Merck Warns That Slowdown in Medical Care Will Hurt Its Sales

(Bloomberg) -- Merck & Co. shares declined on fears that the drugmaker’s sales will suffer as more routine medical care is put off in the face of the coronavirus pandemic.

Physician-administered drugs account for roughly two-thirds of Merck’s pharmaceutical sales. The company told investors Tuesday it expects its 2020 revenue to decline by about $2.1 billion, excluding any effects from fluctuations in the value of the dollar against other currencies.

Shares of the Kenilworth, New Jersey-based Merck fell as much as 4.5% Tuesday. So far this year the stock has fallen about 11%, roughly in line with the broader U.S. market.

The U.S. health system has been almost singularly focused on battling Covid-19 since last month, when infections started to surge in Washington, New York and other states. To avoid overwhelming hospitals and medical practices, and reduce the risk of transmitting the virus, many doctors postponed or canceled elective procedures or in-person checkups.

Keeping patients out of doctors’ offices has lessened demand for many of the vaccines, contraceptive implants, cancer drugs and other medications Merck sells.

“The fact that we are seeing reduced access is what’s driving the reduction in guidance,” said Chief Financial Officer Rob Davis on a conference call with investors. That so many of Merck’s drugs must be administered in person by a medical provider is “probably somewhat unique” among big pharmaceutical companies, Davis said.

Merck’s animal-health segment is also expected to be squeezed as fewer animals see the veterinarian and demand for milk and protein drops with schools and restaurants closed. Davis said the impact in animal health “is actually more significant than it is in the human health business.”

The drugmaker said it has assumed much of the overall negative effects from coronavirus on its business will occur in the second quarter. It suspended share buybacks out of what Davis called an abundance of caution.

Bloomberg Intelligence analysts Sam Fazeli and Cinney Zhang said they were surprised by the degree to which Merck cut its guidance for the year, and that the drugmaker may have taken an “overly conservative approach.”

“As expected the company’s 2020 pharma sales are being crimped, especially given the reliance on Keytruda,” they wrote. “Though cancer drugs are life-saving, access to physicians and hospitals has been curbed, and doctors may think twice about treating those elderly patients at risk.”

Merck also said it is in advanced discussions focused on viral vaccine platforms with potential against the novel coronavirus, as well as antiviral drugs that could be deployed more rapidly.

©2020 Bloomberg L.P.