Merck raises revenue guidance thanks to a surprising bump from COVID-19 pill Lagevrio

It’s been grounded in Europe and reduced to irrelevancy in the U.S., but Merck’s COVID-19 pill Lagevrio somehow remains a force.

The antiviral treatment racked up sales of $640 million in the third quarter, shocking analysts who figured it would generate $120 million.

During a Thursday earnings call, Merck did not address the sales surge of Lagevrio. In its release, the company simply credited an increase in demand in Japan.

The upswing comes eight months after Europe’s Committee for Medicinal Products for Human Use recommended against the authorization of Lagevrio, saying that its clinical benefit could not be demonstrated.

In the U.S., Pfizer’s Paxlovid—spurred by superior efficacy data before the appearance of the omicron variant—has become the dominant treatment for at-risk patients who have been recently infected by the virus. In June 2022, the FDA ruled that pharmacists could prescribe Paxlovid but did not extend the same privilege to Lagevrio.

Sales of Lagevrio reached $3.3 billion in the first three months of 2022, its first full quarter on the market, but had been in steady decline, falling to $392 million and $203 million in the first two quarters of this year, respectively.

“We view this as an aberration,” John Boylan, Edward Jones analyst, wrote in a note to investors of Lagevrio’s performance in the quarter. “We expect sales of this product to moderate over time as the pandemic fades.”

Merck anticipates the same, projecting Lagevrio sales to reach $1.3 billion for the year.

With the bump from Lagevrio, Merck jacked up its annual revenue forecast to a range of $59.7 billion to $60.2 billion, up from its previous estimate of $58.6 billion to $59.6 billion.

Meanwhile, earlier this month, Pfizer slashed its overall revenue projection by $9 billion, down to a range of $58 billion to $61 billion, due largely to a $7 billion decrease in projected sales of Paxlovid. In its second-quarter report, Pfizer said that it recorded no U.S. sales of the antiviral pill “in anticipation of transition to traditional commercial markets in the second half of 2023.”

Merck sales overall reached $16 billion in the third quarter, up from $15 billion, both sequentially and year over year. Analysts also came up short on Merck’s earnings per share, expecting $1.95, while the company reported a $2.13 figure.

Oncology superstar Keytruda generated $6.3 billion in sales in the quarter, up 17%, with the company crediting earlier-stage indications in triple-negative breast cancer and renal cell carcinoma.

Similar momentum was evident with HPV vaccine Gardasil, which registered sales of $2.6 billion, up 13%. Merck chalked up the increase to increased demand in China and a price increase in the U.S.  

“Keytruda continues to exceed our estimates based on good product acceptance and new indications,” Boylan wrote. “Gardasil sales were mostly lower than our expectations, likely due to a temporary shift in buying patterns from the U.S. government. Gardasil sales in China, a key market, appeared solid. Therefore, we continue to see good growth for this product in the future.”