The pandemic increased sales of Merck medicines during the first quarter as households around the world stocked up, but the drugmaker expects a significant hit this quarter as the full force of the outbreak lands.
Merck & Co. anticipates 2020 prescription drug sales will fall by $1.7 billion versus last year because the pandemic is keeping many patients with chronic conditions away from their doctors. The company expects sales of its veterinary medicines to dip by $400 million.
About two-thirds of Merck’s human medicine sales are for injected drugs administered by a doctor, from its blockbuster Keytruda cancer medicine and its portfolio of vaccines, to birth control implant Implanon and an anesthetic used in surgical procedures. The number of elective surgeries, which typically require anesthesia, is down about 70% recently as hospitals focus on treating COVID-19 patients and other people avoid hospitals, Merck executives noted Tuesday on a conference call to discuss their first-quarter results.
The maker of Januvia diabetes pills lowered its outlook for the year despite an 11% revenue jump and a profit increase of 10% in the most recent quarter.
Merck now expects full-year earnings per share of $5.17 to $5.37, excluding one-time items, down from its January forecast of $5.62 to $5.77 per share. The company now expects revenue of $46.1 billion to $48.1 billion, down from the January forecast for $48.8 billion to $50.3 billion.
That reduction led investors to sell off Merck shares, which were down $3.53, or 4.2 %, to $80.45 in early-morning trading as the broader markets rose.
The Kenilworth, New Jersey, drugmaker said its medicine factories and research labs have been operating normally, and it has six to 12 months of product inventory, so it doesn’t foresee shortages of its medicines.
The company is working alone and in multiple collaborations on finding potential antiviral drugs and vaccines, both areas where Merck has a long, successful history.
“Merck is doing everything in its power ... to contribute to fighting the global pandemic today and also to prepare for the next one,” Chief Executive Kenneth Frazier told analysts.
Merck reported net income of $3.22 billion, or $1.26 per share, up from $2.92 billion, or $1.12 per share, a year earlier. Adjusted earnings came to $1.50 per share, beating Wall Street expectations for earnings of $1.39 per share.
Veterinary medicine sales were $1.21 billion, up 18%.
Edward Jones analyst Ashtyn Evans wrote to investors that the first-quarter results were strong, but that sales likely won’t normalize until the fourth quarter, as people delay doctor visits, pet owners postpone veterinarian visits and declining protein consumption amid the global downturn hurt sales of livestock medicines.
“Overall, we believe long-term demand for Merck’s products is strong, and growth will be driven by innovation,” added Evans, who has a “Buy” rating on Merck shares.
Merck has been remaking itself by shedding some parts of the company to focus on its lucrative cancer drug business, veterinary medicines, vaccines and hospital medicines.
The company is spinning off of its women’s health segment, some older medicines and its business selling biosimilars, or near-copies of complex biologic drugs made inside living cells.
Merck said Tuesday it’s on track to complete that spinoff in the first half of 2021, and announced the new company will be called Organon & Co., the name of a business focused on medicines for women and psychiatric conditions that Merck acquired a decade ago.
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This story has been corrected to show that the spinoff is on track to be completed in the first half of 2021.
Linda A. Johnson, The Associated Press