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Merck & Co., Inc. (MRK - Free Report) reported fourth-quarter 2021 adjusted earnings of $1.80 per share, which beat the Zacks Consensus Estimate of $1.46. Earnings rose a whopping 84% year over year (82% excluding the impact of currency) due to higher revenues.
Including acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities and certain other items, earnings per share were $1.51 per share against a loss per share of $1.03 in the year-ago quarter.
Revenues rose 24% year over year (23% on a constant currency basis) to $13.52 billion driven by additional sales from its oral COVID drug, molnupiravir, increased demand for its cancer drugs and human papillomavirus (“HPV”) vaccines and higher sales of Animal health products. Sales beat the Zacks Consensus Estimate of $12.60 billion.
Merck’s stock has gained 7.9% in the past year compared with an increase of 19.4% for the industry.
Image Source: Zacks Investment Research
Quarter in Detail
The Pharmaceutical segment generated revenues of $12.04 billion, up 23% year over year on higher sales of oncology drugs, HPV vaccines, neuromuscular blockade drug — Bridion — and molnupiravir.
Keytruda, the largest product in Merck’s portfolio, generated sales of $4.58 billion in the quarter, up 15% (16% excluding Fx impact) year over year. Keytruda sales have been gaining particularly from continued strong momentum in lung cancer indications and continued uptake in newer indications.
Alliance revenues from Lynparza and Lenvima also boosted oncology sales in the quarter. Merck has a deal with British pharma giant, AstraZeneca (AZN - Free Report) 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 30% year over year to $268 million in the quarter. Lenvima alliance revenues were $206 million, also up 30% from the year-ago period.
In the hospital specialty portfolio, the Bridion injection generated sales of $436 million in the quarter, up 23% year over year, reflecting higher demand globally.
The company’s molnupiravir generated sales of $952 million during the fourth quarter, primarily from supply to the United States, the United Kingdom and Japan.
Merck’s vaccine portfolio witnessed continued recovery for the majority of its vaccines. However, lower sales of pneumococcal vaccine, Pneumovax 23, partially offset gains in other vaccines.
Sales of HPV vaccines — Gardasil and Gardasil 9 — surged 53% year over year to $1.53 billion, primarily driven by strong global demand, especially in China. Proquad, M-M-R II and Varivax vaccines recorded combined sales of $509 million, up 4% year over year. Sales of the rotavirus vaccine, Rotateq rose 9% to $213 million.
Sales of Pneumovax 23 declined 14% to $292 million, reflecting lower demand in the United States amid the prioritization of COVID-19 vaccines.
In December, Merck’s 15-valent pneumococcal conjugate vaccine, Vaxneuvance, was approved in Europe for use in adults.
Januvia/Janumet (diabetes) franchise sales were up 5% year over year to $1.39 billion.
Merck’s Animal Health segment generated revenues of $1.26 billion, up 8% from the year-ago quarter, helped by growth across geographies and species.
Margin Discussion
Adjusted gross margin was 74.8%, down 20 basis points from the year-ago quarter, reflecting a lower margin from molnupiravir due to profit-sharing with Ridgeback.
Selling, general and administrative (SG&A) expenses were $2.6 billion in the reported quarter, up 1.1% year over year due to higher promotion and administrative costs. Research and development (R&D) spending rose 3.3% to $2.7 billion due to higher compensation and benefit costs, partially offset by the reimbursement of a portion of molnupiravir R&D costs from Ridgeback.
Full-Year Results
Merck reported revenues of $48.7 billion, up 17% year over year. The company’s adjusted earnings for 2021 were $6.02 per share, up 33% from the year-ago period.
2022 Guidance
Merck issued earnings and sales guidance for 2022. Merck expects revenues to be in the range of $56.1 billion to $57.6 billion in 2022. The guidance range indicates growth in the range of approximately 15% to 18%. The Zacks Consensus Estimates for 2022 revenues is pegged at $55.63 billion.
