Merck & Co.’s Keytruda and Gardasil soundly beat analysts’ estimates for quarterly sales, driving the company’s annual revenue forecast higher even as costs for its acquisition of Prometheus Biosciences Inc. led to an earnings outlook cut.
(Bloomberg) — Merck & Co.’s Keytruda and Gardasil soundly beat analysts’ estimates for quarterly sales, driving the company’s annual revenue forecast higher even as costs for its acquisition of Prometheus Biosciences Inc. led to an earnings outlook cut.
Second-quarter sales of the blockbuster cancer drug Keytruda rose 19% from a year earlier to $6.27 billion, Merck said Tuesday in a statement, while revenue from Gardasil, a shot that prevents HPV, increased 47% on increased demand in China.
The drugmaker raised its full-year sales guidance to $58.6 billion to $59.6 billion from the earlier range that topped out at $58.9 billion, while noting that revenue growth for the two medications will likely slow. The shares added 1.3% at 9:42 a.m. in New York, after losing 3.9% this year through Monday’s close.
Merck has profited from widespread use of Keytruda, which has been consistently gaining use in a variety of cancers since it reached the US market nine years ago. Company scientists have been working to develop a self-administered version of the drug that would make it easier for patients to use, while potentially extending its patent life.
What Bloomberg Intelligence Says:
Merck’s underlying guidance has actually been increased 3-4% — with Keytruda and Gardasil again hugely exceeding expectations to drive beats of 4% for 2Q sales and 6% in terms of EPS. At first glance, full-year adjusted-EPS guidance appeared to have been cut, as it takes account of the recent Prometheus acquisition, resulting in a $4.16 charge. Despite some inventory build for both Keytruda and Gardasil in 1H, Merck’s minor full-year sales upgrade may again prove to be light.
— BI analysts John Murphy and Sam Fazeli. Read the research.
Merck bought Prometheus, a developer of drugs for autoimmune diseases, as part of its efforts to replenish its pipeline of new drugs before Keytruda loses its market exclusivity. Prometheus’s leading clinical candidate, a treatment for ulcerative colitis, will enter a late-stage trial in the fourth quarter, a Merck spokesperson said in an interview. The study had previously been set to start either late this year or early next year.
The company is still actively looking for new deals and has “ample firepower” for acquisitions, Chief Executive Officer Robert Davis said on an earnings call.
The drugmaker expects Gardasil sales growth to slow in the second half from the first due to reduced shipments in China, executives said on the call. Keytruda’s expansion may also ease off compared to recent quarters due to pricing pressures from new launches in Europe, Chief Financial Officer Caroline Litchfield said on the call.
Merck also applied for US approval of sotatercept, a treatment for pulmonary arterial hypertension. The product is expected to eventually help counteract Keytruda’s patent cliff.
Merck said in June that it would take a charge of $4 a share for the Prometheus purchase, writing off the research and development acquired according to accounting rules. On Tuesday, the company cut its annual forecast for earnings excluding some items to a range of $2.95 to $3.05 a share, less than half its earlier prediction of $6.88 to $7.
Merck posted a quarterly loss excluding some items of $2.06 a share — also because of the costs of Prometheus. That was narrower than the $2.20 loss expected by Wall Street.
Second-quarter revenue reached $15 billion, outpacing analysts’ average expectation of $14.5 billion. Gardasil sales of $2.46 billion beat estimates of $1.98 billion.
(Updates with comments from earnings call starting in third paragraph.)
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