Merck Stock Slides As Q4 Revenue, Guidance Miss Expectations

By | February 3, 2016

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Big pharma Merck ( MRK ) delivered mixed quarterly results and guidance Wednesday, sending its stock lower. Merck’s Q4 earnings excluding one-time items rose 7% over the year-earlier quarter to 93 cents a share, beating analysts’ consensus by 2 cents, according to Thomson Reuters. However, sales declined 2.5% to $10.22 billion, $135 million below Wall Street’s average estimate. For the year, revenue fell 6.5% to $39.45 billion, while earnings increased 3% to $3.59 a share. Merck guided 2016 EPS at $3.60 to $3.75, on the low side of analysts’ consensus of $3.72. The company said this includes a 3% negative impact from foreign-exchange rates, a tax rate of 21.5% to 22.5%, R&D spending slightly above 2015 levels, and sales, general and administrative spending slightly below 2015 levels. Sales guidance was also soft, at $38.7 billion to $40.2 billion. Merck also announced separately that its new hepatitis C drug Zepatier had been approved in Canada with a somewhat broader label than that granted by the FDA last week , as it includes patients with genotype 3 of the virus as well as genotypes 1 and 4. Diabetes drug Januvia and sister drug Janumet were largely responsible for the Q4 revenue miss, selling $1.45 billion in the quarter where analysts had expected $1.64 billion. The franchise has recently been under threat from Eli Lilly ‘s ( LLY ) Jardiance, as that drug substantially reduced death from heart failure in a giant clinical trial late last year, while Januvia had failed to do so in a similar trial. In its own Q4 earnings report last week, however, Lilly said this probably wouldn’t result in a change to Jardiance’s label until late this year, and Merck executives said on the conference call with analysts that they hadn’t seen any real impact yet. Evercore ISI analyst Mark Schoenebaum wrote in an email that Januvia “experienced a quarterly uptick due to stocking in Q3, followed by an expected drawdown in Q4.” Recently launched cancer drug Keytruda racked up $214 million in sales, missing analyst consensus by about $7 million. HPV vaccine Gardasil handily outperformed, however, growing 10% to $497 million vs. a consensus estimate of $383 million. “Overall, our initial read of the earnings and guidance reaffirms our neutral stance on the stock, as pressure on key products such as Januvia and Remicade will likely limit near-term growth opportunities and offset potential areas of upside,” Credit Suisse analyst Vamil Divan wrote in a research note. Merck stock Wednesday fell as much as 3.6%, to a four-month low of 48.58, before recovering to close at 50.05, down just a fraction on the stock market today . Scalper1 News

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