In this Feb. 28, 2013 file photo, a Merck logo is placed on scientist’s lab coat in West Point, Pa. (AP Photo/Matt Rourke, File)
The drug giant Merck earned $1.55 billion on sales of $9.4 billion in the first quarter of 2017, both about even with the same period last year, as global sales of cancer immunotherapy drug Keytruda reached $584 million, up 134% from the year-ago quarter.
Earnings per share, according to generally accepted accounting principles (GAAP), were $0.56. Sales were 2% above forecasts made by analysts on Wall Street according to a tally by Barclays, the investment bank. Earnings excluding one-time items, used by investors to track continuing operations, were $0.88 per share, a nickel more than consensus estimates.
“Merck delivered solid performance across our broad range of products that address major disease categories and the needs of global health,” said Kenneth C. Frazier, Merck’s chairman and chief executive officer, in a prepared statement. “The continued momentum of Keytruda in oncology, along with the strength of the vaccine and other franchises and animal health, helped to drive revenue growth in the quarter.”
Sales of Gardasil, a vaccine to prevent infections that can cause cervical, throat or anal cancers, were $532 million, 50% more than analysts expected. Zepatier, for hepatitis C, brought in $378 million, 40% above expectations. Established brands like Januvia, for diabetes, Zetia, for cholesterol, and Remicade, for rheumatoid arthritis, all performed slightly worse than analysts expected.
But all eyes are on Keytruda, which, despite its eye-popping gains and $584 million in sales, still came in light compared to investors’ Pollyanna-ish hopes. Barclays put consensus at $589 million; Bernstein, another investment bank, at $615 million. Timothy Anderson, Bernstein’s pharmaceutical analyst, suggested that perhaps royalties to Bristol-Myers Squibb were lowering numbers, but Merck says that those are being counted in its cost-of-goods numbers, and are not lowering reported sales.
The truth is Keytruda grew fast, but not quite as fast as expected, while last week Bristol reported sales for its rival drug, Opdivo, which reported $1.127 billion, more than $100 million above what analysts expected. Both medicines work by unleashing the immune system to attack tumor cells. Opdivo has performed better because it is approved for use in melanoma and lung cancer that has not been controlled by other treatments without pre-screening with a diagnostic test. Merck’s drug requires the test.
But late last year, Merck’s study in previously untreated cancer patients who had tested positive on that diagnostic test showed Keytruda was effective. A similar study of Bristol’s Opdivo failed. Analysts are expecting that not only will Merck grab this lucrative market, but also that doctors will start choosing Merck’s Keytruda over Opdivo in pretreated lung cancer patients.