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Merck May Witness Flat Revenue Growth in 2017

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Feb. 27 2017, Published 3:37 p.m. ET

Revenue guidance

For 2017, Merck & Co. (MRK) has projected that its revenue will fall in the range of $38.6 billion–$40.1 billion. This estimate is based on dollar exchange rates as reported in the middle of January 2017. Merck has also assumed a negative impact of ~2% on its revenue estimates attributable to unfavorable foreign currency fluctuations in 2017.

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Flat revenue growth

Wall Street analysts have projected Merck’s 2017 revenue to be ~$39.7 billion, similar to what it reported in 2016. In 2017, its peers Bristol-Myers Squibb (BMY), Pfizer (PFE), and AstraZeneca (AZN) are expected to report revenues of ~$19.7 billion, $53.3 billion, and $21.6 billion, respectively.

Merck has projected flat revenue growth trends for 2017 despite headwinds due to loss of patent exclusivity for many of the company’s mature brands. This flat revenue growth can be attributed to its successful commercial launches of Zepatier and Keytruda as well as projections related to the robust performance of the company’s Januvia franchise and vaccines business in 2017.

The company has also included risk-adjusted sales of Keytruda in case the FDA approves the drug in combination with chemotherapy as a first-line treatment option for advanced non-squamous non-small cell lung cancer (or NSCLC) patients. Merck has submitted the application for review to the FDA based on results from its KEYNOTE-021 trial. It expects the FDA’s decision by the Prescription Drug User Fee Act (or PDUFA) date of May 10, 2017.

In the event the FDA approves Keytruda for this indication, it could have a positive impact on Merck’s share price as well as the share price of the SPDR S&P 500 ETF (SPY). Merck makes up ~0.90% of SPY’s total portfolio holdings.

In the next article, we’ll discuss 2017 margin trends for Merck in greater detail.

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