What To Expect From Merck’s Q3 Earnings
Merck (NYSE:MRK) will report its Q3 2017 earnings on October 27. We expect to see continued growth in its cancer drug, Keytruda, along with Hepatitis C drug Zepatier. The combined sales of these drugs grew 3x year-on-year to $2.36 billion in the first half of 2017. For the full year, we expect around 2x growth in Keytruda revenues and around 3x growth in Zepatier revenue, and believe that the coming quarters are likely to reflect this continued ramp up of sales.
Keytruda is critical to Merck, and also a key growth driver in the near term. The drug has been on a strong run in 2017 with a series of approvals. It already had approval for melanoma, metastatic, non-small cell lung cancer, head and neck cancer, Hodgkin’s lymphoma and urothelial carcinoma. Last month, U.S. regulators approved the drug for two types of advanced gastric cancer in patients who have received at least two prior rounds of therapy. This marks Keytruda’s fifth approval this year. We expect these approvals to accelerate the drug’s growth this year. You can read why Keytruda is important for Merck’s near term growth in a previous note – Merck’s Keytruda Continues To Roll With Another FDA Approval.
However, there are a number of legacy drugs which are facing sales pressure due to generic and branded competition. For instance, Merck’s diabetes drug, Januvia, anti-infective drug, Isentress, and immunology drug, Remicade, are facing pricing pressure amid strong competition. Also, Zetia and Vytorin now face generic competition, thereby losing market share. We expect the offsetting effect to be significant.
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Overall, we expect Keytruda and Zepatier to be the growth drivers for Merck in the third quarter, while other drugs that face pricing pressure amid strong competition may keep the overall growth in check. We currently estimate full year earnings of slightly under $4 for Merck.
Our price estimate of $65 for Merck is close to the current market price.
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