As Merck R&D chief Dean Li discussed a cardiovascular treatment in the company’s pipeline, he was abruptly interrupted.
“We’re sorry. Your conference will end in five minutes,” an operator intoned.
Another reminder came four minutes later as Li talked about an HIV drug in development.
The warnings were an appropriate intrusion considering the clock that is ticking on Merck and its bell cow Keytruda, whose sales of $5.4 billion accounted for 36% of the company’s revenue in the quarter.
With the cancer superstar expected to lose its patent protection in 2028, there’s an elephant in the room until the company identifies suitable replacements.
That’s the mission of CEO Rob Davis, who will now take over as the company’s board chairman, Merck announced on Wednesday, replacing Ken Frazier on Dec. 1.
When Davis was asked a pointed question about why he hasn’t done more in his 16 months as CEO to build Merck’s pipeline—which analyst Steve Scala of Cowen pointed out was the “second smallest” in Big Pharma—Davis had a quick defense, saying the company has made “a lot of progress.”
“A year ago, no one gave us credit for having a cardiovascular pipeline,” Davis said. “By the 2024-28 timeframe we could have as many as eight new approvals driving revenue that could be in excess of $10 billion by the mid-2030s.”
Davis also pointed to one of his first accomplishments as CEO, an $11.5 billion acquisition of Acceleron. The deal brought one of those heart drugs—sotatercept, which recently aced a phase 3 trial.
Davis also mentioned pneumococcal vaccine Vaxneuvance as “underappreciated” and a “game-changer,” with its differentiated approach geared toward defending adults and children against the virus.
As far as business development is concerned, a long-rumored deal to merge with Seattle biotech powerhouse Seagen no longer appears imminent—or at all. But Davis said there is a “portfolio of opportunities,” that are under consideration.
“We see a list of potential places to play,” Davis said. “That is our priority because we continue to believe that the best thing we can do for long-term value creation.”
But the clock is ticking on those efforts as well, Davis admitted, saying that the company is “committed to not holding cash.”
“We will look opportunistically at share buybacks based on our assessment of that [business development] pipeline,” CFO Caroline Litchfield said.
With revenue coming in at $15 billion for the quarter, Merck surprised analysts including Zach’s, which projected a $14.2 billion figure. Earnings were at $1.85 per share versus the $1.67 consensus.
The company also bumped up its annual guidance from a range of $57.5 billion to $58.5 billion to between $58.5 and $59 billion.
In addition to the continued momentum of Keytruda—despite three recent trial failures—vaccine juggernaut Gardasil also continued its upward trajectory, generating sales of $2.29 billion for a 15% year-over-year increase. Litchfield said that the company projects Gardasil revenue to double by 2030 compared to last year when it made $5.7 billion.
Another Merck blockbuster, Januvia, is going in the other direction, however, with sales at $1.13 billion in the quarter, representing a 15% decrease year over year. The company cited fading demand and loss of exclusivity in China and Europe, which happened during the quarter.
Sales of COVID-19 antiviral Lagevrio were $436 million, a drop from the $1.2 billion it generated in the second quarter.