Merck Reports 2018 Financial Results: Keytruda Surpasses $7 Billion in Annual Sales

As the year-end approaches, it is time for companies to showcase their 2018 performance reports.

Merck & Co., Inc. Reports 2018 Financial Results: Total Revenue Reaches $42.294 Billion, Up 5% Year-over-YearRecently, multinational pharmaceutical giant Merck & Co., Inc. (known as MSD outside the United States and Canada) announced its 2018 financial performance. The company achieved total annual revenue of $42.294 billion, representing a 5% year-over-year increase. Of this total, pharmaceutical sales amounted to $37.689 billion, up 6% year-over-year, while animal health revenue reached $4.212 billion, increasing by 9% year-over-year.

Among Merck’s full-year performance, the most closely watched aspect was its “cash cow” product, Keytruda. Data showed that Keytruda’s annual sales in 2018 reached $7.171 billion, while its strongest competitor, Opdivo, recorded sales of $6.735 billion during the same period. In fact, Keytruda’s strong momentum had already become evident in 2018, with annual sales reaching $1.46 billion, representing a year-over-year increase of 151%, easily surpassing the previously forecasted $1.37 billion. Subsequently, Keytruda maintained robust growth, with revenues in the second and third quarters of 2018 increasing by 89% and 80%, respectively.

It is worth noting that Keytruda officially entered the Chinese market last year, significantly boosting its sales performance. On July 25, 2018, Keytruda received approval from the China National Medical Products Administration (NMPA) for the treatment of patients with locally advanced or metastatic melanoma whose disease has progressed after first-line therapy. According to Shanghai in OctoberPharmaceuticalsThe Q3 2018 report released by the Group Co., Ltd. (which secured national exclusive distribution rights for Keytruda and Opdivo in China) revealed that Keytruda generated RMB 150 million in distribution sales revenue within just over a month of its official market launch.

Previously, a relevant executive from MSD stated during the earnings report analyst conference call: “Due to strong marketing and R&D execution, Keytruda has the potential to become the most profitable product in MSD’s history.”

However, some analytical agencies have expressed concerns about Keytruda's strong momentum, believing that the company is currently overly reliant on Keytruda's growth while neglecting the research and development of other product lines.

In fact, such concerns are not unfounded. For instance, Zepatier, MSD’s hepatitis C treatment, generated only $131 million in sales in the first quarter of 2018, far below the market expectation of $236 million, representing a decline of more than 100%. Its total sales for the full year 2018 amounted to just $455 million, significantly lower than the $1.66 billion recorded in 2017. Meanwhile, MSD’s shingles vaccine Zostavax also underperformed in a highly competitive market, and Remicade, troubled by biosimilar competition, brought in only $582 million in 2018, a 31% decrease.

In response, MSD stated that this situation is only temporary. The company’s business development strategy is positioned around “long-term growth and value creation.” MSD will continue to seek opportunities to enhance its portfolio with a broader and more diverse range of products, thereby creating new value through business development.

It is also worth noting that Gardasil 9, another star product from Merck Sharp & Dohme (MSD), may further bolster the company’s optimism. Its quadrivalent HPV vaccine, Gardasil 4, which was approved for launch in China in May 2017, clearly delivered a successful debut. Following the approval of Gardasil 9 in China in April 2018, the vaccine faced severe shortages, with demand far outstripping supply. MSD stated, “Frankly speaking, demand in China has been much greater than we initially anticipated. We are still working to ensure we fully understand the demand there, as it represents a tremendous opportunity. Given the large population, we must determine how much product is needed to effectively enter this market.”

It is reported that Gardasil 9 generated $3.151 billion in sales in 2018, and the substantial release of demand in the Chinese market is poised to fuel its future growth.