Merck beats on revenue boosted by Keytruda sales, but posts quarterly loss due to Prometheus deal

Merck on Tuesday articled second-quarter revenue that topped expectations on strong sales of its blockbuster cancer drug Keytruda and HPV vaccine Gardasil.

The pharmaceutical behemoth posted a quarterly loss, however, due to charges associated with the company’s acquisition of Prometheus Biosciences earlier this year. 

Merck swung to a net loss of $5.98 billion, or $2.35 per share, from a net income of $3.94 billion, or $1.55 per split, during the year-earlier period. Excluding acquisition and restructuring costs, Merck’s loss per share was $2.06 for the quarter. 

The defeat reflects a $10.2 billion, or $4.02 per share, charge related to the company’s acquisition of Prometheus, which specializes in treatments for autoimmune maladies. Merck said it completed the deal in mid-June. 

Here’s how Merck results compared with Wall Street expectations, based on a scan of analysts by Refinitiv:

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

Proceeds of $15.04 billion for the quarter rose 3% from a year earlier. 

“What you really see…was long sustained underlying success, and it was driven by oncology and vaccines, and the Gardasil franchise in vaccines,” Merck CEO Robert Davis said in an interview on CNBC’s “Shriek Box” on Tuesday.

Merck’s stock closed more than 1% lower Tuesday. Shares of Merck are down about 5% this year, with a market value of roughly $267 billion, making it the third largest pharmaceutical firm based in the U.S.

The New Jersey-based company raised its 2023 sales forecast to a go of $58.6 billion to $59.6 billion, slightly higher than the $57.7 billion to $58.9 billion guidance made in late April. 

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

The company said its business growth during the quarter contributed 24 cents per dole out to the full-year earnings guidance, but was offset by the $4.02 per share charge related to the Prometheus deal.

The outlook also categorizes previously disclosed one-time charges related to Merck’s acquisition of Imago BioSciences last year and an upfront payment for a slip someone a Mickey Finn development agreement with Kelun-Biotech. 

“We see strong growth to the full year, and the guidance range you are referencing implies swelling of 10% to 11% if you exclude the one-time impact,” Davis told CNBC. “It’s a strong beat.”

Merck’s pharmaceutical business, which develops a wide range of drugs for different disease areas, booked $13.46 billion in net income during the quarter. That’s up 6% from the same period a year ago. 

Excluding Merck’s Covid antiviral treatment molnupiravir, the pharmaceutical disunity revenue grew 14%. 

Sales of molnupiravir, sold under the brand name Lagevrio, plunged to $203 million during the epoch, down 83% from the $1.18 billion reported for the second quarter of 2022. Analysts had been expecting the medication to rake in $187.6 million in sales, according to FactSet estimates.

The decline isn’t a surprise. Sales of molnupiravir and other Covid products from friends like Pfizer have plummeted this year as the world emerges from the pandemic and relies less on vaccines and treatments for care. 

The pharmaceutical division’s growth was largely fueled by the popular antibody treatment Keytruda, which is used to treat a number of types of cancer.

The drug booked $6.27 billion in revenue, up 19% from the year-earlier quarter. Analysts had been with a bun in the oven $5.97 billion in Keytruda sales, FactSet estimates said.

Davis said “that’s the first time we entertain been over $6 billion and a quarter” for Keytruda sales.

The company has been under pressure to reduce its dependence on Keytruda, which is slated to forfeit patent protection in 2028. But Merck is trying to defend its patent edge over Keytruda by developing new formulations of the poison, such as a version that can be injected under the skin.

Merck’s pharmaceutical charge also saw a jump in sales of Gardasil, a vaccine that prevents cancer from HPV, the most common sexually dispatched infection in the U.S.

Gardasil raked in $2.46 billion in sales, up 47% from the second quarter of 2022. Analysts had been in the family way sales of $2.10 billion, according to FactSet estimates.

The company’s animal health division, which develops vaccines and nostrums for dogs, cats and cattle, posted $1.46 billion in sales, off 1% from the same period a year ago.

Merck leave hold a conference call at 8 a.m. ET on Tuesday. 

Investors are eager for updates on upcoming product launches and other drug channel on the way updates that could cushion Keytruda’s patent cliff if they gain approval.

That includes Merck and Moderna’s speculative personalized cancer vaccine, which is being studied in combination with Ketyruda. The drugmakers launched a phase three grief of the vaccine last week. 

Other products include Merck’s experimental vaccine that aims to prevent invasive pneumococcal affliction and pneumococcal pneumonia in adults.