Cost cuts helped Merck beat analysts' estimates, but they weren't enough to offset the drop in drug sales. Fred Katayama reports.
Patent expirations cut deeply into Merck's quarterly profit. Sales of its asthma drug Singulair posted a double digit drop as did its cervical cancer vaccine Gardasil, which suffered from lower sales to government programs. The number two U.S. drug maker cut costs, but that wasn't enough to make up for the drop in drug revenue. To build its pipeline, Merck is betting on developing immunotherapy drugs for cancer. Last month, the FDA OKed its melanoma drug, Keytruda. Merck said Monday, Keytruda became the first drug of its kind to get designated as a breakthrough therapy for lung cancer patients. That designation expedites the development and review of drugs. Sanford Bernstein analyst Tim Anderson said, "While the Merck 'story' generally works from a qualitative perspective - driven primarily by excitement around various pipeline drugs ... the earnings trajectory for Merck seems lackluster relative to peer companies. Looking ahead, Merck narrowed its earnings target and cut the top end of its revenue range. The cost cuts, especially on R&D, helped Merck beat analysts' estimates. Its shares have risen 15 percent this year.