Merck beats earnings expectations with robust demand for Keytruda and new drugs, despite a decline in HPV vaccine sales.

• Merck reported third-quarter revenue and adjusted earnings that topped expectations.
• Recently launched treatments and its animal health business contributed to strong sales from Keytruda, the company's top-selling cancer drug.
• Sales for Merck's cancer-preventing HPV vaccine were lower than expected in the latest quarter.

The company reported third-quarter revenue and adjusted earnings that exceeded expectations due to strong sales from its top-selling cancer drug Keytruda, recently launched treatments, and its animal health business on Thursday.

Merck's Gardasil vaccine, which prevents cancer from HPV, the most common sexually transmitted infection in the U.S., experienced another quarter of lighter-than-expected sales. Revenue from the shot fell 11% compared to the year-earlier period, mainly due to lower demand in China.

The pharmaceutical company adjusted its full-year sales forecast to a range of $63.6 billion to $64.1 billion, from a previous projection of $63.4 billion to $64.4 billion.

Merck updated its adjusted profit guidance from a range of $7.72 to $7.77 per share, down from a previous forecast of $7.94 to $8.04 per share. This change reflects a one-time charge of 24 cents per share related to business development deals with Curon Biopharmaceutical and Daiichi Sankyo.

According to a survey of analysts by LSEG, Merck's third-quarter results differed from Wall Street's expectations.

• Earnings per share: $1.57 adjusted vs. $1.50 expected
• Revenue: $16.66 billion vs. $16.46 billion expected

In the third quarter, Merck reported net income of $3.16 billion, which amounts to $1.24 per share. This is lower than the net income of $4.75 billion, or $1.86 per share, recorded in the year-earlier period.

During the three-month period, Merck generated $1.57 in earnings per share, excluding acquisition and restructuring expenses.

In the third quarter, the company generated $16.66 billion in revenue, which represents a 4% increase compared to the same period in the previous year.

As Merck demonstrates significant advancements in readying for Keytruda's patent expiration in 2028, the company is likely to experience a decline in sales due to the loss of exclusive rights to the drug, prompting it to seek revenue from other sources.

Merck has recently secured several new deals and launched key drugs to help mitigate its losses, including Winrevair, which was approved in the U.S. in March to treat a severe and potentially fatal lung condition.

In June, the U.S. approved Capvaxive, a vaccine that safeguards adults against pneumococcus, a bacterium causing severe ailments and lung infections.

Pharmaceutical unit beats estimates

During the third quarter, Merck's pharmaceutical division, which produces a variety of drugs, generated $14.94 billion in revenue, representing a 5% increase from the same period in the previous year.

During the quarter, the company's immunotherapy drug Keytruda generated $7.43 billion in revenue, representing a 17% increase from the previous year. This was higher than the analysts' forecast of $7.33 billion in sales, as estimated by StreetAccount.

The increase in sales was due to the higher use of Keytruda for early-stage cancers and the strong demand for the drug in metastatic cancers, which spread to other parts of the body.

In the third quarter of 2023, Gardasil generated $2.31 billion in sales, which was 11% less than the previous year. Merck attributed the decline to reduced demand in China compared to the previous year, although this was partially offset by increased sales in the U.S.

According to StreetAccount, the actual revenue was below the $2.51 billion that analysts had predicted.

Winrevair recorded $149 million in revenue for the third quarter after its approval in March, exceeding analysts' expectations of $127 million in sales.

The sales of Januvia, the company's Type 2 diabetes treatment, decreased by 42% to $482 million compared to the previous year. This decline was mainly due to the lower prices of the drug in the U.S. and the presence of generic competition in several countries, as stated by Merck.

StreetAccount reported that analysts predicted the drug would generate $610 million in sales.

The Medicare drug price negotiations, which involve 10 drugs and aim to make expensive medications more affordable for seniors, will conclude at the start of August as per the Inflation Reduction Act signed by President Joe Biden.

During the quarter, Merck's Covid antiviral pill, Lagevrio, experienced a 40% decline in sales, reaching $383 million.

According to StreetAccount, analysts expected sales of $124.2 million, but the actual sales exceeded their expectations.

Merck's animal health division, which produces vaccines and medications for dogs, cats, and cattle, reported $1.49 billion in sales for the third quarter. This represents a 6% increase from the previous year and is slightly above what analysts predicted.