Merck & Co., Inc. (MRK) exceeded expectations with its Q4 earnings, largely propelled by the performance of its cancer drug Keytruda.
Shares rose 1.2% in pre-market trade.
The company reported an earnings per share (EPS) of $0.03, which is $0.14 higher than the analysts' forecast of a $0.11 loss. The quarter's revenue also surpassed projections, rising 5.8% year-over-year and reaching $14.6 billion against a consensus estimate of $14.47 billion.
Keytruda revenue jumped 21% annually to $6.61 billion.
“2023 was another very strong year for Merck. I am extremely pleased by the progress we’ve made to develop and deliver transformative therapies and vaccines that will help save and improve lives around the world. We reached more than 500 million people with our medicines last year alone, over half of which were donations, including through our program to treat river blindness,” said Robert M. Davis, chairman and chief executive officer, Merck.
“We also made investments of approximately $30 billion in research and development in our ongoing effort to discover, develop and collaborate to propel the next generation of impactful innovations.”
The quarter included a substantial $5.5 billion charge related to the collaboration with Daiichi Sankyo. Moreover, higher development costs have been incurred due to increased spending on clinical programs, including those recently acquired, as well as rising compensation and benefit expenses.
Looking forward, the company anticipates an EPS between $8.44 and $8.59, above the consensus estimate of $8.42.
Furthermore, Merck projects its FY2024 revenue to be in the range of $62.7 billion to $64.2 billion, compared to the market consensus of $63.5 billion.
The company sees adjusted gross margin about 80.5%, ahead of the consensus by 110 basis points.
The company's forecast for yearly sales is affected by a negative impact of 2% due to foreign exchange fluctuations, based on mid-January 2024 exchange rates.
Merck is anticipating the closure of the Harpoon deal in the first half of 2024. This deal is expected to bring about a non-tax deductible charge of $650 million in R&D expenses, which will be reflected in the adjusted results.
The impact of this deal on the fiscal year's adjusted EPS is estimated to be around $0.26 per share, and this has been included in the company's financial outlook.