22Q2 sales increased 28% to $14.6 billion, with LAGEVRIO sales of $1.2 billion, a 26% increase in KEYTRUDA sales to $5.3 billion and a 36% increase in GARDASIL/GARDASIL 9 sales to $1.7 billion. GAAP diluted EPS from continuing operations increased to $1.55, from $0.48 a year ago. Non-GAAP diluted EPS increased to $1.87 from $1.31.
With the stronger than anticipated results, Merck raised its full year sales guidance sales by $500 million to $57.5-$58.5 billion, lowered its GAAP EPS guidance by two cents to $5.89-$5.99 and narrowed its non-GAAP EPS guidance by a penny on both ends of the range to $7.25-$7.35.
Merck reported meaningful advancements in and additions to its pipeline. Especially noteworthy was the FDA’s approval and CDC Advisory Committee’s provisional recommendation of VAXNEUVANCE for invasive pneumococcal disease in infants and children. The EC approved four new indications of KEYTRUDA. The company also announced positive results from a Phase I/II study of V116, an investigational pneumococcal 21-valent conjugate vaccine for adults.
Merck’s stock has significantly outperformed both the broader market and its peer group this year. With the advance, the stock still trades at a discount to the market, but slightly above the peer group average on non-GAAP earnings, excluding LLY. The company will likely succeed in its efforts to grow revenue and earnings going forward, despite the loss of exclusivity on its Januvia/Janumet franchise and other challenges; but the stock could underperform for a while, as the market continues to rotate out of perceived safe havens, like Merck, to riskier stocks that may have more upside after this year’s sell-off. Accordingly, I am maintaining my neutral rating on the stock, but raising my price target to $95 (from $85). At the PT, the total return potential on the stock, with its 3.2% dividend yield, is about 12%.
This is a summary of my recent report on Merck & Co., Inc. (MRK). For a copy of the full report, give me a call or send me an email.
August 3, 2022
Stephen P. Percoco
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