Merck Catching Up to Bristol-Myers as Cancer Drug Sales Double

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  • Adjusted 2017 earnings will be $3.76 to $3.88 a share
  • Stock gains less than 1%, has tracked fortunes of Keytruda

Merck & Co. is gaining on Bristol-Myers Squibb Co. in the race to dominate a new class of cancer treatments that use the body’s own immune system to attack tumors.

Merck raised its full-year forecast Tuesday after sales of Keytruda, Merck’s drug for skin and lung cancers, more than doubled in the first quarter to $584 million. While that was short of analysts’ lofty expectations, Merck is catching up after Bristol-Myers’s rival drug Opdivo suffered a series of setbacks.

Keytruda has been approved for new uses, while Opdivo last year failed in a major trial of lung cancer patients. Bristol-Myers said last month that sales of Opdivo declined compared with the fourth quarter.

“We see it as foundational and transformational for oncologists,” Roger Perlmutter, Merck’s head of research and development, said on a call with investors. “The goal has been to actually change the shape of the survival curve.”

Merck’s adjusted earnings this year will be $3.76 to $3.88 a share, the company said in a statement, up from a previous forecast of $3.72 to $3.87.

The shares were up less than 1 percent to $62.94 at 9:36 a.m. in New York as investors weighed the growth of Keytruda against lackluster sales of Merck’s biggest products, the diabetes pill Januvia and its sister treatment Janumet.

Alex Arfaei, an analyst with BMO Capital Markets, called it a “mixed to net negative quarter,” citing the high expectations for Keytruda. “The focus will be on Keytruda’s light performance and outlook, as well as Januvia’s weakness,” he said, adding that he expects the cancer drug to grow faster in the second half of the year. Arfaei has an outperform rating on the shares.

Merck is increasingly reliant on Keytruda to become its next major blockbuster as its diabetes business starts to come under pressure. Januvia and Janumet sales fell 5.5 percent percent from a year before to $1.34 billion.

The decline in Januvia sales makes Merck the latest drugmaker to report a slowdown for diabetes drugs, after Johnson & Johnson and AstraZeneca Plc both blamed price pressures for hurting sales in the first quarter. Merck said the diabetes sales decline was due to the timing of purchases.

Merck also increased its revenue forecast to $39.1 billion to $40.3 billion, from $38.6 billion to $40.1 billion. First-quarter earnings, excluding some items, were 88 cents a share, beating the 83-cent average of analysts’ estimates compiled by Bloomberg.

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