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Merck (MRK) Q1 Earnings Top, Cancer Drug Keytruda Boosts Sales
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Merck (MRK - Free Report) reported adjusted earnings of $2.07 per share for first-quarter 2024, beating the Zacks Consensus Estimate of $1.94. Earnings rose 48% year over year on a reported basis and 54% excluding foreign exchange (Fx) impact.
Including acquisition and divestiture-related costs, restructuring costs, income and losses from investments in equity securities and certain other items, earnings were $1.87 per share, up 76% ex Fx.
Revenues rose 9% year over year (12% excluding Fx) to $15.78 billion. Sales beat the Zacks Consensus Estimate of $15.32 billion.
Quarter in Detail
The Pharmaceutical segment generated revenues of $14.0 billion, up 9% year over year (12% excluding Fx). Higher sales of oncology drugs and vaccines were partially offset by lower sales of Merck’s diabetes medicines. Pharmaceutical segment revenues beat the Zacks Consensus Estimate of $13.53 billion and our model estimate of $13.50 billion.
All sales growth numbers discussed below exclude Fx impact.
Keytruda, the biggest product in Merck’s portfolio, generated sales of $6.95 billion in the quarter, up 24% year over year. Keytruda sales gained from rapid uptake across earlier-stage indications like triple-negative breast cancer and renal cell carcinoma, as well as early-stage non-small cell lung cancer, for which approval was received in the United States in October 2023. Continued strong momentum in metastatic indications also boosted sales growth. Keytruda sales beat the Zacks Consensus Estimate of $6.80 billion and our estimate of $6.81 billion.
Alliance revenues from Lynparza and Lenvima also boosted oncology sales in the quarter. Merck has a deal with British pharma giant AstraZeneca (AZN - Free Report) to co-develop and commercialize PARP inhibitor Lynparza and a similar one with Japan’s Eisai for its tyrosine kinase inhibitor, Lenvima.
Alliance revenues from AstraZeneca-partnered Lynparza increased 7% year over year to $292 million in the quarter, driven by higher demand in some international markets, mainly Latin America. Lenvima alliance revenues were $255 million, up 10% from the year-ago period’s levels. Welireg recorded sales of $85 million, up 102% year over year.
In vaccines, sales of HPV vaccines — Gardasil and Gardasil 9 — rose 17% year over year to $2.25 billion, driven by strong global demand, particularly in China and favorable government buying patterns in the United States. Gardasil sales, however, missed the Zacks Consensus Estimate of $2.28 billion and our estimate of $2.33 billion.
Proquad, M-M-R II and Varivax vaccines recorded combined sales of $570 million, up 8% year over year. Sales of the rotavirus vaccine, Rotateq, declined 27% to $216 million, while Pneumovax 23 (pneumococcal vaccine polyvalent) vaccine sales declined 33% to $61 million. Sales of Vaxneuvance, Merck’s new pneumococcal 15-valent conjugate vaccine, were $219 million, up 106% year over year, driven by continued uptake in the pediatric patient population and continued launches in Europe.
In the hospital specialty portfolio, neuromuscular blockade medicine, Bridion injection generated sales of $440 million in the quarter, down 8% year over year, due to generic competition in certain ex-U.S. markets, mainly Europe.
In Diabetes, Januvia/Janumet (diabetes) franchise sales declined 21% year over year to $670 million. The drug’s sales were hurt by lower demand and pricing in the United States and generic competition in certain international markets, mainly Europe, Canada and Asia Pacific.
Lagevrio (molnupiravir) generated sales of $350 million in the first quarter, down 5% year over year.
Merck’s Animal Health segment generated revenues of $1.51 billion, up 1% year over year (4% excluding Fx impact). The Animal Health segment sales missed the Zacks Consensus Estimate of $1.55 billion.
Margin Discussion
Adjusted gross margin was 81.2%, up 430 basis points year over year, driven by a favorable product mix (including the benefit from reduced royalties paid on Keytruda and Gardasil),partially offset by higher inventory write-offs.
Adjusted selling, general, and administrative expenses were $2.5 billion in the reported quarter, flat year over year as higher administrative costs were offset by lower promotional spending.
Adjusted research and development (R&D) spending was $4.0 billion compared with $4.3 billion in the year-ago period due to lower costs related to M&A activity in the quarter.
2024 Guidance
Merck slightly raised the upper end of its sales guidance for the year while increasing its EPS range.
In 2024, Merck expects to record revenues in the range of $63.1 to $64.3 billion compared to its previous expectation of $62.7-$64.2 billion. The new guidance includes a negative impact from foreign exchange of approximately 3% on sales compared to 2% expected previously.
Adjusted earnings per share are expected to be between $8.53 and $8.65 versus the prior expectation of $8.44 and $8.59. This guidance includes a one-time charge of 26 cents per share related to the acquisition of Harpoon Therapeutics, which was closed in March. The guidance includes a negative impact from foreign exchange of approximately 30 cents (previously 25 cents) on EPS.
The adjusted gross margin is expected to be approximately 81% (previously 80.5%).
