(Oct 30): Merck & Co beat third-quarter (3Q) sales expectations on strong results from its pneumonia vaccine as the company works to find new growth drivers ahead of the upcoming patent loss for its star drug Keytruda.
The drugmaker had adjusted earnings of US$2.58 per share in the quarter, handily exceeding Wall Street’s expectations.
Shares jumped 3.8% at 6.31am in New York on Thursday, before the start of regular trading. They’ve fallen about 13% this year through Wednesday’s close.
Merck has been cutting costs as it prepares for lower prices and generic competition for its blockbuster cancer drug Keytruda. Research and development spending fell by more than US$1.6 billion in quarter from a year earlier, primarily due to lower charges for its business development activity, and the company also trimmed selling and administrative expenses.
Sales of Capvaxive — a newer pneumonia vaccine that rivals one of Pfizer Inc’s biggest products — were US$244 million, ahead of Wall Street’s estimates. Merck’s shot has the potential to become the preferred vaccine given studies showing it protects against 80% of disease-causing bacterial strains in adults, whereas Pfizer’s drug Prevnar works against just 50%.
Keytruda and Winrevair for a rare lung disease, another of the medicines it is nurturing to bolster future sales, missed expectations in the quarter. Keytruda’s patents are expected to start expiring in 2028, and the drug could face government-mandated price negotiations as early as 2027.
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The company shaved its 2025 sales guidance by US$300 million at the top end, while modestly raising its full year profit forecast to as much as US$8.98 a share.
Merck’s shares have declined almost 13% this year through Wednesday’s close.
In July, it said it would slash US$3 billion annual spending by the end of 2027, mainly through cutting administrative, sales and research jobs and reducing real estate holdings. It plans to reinvest the savings into launching new drugs.
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In September, it snagged US regulatory approval for a new formulation of Keytruda that’s faster and easier to administer. The medicine, called Keytruda Qlex, is given in minutes as a shot under the skin. It’s a key component of Merck’s strategy, allowing it to focus on the newer compound that has a longer remaining patent life.
Merck’s also been coping with a decline in Chinese demand for its second-biggest product, the vaccine Gardasil that protects against cancer-causing human papillomavirus. While it sorts out the problem, the company has paused shipments to China through the end of the year.
Merck didn’t disclose in its statement when the shipments will resume. The halt led to a 24% decline in Gardasil sales to US$1.7 billion in 3Q. Sales excluding China declined 2%, reflecting lower demand in Japan following a national catch-up immunisation programme.
The company said it expects sales between US$64.5 billion and US$65 billion for 2025. Sales in the third quarter were US$17.3 billion, beating expectations.
Trade tensions
Drugmakers are facing the threat of tariffs from President Donald Trump, who has vowed to impose them on companies that don’t lower prices and boost manufacturing in the US. Pfizer and AstraZeneca plc have cut deals with the White House to make some medicines available at steep discounts and recalibrate prices compared to other wealthy countries in exchange for three years of tariff exemptions.
Merck, which hasn’t disclosed a deal, has said it’s stockpiled enough Keytruda to protect itself from tariffs this year. It previously announced plans to invest more than US$9 billion in domestic manufacturing over the next four years, an effort designed to boost the amount of medicine it produces in the US.
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The company is one of the biggest vaccine makers, a group under threat by the Trump administration. It produces immunisations including ProQuad, a widely used combination shot that protects against measles, mumps, rubella, and chickenpox.
In September, a panel of Centers for Disease Control and Prevention advisers chosen by Health Secretary Robert F Kennedy Jr said children under four shouldn’t get the combination shot due to risk of febrile seizures. Instead, the groups recommended children get the chicken pox shot separately.
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