Merck results beat expectations despite a big drop in sales of Covid antiviral treatment

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Medicine pill is seen with Merck logo displayed on a screen in the background in this illustration photo taken in Poland on October 4, 2021.
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Merck on Thursday reported first-quarter revenue and adjusted earnings that topped Wall Street’s expectations, despite a steep drop in sales of its Covid antiviral treatment molnupiravir.

Sales of molnupiravir plunged to $392 million during the period, down 88% from the $3.2 billion reported for the first quarter of 2022. Merck said the decrease is primarily the result of lower sales in the U.S., U.K., Japan and Australia. 

The company reported total revenue of $14.5 billion for the quarter, down 9% from a year earlier. But excluding the Covid drug, Merck said its revenue grew 11%. 

Here’s what Merck reported compared with Wall Street’s expectations, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.40 adjusted, vs. $1.32 expected
  • Revenue: $14.49 billion, vs. $13.78 billion expected

Merck’s stock closed more than 1% higher Thursday. The shares are up more than 3% for the year, putting the company’s market value at more than $292 billion.

The pharmaceutical giant posted net income of $2.82 billion, or $1.11 per share. That compares with $4.31 billion, or $1.70 per share, for the same period a year ago. 

Excluding certain items, Merck’s adjusted earnings per share were $1.40 for the period. That includes a 52-cent impact of charges related to Merck’s acquisition of cancer drug developer Imago BioSciences last year.

The Rahway, New Jersey-based company increased its 2023 sales forecast to $57.7 billion to $58.9 billion, slightly higher than the $57.2 to $58.7 billion guidance provided in early February. The elevated guidance includes approximately $1 billion in sales of molnupiravir.

The company also raised its full-year adjusted earnings outlook to $6.88 to $7.00 per share, from a previous forecast of $6.80 to $6.95 per share.

The forecast does not reflect any financial impact from Merck’s proposed acquisition of biotech company Prometheus Biosciences earlier this month, the company noted. Merck said that deal is expected to close in the third quarter of 2023.

Merck’s Covid treatment molnupiravir first entered the market after the Food and Drug Administration authorized the pill for certain adults in December 2021. Once hailed as a game-changing treatment for Covid-19, Merck signed several contracts to supply millions of courses of the drug to the U.S. government and other nations. 

But Merck and drugmakers such as Pfizer, Moderna and Johnson & Johnson have been bracing for a drop-off in Covid-related sales this year as the world emerges from the pandemic and relies less on blockbuster vaccines and treatments. 

Molnupiravir weighed on sales for Merck’s pharmaceutical business, which declined 10% to $12.7 billion compared with the first quarter of 2022. Excluding molnupiravir, pharmaceutical sales grew 14%. 

Merck said diabetes treatments also drove the sales decrease. Sales of sitagliptin and a similar diabetes treatment fell 29% to $880 million, primarily due to generic competition in several international markets and lower demand and pricing in the U.S.

But Merck’s pharmaceutical unit saw higher sales of Gardasil, Merck’s vaccine that prevents cancer from HPV. The company said revenue for the shot grew 35% to $2 billion, which reflects strong demand outside of the U.S., particularly in China. 

Sales of the blockbuster antibody treatment Keytruda also increased 20% to $5.8 billion during the quarter. Keytruda is used against several types of cancer, including certain types of breast cancer and skin cancer. 

Merck CFO Caroline Litchfield said on the company’s earnings call Thursday that the drugmaker continues to expect strong growth from Keytruda. But she noted that the pricing of Keytruda “is an increasing headwind,” particularly as Merck launches new indications of the drug in key European markets.

The company has been under pressure to reduce its dependence on Keytruda, which is slated to lose patent protection in 2028. Merck highlighted some of its efforts to cushion that patent loss and broaden its drug pipeline during the earnings call.

Dean Li, president of Merck Research Laboratories, pointed to the Prometheus Biosciences acquisition. He said the deal will bring a promising experimental treatment for ulcerative colitis and Crohn’s disease, which will build up Merck’s presence in immunology.

“By combining Prometheus’ deep understanding of inflammatory bowel disease, and Merck’s deep expertise in developing and implementing biomarkers, we hope to usher in a new era in immunology where patients are matched with the right therapy based on a precision medicine approach,” Li said during the call.

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