US pharmaceutical company Merck & Co stated that it expects to incur lost sales of up to $2 billion this year as a direct result of the economic downturn caused by the coronavirus pandemic. The New Jersey-based company also added on Tuesday that it is lowering its profit forecast for the rest of the year after observing a significant drop in doctor's office visits.
Following its announcement, Merck's share prices dipped by more than 3 percent. The company predicts that the performance of its products, including its blockbuster cancer drug Keytruda, could diminish given how most of them are typically administered by doctors to patients.
Merck's chief financial officer, Robert Davis, told stakeholders during a conference call that around two-thirds of the company's products are doctor administered. This means that it may be affected by the ongoing shelter-in-place orders and lockdown more than other pharmaceutical companies.
Apart from Merck, Johnson & Johnson had also expressed concerns regarding the impact of the pandemic on its medical devices business. The company expects that the ongoing restrictions will delay elective surgeries, affecting sales of its core products.
The pandemic has also increased fears amongst Merck's customers, who are now trying to avoid visiting doctors and hospitals in order not to get infected with Covid-19. Davis noted that the company expects that the biggest hit on its sales could come during the second quarter of this year, which will likely be followed by a slight rebound during the second half of the year after restrictions are lifted.
Moody's analysts agree with Davis' assessment, stating that the strong demand for Merck's medications should lead to a sales rebound during the second half of the year and in 2021 after the pandemic is placed under control.
Given the current circumstances, Merck had adjusted its full-year profit forecast from a range of $5.62 to $5.77 per share down to $5.17 to $5.37 per share. The downgrade comes just days after the company announced that it would be suspending its share buyback program.
For the first quarter of the year, prior to the implementation of shelter-in-place orders and lockdowns in most countries, Merck had managed to beat analysts' estimates thanks to the massive demand for its products. Sales for its cancer drug Keytruda surged by more than 45 percent during the quarter to $3.28 billion. Total sales of its products had increased by more than 11.5 percent to $12.06 billion during the quarter. Merck had stated that the surge in sales can partly be attributed to some hospitals and customers stocking up on its drugs.
