Merck KGaA is scheduled to report second-quarter 2018 results on Aug 9.
Merck’s shares have declined 5.3% so far this year compared with the industry’s decrease of 0.5%.
The company reports results under three business sectors — Healthcare, Life Science and Performance Materials.
In the past couple of quarters, Merck’s revenues were driven by organic sales growth in its Healthcare and Life Science segments. We expect to see the same trend in the upcoming quarterly results. However, unfavorable currency movement is anticipated to dent the top line.
Its newly launched drugs – Mavenclad and Bavencio – have shown potential to drive revenues in the future.
Multiple sclerosis drug, Mavenclad, continues to get approval in new geographies. Following its approval in Australia, Canada and Europe last year, in June, the drug received approval in United Arab Emirates. These approvals are likely to bring increased revenues due to greater reach of the drug. Subsequent to the quarter, the company re-submitted the new drug application for the drug in the United States.
Bavencio is approved in several key geographies for the treatment of Merkel cell carcinoma (“MCC”) including the United States, which drive the strong growth. The drug is also approved for advanced bladder cancer in the U.S. region. In June, the company presented two year follow-up data from pivotal JAVELIN Merkel 200 study evaluating the drug in merkel MCC. Data showed that Bavencio continues to show clinically meaningful durable responses and stable rates of progression-free survival ("PFS") and overall survival in patients receiving the treatment for two years. This data should boost the prospect of the drug.
Sales of other key drugs — Rebif and Erbitux — continue to decline due to persistent competitive pressure and price reduction. We may see declining trend to continue in the soon to be reported quarter. However, Gonal-f witnessed a turnaround in the last reported quarter and may also saw growth in the second quarter
Operating expenses are likely to be on the higher side as the company continues to support the launch of Mavenclad and Bavencio in new geographies and progresses with its pipeline.
Meanwhile, the company remains on track with its strategic plan to focus on innovation driven businesses within Healthcare, Life Science and Performance Materials. In April, the company signed an agreement with Procter & Gamble (PG - Free Report) to sell its global Consumer Health business. An update is expected at the upcoming investor call.
Merck is also focused on the development and protection of its novel DNA-sequencing technology – CRISPR. The company was issued patent for the technology in China in April, following issuance patents in Korea and Israel last quarter. This might increase expenses.
We expect management to shed light on the path forward for Bavencio and Mavenclad on the earnings call. The company is likely to provide updates on its pipeline progress.
Stocks that Warrant a Look
Here are a couple of healthcare stocks that you may want to consider, as our model shows that these have the right combination of elements — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to post an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Regulus Therapeutics Inc. (RGLS - Free Report) is expected to release second-quarter results on Aug 7. The company has an Earnings ESP of +2.04% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Madrigal Pharmaceuticals, Inc. (MDGL - Free Report) is expected to release second-quarter results on Aug 9. The Zacks #3 Ranked company has an Earnings ESP of +13.90%.
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