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Keytruda Revenues Grow 21 Percent in Q4 as Merck Focuses on Diversifying Oncology Pipeline

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NEW YORK – Merck is inking deals and acquiring new targeted cancer drugs to strengthen the future of its oncology business as its blockbuster immune checkpoint inhibitor Keytruda (pembrolizumab) inches closer to patent expirations later this decade.

"In oncology, we are diversifying our portfolio and executing on our strategy, which is broadly based on three strategic pillars: immuno-oncology, precision molecular targeting, and tissue targeting," Dean Li, the president of Merck Research Laboratories, said during a call to discuss the drugmaker's fourth-quarter and full-year 2023 financials on Thursday morning.

By the mid-2030s, Merck said it expects the value of its oncology pipeline to exceed $20 billion. Keytruda has well over 100 patents, the first of which are set to expire in 2028.

For the three months ending Dec. 31, Rahway, New Jersey-based Merck brought in $14.63 billion in sales, up 6 percent from $13.83 billion in Q4 2022, and exceeded analysts' average expectations of $14.50 billion. Excluding the negative sales impact from its COVID-19 drug Lagevrio (molnupiravir), the drugmaker says its revenues increased 11 percent during the quarter.

The drugmaker's pharmaceutical business brought in $13.14 billion in Q4 2023, up 8 percent from $12.18 billion in Q4 2022.

Sales of Keytruda in Q4 were $6.61 billion, up 21 percent from $5.45 billion in Q4 2022. Merck cited increased global uptake in earlier-stage cancers, especially in triple-negative breast cancer, as a key growth driver for the immunotherapy. Merck also highlighted recent regulatory approvals, including a European Keytruda approval in an upfront, PD-L1-positive, HER2-negative gastric cancer indication in December 2023.

Trying to launch Keytruda in combination with other treatment modalities is another strategy Merck will use to mitigate the negative impact of patent expirations. For example, Merck is studying Keytruda with Moderna's messenger RNA-based personalized neoantigen vaccine V940. During 2023, the companies presented positive Phase II data on the combination's use in the adjuvant setting for early-stage melanoma. Based on this, the drugmakers are now testing the combination in a Phase III melanoma trial and have started a study in non-small cell lung cancer.

"We are encouraged by the durability of the responses observed and the potential for this regimen to impact patients earlier in their diagnosis," Li said.

Merck is also making moves to break into the antibody-drug conjugate space, including through a recent collaboration with Daiichi Sankyo. In October, they inked a deal to jointly develop three antibody-drug conjugates, and in December 2023, the drugmakers submitted an application to the US Food and Drug Administration seeking approval for one of these candidates, patritumab deruxtecan, as a treatment for EGFR-mutated non-small cell lung cancer. The FDA granted the application priority review and is expected to decide whether to approve the HER3-directed antibody-drug conjugate on June 26.

Li also pointed to Merck's recently announced acquisition of Harpoon Therapeutics as part of its broader strategy to diversify its pipeline. This deal brings a platform of T-cell engagers, including the DLL3-targeting agent HPN328, into Merck's portfolio. Harpoon has been studying HPN328 in a Phase I/II clinical trial as a treatment for certain patients with small-cell lung cancer and neuroendocrine tumors.

"The recently announced acquisition of Harpoon Therapeutics provides the opportunity to help complement and strengthen our approach," Li said.

Merck's alliance revenue from its PARP inhibitor Lynparza (olaparib), which it comarkets with AstraZeneca, was $315 million in Q4 2023, up 8 percent from $292 million in Q4 2022.

Merck posted a net loss of $1.23 billion, or a $.48 per share, in Q4 2023, versus net income of $3.02 billion, or $1.18 per share, in Q4 2022. Non-GAAP EPS was $.03 for the quarter, which beat analysts' average estimate of a $.11 loss per share.

Full-year financials

In 2023, Merck brought in $60.12 billion in revenue, up 1 percent from $59.28 billion in 2022. The revenue total beat Wall Street's consensus estimate of $59.98 billion. The pharmaceutical segment contributed $53.58 billion last year, up 3 percent from $52.01 billion in 2022.

Keytruda sales during 2023 totaled $25.01 billion, up 19 percent from $20.94 billion in 2022. Over that same period Lynparza sales increased 7 percent to $1.20 billion from $1.12 billion.

For the full year, Merck's net income was $365 million, or $.14 per share, versus $14.52 billion, or $5.71 per share, in 2022. Non-GAAP EPS was $1.51, which exceeded the Wall Street consensus estimate of $1.37 per share.

In 2024, Merck is expecting revenues in the range of $62.7 billion and $64.2 billion. The drugmaker projected non-GAAP EPS guidance between $8.44 and $8.59.