Merck Shares Fall 9% Despite Earnings Beat and Strong Demand for Key Drugs

Merck reported second-quarter revenue and adjusted earnings that exceeded Wall Street’s expectations, driven by strong sales from its blockbuster cancer drug Keytruda and other treatments in its oncology and vaccines portfolios, as well as a newly launched cardiovascular drug. Despite this, Merck’s shares fell by 9% due to lighter-than-expected sales of Gardasil, a vaccine for HPV, exacerbated by shipment issues in China.

Merck raised its full-year sales forecast to $63.4 billion to $64.4 billion, slightly up from its previous guidance of $63.1 billion to $64.3 billion. However, it lowered its adjusted profit guidance to a range of $7.94 to $8.04 per share, down from $8.53 to $8.65 per share, reflecting one-time charges for its acquisitions of Harpoon Therapeutics and EyeBio.

For the second quarter, Merck reported adjusted earnings per share of $2.28, surpassing the expected $2.15, and revenue of $16.11 billion, above the anticipated $15.84 billion. The company posted a net income of $5.46 billion, or $2.14 per share, compared to a net loss of $5.98 billion, or $2.35 per share, in the same period last year.

Keytruda recorded $7.27 billion in revenue, up 16% year-over-year, driven by higher uptake for earlier-stage cancers and strong demand for metastatic cancers. Gardasil sales increased by only 1% to $2.48 billion due to shipment timing issues in China. Winrevair, approved in March for treating a progressive lung condition, posted $70 million in revenue, while Capvaxive, a newly approved pneumococcal vaccine, is expected to drive future growth.

Merck’s pharmaceutical division saw a 7% increase in revenue to $14.41 billion. The company’s Type 2 diabetes treatment, Januvia, faced a 27% decline in sales to $629 million due to lower demand, prices, and generic competition. Sales of Merck’s Covid antiviral pill, Lagevrio, fell by 46% to $110 million but still exceeded expectations.

Merck’s animal health division reported $1.48 billion in sales, up 2% from the previous year, but slightly below analyst expectations. Despite strong overall performance, investor concerns about Gardasil sales and future challenges in the pharmaceutical landscape influenced the decline in Merck’s stock.