were expecting, according to FactSet estimates.
Litchfield said the increase reflected strong demand, particularly in China.
Another vaccine called Vaxneuvance, which prevents patients from getting sick with pneumococcal disease, also saw strong growth during the quarter. The plan recorded sales of $219 million, up 106% from the prior period.
Meanwhile, Merck’s type 2 diabetes treatment Januvia generated sales of $670 million, down 24% from the same period a year ago. The company said the decline was mainly due to lower drug prices, lower demand in the US and competition from generics in many international markets.
Analysts had expected Januvia sales of $687.3 million, according to FactSet estimates.
Januvia is one of 10 drugs targeted in ongoing Medicare drug price negotiations, a policy under the Inflation Reduction Act that aims to make costly drugs more affordable for seniors.
Sales of Merck’s Covid antiviral pill Lagevrio also fell 11% to $350 million during the quarter. However, that total beat analysts’ expectations of $106.4 million in sales, according to FactSet.
Demand for Lagevrio and other Covid products from companies such as e.g Pfizer and Modern has plunged over the past year as cases and public concern about the virus have declined since the peak of the pandemic.
Merck’s animal health division, which develops vaccines and drugs for dogs, cats and cattle, posted sales of $1.51 billion for the first quarter. This is just 1% over the same period a year ago.
In February, Merck said it would buy Elanco Animal Healthis aquatic business for $1.3 billion in cash. The deal includes Elanco’s entire portfolio of aquatic drugs, vaccines and supplements, along with two manufacturing plants and a research facility.