Merck & Co (MRK) Q3 2024 earnings summary

Executive summary

• Q3 2024 sales rose 4% year-over-year to $16.7B, driven by strong demand for oncology (especially Keytruda), animal health, and new product launches, while Gardasil declined in China but grew elsewhere.

• Keytruda sales grew 17%–21% to $7.4B, with robust uptake in earlier-stage and metastatic indications.

• Animal Health sales increased 6%–11% to $1.5B, with growth in both companion animal and livestock segments, aided by acquisitions.

• Strategic focus on pipeline expansion, with major acquisitions (EyeBio, Elanco Aqua, Curon, Harpoon) and collaborations (Daiichi Sankyo, Exelixis) to augment oncology and immunology assets.

• Achieved significant regulatory milestones and positive clinical data for Keytruda, Capvaxive, and other pipeline assets.

Financial highlights

• Q3 revenues: $16.7B (+4% reported, +7% ex-FX); human health sales +5–8%, animal health +6–11%.

• Keytruda sales up 17%–21% to $7.4B; Gardasil down 10–11% to $2.3B due to China, but grew double digits elsewhere.

• Gross margin improved to 75.5% (GAAP) and 80.5% (Non-GAAP), driven by favorable mix and lower royalties.

• Q3 GAAP EPS: $1.24 (down 33%); Non-GAAP EPS: $1.57 (down 26%), both impacted by $0.79 per share in business development charges.

• Operating expenses: $8.5B (Non-GAAP), up 48% year-over-year, including $2.2B in acquisition-related charges.

Outlook and guidance

• 2024 revenue guidance narrowed to $63.6–$64.1B (+6–7% YoY), with ~3 percentage point FX headwind.

• Non-GAAP EPS guidance: $7.72–$7.77, reflecting one-time charges and FX impact.

• Operating expenses guidance: $27.8–$28.3B, including $750M one-time charge; full-year Non-GAAP tax rate expected at 16–17%.

• 2025 expected to deliver solid growth, led by Keytruda, new launches, and animal health, offset by Gardasil China headwinds and immunology product expirations.

• Guidance includes negative FX impact of about 3 percentage points on sales and $0.30 per share on EPS, mainly from Argentine peso devaluation.