By every measure, Merck & Co. (MRK +0.36%) enjoyed a solid first quarter.
The big drugmaker reported its first-quarter results before the market opened on Tuesday. Merck's adjusted earnings per share of $0.88 easily beat analysts' estimate of $0.83. Its revenue of $9.4 billion topped Wall Street projections of $9.25 billion.
What's even better is how Merck managed to exceed expectations. Here are five great things from the company's first-quarter results that made the difference.
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1. Keytruda is rocking
The biggest story for Merck in the first quarter was Keytruda. Sales for the cancer drug soared 134% year over year in the quarter to $584 million.
Keytruda won approval from the U.S. Food and Drug Administration (FDA) for two additional indications in the second half of 2016. In August, the FDA granted approval to the drug for treating head and neck cancer. Merck received an even greater prize, though, in October, when Keytruda gained FDA approval as a first-line treatment for non-small cell lung cancer. The company attributed the higher sales for Keytruda to its continued global launch of new indications.
Merck won yet another FDA approval in March 2017 for Keytruda in treating fourth-line classical Hodgkin lymphoma. This approval didn't significantly impact first-quarter results, however.
2. Gardasil revenue growing
The second-best news of the first quarter stemmed from Merck's human papillomavirus (HPV) vaccines Gardasil and Gardasil 9. Sales for the vaccine franchise jumped 41% year over year to $532 million.
There were four factors contributing to the strong performance for the Gardasil franchise. The timing of public sector purchases helped. Higher demand was also a positive. It certainly didn't hurt that Merck raised prices for the vaccines.
The termination of a joint venture with Sanofi at the end of 2016 also made a big impact. Merck recorded around $50 million in Gardasil sales in 19 European countries that previously were recorded by its joint venture with Sanofi.
3. Zepatier coming on strong
AbbVie and Gilead Sciences are experiencing declining hepatitis C virus (HCV) drug sales. That's not the case for Merck. Its HCV drug Zepatier is coming on strong.
Merck reported first-quarter sales for Zepatier of $378 million. In the same quarter of 2016, the HCV drug generated revenue of only $50 million. Zepatier's fourth-quarter 2016 sales totaled $229 million.
How is Merck succeeding in HCV when rivals aren't? For one thing, it's still rolling out Zepatier globally. The drugmaker also enjoyed a favorable adjustment of around $40 million in the first quarter from rebate accruals.
4. Fleas and ticks lending a helping hand
Merck owes some of its first-quarter success to fleas and ticks. Without them, its Bravecto line of products for killing fleas and ticks in dogs and cats wouldn't be in high demand. And without Bravecto, Merck's animal health business wouldn't be doing nearly as well as it currently is.
The company's animal health unit posted sales of $939 million in the first quarter. That reflected a solid 13% year over year increase. The contribution from animal health was second only to diabetes drug Januvia (which had first-quarter sales of $1.3 billion in the first quarter) in terms of overall impact on Merck's top line.
5. Better days ahead
Perhaps the best news of all from Merck's first-quarter update didn't relate to the first quarter. The company provided updated guidance for full-year 2017 that was sure to please investors.
Merck narrowed and raised its 2017 revenue outlook to a range of $39.1 billion to $40.3 billion. The company's previous full-year 2017 guidance projected revenue between $38.6 billion and $40.1 billion.
The drugmaker also narrowed and raised its 2017 earnings guidance. Merck now expects GAAP earnings per share between $2.51 and $2.63, with adjusted earnings per share between $3.76 and $3.88. Previously, the company projected full-year 2017 GAAP earnings per share of $2.47 to $2.62, with adjusted earnings per share between $3.72 and $3.87.
