Pharma giant Merck (MRK) swung to a profit in the third quarter from a loss last year, driven by lower costs and expenses. While R&D expenses fell 53%, materials and production costs witnessed a hike of 9%. The bottom line came in above analysts’ expectations, while the top line missed consensus estimates.
Net income was $1.95 billion or $0.73 per share compared to a loss of $56 million or $0.02 per share a year ago. Non-GAAP EPS increased to $1.19 from $1.11 a year earlier.
Worldwide sales rose 5% to $10.8 billion, including a 1% negative impact from foreign exchange. The top line was driven by an 80% jump in sales of the cancer drug Keytruda, and a 55% climb in sales of cervical cancer preventing therapy Gardasil.
For the full year of 2018, Merck narrowed its revenue outlook to the range of $42.1 billion to $42.7 billion from the previous estimate of $42 billion to $42.8 billion. GAAP EPS target is trimmed down to a range of $2.41 to $2.47 from the prior range of $2.51 to $2.59, while non-GAAP EPS outlook is lifted to a range of $4.30 to $4.36 from the previous range of $4.22 to $4.30.
Pharmaceutical sales grew 5%, driven primarily by growth in oncology, and hospital acute care. This was partially offset by lower sales in virology and the ongoing impacts of the loss of market exclusivity for several products.
Oncology benefited from an increase in sales of Keytruda, which reflects its continued launches with new indications globally and the strong momentum for the treatment of patients with non-small cell lung cancer, as Keytruda is the only anti-PD-1 approved in the first-line setting.
Animal Health sales increased 2% fuelled by higher sales of livestock products. The growth was also driven by higher sales of companion animal products, specifically from the Bravecto line of products that kill fleas and ticks in dogs and cats for up to 12 weeks.
R&D expenses decreased 53% due to a $2.35 billion charge related to the formation of a collaboration with AstraZeneca and lower in-process research and development impairment charges.
Meanwhile, Merck’s rival Pfizer (PFE) is expected to report its second-quarter results on October 30. Analysts are expecting Pfizer to post an 11.90% jump in earnings for the third quarter on a 2.80% rise in revenue.
Shares of Merck opened lower and remained in the negative territory. The stock has risen over 11% in the past year and over 24% in the year so far.