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Merck’s 3Q17 Revenues Could Rise

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Merck’s revenue estimates  

Analysts expect Merck’s (MRK) revenues for 3Q17 to be around $10,546 million, nearly a 0.1% increase as compared to the revenues of $10,536 million reported for 3Q16. The revenues for 3Q17 are expected to see positive operational growth, which will likely be offset by the negative impact of currencies.

The above chart shows actual revenues and analysts’ estimates for 3Q17. Merck has classified its products into two business segments: Human Health (or Pharmaceuticals) and Animal Health. As the company has operations in over 100 countries and earns ~55% of total revenues from sales outside US markets, the company has significant exposure to currency risk. The impact of foreign exchange on the company’s revenues has led to negative growth in absolute figures in previous quarters.

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Pharmaceuticals

The global human health segment (or pharmaceuticals), the highest revenue-generating segment, contributes over 88% of total revenues for Merck. This segment includes various franchises like oncology, vaccines, hospital acute care, diabetes and other primary care, and women’s health.

The pharmaceuticals segment has a few blockbuster drugs with yearly contributions of over $1 billion each. The segment also includes blockbuster pharmaceutical products like Gardasil, Isentress, Januvia, Janumet, Keytruda, Zetia, Vytorin, and Proquad/Varivax. The revenue growth for 3Q17 is expected to be driven by blockbuster drugs including Januvia, Janumet, Gardasil vaccine, and new drug Keytruda, which will likely be partially offset by lower revenues from Remicade, Zetia, and Vytorin.

Animal health  

The animal health segment includes pharmaceuticals and vaccines for both farm animals and companion animals and contributes nearly 10% of total revenues for Merck. For 3Q17, the revenue growth of this segment is expected to be driven by increased revenues from companion animal products including Bravecto.

The SPDR S&P Pharmaceuticals ETF (XPH) holds 4.3% of its total assets in Merck (MRK). XPH also holds 4.4% in Eli Lilly (LLY), 5.1% in Perrigo (PRGO), and 4.3% in Allergan (AGN).

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