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Merck (MRK) Tops Q4 Earnings; Pharmaceutical Sales Down
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Merck & Co., Inc. (MRK - Free Report) reported fourth-quarter 2016 earnings of 89 cents per share, which beat the Zacks Consensus Estimate of 88 cents by a penny. However, earnings declined 4.3% from the year-ago period.
Merck’s shares were up 5.5% so far this year, while the Zacks classified Large-Cap Pharma industry lost 0.6%.
Revenues for the quarter dipped 1% year over year to $10.12 billion, missing the Zacks Consensus Estimate of $10.20 billion by 0.8%. Lower pharmaceutical sales hurt the top line in the quarter. Revenues were also hurt by approximately $150 million in sales in Japan, which occurred in the third quarter ahead of a resource planning system implemented in the fourth quarter of 2016.
Currency movement negatively impacted revenues by 1%.
Quarter in Detail
Merck’s Pharmaceutical segment posted revenues of $8.9 billion, down 1% year over year due to the loss of market exclusivity for many drugs. However, new products like cancer drug Keytruda and hepatitis C virus treatment Zepatier did well in the quarter.
Keytruda brought in sales of $483 million in the fourth quarter of 2016, up 35.6% sequentially. Sales continued to be driven by label as well as geographical expansion.
In the quarter, Keytruda sales gained from launches in new indications like first-line lung cancer (approved in Oct 2016), and recurrent or metastatic head and neck cancer (approved in Aug 2016) in the U.S.; and second-line NSCLC across the world.
Januvia/Janumet franchise recorded sales of $1.51 billion in the quarter, up 4% from the year-ago quarter as higher sales in the U.S. offset lower sales in Japan.
Gardasil/Gardasil 9 sales climbed 9% to $542 million.
Zepatier brought in sales of $229 million, up from $164 million in the third quarter of 2016, supported by launches in the EU and Japan in the fourth quarter.
Meanwhile, combined sales of Remicade (lost exclusivity in Europe and facing stiff biosimilar competition in the region), Nasonex (generic version launched in the U.S. in Mar 2016), Cubicin (lost patent protection in the U.S. in Jun 2016) and Zetia (lost market exclusivity in the U.S. in Dec 2016) declined by $564 million in the quarter. Sales of ProQuad vaccine and Isentress also declined in the quarter.
Sales of Remicade, marketed in partnership with Johnson & Johnson (JNJ - Free Report) , continue to be dampened by biosimilar competition with biosimilars benefiting from increased new patient starts as well as patient switching.
In this regard, note that Pfizer Inc. (PFE - Free Report) launched its Inflectra injection, a biosimilar version of Remicade, in the U.S. in late Nov 2016.
Merck’s Animal Health segment posted revenues of $884 million, up 6% from the year-ago quarter, primarily driven by higher sales of companion animal products.
Gross Margins Flat
Adjusted gross margins were flat in the quarter at 74.8%.
Marketing and administrative (M&A) expenses were flat at $2.57 billion in the fourth quarter of 2016.
Research and development (R&D) spend declined 3% to $1.74 billion in the quarter, reflecting lower licensing costs.
2016 Results
Full-year sales rose 1% to $39.8 billion, slightly missing the Zacks Consensus Estimate of $39.9billion. Revenues were, however, within the guided range of $39.7–$40.2 billion.
Adjusted earnings for 2016 were $3.78 per share, up 5.3% year over year and a pennyabove the Zacks Consensus Estimate of $3.77.Earnings were in line with the projected range of $3.71 to $3.78.
2017 Guidance
Merck issued its 2017 earnings and revenues guidance. The company expects earnings in the range of $3.72–$3.87 per share, including approximately 2% negative foreign exchange impact. The Zacks Consensus Estimate is pegged at $3.82.
Merck expects revenues in the range of $38.6 billion to $40.1 billion, including negative currency impact of approximately 2%. The sales guidance fell slightly short of the Zacks Consensus Estimate of $40.17 billion.
Our Take
Though Merck beat expectations for earnings, sales fell slightly short of expectations due to generic competition for several drugs. Merck’s key drugs, including Singulair, Cozaar/Hyzaar, Remicade, Zocor and Fosamax, have been recording rapid and steep declines in sales due to the presence of generics. Meanwhile, others like Nasonex, Cubicinand Zetia lost patent exclusivity in 2016, which has begun to hurt sales. Nonetheless, we believe that new products like Keytruda and Zepatier should provide top-line support,while cost-cutting initiatives drive the bottom line.
Another pharma giant Eli Lilly and Company (LLY - Free Report) is also facing loss of exclusivity for many of its key drugs in the emerging markets.
