Merck (MRK) is down ~1% after reporting fourth quarter results this morning. Sales grew 1% to $10.4 billion, just shy of estimates while non-GAAP EPS was up 10% to $0.98.
Sales of Keytruda, the company's blockbuster checkpoint inhibitor cancer immunotherapy were up 169% year-over year to $1.3 billion, just above estimates. Keytruda sales were up 155% in the US. Strong momentum for the treatment of patients with lung cancer contributed significantly to Keytruda's overall growth, as it is the only anti-PD-1 approved in the first-line setting.
Sales of Human Papillomavirus vaccine Gardasil were up 17% as the commercial launch in China and growth in Europe were offset by falling sales in the US. Sales from the diabetes franchise were up 1%, reflecting pricing pressure, offset by continued volume growth globally. Sales of cholesterol drugs Zetia and Vytorin fell 42% due to generic competition.
Looking forward, Merck sees an extraordinary opportunity with Keytruda in 2018 and beyond; it referred to the drug as a foundation for the treatment of cancer. Keytruda has a massive pipeline as Merck combines it with other cancer drugs to increase efficacy. Merck also sees a stable diabetes franchise while the animal health business will provide growth.
Like every mega cap pharmaceutical, management will continue to asses acquisitions to enhance its pipeline.
All in, Merck guided for fiscal 2018 non-GAAP EPS of $4.08-4.23 with revenue up 4.6% at the midpoint to $41.2-42.7 billion. Merck tends to guide conservatively and raise its forecast throughout the year.
With a $160 billion market value, Merck trades at ~14x earnings, which is more expensive than Pfizer (PFE) but cheaper than Eli Lilly (LLY).