Biotech and Pharma

Merck posts mixed fourth-quarter results as Keytruda sales skyrocket

Key Points
  • Merck beat earnings expectations but fell short of revenue estimates.
  • Sales of blockbuster cancer drug Keytruda and diabetes drugs Januvia and Janumet narrowly beat consensus estimates.
Kenneth Frazier, Chairman and CEO of pharmaceutical company Merck & Co.
Spencer Platt | Getty Images

Merck posted mixed fourth-quarter results, beating earnings expectations but falling short of revenue estimates despite skyrocketing Keytruda sales.

Here's how the company did compared with what Wall Street expected:

  • EPS: 98 cents vs. 94 cents per share, according to Thomson Reuters
  • Revenue: $10.43 billion vs. $10.5 billion, according to Thomson Reuters

In the fourth quarter, the pharmaceutical company reported it had a net loss of $872 million, or 32 cents per share, compared with a net loss of $594 million, or 22 cents per share, in the year-earlier quarter.

However, after stripping out special items, such as a $2.6 billion charge related to the new tax law, the company earned $2.7 billion, or 98 cents per share, above analysts' estimates of 94 cents per share.

Merck posted revenue of $10.43 billion, up 3 percent from a year ago but below expectations of $10.5 billion. Its pharmaceuticals business grew 4 percent from the same time last year, reaching $9.3 billion in the quarter.

Sales of Keytruda, Merck's blockbuster cancer drug, rocketed 169 percent to hit $1.3 billion, narrowly beating Street expectations of $1.27 billion, according to StreetAccount.

Executives declined to provide a firm date for the release of full results from a much-anticipated study on Keytruda paired with two chemotherapy drugs. Early results showed the mix helped lung cancer patients live longer and stopped the disease from advancing.

"We are certainly encouraged by the strength of the KEYNOTE-189 data, details of which will also be presented as soon as possible in an appropriate time venue," said Roger Perlmutter, president of Merck Research Laboratories.

Diabetes drugs Januvia and Janumet reached $1.52 billion, up 1 percent from the year-ago quarter and just above estimates of $1.5 billion. Management told analysts it expects the diabetes business to be "relatively stable."

For 2018, Merck forecasts adjusted earnings of $4.08 to $4.23 per share and revenue of $41.2 billion to $42.7 billion. Analysts had been expecting $4.11 per share and $41.1 billion, respectively.

Merck expects to pay about $5 billion over eight years for a one-time repatriation tax. The company intends to invest about $12 billion over five years in capital projects, including approximately $8 billion in the U.S.

It plans to provide a "one-time, long-term incentive award" for eligible nonexecutive employees in the second quarter of this year. Further details regarding the award weren't immediately known.

Merck also made a contribution to its foundation in the fourth quarter.

This year, the company expects its effective tax rate to be between 19 and 20 percent, essentially flat compared with last year but down from 2016's rate of 22.3 percent. In coming years, it expects to see "some additional favorability," Chief Financial Officer Robert Davis told analysts.

Shares of Merck dipped 1 percent in morning trading. They've shed 7 percent over the past year.