Merck's (NYSE:MRK) news so far in 2021 has been a mix of both good and bad. The company has picked up key regulatory approvals for blockbuster cancer immunotherapy Keytruda and chronic heart failure drug Verquvo. However, it has also had some bumps in the road, including a thumbs-down from the U.S. Food and Drug Administration (FDA) for Keytruda as a treatment for high-risk early stage triple-negative breast cancer and discontinuing development of COVID-19 therapy MK-7110. 

This pattern continued as Merck announced its first-quarter results before the market opened on Thursday. There was bad news -- as evidenced by the big pharma stock falling 5% in early trading. However, there was some good news, too. Here are the highlights from Merck's Q1 update.

A dollar sign formed by pills

Image source: Getty Images.

By the numbers

Merck reported revenue in the first quarter of $12.1 billion, basically flat year over year. This result fell short of the consensus Wall Street estimate of $12.7 billion.

The drugmaker announced Q1 net income of $3.18 billion, or $1.25 per share, based on generally accepted accounting principles (GAAP). In the prior-year period, Merck posted GAAP earnings of $3.22 billion, or $1.26 per share.

Merck's non-GAAP earnings per share (EPS) came in at $1.40 in the first quarter of 2021, down from $1.51 in the prior-year period. This result was well below analysts' average estimate of non-GAAP EPS of $1.63.

Behind the numbers

As usual, Keytruda stood out as the primary growth driver for Merck in the first quarter. Sales for the cancer immunotherapy jumped 19% year over year to $3.9 billion. However, Merck noted that "the COVID-19 pandemic had a dampening effect" on the demand for the blockbuster drug.

Another cancer drug, Lynparza, also turned in a strong performance. Merck's portion of the sales for the drug, which it co-markets with AstraZeneca, soared 57% year over year to $228 million. Neuromuscular blockade Bridion was another bright spot, with sales rising 14% to $340 million.

Merck's animal health unit generated sales of $1.4 billion in the first quarter, up 17% year over year. This growth was due primarily to increased demand for companion animal products.

The main trouble spot for Merck in Q1, though, was its vaccines business. Sales for human papillomavirus (HPV) vaccine Gardasil fell 16% year over year to $917 million. Pneumococcal vaccine Pneumovax 23 sales plunged 36% to $171 million. Sales for rotavirus vaccine Rotateq sank 29% to $158 million.

Why such malaise for Merck's vaccines? Part of the problem was the timing of shipments of Gardasil and Rotateq to China. The COVID-19 pandemic also negatively affected sales of Gardasil and Pneumovax 23. In addition, Merck attributed some of Gardasil's sales decline to U.S. buying patterns and Rotateq's lower sales to weaker U.S. demand.

Looking ahead

Merck expects that revenue for full-year 2021 will be between $51.8 billion and $53.8 billion, up 8% to 12% year over year. It anticipates GAAP EPS between $5.05 and $5.25, with non-GAAP EPS between $6.48 and $6.68. 

This guidance, though, assumes that the spinoff of Merck's women's health, biosimilars, and established brands businesses into a new company (Organon) won't happen this year. However, Merck anticipates the Organon spinoff will close by June 2, 2021. Look for the company to revise its guidance to reflect this spinoff in the next few months.

Despite its leadership position in the global vaccines market, Merck missed out on an opportunity to become a top player in the COVID-19 vaccine arena. Don't count out the company's prospects in COVID-19 altogether, though. Merck's partnership with Ridgeback Therapeutics in developing experimental antiviral therapy molnupiravir has shown promise.

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