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| Merck CEO Kenneth Frazier |
Merck CEO Kenneth Frazier said Wednesday that the company's effort to slim down and more tightly focus were reflected in the company's financial results, and so they were. The drugmaker reported that global revenues in Q4 were down 7%--although earnings were in line with what Wall Street was expecting. The company also announced that it stands to lose FDA "breakthrough" status on its hepatitis C treatment candidate--Gilead Sciences ($GILD) and AbbVie ($ABBV) beat it to the market with their treatments--but said that it still plans to seek approval for the combo regimen in the first half of the year.
"Our stronger focus has led to better, consistent execution, and our results in 2014 demonstrate the significant progress we've made in evolving the company," Frazier said in a statement, after the company released earnings that showed Q4 revenues of $10.5 billion and earnings per share of $0.87. Full years sales were $42.2 billion, down 4%. Like others, its revenues took a hit from foreign currency adjustments but patent expirations had a larger effect; selling off its consumer health division last year also reduced its sales.
Having lost patent protection on its blockbuster asthma drug, Singulair, in 2012, Merck ($MRK) has spent a couple of years working to get back into fighting shape and growth mode. Toward that end it sold off its consumer health unit last year to Bayer for $14.2 billion, then turned around and spent a big chunk of that on Cubist, a specialist in hospital acute care. It added hospital acute care to its areas of focus Frazier had been talking about, which include vaccines, immunology, emerging markets and diabetes drugs.
It also spent $3.8 billion to buy Idenix Pharmaceuticals last year in an effort to boost is own hepatitis C program, and then accelerated that program. Idenix has three hep C drugs in development that analysts said should help Merck's treatment compete against Gilead's Sovalidi, which has been tearing up the market since a late 2013 launch. Sovaldi raked in $10.9 billion in revenues last year and a newly approved combo drug, Harvoni, sold $2.1 billion more, Gilead reported Tuesday. It is unclear what Merck's loss of the breakthrough status for its hep C drug would mean for its entry into the market, if anything. The drugmaker said today that it will talk with the FDA about the decision but did not expect the FDA's action to have an impact on when it filed for approval its combination regimen.
Merck's pharma sales in the fourth quarter were down 4% to $9.4 billion but saw growth in oncology, helped by its first-in-class, highly promising cancer treatment Keytruda, which turned in $50 million in sales in the fourth quarter after being approved in September. On-the-other-hand, cancer drug Remicade, one of the best selling drugs in the world, saw a small dip in Q4 sales as a result of approval in Europe of a biosimilar of that drug.
Keytruda was one of 6 drugs Merck got approvals for last year as it has pushed its pipeline prospects. In December it got approval for insomnia treatment Belsomra and Zerbaxa, a product it acquired in the Cubist deal which is approved to treat hospital acquired infections.
With all of those new approvals in the bag, Merck told Wall Street it expects in 2015 to earn $3.32 to $3.47 a share, up by mid-single digits ISI Group analyst Mark Schoenebaum pointed out in a note to investors, but only after the exclusion of the effects of currency exchanges. That number also includes the expectation of a lower tax rate than it had previously indicated would be in effect. Schoenebaum also pointed out that Merck will lose about $1 billion in revenue in 2015 because of divestitures.
- here's the earnings release
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