Merck made the biopharma industry’s second-largest deal of 2021 when it acquired Acceleron for $11.5 billion. Last year, Merck’s $10.8 billion buyout of Prometheus was the third-largest in the industry.
So what now for the New Jersey pharma giant as it gets another year closer to its date of reckoning, 2028, when it loses patent protection for cancer superstar Keytruda.
“While I feel very good about the progress we’ve made in growing the deep and diverse portfolio we have in our pipeline, we do believe we need more,” Merck CEO Rob Davis said in a quarterly conference call. “We will continue to prioritize business development. Our view of deals like Prometheus, like Acceleron are still the size of deals we are very interested in if we can find great assets.”
Those assets Merck is counting on include pulmonary arterial hypertension drug sotatercept, which was acquired from Acceleron and is set up for approval in March with the expectation that it will bring $2 billion in sales by 2028. As for the Promethius buy, Merck gained ulcerative colitis treatment PRA023, which carries “multibillion dollar peak sales potential,” Davis said at the time of the deal.
“It’s gonna be a range of deals, but if you look in that $1 [billion] to $15 billion [range], that continues to be what we’ll look for,” Davis said. “We’ve also shown that not only are we very open to acquisition, we see collaboration as an important tool as well.”
Davis pointed to Merck’s recent partnership with Daiichi Sankyo, paying $4 billion to co-develop three antibody-drug conjugate candidates.
Pointing up the urgency for Merck to diversify its portfolio are its financial figures for the fourth quarter and for 2023 overall. For the year, Merck’s revenue totaled $60.1 billion, which was a 1% increase on 2022, with $25 billion of the sales coming from Keytruda, which was up 19% as gains were made with it “moving into earlier lines of treatment,” chief financial officer Caroline Litschfield said.
Keytruda's figure illustrates the company’s dependence on its cancer superstar, which accounted for 41.6% of its revenue in 2023 and 45% of its sales in the quarter.
“Merck generates strong annual cash flow that should allow it to grow through investment in internal research and through acquisitions,” John Boylan, a healthcare analyst with Edward Jones, wrote.
Merck’s revenue for the quarter came in at $14.6 billion, for a 6% increase on 2022. Excluding sales of COVID-19 antiviral Lagevrio, it was an 11% bump, year over year.
The ability of Lagevrio to sustain its performance in the post-pandemic stage was a surprise as it garnered $1.4 billion this year. But sales finally are fading fast as it accounted for $193 million in the fourth quarter, compared to $825 million in the fourth quarter of 2022.
Sales of Merck’s other bell cow, HPV vaccine Gardasil, grew even more rapidly than those of Keytruda, by 29% to $8.9 billion for the year, credited largely to an increase in China.
Together in the fourth quarter, sales of Keytruda at $6.61 billion and Gardasil of $1.87 billion accounted for 64.5% of the company’s $13.1 billion pharmaceutical sales.
With its juggernauts expected to continue their rise in 2024, Merck is projecting annual revenue to fall between $62.7 billion and $64.2 billion.