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Merck (MRK) Tops Q4 Earnings; Pharmaceutical Sales Down
Merck & Co., Inc. (MRK - Free Report) reported fourth-quarter 2016 earnings of 89 cents per share, which beat the Zacks Consensus Estimate of 88 cents by a penny. However, earnings declined 4.3% from the year-ago period.
Merck’s shares were up 5.5% so far this year, while the Zacks classified Large-Cap Pharma industry lost 0.6%.
Revenues for the quarter dipped 1% year over year to $10.12 billion, missing the Zacks Consensus Estimate of $10.20 billion by 0.8%. Lower pharmaceutical sales hurt the top line in the quarter. Revenues were also hurt by approximately $150 million in sales in Japan, which occurred in the third quarter ahead of a resource planning system implemented in the fourth quarter of 2016.
Currency movement negatively impacted revenues by 1%.
Quarter in Detail
Merck’s Pharmaceutical segment posted revenues of $8.9 billion, down 1% year over year due to the loss of market exclusivity for many drugs. However, new products like cancer drug Keytruda and hepatitis C virus treatment Zepatier did well in the quarter.
Keytruda brought in sales of $483 million in the fourth quarter of 2016, up 35.6% sequentially. Sales continued to be driven by label as well as geographical expansion.
In the quarter, Keytruda sales gained from launches in new indications like first-line lung cancer (approved in Oct 2016), and recurrent or metastatic head and neck cancer (approved in Aug 2016) in the U.S.; and second-line NSCLC across the world.
Januvia/Janumet franchise recorded sales of $1.51 billion in the quarter, up 4% from the year-ago quarter as higher sales in the U.S. offset lower sales in Japan.
Gardasil/Gardasil 9 sales climbed 9% to $542 million.
Zepatier brought in sales of $229 million, up from $164 million in the third quarter of 2016, supported by launches in the EU and Japan in the fourth quarter.
Meanwhile, combined sales of Remicade (lost exclusivity in Europe and facing stiff biosimilar competition in the region), Nasonex (generic version launched in the U.S. in Mar 2016), Cubicin (lost patent protection in the U.S. in Jun 2016) and Zetia (lost market exclusivity in the U.S. in Dec 2016) declined by $564 million in the quarter. Sales of ProQuad vaccine and Isentress also declined in the quarter.
Sales of Remicade, marketed in partnership with Johnson & Johnson (JNJ - Free Report) , continue to be dampened by biosimilar competition with biosimilars benefiting from increased new patient starts as well as patient switching.
In this regard, note that Pfizer Inc. (PFE - Free Report) launched its Inflectra injection, a biosimilar version of Remicade, in the U.S. in late Nov 2016.
Merck’s Animal Health segment posted revenues of $884 million, up 6% from the year-ago quarter, primarily driven by higher sales of companion animal products.
Gross Margins Flat
Adjusted gross margins were flat in the quarter at 74.8%.
Marketing and administrative (M&A) expenses were flat at $2.57 billion in the fourth quarter of 2016.
Research and development (R&D) spend declined 3% to $1.74 billion in the quarter, reflecting lower licensing costs.
2016 Results
Full-year sales rose 1% to $39.8 billion, slightly missing the Zacks Consensus Estimate of $39.9billion. Revenues were, however, within the guided range of $39.7–$40.2 billion.
Adjusted earnings for 2016 were $3.78 per share, up 5.3% year over year and a pennyabove the Zacks Consensus Estimate of $3.77.Earnings were in line with the projected range of $3.71 to $3.78.
2017 Guidance
Merck issued its 2017 earnings and revenues guidance. The company expects earnings in the range of $3.72–$3.87 per share, including approximately 2% negative foreign exchange impact. The Zacks Consensus Estimate is pegged at $3.82.
Merck expects revenues in the range of $38.6 billion to $40.1 billion, including negative currency impact of approximately 2%. The sales guidance fell slightly short of the Zacks Consensus Estimate of $40.17 billion.
Our Take
Though Merck beat expectations for earnings, sales fell slightly short of expectations due to generic competition for several drugs. Merck’s key drugs, including Singulair, Cozaar/Hyzaar, Remicade, Zocor and Fosamax, have been recording rapid and steep declines in sales due to the presence of generics. Meanwhile, others like Nasonex, Cubicinand Zetia lost patent exclusivity in 2016, which has begun to hurt sales. Nonetheless, we believe that new products like Keytruda and Zepatier should provide top-line support,while cost-cutting initiatives drive the bottom line.
Another pharma giant Eli Lilly and Company (LLY - Free Report) is also facing loss of exclusivity for many of its key drugs in the emerging markets.
Merck currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Merck & Company, Inc. Price, Consensus and EPS Surprise
Merck & Company, Inc. Price, Consensus and EPS Surprise | Merck & Company, Inc. Quote
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Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>