Adjusted earnings per share are expected to be between $7.12 and $7.27. The Zacks Consensus Estimates for 2022 earnings per share is pegged at $6.95.
Adjusted operating costs are expected to be higher than 2021 by a high single-digit rate.
Our Take
Merck’s fourth-quarter results were better than expected as it beat estimates for both earnings and sales. An ongoing recovery from the pandemic and strong global underlying demand across its business led to improved sales in the quarter.
Though some negative effects from the pandemic hurt the sales of a few vaccines, overall demand trends across all segments are improving. Merck’s view for 2022 also indicates a promising year ahead.
Merck also made meaningful progress in its pipeline in the quarter, including authorizations and supply agreements for its and partner Ridgeback Biotherapeutics’ oral antiviral medicine for treating mild-to-moderate COVID-19, molnupiravir, in several countries. The drug significantly boosted the top line during the fourth quarter and is likely to continue to do so in 2022.
In November 2021, Merck completed the acquisition of Acceleron Pharma for approximately $11.5 billion. The acquisition added Acceleron’s promising phase III pipeline candidate, sotatercept, which is being evaluated for the treatment of pulmonary arterial hypertension, thereby strengthening Merck’s cardiovascular portfolio.
Merck & Co., Inc. Price, Consensus and EPS Surprise
A couple of better-ranked pharma companies are Pfizer (PFE - Free Report) and Eli Lilly (LLY - Free Report) . While Pfizer sports a Zacks Rank of 1, Lilly carries Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Pfizer’s 2022 earnings have gone up from $4.18 to $4.19 over the past seven days while that for 2023 has increased from $6.14 to $6.41 per share.
The Zacks Consensus Estimate for Lilly’s 2022 earnings has remained stable at $8.18 per share over the past seven days, while that for 2023 has increased from $8.45 to $8.52 per share.
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Merck (MRK) Q4 Earnings & Sales Beat, COVID Drug Adds $952M
Merck & Co., Inc. (MRK - Free Report) reported fourth-quarter 2021 adjusted earnings of $1.80 per share, which beat the Zacks Consensus Estimate of $1.46. Earnings rose a whopping 84% year over year (82% excluding the impact of currency) due to higher revenues.
Including acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities and certain other items, earnings per share were $1.51 per share against a loss per share of $1.03 in the year-ago quarter.
Revenues rose 24% year over year (23% on a constant currency basis) to $13.52 billion driven by additional sales from its oral COVID drug, molnupiravir, increased demand for its cancer drugs and human papillomavirus (“HPV”) vaccines and higher sales of Animal health products. Sales beat the Zacks Consensus Estimate of $12.60 billion.
Merck’s stock has gained 7.9% in the past year compared with an increase of 19.4% for the industry.
Quarter in Detail
The Pharmaceutical segment generated revenues of $12.04 billion, up 23% year over year on higher sales of oncology drugs, HPV vaccines, neuromuscular blockade drug — Bridion — and molnupiravir.
Keytruda, the largest product in Merck’s portfolio, generated sales of $4.58 billion in the quarter, up 15% (16% excluding Fx impact) year over year. Keytruda sales have been gaining particularly from continued strong momentum in lung cancer indications and continued uptake in newer indications.
Alliance revenues from Lynparza and Lenvima also boosted oncology sales in the quarter. Merck has a deal with British pharma giant, AstraZeneca (AZN - Free Report) 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 30% year over year to $268 million in the quarter. Lenvima alliance revenues were $206 million, also up 30% from the year-ago period.
In the hospital specialty portfolio, the Bridion injection generated sales of $436 million in the quarter, up 23% year over year, reflecting higher demand globally.
The company’s molnupiravir generated sales of $952 million during the fourth quarter, primarily from supply to the United States, the United Kingdom and Japan.
Merck’s vaccine portfolio witnessed continued recovery for the majority of its vaccines. However, lower sales of pneumococcal vaccine, Pneumovax 23, partially offset gains in other vaccines.
