So far, 2020 has not turned out like Merck (NYSE:MRK) hoped it would: The big drugmaker's blockbuster oncology treatment Keytruda flopped in late-stage studies targeting bladder cancer and small-cell lung cancer. As a result of these setbacks, as well as the COVID-19 pandemic, Merck's shares declined, and remained down more than 10% year to date as of the market close on Thursday.
However, shareholders could now have reason to smile again, based on the second-quarter results Merck released before the market opened on Friday. Here are the highlights from that update.
By the numbers
Merck reported revenue in the second quarter of $10.9 billion, down 8% year over year. However, that total was well above analysts' average estimate of $10.4 billion.
The company announced net income of $3 billion, or $1.18 per share, in the second quarter based on generally accepted accounting principles (GAAP). In the prior-year period, Merck generated GAAP earnings of $2.7 billion, or $1.03 per share.
Merck posted non-GAAP adjusted net income of $1.37 per share, a 6% year-over-year increase. This result handily beat the consensus Wall Street adjusted earnings estimate of $1.04 per share.
Behind the numbers
The COVID-19 pandemic hit Merck's vaccine business especially hard as patients largely chose not to visit healthcare providers for any but the most acute or life-threatening issues. Sales of the HPV vaccines Gardasil/Gardasil 9 sank 26% year over year in Q2 to $656 million. The sales total for its pediatric vaccines Proquad, M-M-R II, and Varivax plunged 44% to $378 million.
It was a similar story with several of the company's other products. Sales for its neuromuscular blockade reversal drug Bridion slid 18% to $224 million. Sales of the HIV drug Isentress fell 21% to $196 million. And sales for cholesterol drug Zetia/Vytorin dropped 23% to $175 million.
Even Merck's animal health unit was impacted by the pandemic, with revenue slipping 2% year over year to $1.1 billion. The company reported lower demand for livestock products as a result of restaurant and school closures during coronavirus-related lockdowns. Sales of its companion animal vaccines also as veterinary visits declined due to the pandemic.
There were a few bright spots, though. Sales of cancer immunotherapy Keytruda jumped 29% year over year to $3.4 billion. Merck's income from the sales of ovarian cancer drug Lynparza, which it co-markets with AstraZeneca, soared 61% to $178 million. Its portion of the sales for cancer drug Lenvima, which is marketed by Eisai, vaulted 57% to $151 million.
Merck's bottom line improved in the second quarter, thanks mainly to spending decreases related to the COVID-19 pandemic. Its expenses in the sales, general, and administrative category fell 12% year over year to $2.4 billion. Research and development expenses declined 3% to $2.1 billion.
The rest of the year should be better for Merck. The company boosted and narrowed its full-year 2020 guidance. It now anticipates revenue will be between $47.2 billion and $48.7 billion, up from its previous guidance range of $46.1 billion to $48.1 billion. Merck projects GAAP earnings per share will be between $4.58 and $4.73, an increase from its previous forecast of $4.12 to $4.32. Non-GAAP EPS is expected to be between $5.63 and $5.78, up from its previous guidance range of $5.17 to $5.37.
While the pandemic could continue to be a headwind for the big pharmaceutical company, its efforts in the fight against the novel coronavirus could also bear fruit. It's collaborating with IAVI on the development of COVID-19 vaccine candidate V590; clinical studies for it are expected to start later this year. Merck also acquired Themis and is accelerating the development of another COVID-19 vaccine candidate, V591. Clinical testing of V591 is scheduled to begin in the current quarter.
Merck is also awaiting a couple of important regulatory decisions. It hopes to win FDA approval for the use of Keytruda as a treatment for relapsed or refractory classical Hodgkin lymphoma; that decision is expected by Oct. 30. The FDA is also scheduled to make an approval decision by Nov. 28 regarding Keytruda in combination with chemotherapy in treating triple-negative breast cancer.