Merck Q4 Earnings & Sales Beat Estimates, Stock Down on Weak '25 View

Merck MRK reported fourth-quarter 2024 adjusted earnings per share (EPS) of $1.72, which beat the Zacks Consensus Estimate of $1.69. In the year-ago period, management reported adjusted EPS of 3 cents. This significant upside was on account of a one-time charge incurred by the company in the year-ago quarter for a collaboration with Daiichi Sankyo.See the Zacks Earnings Calendar to stay ahead of market-making news.Revenues rose 7% year over year (9% excluding Fx) to $15.62 billion. Sales also beat the Zacks Consensus Estimate of $15.56 billion.All sales growth numbers discussed below are on a year-over-year basis and exclude Fx impact.Keytruda & Other Oncology Drugs Drive Merck’s Top LineMerck’s flagship product, Keytruda, generated sales of $7.84 billion in the quarter, up 21%. Sales of the drug benefited from rapid uptake across earlier-stage indications in triple-negative breast cancer, renal cell carcinoma (RCC) and non-small cell lung cancer. Continued strong momentum in metastatic indications also boosted sales growth. Keytruda sales beat the Zacks Consensus Estimate of $7.73 billion and our estimate of $7.62 billion.Alliance revenues from Lynparza and Lenvima also boosted oncology sales in the quarter. Merck has a deal with British pharma giant AstraZeneca AZN to co-develop and commercialize PARP inhibitor Lynparza and a similar one with Japan’s Eisai for its tyrosine kinase inhibitor, Lenvima.Alliance revenues from AstraZeneca-partnered Lynparza increased 18% to $365 million in the quarter, driven by higher global demand for the drug. Lenvima alliance revenues totaled $255 million, up 14%.Welireg recorded sales of $160 million, up 123%. The drug’s sales benefited from encouraging uptake in the RCC indication, which was approved by the FDA in December 2023.Sales Performance of MRK’s Other Key ProductsIn vaccines, sales of HPV vaccines — Gardasil and Gardasil 9 — fell 18% to $1.55 billion due to lower demand in China, partially offset by higher sales in most international markets. The reported sales figure missed the Zacks Consensus Estimate of $1.66 billion and our estimate of $1.71 billion.Proquad, M-M-R II and Varivax vaccines recorded combined sales of $594 million, up 9%. Sales of the rotavirus vaccine, Rotateq, fell 25% to $139 million, while Pneumovax 23 (pneumococcal vaccine polyvalent) vaccine sales declined 12% to $74 million. Sales of Vaxneuvance, Merck’s pneumococcal 15-valent conjugate vaccine, were $161 million, down 9%, primarily due to lower demand in the United States.In the hospital specialty portfolio, neuromuscular blockade medicine, Bridion injection, generated sales of $449 million in the quarter, up 5%. While the drug’s sales benefited from higher demand and pricing in the United States, it was partially offset by the generic competition in certain ex-U.S. markets (mainly Europe and Japan).In Diabetes, Januvia/Janumet (diabetes) franchise sales declined 36% year over year to $487 million. Lower pricing in the United States and generic competition in certain international markets hurt the drug's sales.New PAH drug, Winrevair, which received FDA approval in March, generated sales of $200 million compared with $149 million in the previous quarter.Sales of Lagevrio (molnupiravir) declined 37% to $121 million in the quarter.MRK’s Animal Health SegmentThe segment generated revenues of $1.40 billion, up 9% year over year (13% excluding Fx impact). This growth was driven by higher demand and pricing for both Companion Animal and Livestock product portfolios. This reported metric beat the Zacks Consensus Estimate and our model estimate, both of which stood at $1.34 billion.MRK’s Cost and Margin DiscussionAdjusted gross margin was 80.8%, up 360 basis points year over year, driven by a favorable product mix (including the benefit from reduced royalties paid on Keytruda and Gardasil).Adjusted selling, general and administrative expenses were $2.82 billion in the reported quarter, up 2% year over year, as higher promotional and selling costs were partially offset by the favorable impact of foreign exchange.Adjusted research and development (R&D) spending was $4.57 billion, down 48% from the year-ago quarter levels. This decline was mainly due to lower charges for business development activity and the favorable impact of foreign exchange in the quarter.Full-Year 2024 ResultsFull-year 2024 sales rose 7% (10% ex Fx) to $64.17 billion, which beat both the Zacks Consensus Estimate of $64.06 billion and the guided range of $63.6-$64.1 