What's In The Cards For Merck KGaA (MKGAF) In Q3 Earnings?
Zacks Investment Research | Nov 07, 2017 03:46AM ET
Merck (NYSE:MRK) KGaA industry gained 2.4%.
The company reports results under three business sectors – Healthcare, Life Science and Performance Materials.
Merck’s revenues were driven by sales growth in its Healthcare and Life Science segment in the first half of the year. We expect the positive trend to continue this quarter. Meanwhile, the company is streamlining its Healthcare business to focus on its pipeline of innovative medicines.
During the first half of 2017, the company received approval for Bavencio in metastatic Merkel cell carcinoma (mMCC) and advanced bladder cancer in the United States. Moreover, the drug was approved in the EU and Japan for treating mMCC in late September. However, Bavencio hasn’t generated any meaningful sales as reported by Merck’s partner, Pfizer Inc. (NYSE:PFE) . Merck’s multiple sclerosis drug, Mavenclad, was also approved in Europe this quarter.
The company continues to develop Bavencio in partnership with Pfizer for several cancer indications.
However, we expect sales of three key drugs, Rebif, Erbitux and Gonal-f to be lower this quarter due to continued competitive pressure and price reduction. However, favorable currency movement is expected to positively impact the top line in the third quarter.
Moreover, operating expenses increased during the first half due to new launches and higher pipeline development cost. With the company focusing on the development of an innovative pipeline and launch of Bavencio in new indications and geographies, costs are expected to be higher in the third quarter.
In September, Merck completed the divestment of its Biosimilars business to Fresenius as part of its strategy to become a leading science and technology company. The company is planning to focus on developing its pipeline in oncology, immuno-oncology and immunology. Meanwhile, Merck announced that it is also planning a partial or full sale of its consumer health business, which includes a number of leading products in over-the-counter (OTC) categories.
We expect management to shed light on progress and commercialization plans for Bavencio on the earnings call. It may also provide updates on its strategic plans.
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