Keytruda And Gardasil Will Likely Continue To Drive Merck’s Earnings Growth
Merck (NYSE:MRK) continues to see steady top line growth, primarily led by Keytruda and Gardasil sales. The company’s Q3 results were more or less in line with our estimates, led by a strong growth in these two drugs. Looking forward, we continue to believe Keytruda will be the key growth driver for Merck in the near term. The company, in its recent earnings conference call, narrowed its full year 2018 revenue guidance to be in the range of $42.1 to $42.7 billion, and EPS guidance to be in the range of $4.30 and $4.36, and we forecast the figures to be closer to the lower end of the range. We have created an interactive dashboard ~ What Will Drive Merck’s Near Term Growth ~ on the company’s expected performance in 2018 and 2019. You can adjust the revenue and margin drivers to see the impact on the company’s earnings, and price estimate.
Expect Oncology To See Strong Growth Led By Keytruda
We forecast Merck’s overall revenues to grow in mid-single digits to $42.3 billion in 2018. The growth will primarily be led by the Oncology segment, which will likely see a strong double digit growth with revenues close to $7.3 billion for the full year, according to our estimates. Keytruda garnered over $5 billion in the nine month period ending September 2018, and it was the leading immunotherapy in patient starts as well as total patient volume in the U.S. in Q3, according to the company’s management. This can be attributed to its wide scope with 13 U.S. FDA approvals so far. Keytruda has a large addressable market because of its approval for lung cancer, which is a large market, and it is estimated to grow in double digits to $37 billion by 2023 from $15 billion in 2016, according to a research report. Keytruda will benefit from the growth in the market given its leadership position in the overall immunotherapy space. Also, the company is currently working on 8 programs in different therapeutic areas, such as Head & Neck, Liver, and Gastric, in its phase 3 trials for Keytruda. Some of these will likely see regulatory approvals, and aid the sales growth in the coming years.
- After A 30% Fall In A Year Is Pfizer Stock A Better Pick Over Merck?
- At $100 Does Merck Stock Have Room For Growth?
- Should You Pick Merck Stock Over Coca-Cola?
- Should You Buy Merck Stock After An Upbeat Q2?
- How Has Merck Stock Performed During The 2022-23 Inflation Shock?
- Is Merck Stock A Better Pick Over ABBV?
Looking at Anti-Infective drugs, we forecast a high single digit revenue decline for the full year, as a double digit growth in its vaccine – Gardasil – will be offset by a strong double digit decline in Zepatier sales. Note that currently Vaccines are included in the Anti-Infective segment in our model. Gardasil saw an impressive 38% sales growth for the nine months period ending September 2018, and we forecast the drug to garner over $3 billion in sales by the end of 2018. Gardasil is a vaccine used for prevention against HPV (human papillomavirus) virus, which has been linked to certain types of cancers, which makes it an important vaccine. However, the growth in Gardasil will be offset by Zepatier, which has seen sales decline close to 80% year-to-date. This can be attributed to increasing competition and declining patient volumes. This trend is expected to continue in the near term.
We forecast low double digit growth in the company’s Mature Products & Others segment, primarily driven by alliance revenues for Lynparza, and Lenvima, along with the growth in the Animal Health business, which has been doing well of late, with a high single digit revenue growth year to date. Lenvima received the U.S. FDA, European Union, and China approval for hepatocellular carcinoma in the previous quarter. This is expected to boost the alliance revenues in the coming quarters.
Overall, the company’s near term growth can largely be linked to the ramp up in Keytruda and Gardasil, as well as Lynparza and Lenvima sales. We forecast the EPS for full year 2018 to be around $4.30, which is at the lower end of the company’s guided range. Our price estimate of $73 for Merck is slightly above the current market price.
What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
Like our charts? Explore example interactive dashboards and create your own.