Merck Announces 3rd Quarter Results
- By Sydnee Gatewood
Merck & Co. Inc. (MRK) released its third quarter report and raised its full-year outlook on Tuesday.
Merck was founded in 1891 and over its 125-year history has become one of the largest pharmaceutical companies in the world, operating in over 140 countries. It is headquartered in Kenilworth, New Jersey. The company has four operating segments: Pharmaceutical, Animal Health, Alliances and Healthcare Services.
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Merck raised its full-year generally accepted accounting principles (GAAP) earnings per share to be between $2.02 and $2.09. The non-GAAP EPS was raised to be between $3.71 and $3.78. The company has increased its full-year revenue range to between $39.7 billion and $40.2 billion.
The health care company reported worldwide sales of $10.5 billion for the third quarter, a 5% increase from the same quarter a year ago. This figure included a 1% negative impact from foreign exchange. Third-quarter sales included the benefit of approximately $150 million in additional sales in Japan.
Merck highlighted some updates in regard to its products. For instance, the company was able to advance the clinical development program for Keytruda, a treatment for lung cancer, as the U.S. Food & Drug Administration approved two supplemental Biologics License Applications. The FDA also accepted two New Drug Applications from the company.
Merck also shared that the U.S. Centers for Disease Control and Prevention's Advisory Committee seconded the FDA's recommendation of a two-dose vaccination for Gardasil 9, which is a vaccine that prevents cancer and other diseases caused by HPV, for adolescents.
"The latest achievements for Keytruda and other recent regulatory approvals across our portfolio show that our innovation strategy is working," Kenneth C. Frazier, chairman and CEO of Merck, said. "We are confident that our focus on the science, along with continued commercial execution, will drive long-term results for the company and our shareholders."
Third-quarter pharmaceutical sales increased 6% to $9.4 billion. The company attributed this to higher sales in vaccines, oncology, the cardiovascular franchise and hospital acute care. The company said growth in vaccines was the result of higher sales in Gardasil and Proquad. Growth in oncology was driven by Keytruda. Sales in the cardiovascular franchise were due to an increase in sales of Adempas and Zetia. Hospital acute care growth was the result of higher sales of the Bridion Injection.
Merck further attributed its sales performance to the continued launch of Zepatier, a treatment for chronic hepatitis C. However, the company did see a decline in sales of Remicade, a treatment for inflammatory diseases, due to competition in Europe. It is expecting a decline in sales for Cubicin due to losing patent protection in the U.S.
In regard to its animal health segment, third quarter sales totaled $865 million, a 5% increase compared to the third quarter of 2015. Sales growth was driven by an increase in sales of companion animal and poultry products. The company cited the Bravetco line of products, which kill fleas and ticks in dogs and cats, as the main influence.
The company announced the U.S. Department of Agriculture approved a license for a new vaccine that would aid in the control of diseases associated with canine influenza earlier this month.
On a GAAP basis, the third quarter gross margin was 67.6%, compared to 62.7% for the same period last year. On a non-GAAP basis, the gross margin was 75.3% for the third quarter as compared to 75.1% last year. Merck attributes the increase in the gross margin to lower acquisition- and divestiture-related costs and reflects the favorable effects of product mix.
Merck reported marketing and administrative expenses of $2.4 billion, a 3% decrease. Research and development expenses were $1.7 billion, an 11% increase from the same quarter a year ago.
The Vanguard Health Care Fund (Trades, Portfolio) is Merck's largest shareholder among the gurus. It holds 1.7% of outstanding shares, which is 5.7% of its total assets managed. In total, 29 gurus hold positions in the company.
Recently, Merck was sued by Sanofi for alleged patent infringement.
The DCF Calculator gives Merck a fair value of $19.37; it was trading at $61.75 on Tuesday.
Disclosure: I do not own stock in any companies mentioned in the article.
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This article first appeared on GuruFocus.
Warning! GuruFocus has detected 5 Warning Sign with MRK. Click here to check it out.
The intrinsic value of MRK
