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Can Merck Impress Markets with Q4 2018 Results?

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Third-quarter performance

In the third quarter of 2018, Merck (MRK) reported revenues of $10.79 billion, which is YoY growth of 4.5% on a reported basis and 6% on a constant currency (or CC) basis. The company also reported adjusted EPS of $1.19, which is a 7.21% rise on a YoY basis. Merck managed to beat the consensus EPS estimate by $0.05 but underperformed the consensus revenue estimate by $110 million.

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Revenue projections

Wall Street analysts expect Merck to report revenues of $10.95 billion for the fourth quarter of 2018, a YoY rise of 4.91%. The company is also expected to report revenues of $42.28 billion for fiscal 2018, a YoY rise of 5.38%.

Oncology growth drivers

In its third quarter 2018 investor presentation, Merck highlighted its oncology, vaccines, hospital/specialty, and animal health businesses as major pillars of growth.

The company is currently focused on three of its major oncology assets: Keytruda, Lynparza, and Lenvima. In the third quarter of 2018, Keytruda reported $1.9 billion worth of revenues. According to the company’s third-quarter earnings conference call, the drug is now recognized as the best-performing immune-oncology therapy in the US, not only in terms of new patient starts but also for total patient volumes. Lynparza is also the leading PARP inhibitor both in terms of new-to-brand and total prescriptions. Finally, Merck has strengthened its partnership with Eisai to further advance Lenvima research programs.

Investment plans

Merck has plans to invest capital worth $16 billion by 2022. The company has planned to increase manufacturing capacity in oncology, animal health, and the vaccines business as well as focus on its R&D pipeline and overall technology upgrade in future years.

In the next article, we’ll discuss Merck’s EPS and expense estimates for Q4 2018 and fiscal 2018 in greater detail.

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