Merck Reports 4Q Loss on Tax Charges, but Beats Estimates

Merck & Co reported a loss in the 4th quarter due to the charges it took from the recent US tax overhaul, but its adjusted earnings still beat Wall Street’s Estimates.

In the 4th quarter, the pharmaceutical giant had a net loss of $872 million, or 32 cents per share, compared with a net loss of $594 million, or 22 cents per share, in the year-earlier quarter.

After excluding special items, such as a $2.6 billion charge related to the new tax law, Merck earned $2.7 billion, or 98 cents per share, above analysts’ estimates of 94 cents per share.

The company’s revenue reached $10.43 billion, up 3% from a year ago but below expectations of $10.5 billion. Its pharmaceuticals business gained 4% from the same quarter of the previous year, reaching $9.3 billion in the quarter.

Sales of its Keytruda cancer immunotherapy were better than expected. It is a cancer drug that works by improving the immune system to fight tumors. The drug is approved for lung, skin, and other cancer types.

Keytruda sales soared 169% to $1.3 billion, compared with consensus estimates of $1.25 billion, according to Barclays. Merck’s diabetes drugs Januvia and Janumet gained 1% to $1.52 billion, above the estimates of $1.5 billion.

Sales of veterinary medicines totaled $981 million, a growth of 11% compared with the 4th quarter of 2016.

For the whole 2017, Merck reported a net income of $2.57 billion, or 93 cents per share. Its adjusted profit was $3.98 per share, and its revenue totaled $40.1 billion.

“Our 2017 results reflect the underlying strength of our business and our ability to grow, despite significant headwinds,” said Kenneth C. Frazier, chairman and chief executive officer. “We enter 2018 with strong operating momentum, based on our key pillars of growth that will enable us to deliver on our mission of improving patients’ lives.”

The new law, which cut the corporate rate tax from 35% to 21%, should lower the company's taxes by a couple of percentage points, according to Robert Davis, Merck’s chief financial officer. In addition, Merck has about $17 billion of cash available for repatriation.

Merck said that it plans to invest $12 billion in capital projects over the next 5 years, two-thirds of which will be in the US in part to the new tax law.

For 2018, Merck expects adjusted earnings of $4.08 to $4.23 per share and revenue of $41.2 billion to $42.7 billion, while analysts expect $4.11 per share and $41.1 billion, respectively.

Merck shares dropped 2.17% to finish at $58.56 in Friday trading session. Its shares further fell 0.09% to $58.51 in after-hours trading.

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