Merck (MRK) 2023 Fourth Quarter Earnings Report

merck on Thursday reported fourth-quarter revenue and adjusted earnings that beat estimates as it saw strong demand for its blockbuster cancer drug Keytruda and HPV vaccine Gardasil.

However, the pharmaceutical giant posted a quarterly net loss due to previously announced charges associated with a deal the company closed in October with Japanese drugmaker Daiichi Sankyo to co-develop three highly sought-after cancer treatments.

Here's what Merck reported for the fourth quarter compared to what Wall Street expected, according to a survey of analysts by LSEG, formerly known as Refinitiv:

• Earnings per share: 3 cents adjusted versus an expected loss of 11 cents per share
• Revenue: $14.63 billion vs. $14.50 billion expected

Merck shares closed nearly 5% higher on Thursday.

The company posted a net loss of $1.23 billion, or 48 cents per share, during the quarter. That compares with net income of $3.02 billion, or $1.18 per share, during the same period a year earlier.

Excluding acquisition and restructuring costs, Merck earned 3 cents per share in the fourth quarter. The company's results include a charge of $1.69 per share related to the deal with Daiichi Sankyo.

Merck earned $14.63 billion in revenue during the quarter, up 6% from the same period a year earlier.

Those results come as Merck shows significant progress in preparation for Keytruda's patent expiration in 2028, with a handful of new deals under its belt and key drug launches ahead. Losing exclusive rights to the drug will likely mean its sales will fall, forcing the company to source revenue from elsewhere.

Merck CEO Robert Davis said in an earnings call Thursday that the company “feels very good” about the progress it has made in growing its drug portfolio. But he said “we need more” products and added that the company remains interested in signing acquisitions or collaboration agreements.

Merck also released its full-year 2024 guidance, which was generally in line with expectations. The company expects revenue to be between $62.7 billion and $64.2 billion and adjusted earnings to be $8.44 to $8.59 per share this year.

Analysts surveyed by LSEG expected Merck to forecast full-year sales of $63.52 billion and adjusted earnings of $8.42 per share.

That adjusted earnings outlook includes a one-time charge of about 26 cents per share related to Merck's acquisition of Harpoon therapeuticswhich develops immune-based cancer drugs, earlier this month.

Merck also announced a new restructuring program for 2024, which aims to improve the manufacturing network of both its pharmaceutical division and its animal health business. Merck recorded charges of $190 million related to the program in the fourth quarter, which are excluded from its adjusted results.

This brings Merck's total restructuring costs for the period to $401 million. That number also includes charges from a restructuring program the company launched in 2019.

Merck's pharmaceutical business, which develops a broad range of drugs for various disease areas, posted revenue of $13.14 billion during the quarter. That's 8% more than the same period last year.

Merck's Keytruda immunotherapy, which is used to treat several types of cancer, largely drove the growth.

The drug recorded revenues of $6.61 billion, 21% more than in the same quarter of the previous year. Analysts were expecting $6.41 billion in Keytruda sales, according to FactSet estimates.

The treatment has seen growth due to increased use in earlier-stage cancers and strong demand among patients with metastatic disease, or cancer that spreads to different parts of the body, Merck Chief Financial Officer Caroline Litchfield said during a conference call. about results on Thursday. Merck also reported an increase in sales of Gardasil, a vaccine that prevents cancer caused by HPV, the most common sexually transmitted infection in the US.

Gardasil brought in $1.87 billion in sales, up 27% from the fourth quarter of 2022. That's slightly below the $1.92 billion analysts were expecting, according to FactSet estimates.

Meanwhile, sales of its Covid antiviral pill Lagevrio fell to $193 million during the period, down 77% from the $825 million reported for the fourth quarter of 2022. Still, the drug beat analysts' expectations. of $69 million in sales, according to FactSet. .

This is not a surprise: Demand for Lagevrio and other Covid products from companies like Pfizer and Moderna has plummeted over the past year, as cases and concern about the virus have declined from their pandemic peaks.

Merck's type 2 diabetes treatment Januvia also saw sales fall to $787 million during the quarter, down 14% from the same period a year earlier. The company said competition from cheaper generic drugs outside the United States, particularly in Europe, and lower demand in the United States reduced sales.

That total was still higher than analysts' estimate of $732.3 million for the period, according to FactSet.

Januvia is one of 10 drugs that will be subject to Medicare drug price negotiations, a policy under the Inflation Reduction Act that aims to make expensive drugs more affordable for seniors. Also on Thursday, Medicare will make initial price offers for each of those drugs.

Merck's animal health division, which develops vaccines and medications for dogs, cats and livestock, posted sales of $1.28 billion, up 4% from the same period a year earlier.

The company said increased demand for pet products, such as Bravecto flea and tick treatment, drove the increase.

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