Merck sees sharp decline in COVID sales for 2023 after strong fourth quarter

By Michael Erman

(Reuters) - Merck & Co on Thursday forecast 2023 earnings below Wall Street estimates along with an expected steep decline in sales of its COVID-19 antiviral treatment, and its shares fell around 2%.

The U.S. drugmaker did report a higher-than-expected fourth-quarter profit on strong sales of the COVID pill molnupiravir in Asia and its blockbuster cancer drug Keytruda.

But investors appear to be focused on the outlook for this year and shares were down about 2% at $104.95, after falling as low as $102.80 earlier on Thursday.

Merck forecast 2023 adjusted earnings of $6.80 to $6.95 per share, lower than analysts' average estimate of $7.36.

The forecast was impacted by a tax hit Merck will have to pay related to its $1.35 billion acquisition of cancer drug developer Imago BioSciences, the company said.

The company also sees a steep decline ahead for molnupiravir sales in 2023, dropping to around $1 billion from $5.68 billion in 2022. It forecast 2023 sales of $57.2 to $58.7 billion, down from $59.3 billion last year.

"Merck faces a more challenging 2023" as the 2022 boost in sales from molnupiravir rolls off, said Citi analyst Andrew Baum.

Merck's sales in the quarter were $13.83 billion, up from $13.52 billion a year earlier. Analysts had expected sales of $13.67 billion, according to Refinitiv data.

The cancer immunotherapy Keytruda continues to grow, with fourth-quarter sales of $5.45 billion, up 19% from a year ago and roughly in line with analyst estimates.

Excluding items, Merck earned $1.62 a share, exceeding Wall Street expectations by 8 cents, according to Refinitiv.

Molnupiravir sales were $825 million in the quarter, well over double analyst estimates of around $358 million.

Merck Chief Executive Rob Davis said the pandemic wave that moved through Asia in the fourth quarter drove sales of molnupiravir, which is sold under the brand name Lagevrio, particularly in Japan, South Korea and other areas of the Asia Pacific region.

"That really was the strength, and we've seen very good demand for Lagevrio in those markets," Davis said in an interview. "In Japan, we are a market leader."

The drug was not approved for use in China until Dec. 30, so sales there were not a factor in the fourth quarter.

The human papillomavirus (HPV) vaccine Gardasil had sales of $1.47 billion, slightly underperforming analyst expectations.

(Reporting by Michael Erman in New Jersey, Leroy Leo and Khushi Mandowara in Bengaluru; Editing by Bill Berkrot)