Merck (NYSE:MRK) is off to a rocky start in 2020. The company's blockbuster cancer drug, Keytruda, disappointed in a late-stage clinical study targeting small cell lung cancer. Shortly afterward, Chinese biotech BeiGene announced positive results from a late-stage study for tislelizumab, potentially setting up a battle between the drug and Keytruda in the big Chinese market.

Today, the year became even rockier. Merck reported its 2019 fourth-quarter and full-year results before the market opened on Wednesday. The drugmaker's shares fell around 3% in early trading. Here are the four most important things to know about Merck's Q4 update.

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Image source: Getty Images.

1. Solid sales growth -- but not enough to satisfy Wall Street

Merck announced fourth-quarter revenue of $11.87 billion, up 8% year over year and an increase of 9% on a constant currency basis. But this revenue growth wasn't quite enough to make Wall Street happy. The analysts' consensus Q4 revenue estimate was $11.98 billion.

Keytruda wasn't the problem. Sales for the cancer immunotherapy skyrocketed 45% year over year in Q4 to $3.1 billion. Neuromuscular blockade reversal drug Bridion also performed well, with sales jumping 22% to $313 million.

However, revenue from Merck's HPV vaccine, Gardasil 9, fell 17% from the prior-year period to $693 million. This sales figure was negatively impacted by the company's previous borrowing of doses of the vaccine from the U.S. Centers for Disease Control and Prevention's pediatric vaccine stockpile. In addition, Merck faced continued headwinds from pricing pressure for diabetes drugs Januvia and Janumet, as well as sales declines due to the loss of market exclusivity for several drugs, including Remicade, Zetia, and Vytorin.

2. A narrow earnings beat

While Merck fell a little short of meeting analysts' revenue expectations, it narrowly beat Wall Street's consensus Q4 earnings estimate. The company reported adjusted earnings per share (EPS) of $1.16, compared to the average analyst estimate of $1.15.

This result reflected solid 12% year-over-year growth. Merck's earnings growth of 29% based on generally accepted accounting principles (GAAP) was even more impressive.  

3. Outlook for 2020

Merck expects full-year 2020 sales will be between $48.8 billion and $50.3 billion. The midpoint of this range represents a year-over-year increase of 5.9%. It is also slightly above analysts' full-year 2020 revenue estimate of $49.53 billion.

The company expects full-year 2020 non-GAAP EPS between $5.62 and $5.77, up 9.7% year over year at the midpoint. Analysts projected 2020 adjusted EPS of $5.61.

4. A new spin-off

Perhaps the biggest news from Merck's Q4 update was that it's planning to spin off its women's health, trusted legacy brands, and biosimilar products into a new stand-alone company. Merck will retain its core oncology, vaccines, hospital, and animal health products businesses.

Why a spin-off? Merck said that it "will allow both management teams to drive increased responsiveness to the particular needs of their patients and customers and achieve faster growth through focused and fit-for-purpose operating models." The most important words in that sentence were "achieve faster growth." Merck's Q4 growth would have looked a lot better without the drag of its older products.

The good news for investors is that Merck will remain an attractive dividend stock. Merck anticipates future dividend hikes and will strive to reach a payout ratio between 47% and 50% down the road. The spin-off company is also expected to pay an incremental dividend.

This transaction won't happen immediately, though. Merck said that the spin-off would likely be finalized in the first half of 2021. That means the positive and negative factors affecting the company in Q4 will carry over throughout 2020.