Big jumps in sales of Merck's top two blockbuster drugs drove revenue up 15%, but higher spending across the board pushed profits down 3% in the third quarter. Merck still easily beat Wall Street forecasts and boosted its forecast for the year.
The quarter was dominated again by advanced cancer drug Keytruda, with sales soaring 62% to $3.07 billion, more than a quarter of Merck's $11.1 billion in revenue from prescription medicines. Sales of its Gardasil vaccine, for preventing a sexually transmitted, cancer-causing virus, climbed 26%, to $1.32 billion.
The maker of Januvia Type 2 diabetes pills and vaccines on Tuesday reported total revenue of $12.4 billion, including $1.12 billion in sales of veterinary medicines.
The Kenilworth, New Jersey, company posted net income of $1.9 billion, or 74 cents per share, up from $1.95 billion, or 73 cents per share, a year earlier.
Excluding non-recurring items and restructuring costs, earnings came to $3.87 billion, or $1.51 per share. That easily topped the per-share estimates of $1.25 from industry analysts.
In early trading, Merck shares rose $1.82, or 2.2%, to $84.02.
"2019 is shaping up to be a year of very exciting growth for our company," Chief Executive Kenneth Frazier told analysts on a conference call.
Frazier credited strong execution in Merck's research labs and marketing operations.
Keytruda is the core of Merck's surging oncology franchise, which includes two drugs the company markets with partners: Lynparza for ovarian and breast cancers and Lenvima for liver, kidney and thyroid cancers. Keytruda alone is now approved for treating 22 types of cancer or patient groups, with many more possibilities and combinations with other cancer drugs in testing.
"Keytruda is exceeding our already high expectations," Chief Financial Officer Rob Davis said in an interview.
He added that in 10 patient studies involving various cancers, Keytruda has beaten comparison drugs on length of overall survival, the most meaningful outcome measure.
"We continue to believe the market is underappreciating the long-term profitability of" Keytruda, Edward Jones analyst Linda Bannister wrote in a note to investors, adding, "We believe the company could use its strong financial position to make acquisitions to add to its innovative drug and vaccine portfolios."
Davis noted one continuing drag on sales: He expects continued pressure for lower drug prices next year.
Insurers, patients and politicians continue to complain that many brand-name drugs aren't affordable, and while multiple bills to rein in prices are in play in Congress, it's unclear if any will be enacted soon.
Merck narrowed and raised its per-share 2019 profit forecast to between $5.12 and $5.17, up from its July forecast of $3.78 to $3.88. It also narrowed and raised its full-year forecast for sales to a range of between $46.5 billion and $47 billion, up from between $45.2 billion and $46.2 billion.
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