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Merck : weighed down by charges in Q2, but drug sales rebound

07/29/2021 | 12:47pm EDT

Merck’s second-quarter profit dove 49%, mainly due to a big charge for an acquisition and a higher tax rate, though sales of its vaccines and medicines used in hospitals rebounded from the pandemic's effects.

The profit fell just short of expectations and Shares of Merck fell slightly Thursday.

The company narrowly missed Wall Street’s profit expectations, and Merck shares fell slightly in early trading Thursday.

The maker of cancer blockbuster Keytruda said it believes patients and health care systems have now “largely adapted to the impacts of COVID-19” and the pandemic should reduce its 2021 revenue by less than 3%.

The drug giant slimmed down with a June 2 spinoff that combined its Organon women’s health unit with its businesses selling biosimilars, or near-copies of pricey biologic drugs, and off-patent former blockbusters like respiratory drugs Singulair and Nasonex.

Adjusted earnings came to $1.31 per share, two cents below the $1.33 analysts expected. Merck took a $1.7 billion charge for the April 1 acquisition of Pandion Therapeutics, a biotech company developing new treatments for autoimmune diseases.

The Kenilworth, New Jersey, company posted revenue of $11.4 billion, up 22% from $9.4 billion in 2020′s second quarter. The earnings and revenue figures are adjusted to exclude the businesses spun off last month.

Total prescription drug sales climbed 22% to $9.98 billion, while sales of drugs and vaccines for pets and livestock jumped 34% to $1.47 billion.

Edward Jones analyst Ashtyn Jones wrote to investors 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.

Shares fell $1.44 or 1.8%, to $76.89.

The Organon spinoff brought Merck a $9 billion windfall, which the company's new executive team said will help fund share buybacks and business development.

However, new Chief Executive Rob Davis, who took over upon the June retirement of longtime CEO Ken Frazier, told analysts on a call to discuss the quarterly results that he doesn't plan any megadeals primarily meant to cut costs.

“I think we have enough firepower in our portfolio” of drugs, he said, to balance the company's business by winning approvals of experimental drugs and new uses for existing ones whiles making smaller, targeted acquisitions. Davis said the company needs to broaden its small cancer drug portfolio, along with adding other new medicines.

Merck has long faced investor criticism that it's far too dependent on Keytruda, which is now approved for treating a dozen types of cancer in multiple patient groups. Keytruda brought in $4.2 billion in the second quarter, more than one-third of total revenue.

Along with a big jump in Keytruda sales, Merck’s revenue increase was driven largely by the Gardasil vaccine against cancer-causing human papilloma virus infections, surgery anesthetic Bridion and veterinary medicines.

Type 2 diabetes pills Januvia and Janumet, long among Merck’s top sellers, together fell about 6%. Januvia, launched in 2006, faces U.S. generic competition starting in 2023. Keytruda likewise loses patent protection in 2028, giving Merck seven years to find ways to offset loss of its $14.4 billion in annual sales.

Meanwhile, Merck now is in late-stage of a potential COVID-19 treatment called molnupiravir, a pill aimed at home treatment of infected people who don’t yet need hospitalization but have risk factors linked to poor disease outcomes.

Merck said it expects full-year earnings in the range of $5.47 to $5.57 per share, with revenue in the range of $46.4 billion to $47.4 billion. Both forecasts are well down from its prior estimates because of the revenue lost from the spinoff.

This story has been corrected to show analysts expected earnings per share of $1.33, not $1.30, and that Merck missed that expectation.

Follow Linda A. Johnson on Twitter: @LindaJ_on Pharma

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission., source Associated Press News

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Financials (USD)
Sales 2021 46 881 M - -
Net income 2021 12 645 M - -
Net Debt 2021 15 254 M - -
P/E ratio 2021 15,7x
Yield 2021 3,60%
Capitalization 182 B 182 B -
EV / Sales 2021 4,22x
EV / Sales 2022 3,81x
Nbr of Employees 73 500
Free-Float 70,7%
Chart MERCK & CO., INC.
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Merck & Co., Inc. Technical Analysis Chart | MRK | US58933Y1055 | MarketScreener
Technical analysis trends MERCK & CO., INC.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus BUY
Number of Analysts 22
Last Close Price 72,04 $
Average target price 93,42 $
Spread / Average Target 29,7%
EPS Revisions
Managers and Directors
Robert M. Davis President, Chief Executive Officer & Director
Caroline A. Litchfield Chief Financial Officer & Executive Vice President
Kenneth C. Frazier Executive Chairman
Sandy Tremps Vice President-R&D IT CIO
Dave Williams Chief Information & Digital Officer
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