Sales of HPV vaccines — Gardasil and Gardasil 9 — surged 53% year over year to $1.53 billion, primarily driven by strong global demand, especially in China. Proquad, M-M-R II and Varivax vaccines recorded combined sales of $509 million, up 4% year over year. Sales of the rotavirus vaccine, Rotateq rose 9% to $213 million.
Sales of Pneumovax 23 declined 14% to $292 million, reflecting lower demand in the United States amid the prioritization of COVID-19 vaccines.
In December, Merck’s 15-valent pneumococcal conjugate vaccine, Vaxneuvance, was approved in Europe for use in adults.
Januvia/Janumet (diabetes) franchise sales were up 5% year over year to $1.39 billion.
Merck’s Animal Health segment generated revenues of $1.26 billion, up 8% from the year-ago quarter, helped by growth across geographies and species.
Margin Discussion
Adjusted gross margin was 74.8%, down 20 basis points from the year-ago quarter, reflecting a lower margin from molnupiravir due to profit-sharing with Ridgeback.
Selling, general and administrative (SG&A) expenses were $2.6 billion in the reported quarter, up 1.1% year over year due to higher promotion and administrative costs. Research and development (R&D) spending rose 3.3% to $2.7 billion due to higher compensation and benefit costs, partially offset by the reimbursement of a portion of molnupiravir R&D costs from Ridgeback.
Full-Year Results
Merck reported revenues of $48.7 billion, up 17% year over year. The company’s adjusted earnings for 2021 were $6.02 per share, up 33% from the year-ago period.
2022 Guidance
Merck issued earnings and sales guidance for 2022. Merck expects revenues to be in the range of $56.1 billion to $57.6 billion in 2022. The guidance range indicates growth in the range of approximately 15% to 18%. The Zacks Consensus Estimates for 2022 revenues is pegged at $55.63 billion.
Adjusted earnings per share are expected to be between $7.12 and $7.27. The Zacks Consensus Estimates for 2022 earnings per share is pegged at $6.95.
Adjusted operating costs are expected to be higher than 2021 by a high single-digit rate.
Our Take
Merck’s fourth-quarter results were better than expected as it beat estimates for both earnings and sales. An ongoing recovery from the pandemic and strong global underlying demand across its business led to improved sales in the quarter.
Though some negative effects from the pandemic hurt the sales of a few vaccines, overall demand trends across all segments are improving. Merck’s view for 2022 also indicates a promising year ahead.
Merck also made meaningful progress in its pipeline in the quarter, including authorizations and supply agreements for its and partner Ridgeback Biotherapeutics’ oral antiviral medicine for treating mild-to-moderate COVID-19, molnupiravir, in several countries. The drug significantly boosted the top line during the fourth quarter and is likely to continue to do so in 2022.
In November 2021, Merck completed the acquisition of Acceleron Pharma for approximately $11.5 billion. The acquisition added Acceleron’s promising phase III pipeline candidate, sotatercept, which is being evaluated for the treatment of pulmonary arterial hypertension, thereby strengthening Merck’s cardiovascular portfolio.
Merck & Co., Inc. Price, Consensus and EPS Surprise
Merck & Co., Inc. price-consensus-eps-surprise-chart | Merck & Co., Inc. Quote
Zacks Rank & Stocks to Consider
Merck currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A couple of better-ranked pharma companies are Pfizer (PFE - Free Report) and Eli Lilly (LLY - Free Report) . While Pfizer sports a Zacks Rank of 1, Lilly carries Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Pfizer’s 2022 earnings have gone up from $4.18 to $4.19 over the past seven days while that for 2023 has increased from $6.14 to $6.41 per share.
The Zacks Consensus Estimate for Lilly’s 2022 earnings has remained stable at $8.18 per share over the past seven days, while that for 2023 has increased from $8.45 to $8.52 per share.