Here Are The Key Takeaways From Merck’s Q3 Earnings
While Merck’s (NYSE:MRK) recently released Q3 numbers came in above consensus estimates, the highlight of the day was the news of the company withdrawing its European application seeking approval of one of its combinations with Keytruda in Europe as a first-line treatment for lung cancer. The reason for this action wasn’t disclosed. It should be noted that Merck’s stock fell around 6% in Friday’s trading session following the earnings, while this news on the Europe application came in post market hours. Merck’s stock was down further in Monday morning trading.
Regarding the quarterly numbers, the NotPetya cyber attack cost the company $135 million in lost sales along with $175 million in related costs, and this loss will also repeat in Q4, according to the company’s management. Looking at its drug portfolio, Keytruda continued to shine with sales north of $1 billion during the quarter, representing 194% growth over the prior year period. Zepatier was also up 184% to $468 million during the quarter. However, Merck’s best selling drug, Januvia, saw a 2% decline in sales due to continued pricing pressure.
Looking forward, Keytruda remians 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. These approvals will accelerate the drug’s growth in the coming quarters. However, we are still awaiting more details on the recently withdrawn Europe application. Beyond Keytruda, Zepatier is another success story, with sales potentially reaching north of $2 billion in 2018, per our estimates. On the other hand, Merck’s diabetes drugs, Januvia and Janumet, will likely continue to face pricing pressure, which may even intensify going forward.
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Our price estimate of $65 for Merck is over 10% above the current market price.
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