After two swings and misses in its attempt to develop a COVID-19 vaccine, it appears that Merck has hit a home run with molnupiravir, which is set to become the first oral treatment for the virus.
On Thursday, when the company reported third-quarter earnings that significantly exceeded expectations—resulting in a 5% boost in shares—the good news was almost an afterthought as the tantalizing future of molnupiravir was the dominant topic of an investors call.
Since reporting results from a trial of the Ridgeback-partnered antiviral that showed it reduced the risk of hospitalization and death in at-risk adults with mild-to-moderate COVID by 50% each, Merck has been busy lining up supply deals and ramping up manufacturing resources.
The company plans to produce 10 million courses of the treatment by the end of this year and at least 20 million next year. On Thursday, the company said the 2022 figure only takes into consideration Merck’s in-house production.
“We are not including, in any of those numbers, any voluntary licensed partners in India nor anyone who the Medicine’s Patent Pool signs up,” Davis said. “So obviously global production of molnupiravir will be significantly more next year.”
The Medicines Patent Pool will provide molnupiravir to 105 low- and middle-income countries. Earlier this week, Merck revealed its deal with the United Nations-endorsed effort. The pact is an extension of a molnupiravir licensing deal Merck made with eight generic manufacturers in India.
Merck sees the potential for between $5 billion and $7 billion in sales of molnupiravir through 2022, but that could be adjusted upward.
“If our postexposure prophylactic trial is successful, with an expected readout in the spring, there is potential upside to these estimates,” said Frank Clyburn, Merck’s president of human health.
Another factor that could alter projections on molnupiravir sales, Clyburn noted, is the progression of oral antivirals produced by other companies. Both Roche and Pfizer are testing their own candidates.
With $13.2 billion in revenue in the third quarter, Merck is up 20% from the pandemic-marred third quarter of last year and up from the $11.4 billion figure it posted in the previous quarter.
The revenue figure topped consensus estimates by a whopping $900 million. Earnings per share came in at $1.75, which routed the consensus of $1.55.
As a result, Merck increased and narrowed its guidance for annual revenue from a range of $46.4 to $47.4 billion to $47.4 to $47.9 billion, which represents a sales growth of 14% to 15%.
Merck’s portfolio had much to do with the performance of cancer powerhouse Keytruda, which raked in sales of $4.5 billion, a 22% increase from last year’s third quarter.
Meanwhile, Gardasil blew away estimates by ringing up $2 billion in sales, a 68% increase from last year. The shot rebounded from supply issues and its pandemic-plagued performance of 2020.
“The underlying sales for Merck’s key products underscores that growth across oncology, vaccines and animal health as well as margin expansion opportunities remain underappreciated,” Cantor Fitzgerald wrote in a note to investors. “Multiple expansion should drive Merck shares higher as earnings visibility improves beyond Keytruda’s patent cliff in 2028.”