Merck is posting a 29% jump in fourth-quarter profit and it's spinning off its women's health division and other operations that churn out $6.5 billion in annual revenues.
The maneuver culminates a steady shift of Merck's business the past several years from a primary care drugmaker with 160 products, to a company focused on its surging but young oncology business, as well as growing sales of its vaccine, hospital products and veterinary medicines..
Chief Executive Kenneth Frazier said in an interview that the spinoff will ensure Merck's long-term growth, while the new company will have strong cash flow to expand in women's health, which wasn't getting enough attention.
“That didn't feel right,” Frazier said. “It's a large market. It's got great opportunity and they're intending to become a leader in women's health."
The drugmaker on Wednesday reported net income of $2.36 billion, or 92 cents per share, up from $1.83 billion, or 69 cents per share, a year earlier.
Adjusted earnings came to $2.98 billion, or $1.16 per share, edging out by a penny the projections from Wall Street analysts, according to a survey by FactSet.
The maker of Januvia Type 2 diabetes pills reported revenue of $11.87 billion, up 8% from a year ago. That missed analysts’ expectations for $11.98 billion.
Merck said the spinoff of women's medicines and some of its older drugs and biosimilars, or near-copies of biologic drugs, is expected to be completed in the first half of 2021. It will create a new company via a tax-free distribution to Merck shareholders.
It expects to record $1.5 billion in operating efficiencies by 2024 with the spinoff.
Merck’s pharmaceutical business posted sales totaling $10.53 billion in the fourth quarter, up 8%.
Cancer blockbuster Keytruda, one of the top new oncology drugs that boost the immune system to hunt and kill cancer cells, led sales, bringing in $3.11 billion in the quarter. For the year, it posted a whopping $11.08 billion in sales, nearly 24% of total company sales.
The company, based in Kenilworth, New Jersey, forecast adjusted annual net income of $5.62 to $5.77 per share, for all of 2020, and revenue ranging from $48.8 billion to $50.3 billion. Analysts were expecting earnings of $5.64 per share and revenue of $46.4 billion.