Merck Beats Estimates as Sales of Gardasil Vaccine Surge

  • Sales of top drug Januvia and related Janumet missed estimates
  • Cancer drug Keytruda approved, could be prescribed flexibly

Merck & Co.’s third-quarter profit topped analysts’ estimates, helped by better-than-expected sales of the vaccine Gardasil and the antibiotic Cubicin.

While the two older drugs performed well, Merck is depending on newer products like cancer treatment Keytruda, its crown jewel, to revive growth as longtime franchise products face competition from cheaper generics. On Monday, two months earlier than expected, the U.S. Food and Drug Administration approved it for first-line use in metastatic non-small cell lung cancer. The broader label is expected to more double Keytruda sales to about $3.3 billion in 2017.

Earnings excluding some items were $1.07 a share, the Kenilworth, New Jersey-based company said Tuesday in a statement, compared with the 99-cent average of predictions compiled by Bloomberg. Sales of Keytruda, at $356 million, fell short of the $371 million average estimate.

“Keytruda was weak but that’s before the first-line launch, which everyone is excited about,” said Alex Arfaei, an analyst at BMO who rates the stock outperform.

The shares rose 1.7 percent to $61.77 at 2:17 p.m. in New York.

Keytruda’s momentum has been high after its main competitor, Opdivo from Bristol-Myers Squibb Co., failed in a large, late-stage trial. Merck is conducting more tests than any of its competitors in PD-L1 inhibitors, the immunotherapy mechanism of action in battling cancer, according to Sanford C. Bernstein & Co. analyst Tim Anderson, who rates the stock outperform.

Merck is actively looking for ways to expand its pipeline, including “bolt-on” acquisitions, Chief Executive Officer Ken Frazier said on a conference call with analysts.

Sales of the diabetes treatments Januvia and Janumet slipped 1.4 percent to $1.55 billion, compared with analysts’ projection of $1.62 billion. The pills are Merck’s biggest products and could face competition from generics and Eli Lilly & Co.’s Jardiance, which is waiting for approval from the U.S. government for claims that it cuts down the risk of death from cardiac events.

Merck also received a one-time boost of $150 million in sales in Japan after shipment timings were moved to accommodate a new software system the drugmaker will implement in the fourth quarter, the company said in the statement.

Gardasil had sales of $860 million compared with analysts’ predictions of $629 million. Cubicin sold $320 million, compared with estimates of $209 million.

Other highlights from the third quarter:

  • Merck raised its 2016 revenue projection to $39.7 billion to $40.2 billion, compared to a July estimate of $39.1 billion to $40.1 billion. 
  • The drugmaker raised its forecast for full-year adjusted earnings to $3.71 to $3.78 a share, compared with a previous projection of $3.67 to $3.77 a share.
  • Quarterly net income rose to $2.18 billion, or 78 cents a share, from $1.83 billion, or 64 cents, a year earlier.
  • Revenue gained 4.6 percent to $10.5 billion, topping analysts’ estimates of $10.2 billion.

— With assistance by Katherine Doherty

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