COVID-19 to hurt 2020 revenues, says Merck & Co

Merck & Co has lowered its full-year revenue and earnings estimates because of the impact of COVID-19 on its business, which is focused on products administered in hospitals. 

The company’s business is heavily reliant on its big cancer blockbuster Keytruda (pembrolizumab), which is likely to be disrupted by the impact of the pandemic. 

Fewer patients will be able to visit their hospitals or clinics to receive their drugs, which could impact on sales in the coming months.

CEO Kenneth Frazier said the “fundamentals of the business remain strong”, a claim backed by the figures from the first quarter. 

Global sales were $12.1 billion, an increase of 11%, and excluding impact from exchange rates, sales grew 13%. 

Sales of Keytruda grew 45% to $3.3 billion, and excluding the impact from foreign exchange, sales were 46%. 

First-quarter pharmaceutical sales increased 10% to $10.7 billion, and excluding the unfavourable effect from foreign exchange, sales grew 12%. 

Net income of $3.2 billion was ahead of market expectations, and up on the $2.9 billion net income recorded in the same period last year. 

Earnings per share were also increased to $1.26, compared with $1.12 in last year’s Q1. 

But the company has lowered 2020 full year revenue forecasts to between $46.1 billion and $48.1 billion, including foreign exchange headwinds of around 2.5%. 

Due to the impact of COVID-19, Merck lowered its 2020 predicted EPS forecast to a range between $4.12 and $4.32. 

Analyst Michael Levesque, a Moody's senior vice president, said: “A heavy focus on provider-administered drugs like Keytruda, vaccines and hospital products increases Merck’s exposure to the global coronavirus pandemic because of fewer patient visits to healthcare sites.” 

“This will flatten Merck’s growth in 2020, but its credit profile will remain very strong based on debt/EBITDA below 2.0x, solid cash flow and a suspension of share repurchases.  

“In addition, strong underlying demand for Merck’s products will lead to a sales rebound in 2021 as the pandemic eventually ebbs.”