Merck (MRK) Earnings Q1 2024

merck on Thursday reported first-quarter revenue and adjusted earnings that beat expectations as it posted strong sales of its blockbuster cancer drug 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 be between $63.1 billion and $64.3 billion, up from a 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 guidance 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 due to exchange rate changes.

Merck shares rose 4% on Thursday following the results.

Here's what Merck reported for the first quarter compared to what Wall Street expected, according to a survey of analysts by LSEG:

• Earnings per share: $2.07 adjusted vs. $1.88 expected
• Revenue: $15.78 billion vs. $15.2 billion expected

The company posted net income of $4.76 billion, or $1.87 per share, during the first quarter. That compares with net income of $2.82 billion, or $1.11 per share, during the same period a year earlier.

Excluding acquisition and restructuring costs, Merck earned $2.07 per share during the first quarter. Both adjusted and unadjusted earnings for the period include the charge related to the Harpoon deal.

Merck earned $15.78 billion in revenue during the quarter, up 9% from the same period a year earlier.

Those results come as Merck shows substantial progress in preparing for Keytruda's patent expiration in 2028. Losing exclusive rights to the drug will likely cause sales to decline, forcing the company to take revenue from other places.

But Merck has a handful of new deals under its belt and key drug launches that will help offset those losses. That includes Winrevair, a drug approved in the United States last month to treat a progressive and life-threatening lung condition. Some analysts expect Winrevair's global sales could reach $5 billion by 2030.

Merck is seeing “strong interest” in Winrevair from patient groups and a variety of prescribers, and is making “good progress” in enabling access to the drug, Chief Financial Officer Caroline Litchfield said during an earnings conference call Thursday. . Several payers already have established coverage policies for the drug, she noted.

“We are confident in a successful launch of Winrevair consistent with our previous expectations and look forward to providing updates on our progress,” Litchfield said.

Merck is also cutting costs under a new restructuring program it announced in February. Those efforts are aimed at improving the manufacturing network of both its pharmaceutical division and its animal health business.

The company recorded charges of $246 million related to the restructuring in the first quarter, which are excluded from its adjusted results.

Merck's pharmaceutical unit posted revenue of $14.01 billion during the first quarter, up 10% from the same period a year earlier. That division develops a broad range of drugs for several disease areas, including oncology and infectious diseases.

Merck's Keytruda immunotherapy, which is used to treat several types of cancer, largely drove the growth. Keytruda generated $6.95 billion in revenue during the quarter, up 20% from the same period last year.

Analysts were expecting $6.71 billion in Keytruda sales, according to FactSet estimates.

Litchfield said the growth reflects greater acceptance in patients in the early stages of cancer and continued demand to treat metastatic cancers, which refers to when the disease spreads to a part of the body other than where it started.

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 generated $2.25 billion in sales, up 14% from the first quarter of 2023. This is in line with the $2.24 billion analysts were expecting, according to FactSet estimates.

Litchfield said the increase reflects strong demand, particularly in China.

Another vaccine called Vaxneuvance, which prevents patients from contracting pneumococcal disease, also saw strong growth during the quarter. The injection recorded $219 million in sales, 106% more than in the same period of the previous year.

Meanwhile, Januvia, Merck's type 2 diabetes treatment, earned $670 million in sales, down 24% from the same period a year earlier. The company said the drop was primarily due to lower drug prices, falling demand in the United States 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 targeted in ongoing Medicare drug pricing negotiations, a policy under the Inflation Reduction Act that aims to make expensive drugs more affordable for seniors.

Sales of Merck's Covid Lagevrio antiviral pill also fell 11% to $350 million during the quarter. Still, that total beat analysts' expectations of $106.4 million in sales, according to FactSet.

Demand for Lagevrio and other Covid products from companies like Pfizer and modern has plummeted over the past year, as cases and public concern about the virus have declined from their pandemic peaks.

Merck's animal health division, which develops vaccines and medications for dogs, cats and livestock, posted sales of $1.51 billion in the first quarter. This represents only 1% more than the same period last year.

In February, Merck said it would buy Elanco Animal Healthaquatic business for 1.3 billion dollars in cash. The agreement includes Elanco's entire portfolio of aquatic medicines, vaccines and supplements, along with two manufacturing plants and a research center.