Merck & Co (MRK) Q3 2024 earnings summary

Executive summary

• Q3 2024 sales rose 4% year-over-year to $16.7B, driven by oncology (notably Keytruda), new product launches, and animal health, partially offset by declines in Gardasil due to lower China demand and diabetes franchise.

• Keytruda sales grew 21% ex-FX to $7.4B, maintaining leadership in oncology with expanded indications and robust global demand across earlier-stage and metastatic settings.

• Animal Health sales increased 11% ex-FX to $1.5B, with strong growth in both companion animal and livestock segments, aided by the Elanco aqua business acquisition.

• Major acquisitions in 2024 included EyeBio, Elanco aqua, Harpoon Therapeutics, and MK-1045 from Curon, resulting in significant R&D charges and pipeline expansion.

• Achieved significant milestones in vaccine and oncology programs, including new regulatory approvals, positive clinical data, and expanded collaborations.

Financial highlights

• Q3 revenues: $16.7B (+4% reported, +7% ex-FX); Keytruda: $7.4B (+21% ex-FX); Gardasil: $2.3B (-10% to -11%).

• Gross margin: 80.5% (Non-GAAP, up 3.5 pts YoY); GAAP gross margin: 75.5%.

• Q3 Non-GAAP EPS: $1.57; GAAP EPS: $1.24, both including $0.79 per share net charge from business development.

• Operating expenses: $8.5B (Non-GAAP), including $2.2B in acquisition-related charges; R&D expenses rose 77% to $5.9B.

• Net income: $3.2B (GAAP), down from $4.7B YoY; Non-GAAP net income: $3.99B.

Outlook and guidance

• 2024 revenue guidance narrowed to $63.6–$64.1B (+6–7% YoY), with ~3 pts FX headwind; Non-GAAP EPS guidance: $7.72–$7.77, reflecting business development charges and FX impact.

• Gross margin expected at ~81% (Non-GAAP); operating expenses $27.8–$28.3B, including $750M one-time charge.

• Full-year Non-GAAP tax rate: 16–17%; guidance includes negative FX impact of $0.30 per share on EPS.

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

• Restructuring program targets $750M in annual net cost savings by 2031, with $900M in charges expected for 2024.