Merck (MRK) Q1 Earnings Top, Cancer Drug Keytruda Boosts Sales

Core Viewpoint - Merck reported strong first-quarter 2024 results, exceeding earnings and revenue estimates, driven primarily by the performance of its oncology products, particularly Keytruda, and raised its guidance for the year despite foreign exchange headwinds [1][9]. Financial Performance - Adjusted earnings per share (EPS) for Q1 2024 were $2.07, surpassing the Zacks Consensus Estimate of $1.94, with a year-over-year increase of 48% [1]. - Revenues increased by 9% year over year to $15.78 billion, exceeding the Zacks Consensus Estimate of $15.32 billion [1][2]. Segment Performance - The Pharmaceutical segment generated $14.0 billion in revenues, up 9% year over year, driven by oncology drugs and vaccines, despite lower sales in diabetes medications [2][3]. - Keytruda sales reached $6.95 billion, a 24% increase year over year, benefiting from new indications and strong momentum in metastatic cases [2][3]. - Alliance revenues from Lynparza and Lenvima contributed positively, with Lynparza sales at $292 million (up 7%) and Lenvima at $255 million (up 10%) [3]. - HPV vaccine sales rose 17% to $2.25 billion, although they fell short of expectations [3][4]. Margin and Cost Analysis - Adjusted gross margin improved to 81.2%, up 430 basis points year over year, aided by a favorable product mix [6]. - Adjusted R&D spending decreased to $4.0 billion from $4.3 billion in the previous year, reflecting lower M&A-related costs [6]. 2024 Guidance - Merck raised its revenue guidance for 2024 to a range of $63.1 to $64.3 billion, with adjusted EPS expected between $8.53 and $8.65 [7][8]. - The adjusted gross margin is anticipated to be around 81%, an increase from previous estimates [7]. Strategic Developments - Merck is poised for future growth with eight potential new product approvals expected between 2025 and 2030, including V116 and Winrevair, which are anticipated to generate significant revenues [10].