One analyst called Merck & Co.’s new product sales for the first quarter “uninspiring.” The same could be said of the entire Q1 report, with every gain for one product counterbalanced by losses for another.
Sales were essentially flat, and those new products, including the immuno-oncology med Keytruda, chugged, rather than soared. Longtime top sellers Januvia and Janumet ticked upward, but just a tick.
Another longtime stalwart, Remicade, shrank by about 30% on biosimilar competition in Europe. The HPV vaccine franchise ratcheted up by 5%, but the HIV med Isentress lost more ground with a 12% decline. And Zetia and Vytorin sales differed from last year’s by just $2 million.
It’s no wonder that CEO Kenneth Frazier’s first specific comment in the Q1 earnings release--after the obligatory “on a good course for the year” quote--was about dealmaking.
“Business development is a top priority, and we are actively pursuing the best external science through licensing or bolt-on acquisitions to bolster our pipeline and grow our company,” Frazier said in the statement.
Overall, the company reported a slight slide in revenue--1%--to $9.3 billion, which missed analyst estimates, mostly because of currency headwinds. Lower costs and bigger margins offset that, with earnings of 89 cents per share beating expectations.
Leerink Partners analyst Seamus Fernandez is the one who called the new products “uninspiring.” Evercore ISI analyst Mark Schoenebaum called the results “a mixed quarter.”
Keytruda and Zepatier, Merck’s two closely watched launches in cancer and hepatitis C, both beat consensus expectations overall, but Keytruda’s U.S. sales fell short. Zepatier’s $5 million beat--for a total of $49 million--managed to disappoint some market-watchers, who’d come to hope for a surprise sales boost from government programs.
Of course, it’s very early days for Zepatier, and the third-to-market hep C cocktail faces some formidable competition from Gilead Sciences and, to a lesser extent, AbbVie. Keytruda is battling head-to-head with Bristol-Myers Squibb’s Opdivo, and in lung cancer, the Merck drug is handicapped by the need for a diagnostic test to identify appropriate patients. Merck has priced Zepatier far lower than the other two hep C drugs, and its rivals hint that the strategy may be winning Merck some market share. Meanwhile, Merck is pushing hard for the PD-L1 diagnostic testing in lung cancer, and working toward a first-line indication where it will compete with BMS on equal footing, i.e., without the testing hurdle.
But the excitement on Merck’s Q1 earnings call was about deals. As Anderson wrote in a Thursday note, company executives say they want to be "aggressive" about chasing deals, but not so much that they don’t create value. They’re open to bolt-on deals of any size--bigger than their $9.5 billion merger with Cubist, for instance. And they figure that buyouts in diseases where Merck already operates would be easiest, but wouldn’t rule out expanding into other therapeutic areas.
Merck did raise its guidance for the year, but only slightly. It lifted the low end of its projected revenue range to $39 billion from $38.7 billion, leaving high end projections at $40.2 billion. The EPS forecast bumped upward at both ends, to $3.65 to $3.77 from $3.60 to $3.75.
- read the Merck release
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