Still reeling from cyberattack, Merck warns some drug supplies may be delayed

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Merck CEO Ken Frazier said that the company is continuing to bring production online that was disrupted by the Petya hack in June.

Merck & Co., one of the victims of the Petya cyberattack last month, has yet to fully restore its manufacturing and R&D operations since they were targeted more than four weeks ago. And though it didn't hit the company's second-quarter results, the global attack and its costs are an unexpected blow to Merck's prospects for the rest of the year.

The company said Friday it is confident it can continue to supply its top products, including its highly successful cancer med Keytruda, but warned it may have temporary delays in fulfilling orders for certain other products in some markets. It still is not producing bulk products, but the company said that through significant effort it has been able to keep clinical trials on track.

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“The network cyberattack disrupted our worldwide operations, including manufacturing, research and sales operations, but we did not have any appreciable impact on our second quarter results,” Merck CEO Ken Frazier said when he kicked off an earning call today.

Frazier said recovery will take some time, but the U.S.-based company is working nonstop to get that done.

Merck reported in its second-quarter earnings release that it does not expect any “significant impact to sales” of its top products from the network disruptions. It has factored the costs of dealing with the attack into its full-year guidance, which it updated Friday. On non-GAAP earnings, its expectations are unchanged at $3.76 to $3.88 per share. Merck hiked its revenue number to a range of $39.4 billion to $40.4 billion.

Execs acknowledged, however, that guidance would have been higher had it not been for the costs of the cyberattack, which it has yet to fully quantify.

As far as the efforts to return to business as usual, Merck said it has largely restored its packaging operations and has partially restored its formulation operations. The company is in the process of restoring its active pharmaceutical ingredient (API) operations but is not yet producing bulk product.  

Even so, Merck was able to handily beat analyst expectations for the quarter with revenue of $9.9 billion and EPS of $1.01. Of course, sales were juiced by Keytruda, which blasted past consensus forecasts, turning in $881 million worldwide, $556 million of that in the U.S.

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The only drug in a new generation of treatments to win FDA approval for first-line treatment in lung cancer, Keytruda had its lead reconfirmed yesterday when highly anticipated trial data were a bust for AstraZeneca's combo based on rival drug Imfinzi. AstraZeneca reported that its newly approved Imfinzi and experimental tremelimumab failed to stave off lung cancer progression better than chemotherapy or Imfinzi alone.

Bristol-Myers Squibb’s Opdivo failed as a monotherapy in lung cancer last year as well.

Analysts saw the AZ data as a win for Merck not only by keeping a potential competitor out of the running for now, but also because Merck has pushed ahead with its own combination approach.

Merck has already won a quick FDA approval for its Keytruda-chemo regimen, expected to put Keytruda in an even better spot in lung cancer. Results are expected later this year from Roche’s similar combo, a pairing of its PD-L1 drug Tecentriq with chemo, in the phase 3 IMpower-150 trial.