Merck lifts full-year forecast as Keytruda sales soar

Merck & Co. reported better-than-expected Q3 sales and earnings Thursday. Those results came on the back of a jump in demand for Keytruda cancer immunotherapy and the human papillomavirus vaccine Gardasil.

Merck shares rose about 2% as the drugmaker also raised its full-year sales and profit forecast despite the impact of a weak euro and pound. The company's stock is up more than 30% since the beginning of the year, well ahead of the market as a whole.

Merck was eager to close deals to protect itself from potential revenue losses as Keytruda's patents expire by the end of the decade. The company was reportedly in talks over the summer to buy biotech company Seagen Inc, but the deal ultimately fell through.

Chief Financial Officer Caroline Litchfield said one of the difficulties in closing the deals was negotiating the price, "We continue to see seller expectations lag behind what the market looks like right now".

Keytruda sales rose 20% to $5.4 billion for the quarter, in line with analysts' estimates. Gardasil sales rose 15% to $2.3 billion, exceeding expectations by more than $200 million.

Merck managed to get the desired results from its currency hedging program, Litchfield said. It boosted quarterly revenue by about $300 million, partially offsetting the pressure on overseas sales.

Caroline also noted that foreign currency exchange rates continue to be a constraint. In addition, the CFO said the impact of Merck's hedging program could weaken in 2023 as the rate of dollar appreciation slows.

Sales of Merck's veterinary business fell short of analysts' estimates. BMO Capital Markets analyst Evan Seigerman called it "the only cause for concern",  but noted that the division had grown significantly earlier during the pandemic.

Some investors have suggested that Merck follow the lead of rivals Eli Lilly and Co. and Pfizer Inc. by spinning off its animal health business into a separate company. But the company said it has no plans to do so.

Merck now expects to earn $7.32 to $7.37 per share in 2022, up from a previous forecast of $7.25 to $7.35. That beat analysts' estimates by 14 cents.