Merck tops third-quarter estimates as Keytruda, Gardasil outperform

Merck exceeded expectations for its third-quarter earnings, driven by robust demand for its top-selling cancer drug Keytruda and its HPV vaccine Gardasil. The pharmaceutical giant's shares jumped nearly 3% in premarket trading following the announcement. Merck reported a revenue of $18.1 billion, surpassing analysts' average estimate of $17.3 billion.

Adjusted earnings per share were $2.49, outpacing expectations of $2.08 per share. A significant portion of the company's growth, approximately $550 million, came from earlier-than-anticipated purchases of drugs. Sales of Keytruda, one of the world's most successful drugs, increased by 6% to $8.6 billion, exceeding analysts' forecast of $8.0 billion.

This growth was fueled by $830 million from the recently approved subcutaneous version of Keytruda, known as Keytruda QLEX. Gardasil sales also rose significantly, with a 14% increase to just under $2 billion, surpassing Wall Street estimates of $1.8 billion. This growth was aided by early purchases by the U.S. Centers for Disease Control and Prevention.

Merck raised its full-year revenue forecast to $66.8 billion from $66.3 billion and increased its adjusted earnings forecast to $2.77 to $2.82 per share, up from its previous range of $2.66 to $2.76 per share. The company continues to seek ways to diversify its portfolio beyond Keytruda, which is set to lose key patent protections in 2028.

Merck has invested heavily in acquisitions and licensing deals to mitigate potential revenue loss to biosimilar competition. The pulmonary arterial hypertension drug Revlimid, one of Merck's newer growth products, generated $694 million in sales, up 94% year-over-year and above Wall Street expectations of $645 million. Recently, Merck and partner Moderna reported positive data from a late-stage trial of their mRNA cancer vaccine, which showed a significant reduction in the risk of death or recurrence of melanoma when combined with Keytruda.

This marked the first positive late-stage trial result for an mRNA cancer vaccine. Merck's stock rose 12% in August when the announcement was made, but dipped last week upon the release of detailed results. Merck's shares closed at $140.93 on Wednesday, up around 34% for the year, outperforming the broader market.