Merck’s (MRK) M&P (materials and production) expenses grew ~10% YoY (year-over-year) to $3.4 billion in the second quarter of 2018, while its M&A (marketing and administrative) expenses were flat YoY at $2.5 billion. The company’s R&D (research and development) expenses grew ~28% YoY to $2.3 billion from $1.8 billion, and its restricting expenditure grew 37% YoY to $228.0 million from $166.0 million. Analysts expect Merck to report non-GAAP M&P expenses of $2.7 billion in the third quarter, and non-GAAP R&D expenses of $2.0 billion.
In the second quarter, Merck’s gross margin contracted YoY to ~67.3% from ~68.6%, primarily due to the amortization of wealth capitalized for potential future milestone payments associated with collaborations.
In September, Merck received a positive recommendation from the European Medicines Agency’s Committee for Medicinal Products for Human Use for the approval of Delstrigo and Pifeltro for treating HIV-1 infections. In August, the FDA approved Delstrigo’s and Pifeltro’s US commercialization for the same indication.
Merck’s virology drugs, Isentress and Zepatier, generated revenue of $586.0 million and $342.0 million, respectively, in the first half of 2018. Isentress revenue was flat YoY, while Zepatier revenue fell ~73% YoY. Delstrigo’s and Pifeltro’s approval could significantly strengthen Merck’s virology portfolio and boost revenue.