Adjusted operating costs are expected to be in the range of $25.2 to $26.1 billion (previously $25.1 to $26.1 billion), which includes approximately $650 million of R&D expense related to the Harpoon acquisition. The adjusted tax rate guidance was maintained in the range of approximately 14.5% to 15.5%.
Our Take
Merck’s first-quarter results were better than expected as it beat estimates for earnings as well as sales. The company also raised its earnings guidance despite a steeper expected impact from currency.
Keytruda continued its growth trajectory and was the key driver of the top line in the quarter. Though sales of another vital product, Gardasil vaccine, rose in the quarter, it was less than our expectations.
Shares of Merck were up 3% in pre-market trading in response to the strong quarterly performance and guidance increase.
In the past year, the stock has gained 9% compared with the industry’s 15.7% rise.
Image Source: Zacks Investment Research
Merck also made meaningful regulatory and clinical progress in the quarter across areas like oncology, vaccines and infectious diseases while also executing strategic business development like the Harpoon acquisition.
Merck also has some key new products lined up for launch. Between 2025 and 2030, Merck expects eight potential new product approvals. We believe that among these, V116 and Winrevair have the potential to generate significant revenues for Merck over the long term. Winrevair (sotatercept) was approved for pulmonary arterial hypertension (PAH, WHO Group 1) in March 2024. V116 is Merck’s 21-valent pneumococcal conjugate vaccine, which is under priority review in the United States, with an FDA decision scheduled for Jun 17, 2024.
In the past 60 days, the Zacks Consensus Estimate for ANI Pharmaceuticals has improved from $4.12 per share to $4.43 per share. For 2025, earnings estimates have improved from $4.80 per share to $5.04 per share in the past 60 days. In the past year, shares of ANIP have risen 74.1%.
Earnings of ANI Pharmaceuticals beat estimates in each of the last four quarters, delivering a four-quarter average earnings surprise of 109.06 %.
In the past 60 days, estimates for ADMA Biologics’ 2024 earnings per share have improved from 22 cents to 30 cents. Estimates for 2025 have increased from 32 cents to 50 cents. In the past year, shares of ADMA Biologics have risen 95.8%.
Earnings of ADMA Biologics beat estimates in three of the last four quarters while meeting the same once. ADMA delivered a four-quarter average earnings surprise of 85.0%.
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Merck (MRK) Q1 Earnings Top, Cancer Drug Keytruda Boosts Sales
Merck (MRK - Free Report) reported adjusted earnings of $2.07 per share for first-quarter 2024, beating the Zacks Consensus Estimate of $1.94. Earnings rose 48% year over year on a reported basis and 54% excluding foreign exchange (Fx) impact.
Including acquisition and divestiture-related costs, restructuring costs, income and losses from investments in equity securities and certain other items, earnings were $1.87 per share, up 76% ex Fx.
Revenues rose 9% year over year (12% excluding Fx) to $15.78 billion. Sales beat the Zacks Consensus Estimate of $15.32 billion.
Quarter in Detail
The Pharmaceutical segment generated revenues of $14.0 billion, up 9% year over year (12% excluding Fx). Higher sales of oncology drugs and vaccines were partially offset by lower sales of Merck’s diabetes medicines. Pharmaceutical segment revenues beat the Zacks Consensus Estimate of $13.53 billion and our model estimate of $13.50 billion.
All sales growth numbers discussed below exclude Fx impact.
Keytruda, the biggest product in Merck’s portfolio, generated sales of $6.95 billion in the quarter, up 24% year over year. Keytruda sales gained from rapid uptake across earlier-stage indications like triple-negative breast cancer and renal cell carcinoma, as well as early-stage non-small cell lung cancer, for which approval was received in the United States in October 2023. Continued strong momentum in metastatic indications also boosted sales growth. Keytruda sales beat the Zacks Consensus Estimate of $6.80 billion and our estimate of $6.81 billion.
Alliance revenues from Lynparza and Lenvima also boosted oncology sales in the quarter. Merck has a deal with British pharma giant AstraZeneca (AZN - Free Report) to co-develop and commercialize PARP inhibitor Lynparza and a similar one with Japan’s Eisai for its tyrosine kinase inhibitor, Lenvima.
Alliance revenues from AstraZeneca-partnered Lynparza increased 7% year over year to $292 million in the quarter, driven by higher demand in some international markets, mainly Latin America. Lenvima alliance revenues were $255 million, up 10% from the year-ago period’s levels. Welireg recorded sales of $85 million, up 102% year over year.
In vaccines, sales of HPV vaccines — Gardasil and Gardasil 9 — rose 17% year over year to $2.25 billion, driven by strong global demand, particularly in China and favorable government buying patterns in the United States. Gardasil sales, however, missed the Zacks Consensus Estimate of $2.28 billion and our estimate of $2.33 billion.
