Profits at the drugmaker Merck surged in the fourth quarter, and the company CEO told investors that a “constructive” meeting with President Donald Trump focused on reducing taxes and relaxing regulations.
Merck CEO Kenneth Frazier on Thursday said he’s encouraged by an initial meeting he and other pharmaceutical executives had Tuesday with Trump, who has said drugmakers have been “getting away with murder” on drug prices.
The pharmaceutical industry has come under fire in recent months over soaring drug prices, which have been blasted by patients, doctors, politicians and others. Drug companies and investors have been alternatively worried that the Trump administration and Congress will move to reduce prices, and cheered by hopes that they will help them increase profits by reducing taxes and reducing regulations so they can bring new drugs to market faster.
On a conference call to discuss Merck’s latest financial results, Frazier told analysts the meeting with Trump focused on possible changes to U.S. tax laws, removing “outdated” regulations and using market forces to make medicines more affordable.
“What I heard from Mr. Trump was a concern less around the costs of drugs in the aggregate,” and more about affordability for patients and finding a way for them to share in the sizeable discounts insurers and other payers negotiate with drugmakers, Frazier said.
He said more meetings with Trump are expected, and that while he expects Congress to introduce bills calling for government price negotiations or controls, he doesn’t think that’s widely seen as a solution.
Merck’s fourth quarter profit surged 21 percent on the strength of aggressive cost-cutting and sales of two new drugs, the cancer medicine Keytruda and the hepatitis C treatment Zepatier.
Keytruda is among the most successful of a new generation of cancer medicines that work by helping the immune system fight tumors. Launched in September 2014 for advanced skin cancer, Keytruda has since been approved for treating lung cancer - a much bigger market - plus head and neck cancer.
Keytruda had sales of $483 million in the quarter and $1.4 billion over 2016, and could get U.S. approval in March for two other tumor types. Edward Jones analyst Ashtyn Evans wrote to investors that she expects annual Keytruda sales to reach $7 billion by 2020.
Zepatier was launched early last year in the crowded field of new drugs that cure hepatitis C. It brought in $229 million in fourth-quarter sales, putting it on pace to possibly hit $1 billion in sales this year.
Strong sales of those and other drugs, plus the cost cuts, helped Merck overcome the ongoing drag of lower revenues from older drugs, especially ones that are starting to face competition from generics, like the cholesterol pill Zetia and the allergy spray Nasonex. That will continue, as a big-selling cholesterol drug, Vytorin, will soon face cheaper copycats.
Merck, the country’s second-biggest drugmaker, reported fourth-quarter net income of $1.18 billion, or 42 cents per share. Excluding one-time costs, earnings were 89 cents per share, a penny better than industry analysts had projected. Sales dipped 1 percent to $10.12 billion, just shy of Wall Street forecasts for $10.2 billion.
Merck shares jumped $1.75, or 3 percent, to $63.85 in midday trading.
The Kenilworth, New Jersey, company expects full-year earnings in the range of $2.47 to $2.62 per share, with revenue of $38.6 billion to $40.1 billion - just a tad below what analysts were expecting.
For all of 2016, Merck reported net income of $5.7 billion, or $2.04 per share, on revenue of $39.8 billion.
BernsteinResearch analyst Tim Anderson called the 2017 forecasts “a relief,” given Merck’s prior cautionary language and what its rivals have been predicting for 2017.
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