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UPDATE 1-Merck profit tops Wall Street view on strong Keytruda sales

·2 min read

(Adds management comments from conference call, sales details, background, share move)

By Michael Erman and Leroy Leo

July 28 (Reuters) - Merck & Co on Thursday reported higher-than-expected second-quarter earnings and revenue on strong sales of its blockbuster cancer immunotherapy drug.

Much of that beat came from better-than-expected sales of Merck's top-selling drug Keytruda and increased demand for its Gardasil vaccine, which protects against cancers caused by the human papillomavirus (HPV).

The results were reported a day after U.S. Democratic Senator Joe Manchin and Senate Democratic leader Chuck Schumer agreed on a bill to help curb drug prices.

The proposed bill aims to cap out-of-pocket drug costs for recipients of Medicare - the U.S. health insurance for those 65 and older - at $2,000 a year, and also provide free vaccines for seniors.

Merck Chief Executive Rob Davis said the proposed bill could have a "highly chilling" effect on innovation, but he does not see it hurting sales of Keytruda and Gardasil in the near-term, if it is passed.

With Merck expected to lose patent protection for Keytruda in 2028, the company could also consider a subcutaneous or other versions of the drug, which is currently given by intravenous infusion form.

"I think there is a path to think about that innovation," said Merck research chief Dean Li.

Keytruda has come to the attention of U.S. lawmakers over tax issues.

On Wednesday, U.S. Senator Ron Wyden, a Democrat, sent a letter to Merck suggesting the company had avoided billions of dollars of U.S. taxes owed from Keytruda sales in recent years by booking all the profits from the treatment outside of the United States.

Merck in an emailed statement on Wednesday said they have responded with information they believe appropriately addressed inquiries made in two letters received from the Senate Finance Committee.

Excluding one-off items, the company said it earned $1.87 a share, 17 cents higher than analysts on average expected, according to Refinitiv data.

The company reported $5.3 billion in sales of Keytruda, compared with analyst estimates of $4.9 billion.

Merck also narrowed its full-year earnings forecast to $7.25 to $7.35 per share, below Wall Street estimates of $7.37 per share.

Merck shares were down about 2% on an off day for many drugmakers following Wednesday's proposed drug pricing bill announcement. (Reporting by Michael Erman in New Jersey and Leroy Leo in Bengaluru; Editing by Bill Berkrot)