Merck Sales Rise 5% to $18.085 Billion, Beating Estimates Despite Lower Profit
Key Facts
Merck reported third-quarter results on October 29, with sales of $18.085 billion, up 5% year over year, while revenue and adjusted earnings per share exceeded analysts’ average estimates, according to the company and Reuters. Shares rose more than 4% in midday trading, Reuters reported, then closed at $146.33, compared with $140.93 at the previous session’s close, according to EL7 data. The results presented a mixed picture: sales growth was offset by declines in year-over-year profitability measures. The company said sales growth was 4% excluding the effect of foreign exchange rates. Merck held its earnings call the same day at 9 a.m. U.S. Eastern Time.
Revenue was $18.085 billion, compared with $17.276 billion in the third quarter of the previous year, topping analysts’ average estimate of $17.3 billion, according to Reuters. Adjusted earnings per share were $2.49, against estimates of $2.08, but fell 3% from $2.58 a year earlier. GAAP earnings per share were $2.04, compared with $2.32, a 12% year-over-year decline; GAAP net income also fell 12%. Both GAAP and adjusted earnings per share included a one-time cost of $0.12 per share related to a global licensing agreement with SciBrunch. The results therefore beat analysts’ estimates, but the year-over-year comparison shows that revenue growth did not translate into earnings growth.
Keytruda, the company’s cancer drug, was its leading revenue source, with sales rising 6% to $8.6 billion, above analysts’ estimate of $8 billion, according to Reuters. The total included $830 million from the Keytruda QLEX formulation. Sales of Gardasil and Gardasil 9 vaccines also rose 14% to $1.995 billion. The company attributed the increase to higher U.S. sales, government purchasing patterns and net prices. The results highlight the contribution of oncology and vaccine products to quarterly sales growth, while growth rates remained uneven across the portfolio.
Winrevair, a newer drug in Merck’s portfolio, generated sales of $694 million, up 93% as reported, or 94% excluding the effect of foreign exchange. The company attributed the growth to higher demand, purchasing patterns among distributors and pharmacies, and the drug’s international launch. But some of the strength in quarterly sales was tied to timing factors: favorable timing of drug purchases and inventory in the U.S. added about $550 million to sales of Keytruda, Gardasil and Winrevair. The company said most of this effect would reverse during the fourth quarter and 2027. This means some sales that supported the quarter may shift into later periods rather than represent recurring demand at the same level.
On spending, research and development expenses rose to $4.5 billion in the third quarter, up 7% from the year-earlier period, according to the company. Merck attributed the increase mainly to clinical development spending and the SciBrunch agreement. This comes as the company seeks to expand its portfolio of new drugs ahead of expected pressure on older products. Chief Executive Robert Davis said the company plans to raise its revenue outlook for its emerging drug portfolio over the next decade. Merck set a target in January for revenue from that portfolio of $70 billion by the mid-2030s.
Merck expects an impact of more than $2 billion in 2027 from generic competition and the loss of patent protection for older products, according to the company, which is likely to limit the contribution from growth in newer drugs and animal health. The company therefore expects moderate revenue growth that year, with new sources of growth partly offsetting the expected losses. Further out, Merck is preparing for Keytruda to lose U.S. patent protection beginning in 2028. Davis said he was confident the company could manage the loss of exclusivity. In a development supporting its drug pipeline, Davis said late-stage data for a personalized cancer vaccine developed with Moderna showed a 42% reduction in the risk of death or melanoma recurrence when used with Keytruda.