The exterior view of the entrance to Merck headquarters in Rahway, New Jersey, on February 5, 2024.
Spencer Platt | Getty Images
Merck on Thursday reported first-quarter revenue and adjusted earnings that beat expectations as the company posted strong sales of its blockbuster cancer drug Keytruda and its vaccine products.
The pharmaceutical giant also increased and reduced its sales and profit forecasts for the full year. Merck now expects 2024 sales to be between $63.1 billion and $64.3 billion, up from its previous forecast of $62.7 billion to $64.2 billion.
The company expects full-year adjusted earnings of $8.53 to $8.65 per share, up 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 forecast also includes a negative impact of 30 cents per share from changes in foreign exchange rates.
Shares of Merck rose 4% on Thursday following the results.
Here's what Merck reported for the first quarter compared to Wall Street's expectations, based on an LSEG analyst survey:
- Earnings per share: $2.07 adjusted versus $1.88 expected
- Revenue: $15.78 billion versus expected $15.20 billion
The company reported first-quarter net income of $4.76 billion, or $1.87 per share. That compares to 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 in the first quarter. Both adjusted and unadjusted earnings for the period include the charge related to the Harpoon deal.
Merck reported revenue of $15.78 billion in 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. The loss of exclusive rights to the drug will likely lead to a decline in sales and force the company to obtain revenue from other sources.
But 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 last month to treat a progressive and life-threatening lung disease. Some analysts believe Winrevair's global revenue could reach $5 billion by 2030.
Merck is seeing “strong interest” in Winrevair from patient groups and a number of prescribers and is making “good progress” in providing access to the drug, Chief Financial Officer Caroline Litchfield said during a conference call Thursday. Several payers have already taken out insurance policies for the drug, she noted.
“We are confident that the launch of Winrevair meets our expectations to date and look forward to staying updated on our progress,” said Litchfield.
Merck is also cutting costs as part of a new restructuring program it announced in February. These efforts aim to improve the production network of both the pharmaceutical division and the animal health business.
The company recorded $246 million in expenses related to the restructuring in the first quarter, which are not reflected in the adjusted results.
Surge in sales in the pharmaceutical division
Merck's pharmaceutical division posted first-quarter sales of $14.01 billion, up 10% from the same period last year. This department develops a wide range of drugs for various disease areas including oncology and infectious diseases.
The main driver of growth was Merck's immunotherapy Keytruda, which is used to treat several types of cancer. Keytruda reported revenue of $6.95 billion in the quarter, up 20% from the same period last year.
Analysts had expected Keytruda sales of $6.71 billion, according to FactSet estimates.
Litchfield said the growth reflects increased uptake among patients in the earliest stages of cancer and continued demand for treatment of metastatic cancer, which is when the disease spreads to a different part of the body than where it started.
Merck also reported a jump in sales of Gardasil, a vaccine that prevents cancer caused by HPV, the most common sexually transmitted infection in the United States
Gardasil posted sales of $2.25 billion, up 14% from the first quarter of 2023. That's in line with the $2.24 billion analysts had expected, according to FactSet estimates.
Litchfield said the increase reflected strong demand, particularly in China.
Another vaccine called Vaxneuvance, which prevents patients from developing pneumococcal disease, also saw strong growth in the quarter. The shot brought in $219 million in sales, up 106% from the same period last year.
Meanwhile, Merck's type 2 diabetes drug Januvia posted sales of $670 million, down 24% from the same period last year. The company said the decline was primarily due to lower drug prices, declining demand in the U.S. and generic competition in several international markets.
Analysts had expected Januvia sales of $687.3 million, according to FactSet estimates.
Januvia is one of 10 drugs subject to ongoing Medicare pricing negotiations, a policy under the Inflation Reduction Act aimed at making expensive drugs more affordable for seniors.
Sales of Merck's antiviral Covid pill Lagevrio also fell 11% to $350 million in the quarter. Still, that total revenue beat analysts' expectations of $106.4 million, according to FactSet.
The demand for Lagevrio and other Covid products from companies like Pfizer And Modern has declined sharply over the past year as cases and public concern about the virus have declined from their pandemic peak.
Merck's animal health division, which develops vaccines and medications for dogs, cats and cattle, posted first-quarter sales of $1.51 billion. That's just 1% more than the same period a year ago.
In February, Merck announced a purchase Elanco Animal Health's water business for $1.3 billion in cash. The deal includes Elanco's entire portfolio of aquatic medicines, vaccines and nutritional supplements, as well as two manufacturing facilities and a research facility.
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