Merck & Co.'s sales rise over 20% in Q2, led by Keytruda, vaccines

Headline results for the second quarter:

  • Pharmaceutical product sales: $10 billion, up 22%
  • Overall revenue: $11.4 billion (forecasts of $11.1 billion), up 22%
  • Profit: $1.2 billion, down 48%

Note: All changes are versus the prior-year period unless otherwise stated

What the company said:

"We are encouraged by the strong momentum of our underlying business led by our key growth drivers as the impact of the [COVID-19] pandemic on our performance lessens," commented new CEO Rob Davis, who took over the reins from longtime chief executive Kenneth Frazier this month.

Growth in oncology was largely driven by higher sales of Keytruda, as well as greater alliance revenues from Lynparza and Lenvima, while the vaccines unit saw Gardasil/Gardasil 9 sales rebounding during the quarter largely due to the ongoing COVID-19 pandemic recovery.

Merck & Co. said COVID-19 had hurt sales in the second quarter, but to a lesser extent than in the year-earlier period, citing an estimated $900-million year-over-year benefit amid the ongoing pandemic recovery. The company also indicated that quarterly profit took a hit as a result of a $1.7-billion charge related to its acquisition of Pandion Therapeutics, which was completed in April, as well as higher expenses for drug development.

Other results:

  • Keytruda: $4.2 billion (in line with forecasts), up 23%, with the immunotherapy logging 15% higher sales in the US driven by "strong growth" across all key tumour types, particularly lung, while ex-US sales were up 27% boosted by uptake in lung cancer and ongoing launches in head and neck squamous cell carcinoma and kidney cancer
  • Vaccines:  $2.3 billion, up from $1.4 billion in the prior year
    • Gardasil/Gardasil 9: $1.2 billion (forecasts of $991 million), up 88%, reflecting underlying demand in the US, where sales surged 170%, plus uptake in other markets such as China, where there was increased supply
    • Proquad/M-M-R II/Varivax: $516 million, up 36%, driven primarily by the ongoing market recovery from the COVID-19 pandemic in the US, but still missing estimates of $541 million
    • RotaTeq: $208 million, up 23%
    • Pneumovax 23: $152 million, up 30%, falling short of estimates of $194 million
  • Januvia/Janumet: $1.3 billion, down 6%, hit by continued pricing pressure in the US, partially offset by higher demand in certain international markets
  • Bridion: $387 million, up 72%, reflecting higher demand globally and improved patient access
  •  Simponi: $202 million, up 5%
  • Isentress/Isentress HD: $192 million, down 2%
  • Lynparza (alliance revenue): $248 million, up 39%, reflecting continued uptake in approved indications in the US, Europe and China
  • Lenvima (alliance revenue): $181 million, up 19%, driven primarily by higher demand in China following listing on the country's National Reimbursement Drug List

Looking ahead:

Merck said it believes patients and healthcare systems have now "largely adapted to the impacts of COVID-19," and that the pandemic should only reduce its 2021 revenue by less than 3%.

The company also slimmed down last month via a spinoff that combined its Organon women's health unit with its businesses selling biosimilars and established brands. It now expects full-year revenues somewhere between $46.4 billion and $47.4 billion. That's down from its April forecast of $51.8 billion and $53.8 billion because of revenue lost from the spinoff, but within the range Merck had predicted taking the Organon split into account, which was between $45.8 billion and $47.8 billion.

Meanwhile, full-year earnings for 2021 are expected to be $5.47 to $5.57 per share, down from a previous range of $6.48 to $6.68. Merck noted that neither the sales nor the earnings guidance include the impact of a potential launch of its COVID-19 antiviral drug candidate molnupiravir, for which the company recently signed a $1.2-billion supply deal with the US government.

Merck gained $9 billion via the Organon spinoff and plans to use the funds for share buybacks and business development, although will not be undertaking any large deals. "One of the areas we continue to believe we do not need to go is to the very large synergy-driven deals. I think we have enough firepower in our own pipeline," Davis remarked. However, the executive said that the company will continue to make smaller, targeted acquisitions, particularly to broaden its small cancer drug portfolio, adding "we want to build upon that strength and actually see ourselves as a company that over time can be a broad player across oncology."

What analysts said:

Edward Jones analyst Ashtyn Jones noted that the results reflect "a solid recovery from second-quarter results last year at the height of the pandemic," with cancer screenings and other doctor visits picking up and sales of most key drugs increasing.

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