Merck’s Q2 2023 Earnings Report Highlights

Merck, a leading pharmaceutical company, exceeded revenue expectations in the second quarter due to strong sales of its cancer drug Keytruda and HPV vaccine Gardasil.

However, the company reported a quarterly loss, primarily attributed to charges associated with its acquisition of Prometheus Biosciences earlier this year.

Merck incurred a net loss of $5.98 billion, or $2.35 per share, compared to a net income of $3.94 billion, or $1.55 per share, during the same period last year. Excluding acquisition and restructuring costs, Merck’s loss per share for the quarter was $2.06.

The loss can be attributed to a $10.2 billion, or $4.02 per share, charge related to the acquisition of Prometheus, a specialist in autoimmune disease treatments. The acquisition was completed in mid-June.

Here’s how Merck’s results compared to analysts’ expectations:

• Loss per share: $2.06 adjusted vs. $2.18 expected
• Revenue: $15.04 billion vs. $14.45 billion expected

Merck’s revenue for the quarter increased by 3% compared to the previous year, reaching $15.04 billion.

Despite a 4% decline in its share price this year, Merck remains the third largest pharmaceutical company in the U.S. with a market value of approximately $270 billion.

The company raised its 2023 sales forecast, now expecting a range of $58.6 billion to $59.6 billion, slightly higher than the previous guidance of $57.7 billion to $58.9 billion provided in late April.

However, Merck lowered its full-year adjusted earnings outlook to $2.95 to $3.05 per share from the previous forecast of $6.88 to $7 per share.

The adjusted earnings outlook includes the impact of one-time charges related to Merck’s acquisitions of Imago BioSciences last year and an upfront payment for a drug development agreement with Kelun-Biotech.

Merck’s pharmaceutical business generated $13.46 billion in revenue during the quarter, representing a 6% increase compared to the same period last year.

Excluding the sales of Merck’s Covid antiviral treatment molnupiravir, the pharmaceutical division experienced a 14% growth.

Sales of molnupiravir, marketed as Lagevrio, declined significantly to $203 million during the quarter, down 83% from the $1.18 billion reported for the second quarter of 2022. This decrease was expected as the world moves away from the pandemic and relies less on Covid treatments and vaccines for protection.

The growth of the pharmaceutical division was primarily driven by Keytruda, an antibody treatment used for various types of cancer. Keytruda generated $6.27 billion in revenue, a 19% increase from the same quarter last year.

Merck is actively working to reduce its dependency on Keytruda, which will lose patent protection in 2028. They are developing new formulations of the drug, such as a version that can be injected subcutaneously, to maintain its market position.

Merck also witnessed a significant increase in sales of Gardasil, a vaccine that prevents cancer associated with HPV, the most common sexually transmitted infection in the U.S. Gardasil generated $2.46 billion in sales, a 47% increase from the second quarter of 2022.

The company’s animal health division, which focuses on vaccines and medications for animals, reported $1.46 billion in sales, a slight decrease of 1% compared to the same period last year.

Merck will provide further updates during a conference call at 8 a.m. ET on Tuesday. Investors are particularly interested in upcoming product launches and updates to the drug pipeline, which could mitigate the impact of Keytruda’s patent expiration if approved.

This includes the ongoing phase three trial of Merck and Moderna’s personalized cancer vaccine, being studied in combination with Keytruda.

Other notable products in Merck’s pipeline include an experimental vaccine aimed at preventing invasive pneumococcal disease and pneumococcal pneumonia in adults.