Merck raises 2023 sales forecast as top drugs beat Street estimates

By Michael Erman and Leroy Leo

(Reuters) -Merck & Co raised its full-year revenue forecast on Tuesday as second-quarter sales of its top-selling products, cancer immunotherapy Keytruda and human papillomavirus (HPV) vaccine Gardasil, sailed past Wall Street estimates.

Merck said Keytruda sales for the quarter jumped 19% to $6.3 billion, surpassing analysts’ average estimate of $5.9 billion.

CEO Rob Davis said Keytruda’s strength is coming from within the United States and internationally, and that the drug is increasingly being used prior to other treatments.

Davis said Keytruda was also being used more often against a particularly aggressive form of cancer known as triple negative breast cancer, contributing to its sales strength.

Sales of Gardasil, which prevents cancers caused by HPV, surged 47% to $2.5 billion, also well above Wall Street estimates of $2.1 billion.

Use of Gardasil in China was the biggest driver of growth for the vaccine, Davis said. There is room for further Gardasil growth as its use expands into treating males and moves into smaller cities, he added.

However, the second half of the year could see lower shipments of the vaccine to China compared to the first, which may hurt growth, Chief Financial Officer Caroline Litchfield said on a conference call.

Litchfield also pointed to continued price pressure for Keytruda in Europe this year as the company gets approval for expanding use in more types of cancer, as well as changes in insurance reimbursements in some countries, especially Germany and the UK.

Despite those challenges, Merck raised its full-year sales forecast to $58.6 to $59.6 billion, from its prior view of $57.7 billion to $58.9 billion.

Merck shares were about flat in morning trade.

Merck reported total second-quarter sales of 15.0 billion, up from $14.6 billion a year ago.

The company posted an adjusted loss of $5.2 billion, or $2.06 a share, primarily due to a $10.2 billion charge related to its acquisition of Prometheus Biosciences. Analysts had expected a loss of $2.18.

Merck paid close to $11 billion in cash for Prometheus, adding a promising experimental treatment for ulcerative colitis and Crohn’s disease to its pipeline.

“We’d rather have them grow future profits and free cash flow by using the money that way (through deals),” said Bill Smead, chief investment officer at Smead Capital Management, which owns a 0.12% stake in the U.S. drugmaker.

Merck has been looking for deals to protect itself from eventual revenue loss as patents on Keytruda begin to expire toward the end of the decade.

Davis said the Prometheus deal will not constrain the company’s ability to do more deals, and that Merck continues to “look for science-driven, science-led opportunities.”

“While I feel pretty good about what we have in the internal pipeline and the progress we’re making, we know there’s more to do,” he said.

The U.S. drugmaker now expects to earn $2.95 to $3.05 a share for 2023.

(Reporting by Michael Erman in New York and Leroy Leo in Bengaluru; Editing by Bill Berkrot)

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