8-K: Merck Reports Strong Second Quarter 2024 Results Driven by Keytruda and Vaccine Growth

Merck's second-quarter 2024 results show a 7% increase in worldwide sales, reaching $16.1 billion, with a notable 16% growth in Keytruda sales.

Summary

• Merck's total worldwide sales for the second quarter of 2024 were $16.1 billion, a 7% increase compared to the same period in 2023, or 11% excluding foreign exchange impacts.
• Keytruda sales grew by 16% to $7.3 billion, or 21% excluding foreign exchange impacts, driven by increased global uptake in earlier-stage indications.
• GAAP earnings per share (EPS) was $2.14, while non-GAAP EPS was $2.28.
• The company successfully launched WINREVAIR in the U.S. and received a positive EU CHMP opinion for adults with PAH.
• Merck achieved key milestones in vaccine programs, including FDA approval and CDC recommendation for CAPVAXIVE.
• The company completed the acquisitions of EyeBio and Elanco's aqua business in July 2024.
• Merck has raised and narrowed its full-year 2024 worldwide sales outlook to between $63.4 billion and $64.4 billion.
• The company now expects non-GAAP EPS to be between $7.94 and $8.04, reflecting a negative impact from a one-time charge of approximately $1.3 billion for the acquisition of EyeBio.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to strong sales growth and pipeline progress, but tempered by the reduced EPS outlook and negative impacts from foreign exchange and some product declines.

Positives

• Strong sales growth driven by Keytruda and vaccines.
• Successful launch of WINREVAIR in the U.S.
• Positive regulatory milestones for CAPVAXIVE and WINREVAIR.
• Completion of strategic acquisitions of EyeBio and Elanco's aqua business.
• Raised and narrowed full-year sales outlook.
• Positive results from Phase 2b/3 trial of clesrovimab, an investigational RSV preventative monoclonal antibody for infants.

Negatives

• The full-year non-GAAP EPS outlook was lowered due to a one-time charge of approximately $1.3 billion, or $0.51 per share, for the acquisition of EyeBio.
• The company experienced a negative impact from foreign exchange, particularly due to the devaluation of the Argentine peso.
• Sales of JANUVIA/JANUMET declined by 27% due to lower pricing and demand.
• LAGEVRIO sales declined by 46% due to lower demand and pricing in certain markets.
• Non-GAAP EPS outlook includes a negative impact of foreign exchange of more than $0.30 per share.

Risks

• The company faces risks related to currency exchange rate fluctuations, particularly the devaluation of the Argentine peso.
• There are risks associated with the development and regulatory approval of pipeline candidates.
• The company is exposed to competition from other pharmaceutical companies.
• The company is subject to the impact of pharmaceutical industry regulation and healthcare legislation.
• There are risks related to manufacturing difficulties or delays.

Future Outlook

Merck has raised and narrowed its full-year 2024 sales outlook and now expects non-GAAP EPS to be between $7.94 and $8.04, reflecting the impact of recent acquisitions and foreign exchange.

Management Comments

• Our business is demonstrating strong momentum as we exit the first half of the year, said Robert M. Davis, chairman and chief executive officer, Merck.
• Through excellent scientific, commercial and operational execution, were achieving significant milestones for our company and for patients, including the launch of WINREVAIR.
• I am proud of our dedicated teams around the world that are working tirelessly to advance our deep pipeline as we continue delivering innovation that solves unmet medical needs.

Industry Context

The results reflect the ongoing demand for oncology and vaccine products, and the company's strategic focus on acquisitions to expand its pipeline and market presence. The launch of WINREVAIR and the progress in vaccine programs highlight the company's commitment to innovation in key therapeutic areas.

Comparison to Industry Standards

• Merck's 16% growth in Keytruda sales is strong compared to other major oncology players, such as Bristol Myers Squibb and Roche, who have also reported growth in their oncology portfolios, but not at the same rate for a single product.
• The successful launch of WINREVAIR positions Merck as a leader in the treatment of pulmonary arterial hypertension, a space where competitors like United Therapeutics also operate, but with different mechanisms of action.
• The FDA approval and CDC recommendation for CAPVAXIVE places Merck ahead of competitors like Pfizer and GSK in the pneumococcal vaccine market, as it is the first vaccine specifically designed to address the serotypes responsible for approximately 85% of invasive pneumococcal disease cases in adults age 65 and older.
• Merck's overall revenue growth of 7% is in line with the average growth of large pharmaceutical companies, but the 11% growth excluding foreign exchange is above average.
• The company's non-GAAP EPS of $2.28 is competitive, but the reduction in the full-year outlook due to the EyeBio acquisition highlights the impact of strategic acquisitions on short-term profitability.

Stakeholder Impact

• Shareholders may experience short-term volatility due to the reduced EPS outlook, but long-term growth prospects remain positive.
• Employees may benefit from the company's continued growth and strategic acquisitions.
• Patients will have access to new treatment options with the launch of WINREVAIR and the development of new vaccines.
• Suppliers and partners may see increased business opportunities due to the company's expansion.

Next Steps

• Continue the global launch of WINREVAIR.
• Advance the development of clesrovimab for RSV prevention in infants.
• Pursue regulatory approvals for KEYTRUDA in new indications.
• Integrate the acquired businesses of EyeBio and Elanco's aqua business.
• Monitor and manage the impact of foreign exchange fluctuations.

Key Dates

Keywords

Keytruda, WINREVAIR, CAPVAXIVE, vaccines, oncology, pharmaceuticals, sales, earnings, acquisition, biopharmaceutical