Proquad, M-M-R II and Varivax vaccines recorded combined sales of $570 million, up 8% year over year. Sales of the rotavirus vaccine, Rotateq, declined 27% to $216 million, while Pneumovax 23 (pneumococcal vaccine polyvalent) vaccine sales declined 33% to $61 million. Sales of Vaxneuvance, Merck’s new pneumococcal 15-valent conjugate vaccine, were $219 million, up 106% year over year, driven by continued uptake in the pediatric patient population and continued launches in Europe.
In the hospital specialty portfolio, neuromuscular blockade medicine, Bridion injection generated sales of $440 million in the quarter, down 8% year over year, due to generic competition in certain ex-U.S. markets, mainly Europe.
In Diabetes, Januvia/Janumet (diabetes) franchise sales declined 21% year over year to $670 million. The drug’s sales were hurt by lower demand and pricing in the United States and generic competition in certain international markets, mainly Europe, Canada and Asia Pacific.
Lagevrio (molnupiravir) generated sales of $350 million in the first quarter, down 5% year over year.
Merck’s Animal Health segment generated revenues of $1.51 billion, up 1% year over year (4% excluding Fx impact). The Animal Health segment sales missed the Zacks Consensus Estimate of $1.55 billion.
Margin Discussion
Adjusted gross margin was 81.2%, up 430 basis points year over year, driven by a favorable product mix (including the benefit from reduced royalties paid on Keytruda and Gardasil),partially offset by higher inventory write-offs.
Adjusted selling, general, and administrative expenses were $2.5 billion in the reported quarter, flat year over year as higher administrative costs were offset by lower promotional spending.
Adjusted research and development (R&D) spending was $4.0 billion compared with $4.3 billion in the year-ago period due to lower costs related to M&A activity in the quarter.
2024 Guidance
Merck slightly raised the upper end of its sales guidance for the year while increasing its EPS range.
In 2024, Merck expects to record revenues in the range of $63.1 to $64.3 billion compared to its previous expectation of $62.7-$64.2 billion. The new guidance includes a negative impact from foreign exchange of approximately 3% on sales compared to 2% expected previously.
Adjusted earnings per share are expected to be between $8.53 and $8.65 versus the prior expectation of $8.44 and $8.59. This guidance includes a one-time charge of 26 cents per share related to the acquisition of Harpoon Therapeutics, which was closed in March. The guidance includes a negative impact from foreign exchange of approximately 30 cents (previously 25 cents) on EPS.
The adjusted gross margin is expected to be approximately 81% (previously 80.5%).
Adjusted operating costs are expected to be in the range of $25.2 to $26.1 billion (previously $25.1 to $26.1 billion), which includes approximately $650 million of R&D expense related to the Harpoon acquisition. The adjusted tax rate guidance was maintained in the range of approximately 14.5% to 15.5%.
Our Take
Merck’s first-quarter results were better than expected as it beat estimates for earnings as well as sales. The company also raised its earnings guidance despite a steeper expected impact from currency.
Keytruda continued its growth trajectory and was the key driver of the top line in the quarter. Though sales of another vital product, Gardasil vaccine, rose in the quarter, it was less than our expectations.
Shares of Merck were up 3% in pre-market trading in response to the strong quarterly performance and guidance increase.
In the past year, the stock has gained 9% compared with the industry’s 15.7% rise.
Image Source: Zacks Investment Research
Merck also made meaningful regulatory and clinical progress in the quarter across areas like oncology, vaccines and infectious diseases while also executing strategic business development like the Harpoon acquisition.
Merck also has some key new products lined up for launch. Between 2025 and 2030, Merck expects eight potential new product approvals. We believe that among these, V116 and Winrevair have the potential to generate significant revenues for Merck over the long term. Winrevair (sotatercept) was approved for pulmonary arterial hypertension (PAH, WHO Group 1) in March 2024. V116 is Merck’s 21-valent pneumococcal conjugate vaccine, which is under priority review in the United States, with an FDA decision scheduled for Jun 17, 2024.
Zacks Rank & Stocks to Consider
Merck currently has a Zacks Rank #3 (Hold).
Merck & Co., Inc. Price and Consensus
Merck & Co., Inc. price-consensus-chart | Merck & Co., Inc. Quote
Some better-ranked stocks in the healthcare sector are ANI Pharmaceuticals (ANIP - Free Report) and ADMA Biologics (ADMA - Free Report) , sporting a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, the Zacks Consensus Estimate for ANI Pharmaceuticals has improved from $4.12 per share to $4.43 per share. For 2025, earnings estimates have improved from $4.80 per share to $5.04 per share in the past 60 days. In the past year, shares of ANIP have risen 74.1%.
Earnings of ANI Pharmaceuticals beat estimates in each of the last four quarters, delivering a four-quarter average earnings surprise of 109.06 %.
In the past 60 days, estimates for ADMA Biologics’ 2024 earnings per share have improved from 22 cents to 30 cents. Estimates for 2025 have increased from 32 cents to 50 cents. In the past year, shares of ADMA Biologics have risen 95.8%.
Earnings of ADMA Biologics beat estimates in three of the last four quarters while meeting the same once. ADMA delivered a four-quarter average earnings surprise of 85.0%.