A Mixed Bag
Merck & Co Inc. (MRK) reported its third-quarter earnings on Thursday, revealing a mixed performance. While overall sales increased by 4% year-over-year to $16.66 billion, exceeding analyst expectations, the company's flagship vaccine, Gardasil, experienced a decline in sales.
Gardasil, which protects against human papillomavirus (HPV), the most common sexually transmitted infection in the U.S., saw a 11% drop in sales to $2.31 billion. This decline was primarily attributed to lower demand in China, partially offset by higher sales in the U.S. driven by public-sector buying patterns, higher pricing and demand, and increased demand in most international regions.
Despite the Gardasil setback, Merck's performance was bolstered by strong contributions from other key franchises. Keytruda, a blockbuster cancer immunotherapy, generated $7.43 billion in revenue, representing a 17% increase from the previous year. Additionally, the newly approved Winrevair (sotatercept) for pulmonary arterial hypertension generated $149 million in sales.
Analysts remain optimistic about Merck's future prospects. Goldman Sachs maintains a Buy rating for the stock, albeit with a lowered price target of $135 due to revised Gardasil forecasts. BMO Capital Markets also suggests that Gardasil sales in China may face challenges through 2025. However, the strong performance of Winrevair and other key franchises provides a positive outlook for the company.
Merck's CEO, Rob Davis, anticipates Gardasil sales in China to reach between $2 billion and $3 billion by 2025. Winrevair continues to demonstrate strong demand, with an uptake of approximately 80% for the quarter. This trend is expected to continue into 2025, particularly with the upcoming ZENITH and CADENCE trials.
Overall, Merck's third-quarter earnings presented a mixed picture. While Gardasil sales declined, the company's performance was bolstered by other key franchises and promising new products. Analysts remain optimistic about Merck's future, with a Buy rating and a lowered price target reflecting the revised Gardasil forecasts.