Merck third-quarter results beat estimates, boosted by cancer drug and vaccine growth

By Eleanor Laise

Drugmaker raises full-year sales outlook but cuts earnings guidance as it digests recent deals

Merck & Co. on Thursday reported third-quarter results that topped analysts' expectations, powered by growth in oncology and vaccines.

The drugmaker reported net income of $4.745 billion, or $1.86 per share, up from $3.248 billion, or $1.28 per share, in the year-earlier period. Adjusted earnings per share came to $2.13, ahead of the FactSet consensus of $1.95.

Sales rose to $15.962 billion, up 7% from a year earlier and beating the FactSet consensus of $15.296 billion.

Third-quarter pharmaceutical sales climbed 10% from a year earlier, to $14.263 billion, driven by growth in cancer drugs, vaccines and virology, Merck said. Sales of blockbuster cancer drug Keytruda climbed 17% from a year earlier, while sales of human papillomavirus vaccine Gardasil rose 13%. Revenues from the COVID antiviral Lagevrio rose 47%, largely due to higher demand in Japan, Merck said.

Merck raised its full-year sales outlook to a range of $59.7 billion to $60.2 billion, up from prior guidance of $58.6 billion to $59.6 billion, but slashed its full-year adjusted earnings per share guidance. The company now expects adjusted earnings per share of $1.33 to $1.38, versus previous guidance of $2.95 to $3.05. The revised earnings outlook includes a pretax charge of $5.5 billion, or $1.70 per share, related to Merck's collaboration agreement announced late last week with Japanese healthcare company Daiichi Sankyo.

As Merck faces U.S. patent expiration in 2028 for Keytruda, which accounted for 44% of the company's total pharmaceutical sales in the third quarter, analysts have been looking for dealmaking and pipeline advancements to ease the pressure. Merck could get U.S. regulatory approval for sotatercept, a treatment for pulmonary arterial hypertension, in the first quarter of next year. The company in June closed its $10.8 billion acquisition of Prometheus Biosciences, a biotech company focused on autoimmune treatments. And under the new Daiichi Sankyo agreement, Merck will pay $4 billion upfront and a total of up to $22 billion over time to collaborate on several experimental antibody-drug conjugates--targeted drugs that can deliver chemotherapy to cancer cells.

Merck also sought to showcase strength in its oncology pipeline with data presented over the weekend at a European Society for Medical Oncology conference. The new trial results show potential for Keytruda to advance the standard of care for early-stage non-small cell lung cancer and that Keytruda combined with an antibody-drug conjugate could be a big step forward for urothelial cancer patients, analysts say.

Merck shares (MRK) are down 6.6% in the year to date, while the S&P 500 SPX has gained 9%.

-Eleanor Laise

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10-26-23 0632ET

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