Merck exceeds financial targets for second quarter, but investors concerned about full-year cut in adjusted EPS

Q2/24 Earnings

Merck (MRK) reported strong second-quarter earnings with an adjusted EPS of $2.28, beating analysts' expectations by $0.12, and revenue of $16.11 billion, surpassing the $15.85 billion consensus. Nevertheless, the stock price is taking a big beating today....

CEO Robert Davis attributed the success to effective launches and positive reviews, particularly for WINREVAIR and treatments for pulmonary arterial hypertension. Keytruda sales rose by 16%, driving much of the quarter's growth. Overall, Merck’s global sales increased by 7%, with an 11% rise after adjusting for currency impacts.

Merck raised its 2024 sales forecast to $63.4-$64.4 billion, slightly below the analyst consensus of $64.3 billion. However, it lowered its full-year adjusted EPS guidance to $7.94-$8.04 due to a one-time charge related to the EyeBio acquisition.

BMO Capital analysts highlighted Keytruda’s strong performance and a successful Winrevair launch, despite Gardasil sales missing slightly due to shipment issues in China. The pharmaceutical division saw a 7% revenue increase, led by oncology and vaccine sales, especially Keytruda and Winrevair.

Merck reported a net income of $5.46 billion, or $2.14 per share, compared to a net loss of $5.98 billion the previous year, which included a charge from the Prometheus Biosciences acquisition. Excluding these costs, earnings were $2.28 per share.

Key achievements included FDA approval and CDC recommendations for CAPVAXIVE and positive trial results for an RSV preventative for infants. Merck is planning for Keytruda’s 2028 patent expiration with new deals and drug launches.

Keytruda revenue was $7.27 billion, a 16% increase. Gardasil sales grew by 1%, hindered by shipment timing in China. Winrevair revenue was $70 million, exceeding expectations. Januvia sales dropped 27% due to lower demand and generic competition. Covid antiviral pill Lagevrio sales fell 46%, though they exceeded expectations. The animal health division saw a 2% sales increase to $1.48 billion.

Despite strong quarterly results and sales, Merck's stock decline reflects concerns over Gardasil's performance and the lowered EPS guidance.

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