Merck & Co., Inc.(NYSE: MRK) in the first quarter of FY 17 has posted better than expected quarterly profit, due to the higher gross margins, and the drugmaker has also raised its revenue and profit forecasts for 2017. The Gross margins grew to 68 percent from 61.6 percent, primarily due to a lower impact from acquisition- and divestiture-related expenses as well as restructuring costs.
Merck in the first quarter of FY 17 reported the adjusted earnings per share of 88 cents, beating the analysts’ estimates for the adjusted earnings per share of 83 cents. The company had reported the adjusted revenue growth of 1.3 percent to $9.43 billion in the first quarter of FY 17, beating the analysts’ estimates for revenue of $9.25 billion. The revenue grew due to the continued momentum of Keytruda in oncology, along with the strength of the vaccine and other franchises and animal health. The revenue from the cancer medicine Keytruda has more than doubled to $584 million. On the other hand, the company’s sales growth fell due to a drop in its diabetes franchise, and the loss of patent exclusivity on its cholesterol drug Zetia, antibiotic Cubicin, Nasonex nasal spray in the United States as well as competition for Remicade, its big-selling arthritis drug, in Europe. Further, the sales of cancer drug Keytruda, which works by taking the brakes off the immune system, grew 134 percent to $584 million, but missed the analysts’ consensus estimate of $589 million.
Moreover, Merck has begun a new cycle in which sales of its latest drugs grows as revenue fades for older drugs facing new generic competition. Those drugs include its blockbuster cholesterol pills Zetia and Vytorin, or facing more brand competition. Merck’s crucial diabetes franchise is being hurt as insurers win bigger discounts for Januvia and Janumet, whose combined sales dipped 5 percent, to $1.34 billion.
Merck has raised its full-year 2017 adjusted profit forecast to $3.76 to $3.88 per share from the forecast of $3.72 to $3.87 it gave in February. The company has also hiked its revenue forecast to $39.1 billion-$40.3 billion from $38.6 billion-$40.1 billion.
Merck stock has risen 13.75% in the last one year (source: Google Finance) and has an average price target of $64.33, which is a further upside of 3.13%. But the stock lost over 0.2% in the pre-market session on May 2nd, 2017 (as of 8:16AM EDT ; Source: Google finance)