Flush with Q1 success, Merck touts coming launches in hep C, lung cancer

Merck CEO Kenneth Frazier

Merck & Co. ($MRK) had a lot to brag about with first-quarter earnings. Sales and profits beat analyst forecasts. It's preparing to launch its new cancer med in a big new market. And it ticked off a triad of study victories that could give its product line a boost.

It's true that sales expectations weren't that high, for a couple of good reasons. Merck revenue dropped by 8.2% to $9.43 billion, but more than $540 million of the decline came from the sale of its consumer business to Bayer last year. Currency effects took their toll, too, as they have been across Big Pharma.

Earnings, excluding items, came in at 85 cents per share--a few slots below last year's 88 cents--where analysts had figured on 75 cents.

Of Merck's major franchises, only Januvia managed to beat back foreign exchange effects to a positive growth rate. With almost $1.4 billion in sales, Januvia and its combo-drug sister Janumet grew by 4% (or 10%, after factoring out the currency hit).

And thanks to new data Merck announced Monday, Januvia could be on its way to market-share gains. A cardiovascular outcomes trial has cleared the DPP-4 inhibitor on several heart-safety measures, including hospitalizations for heart failure. AstraZeneca's ($AZN) rival med Onglyza, on the other hand, could soon get a labeling revision noting an increase in heart-failure risks. An FDA advisory panel recommended as such earlier this month, after reviewing the data from Onglyza's own outcomes trial, SAVOR.

On the negative side of the ledger, Merck's blockbuster anti-inflammatory med Remicade saw sales drop by 17%. That's mostly because Merck's marketing rights to that drug are all overseas, so its sales are more vulnerable to the strong dollar. But part of that decline was an apples-to-apples drop. Remicade is facing biosimilar competition in several European countries now, and bigger-than-expected discounts in a few of them are leaching away sales.

Meanwhile, the Zetia/Vytorin franchise continues its slide, with a 2% decline after factoring out currency effects. The company got positive results from a Zetia outcomes trial earlier this year, so that might reverse itself.

Looking ahead, Merck is revving up to launch Keytruda, its new PD-L1 cancer fighter, in lung cancer, a much bigger market than its current indication in melanoma. The drug is awaiting FDA approval, with a decision expected in a few months. And it's eyeing a hepatitis C launch later this year, aided by a new round of data showing cure rates of 95%. The cocktail's results are especially strong in hard-to-treat patients, R&D chief Roger Perlmutter said during Tuesday's earnings call. Analysts have said Merck may need to offer hefty discounts to challenge the current market leader, Gilead Sciences ($GILD).

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