Merck Stock Price Rose as the Company Raised Its Full-Year Outlook Due to the Success of Keytruda
October 27, 2022 at 15:06 PM EDT
Merck & Co Inc (NYSE:MRK)
A rise in demand for blockbuster cancer treatment Keytruda and human papillomavirus vaccination Gardasil contributed to Merck & Co Inc (NYSE: MRK) higher-than-expected sales and earnings for the third quarter, which were revealed on Thursday. As a result, Merck stock soared in the market.
Merck stock price rose by approximately 2% at lunchtime as the U.S. pharmaceutical company again increased its full-year sales and profit outlook, offsetting the adverse effects of a weak euro and pound. Compared to the overall market, the company’s stock price has increased by more than 30% this year.
Merck has been actively pursuing partnerships to offset the income loss that would occur when the patents protecting Keytruda expire at the end of the decade. In the summer, the business was said to have been in acquisition negotiations with cancer-focused biotech Seagen Inc., but no deal was ultimately reached.
“Our focus on company expansion remains urgent. There is a directory of possible venues that we might peruse, “On a conference call with investors, Robert Davis, CEO of Merck, made the following statement. The next logical step is to make things happen, and that’s what we’re working toward.
CFO Caroline Litchfield states that a value disagreement is a significant obstacle to closing acquisitions.
In an interview, she noted that “sellers’ expectations continue to trail what the marketplace looks like.”
Merck stock said on Wednesday that Davis would replace Ken Frazier as CEO and chairman of the board, effective December 1.
Sales of Keytruda increased by 20% during the quarter, totaling $5.4 billion. With a 15% increase to $2.3 billion, Gardasil sales were almost $200 million over projections.
“Growing overseas demand and maybe a normalization from COVID patterns in the U.S.” is how Wells Fargo (NYSE:WFC) analyst Mohit Bansal described Gardasil’s success.
The antiviral medicine Lagevrio (molnupiravir), which the business co-developed with Ridgeback Biotherapeutics, also performed somewhat better than anticipated in terms of sales.
CFO Litchfield said that foreign currency hedging helped Merck by adding almost $300 million to quarterly revenue, relieving some of the strain on international sales.
“Foreign currency will continue to be a headwind,” she said, adding that in 2023 when the speed of the dollar’s rise slows, the effect of Merck’s hedging program is expected to be more modest.
Merck’s animal health division had lower sales than expected. Analyst Evan Seigerman from BMO Capital Markets referred to it as “the sole area of worry.” However, he did point out that the division had seen substantial growth before the epidemic hit.
Some Merck stock shareholders have proposed that Merck split off its animal health division, similar to what its competitors Eli Lilly (NYSE:LLY) and Pfizer Inc (NYSE:PFE) have done. Davis said that the firm has no such intentions.
The CEO said, “We’re reaping the benefits of what it provides us, and we continue to consider it a strategic asset.”
Merck has raised its earnings forecast for 2022 from $7.25 to $7.35 per share to $7.32 to $7.37. Adjusted earnings for the quarter were 14 cents higher than predicted.
Keytruda sales have skyrocketed, causing Merck to raise its full-year projection, which made the company’s shares soar.
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