Merck treads water in Q4 as Keytruda helps offset Remicade suffering

Merck & Co. ($MRK) took a one-two punch in the fourth quarter. Revenue from two top-selling franchises--Januvia and Remicade--slid, dragging overall sales below analyst estimates at $10.2 billion. One bright spot? A lower tax rate managed to boost Merck's earnings above analyst estimates at 93 cents per share.

Januvia and its sister drug Janumet saw sales decline by 12% to $1.45 billion for the quarter, largely because of big stock-ups in Q3. The full-year numbers were better, with 7% growth in constant currencies. The DPP-4 diabetes drugs delivered $3.86 billion and $2.15 billion for the full year, respectively, or just over $6 billion.

Meanwhile, Remicade, the anti-inflammatory drug Merck shares with Johnson & Johnson ($JNJ), has been suffering badly from biosimilar competition in Europe. Quarterly sales were down 29% to $396 million--an 18% decline at constant exchange rates. For the full year, the drug brought in $1.79 billion, down from $2.37 billion in 2014. That's a decline of 24%, or 10% ex-currency effects.

Overall, the company brought in $39.5 billion, essentially flat compared with 2014 after backing out foreign exchange. Merck's forecast for 2016 is $38.7 billion to $40.2 billion in revenue, or low- to mid-single digit growth. It's expecting more from earnings, with a forecast of mid- to high-single digit gains excluding currency effects.

Merck is putting its hopes in several new drugs, including hepatitis C treatment Zepatier, which it priced much lower than rival meds from Gilead Sciences ($GILD) and AbbVie ($ABBV). Then there's Keytruda, which racked up $214 million in the fourth quarter, $566 million for the full year, with most of its sales in refractory melanoma. The company's sales force is in the process of launching a new indication in previously untreated patients with advanced melanoma, and it's pushing PD-1 diagnostic testing for lung cancer patients to get ready for a first-line approval in that disease.

Merck's newly augmented hospital-focused business--thanks to the addition of Cubist's meds and a couple of new approvals, including the new anesthesia reversal agent Bridion--is another place where the company sees growth for 2016. And the company says it expects Januvia to grow in the coming year, despite pricing pressure in the U.S.

- see the release from Merck

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Editor's note: This story was updated with Bridion's correct name.

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