billion. Pharmaceutical sales grew 7% (10% excluding Fx) to $57.40 billion.Adjusted earnings for 2024 were $7.65 per share compared with $1.51 in the year-ago period. This upside was related to certain acquisitions and collaboration agreements entered into by Merck throughout 2023. Though earnings beat the Zacks Consensus Estimate of $7.62 per share, it missed the company’s guided range of $7.72 and $7.77.MRK’s 2025 Guidance Fails to Impress InvestorsMerck issued a fresh earnings and sales outlook for 2025.Merck expects revenues to be in the range of $64.1-$65.6 billion in 2025. However, the forecasted range significantly missed the Zacks Consensus Estimate of $68.05 billion. Per management, sales for the full year are expected to be negatively impacted by management’s decision to temporarily halt shipments of Gardasil vaccines to China. The guidance also includes a negative impact on sales from foreign exchange of approximately 2%.Adjusted earnings per share are expected to be between $8.88 and $9.03, also missing the Zacks Consensus Estimate of $9.18 per share. This guided range includes a one-time charge of $300 million, payable as a milestone payment to China-based LaNova Medicines for in-licensing rights to the latter’s PD-1xVEGF targeting bispecific antibody candidate, MK-2010 (formerly LM-299).The adjusted gross margin is expected to be around 82.5%.Adjusted operating costs are expected to be in the range of $25.4 to $26.4 billion. The adjusted tax rate is expected to be approximately 16% to 17%.Our Take on MRK’s ResultsMerck exited the fourth quarter with better-than-expected results as its earnings and sales beat their respective estimates. Higher sales of oncology drugs like Keytruda, higher demand for products in the company’s Animal Health segment, as well as additional sales from recently launched products like Winrevair, drove the company’s top line.Despite the encouraging results, investors were left disappointed by the weak 2025 guidance that fell below Wall Street expectations. This was the primary reason that Merck’s shares fell nearly 8% in pre-market trading today.In the past year, the stock has lost 21% compared with the industry’s nearly 3% fall.Image Source: Zacks Investment ResearchThough Keytruda may seem to be Merck’s biggest strength and a solid reason to own the stock, investors have been worried about the company’s heavy reliance on the drug. This blockbuster oncology drug is set to lose exclusivity in 2028 and Merck currently does not have any new product or pipeline candidate that can replace its sales. Today’s results have investors also concerned about Gardasil, the company’s second-largest product.To build its long-term portfolio, management is also tapping external sources. Merck’s late-stage pipeline has almost tripled over the past three years, positioning it to launch several new vaccines and drugs over the next five years, with many having blockbuster potential. We believe the recently approved 21-valent pneumococcal conjugate vaccines, Capvaxive and Winrevair have the potential to generate significant revenues for the company over the long term.MRK’s Zacks RankMerck currently has a Zacks Rank #3 (Hold).Merck & Co., Inc. Price Merck & Co., Inc. price | Merck & Co., Inc. QuoteOur Key Picks Among Biotech StocksA couple of better-ranked stocks include Castle Biosciences CSTL and Erasca ERAS. While CSTL sports a Zacks Rank #1 (Strong Buy) at present, ERAS carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Bottom-line estimates for Castle Biosciences have improved from a loss of 59 cents per share to earnings of 39 cents for 2024 in the past 90 days. During the same timeframe, loss per share estimates for 2025 have narrowed from $2.15 to $1.70. In the past year, shares of Castle Biosciences have risen over 23%.CSTL’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 172.72%.In the past 90 days, estimates for Erasca’s 2024 loss per share have improved from 90 cents to 73 cents. Estimates for 2025 loss per share have narrowed from 82 cents to 61 cents during the same timeframe. In the past year, Erasca’s shares have risen nearly 4%.ERAS’ earnings beat estimates in two of the trailing four quarters and missed the mark on the other two occasions, delivering an average negative surprise of 7.04%.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AstraZeneca PLC (AZN): Free Stock Analysis Report Merck & Co., Inc. (MRK): Free Stock Analysis Report Castle Biosciences, Inc. (CSTL): Free Stock Analysis Report Erasca, Inc. (ERAS): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks