- Second-Quarter 2019 Worldwide Sales Were $11.8 Billion, an
Increase of 12%; Sales Increased 15% Excluding Negative Impact from
Foreign Exchange; Growth Driven by Oncology and Human Health
Vaccines
- KEYTRUDA Sales Grew 58% to $2.6 Billion; Excluding the Impact
of Foreign Exchange, Sales Grew 63%
- Human Health Vaccines Sales Grew 33% to $2.0 Billion; Excluding
the Impact of Foreign Exchange, Sales Grew 36%
- Second-Quarter 2019 GAAP EPS was $1.03, Second-Quarter Non-GAAP
EPS was $1.30
- Company Narrows and Raises 2019 Full-Year Revenue Range to be
Between $45.2 Billion and $46.2 Billion, Including a Negative
Impact from Foreign Exchange of Slightly More Than 1%
- Company Narrows and Reduces 2019 Full-Year GAAP EPS Range to be
Between $3.78 and $3.88, Reflecting Charge Related to Acquisition
of Peloton Therapeutics
- Company Narrows and Raises 2019 Full-Year Non-GAAP EPS Range to
be Between $4.84 and $4.94, Including a Slightly Negative Impact
from Foreign Exchange
- KEYTRUDA in Combination with Chemotherapy Met Primary Endpoint
of Pathological Complete Response (pCR) in Pivotal Phase 3
KEYNOTE-522 Trial as Neoadjuvant Therapy in Patients with
Triple-Negative Breast Cancer
Merck (NYSE: MRK), known as MSD outside the United States and
Canada, today announced financial results for the second quarter of
2019.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20190730005360/en/
“Our science-led strategy and execution across our key growth
pillars have driven another quarter of accelerating revenue growth
with strength across our global portfolio,” said Kenneth C.
Frazier, chairman and chief executive officer, Merck. “We remain
confident that our innovative products and significant pipeline
opportunities will continue to deliver strong results and provide
sustainable value to patients and shareholders.”
Financial Summary
$ in millions, except EPS amounts
Second Quarter
2019
2018
Change
Change Ex- Exchange
Sales
$11,760
$10,465
12%
15%
GAAP net income1
2,670
1,707
56%
61%
Non-GAAP net income that excludes certain
items1,2*
3,356
2,854
18%
20%
GAAP EPS
1.03
0.63
63%
67%
Non-GAAP EPS that excludes certain
items2
1.30
1.06
23%
25%
*Refer to table on page 10
Worldwide sales were $11.8 billion for the second quarter of
2019, an increase of 12% compared with the second quarter of 2018;
excluding the negative impact from foreign exchange, worldwide
sales grew 15%.
GAAP (generally accepted accounting principles) earnings per
share assuming dilution (EPS) were $1.03 for the second quarter of
2019. Non-GAAP EPS of $1.30 for the second quarter of 2019 excludes
acquisition- and divestiture-related costs, restructuring costs and
certain other items. Year-to-date results can be found in the
attached tables.
Pipeline Highlights
Oncology
Merck continued to advance the development programs for KEYTRUDA
(pembrolizumab), the company’s anti-PD-1 therapy; Lynparza
(olaparib), a PARP inhibitor being co-developed and
co-commercialized with AstraZeneca; and Lenvima (lenvatinib
mesylate), an orally available tyrosine kinase inhibitor being
co-developed and co-commercialized with Eisai Co., Ltd.
(Eisai).
KEYTRUDA
- Merck announced that the U.S. Food and Drug Administration
(FDA) approved KEYTRUDA for the following indications:
- First-line treatment of patients with metastatic or with
unresectable, recurrent head and neck squamous cell carcinoma
(HNSCC) as monotherapy for patients whose tumors express PD-L1
(Combined Positive Score [CPS] >1) or in combination with
platinum and fluorouracil (FU), a commonly used chemotherapy
regimen, based on overall survival results from the KEYNOTE-048
trial; and
- Treatment of patients with metastatic small cell lung cancer
(SCLC) with disease progression on or after platinum-based
chemotherapy and at least one other prior line of therapy based on
the results from the KEYNOTE-158 and KEYNOTE-028 trials.
- Merck announced that the European Medicines Agency (EMA)
adopted a positive opinion for KEYTRUDA in combination with
axitinib as a first-line treatment for advanced renal cell
carcinoma (RCC) based on the findings from the pivotal KEYNOTE-426
trial.
- Merck announced that the FDA has accepted for review six
supplemental Biologics License Applications (sBLAs) to update the
dosing frequency for KEYTRUDA to include an every-six-weeks (Q6W)
dosing schedule option for certain monotherapy indications. The FDA
has set a PDUFA date of Feb. 18, 2020.
- Merck presented five-year survival data for KEYTRUDA in
advanced non-small cell lung cancer (NSCLC) from the first KEYNOTE
trial (Phase 1b KEYNOTE-001) and updated overall survival analysis
and new data for disease progression after next-line treatment
(progression-free survival2) from the KEYNOTE-189 trial in
metastatic nonsquamous NSCLC at the 2019 American Society of
Clinical Oncology (ASCO) annual meeting.
- Merck announced that the Phase 3 KEYNOTE-522 trial
investigating KEYTRUDA in combination with chemotherapy met the
primary endpoint of pathological complete response (pCR) following
the neoadjuvant part of the neoadjuvant/adjuvant study regimen in
patients with triple-negative breast cancer (TNBC). The trial will
continue to evaluate the other dual-primary endpoint of event-free
survival (EFS). Results will be presented at an upcoming medical
congress.
Lynparza
- Merck and AstraZeneca announced approval of Lynparza in Japan
and separately in the European Union for use as first-line
maintenance therapy in patients with BRCA-mutated advanced ovarian
cancer based on the results of the Phase 3 SOLO-1 trial. Lynparza
is the only PARP inhibitor approved for this indication and the
only PARP inhibitor approved in Japan.
- Merck and AstraZeneca presented results from the Phase 3 POLO
trial in patients with germline BRCA-mutated metastatic pancreatic
cancer whose disease had not progressed following platinum-based
chemotherapy. In the trial, Lynparza reduced the risk of disease
progression or death by nearly half (47%). These results were
presented at the 2019 ASCO annual meeting and simultaneously
published in the New England Journal of Medicine.
- Merck and AstraZeneca also presented results from the Phase 3
SOLO3 trial at the 2019 ASCO annual meeting. This study evaluated
the objective response rate of Lynparza compared to chemotherapy in
patients with platinum-sensitive relapsed germline BRCA1/2-mutated
advanced ovarian cancer, who have received two or more prior lines
of chemotherapy.
Lenvima
- Merck and Eisai announced receipt of a Breakthrough Therapy
Designation from the FDA for the KEYTRUDA plus Lenvima combination
regimen for potential first-line treatment of patients with
advanced unresectable hepatocellular carcinoma not amenable to
loco-regional treatment, representing the third such
designation.
Vaccines
- Merck announced the U.S. Centers for Disease Control and
Prevention’s (CDC’s) Advisory Committee on Immunization Practices
(ACIP) voted to recommend Human Papillomavirus (HPV) vaccination
with GARDASIL 9 (Human Papillomavirus 9-valent Vaccine,
Recombinant) based on shared clinical decision making for
individuals ages 27 through 45 who are not adequately vaccinated.
The ACIP also voted to expand routine and catch-up recommendations
for males through age 26 who are not adequately vaccinated.
- Merck presented Phase 2 trial results of V114, the company’s
investigational 15-valent pneumococcal conjugate vaccine, which
demonstrated noninferiority to PCV 13 for all shared serotypes and
an immune response for two additional disease-causing serotypes,
22F and 33F in healthy infants. Results were presented at the
European Society for Paediatric Infectious Diseases (ESPID). V114
is currently in Phase 3 development.
HIV and Hospital Acute
Care
- Merck presented late-breaking data with islatravir (formerly
MK-8591), the company’s investigational nucleoside reverse
transcriptase translocation inhibitor (NRTTI) in development for
the prevention and treatment of HIV-1 infection, at the recent 10th
International AIDS Society Conference on HIV Science (IAS 2019),
which included:
- Phase 2b results demonstrating the combination of islatravir
with doravirine maintained antiviral activity in treatment-naïve
adults through 48 weeks. Based on these results, the company plans
to initiate a Phase 3 program evaluating islatravir in combination
with doravirine across diverse patient populations; and
- Phase 1 results evaluating the pharmacokinetics and safety of a
prototype subdermal drug-eluting implant for extended
administration of islatravir in healthy volunteers for HIV
pre-exposure prophylaxis (PrEP).
- Merck announced FDA approval of an expanded use for ZERBAXA
(ceftolozane and tazobactam) for the treatment of adults with
hospital-acquired and ventilator-associated bacterial pneumonia
(HABP/VABP) and separately announced the EMA adopted a positive
opinion recommending ZERBAXA for HABP and VABP, which is now under
consideration by the European Commission.
- Merck announced FDA approval of RECARBRIO (imipenem,
cilastatin, and relebactam) for the treatment of adults with
complicated urinary tract and complicated intra-abdominal bacterial
infections where limited or no alternative treatment options are
available.
Business Development Highlights
- Merck acquired Peloton Therapeutics (Peloton), a
biopharmaceutical company focused on the development of novel small
molecule therapeutic candidates targeting hypoxia-inducible
factor-2A (HIF-2a) for the treatment of patients with cancer and
other non-oncology diseases, including a novel oral HIF-2a
inhibitor in late-stage development for RCC. The acquisition closed
in July.
- Merck acquired Tilos Therapeutics, gaining a portfolio of
investigational antibodies targeting TGFβ for the potential
application in the treatment of cancer, fibrosis and autoimmune
diseases. The acquisition closed in June.
- Merck acquired Immune Design, providing potential
next-generation in vivo approaches to enable the body’s immune
system to fight disease. The acquisition closed in April.
Second-Quarter Revenue Performance
The following table reflects sales of the company’s top
pharmaceutical products, as well as sales of animal health
products.
$ in millions
Second Quarter
2019
2018
Change
Change Ex- Exchange
Total Sales
$11,760
$10,465
12%
15%
Pharmaceutical
10,460
9,282
13%
17%
KEYTRUDA
2,634
1,667
58%
63%
JANUVIA / JANUMET
1,441
1,535
-6%
-3%
GARDASIL / GARDASIL 9
886
608
46%
50%
PROQUAD, M-M-R II and
VARIVAX
675
426
58%
61%
BRIDION
278
240
16%
20%
ISENTRESS / ISENTRESS HD
247
305
-19%
-13%
NUVARING
240
236
2%
3%
ZETIA / VYTORIN
232
381
-39%
-36%
SIMPONI
214
233
-8%
-1%
ROTATEQ
172
156
10%
13%
Animal Health
1,124
1,090
3%
9%
Livestock
671
633
6%
13%
Companion Animals
453
457
-1%
4%
Other Revenues
176
93
88%
-62%
Pharmaceutical Revenue
Second-quarter pharmaceutical sales were $10.5 billion, an
increase of 13% compared with the second quarter of 2018; excluding
the unfavorable effect of foreign exchange, sales grew 17% in the
second quarter. The increase was driven primarily by growth in
oncology and vaccines, partially offset by the ongoing impacts of
the loss of market exclusivity for several products. International
pharmaceutical sales represented 55% of total sales in the quarter.
Performance in international markets was led by China, which had
pharmaceutical sales of $745 million representing growth of 41%
compared with the second quarter of 2018, driven by oncology and
vaccines. Excluding the unfavorable effect of foreign exchange,
pharmaceutical sales in China grew by 51%.
Growth in oncology was largely driven by a nearly $1 billion
increase in sales for KEYTRUDA to $2.6 billion, reflecting strong
momentum from the NSCLC indications as well as continued uptake in
other indications, including the recently launched RCC and adjuvant
melanoma indications, along with growth from Lynparza and
Lenvima.
Growth in vaccines reflects higher sales of GARDASIL [Human
Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine,
Recombinant] and GARDASIL 9, vaccines to prevent certain cancers
and other diseases caused by HPV, primarily due to public sector
buying patterns, demand and pricing in the United States, and the
ongoing commercial launch in China. Higher demand in Europe, driven
primarily by increased vaccination rates for both boys and girls,
also contributed to sales growth.
Growth in pediatric vaccines was driven by M-M-R II (Measles,
Mumps and Rubella Virus Vaccine Live), a vaccine to help prevent
measles, mumps and rubella; VARIVAX (Varicella Virus Vaccine Live),
a vaccine to help prevent chickenpox; and PROQUAD (Measles, Mumps,
Rubella and Varicella Virus Vaccine Live), a combination vaccine to
help protect against measles, mumps, rubella and varicella;
reflecting higher demand, including private-sector buy-in, and
pricing in the United States; government tenders in Latin America
and higher demand in Europe.
Performance in hospital acute care reflects strong demand in the
United States for BRIDION (sugammadex) Injection 100 mg/mL, a
medicine for the reversal of neuromuscular blockade induced by
rocuronium bromide or vecuronium bromide in adults undergoing
surgery; and the ongoing launch of PREVYMIS (letermovir), a
medicine for the prevention of cytomegalovirus (CMV) infection and
disease in adult CMV-seropositive recipients of an allogeneic
hematopoietic stem cell transplant.
Pharmaceutical sales growth for the quarter was partially offset
by the ongoing impacts from the loss of market exclusivity for
ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), INVANZ
(ertapenem sodium) and REMICADE (infliximab). In addition, the
decline in sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin
and metformin HCI) reflects continued pricing pressure in the
United States, which more than offset higher demand globally.
Animal Health Revenue
Animal Health sales totaled $1.1 billion for the second quarter
of 2019, an increase of 3% compared with the second quarter of
2018. Excluding the unfavorable effect from foreign exchange,
Animal Health sales grew 9%. Growth in the second quarter was
primarily driven by livestock, predominantly due to products
acquired in the Antelliq acquisition. Companion animal sales
performance reflects volume growth in vaccine and insulin products,
partially offset by the timing of customer purchases in the prior
year for the BRAVECTO (fluralaner) line of products for parasitic
control.
Animal Health segment profits were $405 million in the second
quarter of 2019, a decrease of 10% compared with $450 million in
the second quarter of 2018, primarily reflecting the unfavorable
impact of foreign exchange.3
Second-Quarter Expense, EPS and Related Information
The tables below present selected expense information.
$ in millions
Second-Quarter 2019
GAAP
Acquisition- and Divestiture-
Related Costs4
Restructuring Costs
Certain Other Items
Non-GAAP2
Cost of sales
$3,401
$447
$65
$–
$2,889
Selling, general and administrative
2,712
61
32
–
2,619
Research and development
2,189
4
3
–
2,182
Restructuring costs
59
–
59
–
–
Other (income) expense, net
140
148
–
48
(56)
Second-Quarter 2018
Cost of sales
$3,417
$733
$3
$–
$2,681
Selling, general and administrative
2,508
16
1
–
2,491
Research and development
2,274
1
3
344
1,926
Restructuring costs
228
–
228
–
–
Other (income) expense, net
(48)
105
–
(32)
(121)
GAAP Expense, EPS and Related Information
Gross margin was 71.1% for the second quarter of 2019 compared
to 67.3% for the second quarter of 2018. The increase in gross
margin for the second quarter of 2019 was primarily driven by lower
acquisition- and divestiture-related costs, favorable product mix
and lower amortization of intangible assets related to
collaborations, partially offset by higher restructuring costs.
Selling, general and administrative expenses were $2.7 billion
in the second quarter of 2019, an 8% increase compared to the
second quarter of 2018. The increase primarily reflects higher
administrative, acquisition- and divestiture-related, restructuring
and promotion costs, partially offset by the favorable effects of
foreign exchange.
Research and development (R&D) expenses were $2.2 billion in
the second quarter of 2019, a decline of 4% compared with the
second quarter of 2018. The decline was driven primarily by lower
expenses related to business development transactions, largely
reflecting a $344 million charge recorded in the second quarter of
2018 related to the Viralytics Limited acquisition. The decline was
partially offset by higher expenses related to clinical development
and increased investment in discovery research and early drug
development.
Other (income) expense, net, was $140 million of expense in the
second quarter of 2019 compared to $48 million of income in the
second quarter of 2018. Other (income) expense, net, in the second
quarter of 2019 reflects impairment charges and lower income from
investments in equity securities.
GAAP EPS was $1.03 for the second quarter of 2019 compared with
$0.63 for the second quarter of 2018.
Non-GAAP Expense, EPS and Related Information
The non-GAAP gross margin was 75.4% for the second quarter of
2019, compared to 74.4% for the second quarter of 2018. The
increase in non-GAAP gross margin reflects favorable product mix
and lower amortization of intangible assets related to
collaborations.
Non-GAAP selling, general and administrative expenses were $2.6
billion in the second quarter of 2019, a 5% increase compared to
the second quarter of 2018. The increase reflects higher
administrative and promotion costs, partially offset by the
favorable effects of foreign exchange.
Non-GAAP R&D expenses were $2.2 billion in the second
quarter of 2019, a 13% increase compared to the second quarter of
2018. The increase reflects higher expenses related to clinical
development, investment in discovery research and early drug
development, as well as business development transactions.
Non-GAAP other (income) expense, net, was $56 million of income
in the second quarter of 2019 compared to $121 million of income in
the second quarter of 2018, driven primarily by lower income from
investments in equity securities.
Non-GAAP EPS was $1.30 for the second quarter of 2019 compared
with $1.06 for the second quarter of 2018.
A reconciliation of GAAP to non-GAAP net income and EPS is
provided in the table that follows.
$ in millions, except EPS amounts
Second Quarter
2019
2018
EPS
GAAP EPS
$1.03
$0.63
Difference5
0.27
0.43
Non-GAAP EPS that excludes items listed
below2
$1.30
$1.06
Net Income
GAAP net income1
$2,670
$1,707
Difference
686
1,147
Non-GAAP net income that excludes items
listed below1,2
$3,356
$2,854
Decrease (Increase) in Net Income Due
to Excluded Items:
Acquisition- and divestiture-related
costs4
$660
$855
Restructuring costs
159
235
Charge for the acquisition of
Viralytics
–
344
Other
48
(32)
Net decrease (increase) in income before
taxes
867
1,402
Estimated income tax (benefit) expense
(145)
(255)
Acquisition- and divestiture-related costs
attributable to noncontrolling interests
(36)
–
Decrease (increase) in net income
$686
$1,147
Financial Outlook
Merck narrowed and raised its full-year 2019 revenue range to be
between $45.2 billion and $46.2 billion, including a negative
impact from foreign exchange of slightly more than 1% at mid-July
exchange rates.
Merck narrowed and reduced its full-year 2019 GAAP EPS range to
be between $3.78 and $3.88. The reduction in the GAAP EPS range
primarily reflects the inclusion of an approximately $1.1 billion
charge related to the acquisition of Peloton. Merck narrowed and
raised its full-year 2019 non-GAAP EPS range to be between $4.84
and $4.94, including a slightly negative impact from foreign
exchange at mid-July exchange rates. The non-GAAP range excludes
acquisition- and divestiture-related costs, costs related to
restructuring programs, a net benefit from the settlement of
certain federal income tax matters, the charge for the acquisition
of Peloton and certain other items.
The following table summarizes the company’s full year 2019
financial guidance.
GAAP
Non-GAAP2
Revenue
$45.2 to $46.2 billion
$45.2 to $46.2 billion*
Operating expenses
Higher than 2018 by a low-single
digit rate
Higher than 2018 by a mid-single
digit rate
Effective tax rate
16.0% to 17.0%
18.5% to 19.5%
EPS**
$3.78 to $3.88
$4.84 to $4.94
*The company does not have any
non-GAAP adjustments to revenue.
**EPS guidance for 2019 assumes a
share count (assuming dilution) of approximately 2.6 billion
shares.
A reconciliation of anticipated 2019 GAAP EPS to non-GAAP EPS
and the items excluded from non-GAAP EPS are provided in the table
below.
$ in millions, except EPS amounts
Full-Year 2019
GAAP EPS
$3.78 to $3.88
Difference5
1.06
Non-GAAP EPS that excludes items listed
below2
$4.84 to $4.94
Acquisition- and divestiture-related
costs4
$2,100
Restructuring costs
500
Charge for the acquisition of Peloton
1,100
Net decrease (increase) in income before
taxes
3,700
Income tax (benefit) expense6
(950)
Decrease (increase) in net income
$2,750
The expected full-year GAAP effective tax rate of 16.0% to 17.0%
reflects a net favorable impact of approximately 2.5 percentage
points from the above items.
Earnings Conference Call
Investors, journalists and the general public may access a live
audio webcast of the call today at 8:00 a.m. EDT on Merck’s website
at
http://investors.merck.com/events-and-presentations/default.aspx.
Institutional investors and analysts can participate in the call by
dialing (706) 758-9927 or (877) 381-5782 and using ID code number
4263838. Members of the media are invited to monitor the call by
dialing (706) 758-9928 or (800) 399-7917 and using ID code number
4263838. Journalists who wish to ask questions are requested to
contact a member of Merck’s Media Relations team at the conclusion
of the call.
About Merck
For more than a century, Merck, a leading global
biopharmaceutical company known as MSD outside of the United States
and Canada, has been inventing for life, bringing forward medicines
and vaccines for many of the world’s most challenging diseases.
Through our prescription medicines, vaccines, biologic therapies
and animal health products, we work with customers and operate in
more than 140 countries to deliver innovative health solutions. We
also demonstrate our commitment to increasing access to health care
through far-reaching policies, programs and partnerships. Today,
Merck continues to be at the forefront of research to advance the
prevention and treatment of diseases that threaten people and
communities around the world - including cancer, cardio-metabolic
diseases, emerging animal diseases, Alzheimer’s disease and
infectious diseases including HIV and Ebola. For more information,
visit www.merck.com and connect with us on Twitter, Facebook,
Instagram, YouTube and LinkedIn.
Forward-Looking Statement of Merck & Co., Inc.,
Kenilworth, N.J., USA
This news release of Merck & Co., Inc., Kenilworth, N.J.,
USA (the “company”) includes “forward-looking statements” within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. These statements are
based upon the current beliefs and expectations of the company’s
management and are subject to significant risks and uncertainties.
There can be no guarantees with respect to pipeline products that
the products will receive the necessary regulatory approvals or
that they will prove to be commercially successful. If underlying
assumptions prove inaccurate or risks or uncertainties materialize,
actual results may differ materially from those set forth in the
forward-looking statements.
Risks and uncertainties include but are not limited to, general
industry conditions and competition; general economic factors,
including interest rate and currency exchange rate fluctuations;
the impact of pharmaceutical industry regulation and health care
legislation in the United States and internationally; global trends
toward health care cost containment; technological advances, new
products and patents attained by competitors; challenges inherent
in new product development, including obtaining regulatory
approval; the company’s ability to accurately predict future market
conditions; manufacturing difficulties or delays; financial
instability of international economies and sovereign risk;
dependence on the effectiveness of the company’s patents and other
protections for innovative products; and the exposure to
litigation, including patent litigation, and/or regulatory
actions.
The company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events or otherwise. Additional factors that could cause
results to differ materially from those described in the
forward-looking statements can be found in the company’s 2018
Annual Report on Form 10-K and the company’s other filings with the
Securities and Exchange Commission (SEC) available at the SEC’s
Internet site (www.sec.gov).
_________________________
1
Net income attributable to Merck &
Co., Inc.
2
Merck is providing certain 2019 and 2018
non-GAAP information that excludes certain items because of the
nature of these items and the impact they have on the analysis of
underlying business performance and trends. Management believes
that providing this information enhances investors’ understanding
of the company’s results and permits investors to understand how
management assesses performance. Management uses these measures
internally for planning and forecasting purposes and to measure the
performance of the company along with other metrics. Senior
management’s annual compensation is derived in part using non-GAAP
income and non-GAAP EPS. This information should be considered in
addition to, but not as a substitute for or superior to,
information prepared in accordance with GAAP. For a description of
the items, see Table 2a attached to this release.
3
Animal Health segment profits are
comprised of segment sales, less all cost of sales, as well as
selling, general and administrative expenses and research and
development costs directly incurred by the segment. For internal
management reporting, Merck does not allocate general and
administrative expenses not directly incurred by the segment, nor
the cost of financing these activities. Separate divisions maintain
responsibility for monitoring and managing these costs, including
depreciation related to fixed assets utilized by these divisions
and, therefore, they are not included in segment profits.
4
Includes expenses for the amortization of
intangible assets and purchase accounting adjustments to
inventories recognized as a result of acquisitions, intangible
asset impairment charges, and expense or income related to changes
in the estimated fair value measurement of liabilities for
contingent consideration. Also includes integration, transaction
and certain other costs related to business acquisitions and
divestitures.
5
Represents the difference between
calculated GAAP EPS and calculated non-GAAP EPS, which may be
different than the amount calculated by dividing the impact of the
excluded items by the weighted-average shares for the period.
6
Includes the estimated tax impact on the
reconciling items. In addition, includes a $360 million net tax
benefit related to the settlement of certain federal income tax
matters and a $67 million tax charge related to the finalization of
treasury regulations for the Tax Cuts and Jobs Act of 2017.
MERCK & CO., INC. CONSOLIDATED STATEMENT OF
INCOME - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE
FIGURES) (UNAUDITED) Table 1 GAAP
% Change GAAP % Change 2Q19
2Q18 June YTD2019 June YTD2018
Sales
$
11,760
$
10,465
12%
$
22,575
$
20,502
10%
Costs, Expenses and Other
Cost of sales (1)
3,401
3,417
--
6,453
6,601
-2%
Selling, general and administrative (1)
2,712
2,508
8%
5,138
5,016
2%
Research and development (1)(2)
2,189
2,274
-4%
4,119
5,470
-25%
Restructuring costs (3)
59
228
-74%
212
323
-34%
Other (income) expense, net (1)
140
(48
)
*
327
(340
)
*
Income Before Taxes
3,259
2,086
56%
6,326
3,432
84%
Taxes on Income (1)
615
370
820
975
Net Income
2,644
1,716
54%
5,506
2,457
*
Less: Net (Loss) Income Attributable to Noncontrolling Interests
(1)
(26
)
9
(79
)
14
Net Income Attributable to Merck & Co., Inc.
$
2,670
$
1,707
56%
$
5,585
$
2,443
*
Earnings per Common Share Assuming Dilution
$
1.03
$
0.63
63%
$
2.15
$
0.90
*
Average Shares Outstanding Assuming Dilution
2,588
2,696
2,596
2,702
Tax Rate (4)
18.9
%
17.8
%
13.0
%
28.4
%
* 100% or greater (1) Amounts include the impact of
acquisition and divestiture-related costs, restructuring costs and
certain other items. See accompanying tables for details.
(2) Research and development expenses in the second quarter and
first six months of 2018 include a $344 million charge for the
acquisition of Viralytics Limited. Research and development
expenses in the first six months of 2018 also include a $1.4
billion charge related to the formation of a collaboration with
Eisai Co., Ltd. (Eisai). (3) Represents separation and other
related costs associated with restructuring activities under the
company's formal restructuring programs. (4) The effective
income tax rate for the first six months of 2019 reflects a net tax
benefit of $360 million related to the settlement of certain
federal income tax matters. The effective income tax rate for the
first six months of 2018 reflects the unfavorable impact of a $1.4
billion pretax charge related to the formation of a collaboration
with Eisai for which no tax benefit was recognized.
MERCK &
CO., INC. GAAP TO NON-GAAP RECONCILIATION SECOND
QUARTER 2019 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE
FIGURES) (UNAUDITED) Table 2a GAAP
Acquisition andDivestiture-Related Costs (1)
RestructuringCosts (2) Certain OtherItems
AdjustmentSubtotal Non-GAAP Cost of
sales
$
3,401
447
65
512
$
2,889
Selling, general and administrative
2,712
61
32
93
2,619
Research and development
2,189
4
3
7
2,182
Restructuring costs
59
59
59
-
Other (income) expense, net
140
148
48
196
(56
)
Income Before Taxes
3,259
(660
)
(159
)
(48
)
(867
)
4,126
Income Tax Provision (Benefit)
615
(109
)
(3)
(25
)
(3)
(11
)
(3)
(145
)
760
Net Income
2,644
(551
)
(134
)
(37
)
(722
)
3,366
Less: Net (Loss) Income Attributable to Noncontrolling Interests
(26
)
(36
)
(36
)
10
Net Income Attributable to Merck & Co., Inc.
2,670
(515
)
(134
)
(37
)
(686
)
3,356
Earnings per Common Share Assuming Dilution
$
1.03
(0.20
)
(0.05
)
(0.02
)
(0.27
)
$
1.30
Tax Rate
18.9
%
18.4
%
Only the line items that are affected by non-GAAP adjustments are
shown. Merck is providing certain non-GAAP information that
excludes certain items because of the nature of these items and the
impact they have on the analysis of underlying business performance
and trends. Management believes that providing this information
enhances investors’ understanding of the company’s results as it
permits investors to understand how management assesses
performance. Management uses these measures internally for planning
and forecasting purposes and to measure the performance of the
company along with other metrics. Senior management’s annual
compensation is derived in part using non-GAAP income and non-GAAP
EPS. This information should be considered in addition to, but not
as a substitute for or superior to, information prepared in
accordance with GAAP. (1) Amount included in cost of sales
primarily reflects $373 million of expenses for the amortization of
intangible assets recognized as a result of business acquisitions,
as well as $69 million of intangible asset impairment charges.
Amount included in selling, general and administrative expenses
primarily reflects integration, transaction and certain other costs
related to business acquisitions and divestitures, including costs
related to the acquisition of Antelliq Corporation. Amount included
in other (income) expense, net primarily reflects goodwill
impairment charges related to certain businesses in the Healthcare
Services segment and expenses related to an increase in the
estimated fair value of liabilities for contingent consideration
related to the termination of the Sanofi-Pasteur MSD joint venture.
(2) Amounts primarily include employee separation costs and
accelerated depreciation associated with facilities to be closed or
divested related to activities under the company's formal
restructuring programs. (3) Represents the estimated tax
impact on the reconciling items based on applying the statutory
rate of the originating territory of the non-GAAP adjustments.
MERCK & CO., INC. GAAP TO NON-GAAP RECONCILIATION
SIX MONTHS ENDED JUNE 30, 2019 (AMOUNTS IN MILLIONS,
EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2b
GAAP Acquisition andDivestiture-Related Costs
(1) RestructuringCosts (2) Certain OtherItems
AdjustmentSubtotal Non-GAAP Cost of
sales
$
6,453
860
99
959
$
5,494
Selling, general and administrative
5,138
60
32
92
5,046
Research and development
4,119
(27
)
3
(24
)
4,143
Restructuring costs
212
212
212
-
Other (income) expense, net
327
315
48
363
(36
)
Income Before Taxes
6,326
(1,208
)
(346
)
(48
)
(1,602
)
7,928
Income Tax Provision (Benefit)
820
(207
)
(3)
(56
)
(3)
(304
)
(4)
(567
)
1,387
Net Income
5,506
(1,001
)
(290
)
256
(1,035
)
6,541
Less: Net (Loss) Income Attributable to Noncontrolling Interests
(79
)
(89
)
(89
)
10
Net Income Attributable to Merck & Co., Inc.
5,585
(912
)
(290
)
256
(946
)
6,531
Earnings per Common Share Assuming Dilution
$
2.15
(0.36
)
(0.11
)
0.10
(0.37
)
$
2.52
Tax Rate
13.0
%
17.5
%
Only the line items that are affected by non-GAAP
adjustments are shown. Merck is providing certain non-GAAP
information that excludes certain items because of the nature of
these items and the impact they have on the analysis of underlying
business performance and trends. Management believes that providing
this information enhances investors’ understanding of the company’s
results as it permits investors to understand how management
assesses performance. Management uses these measures internally for
planning and forecasting purposes and to measure the performance of
the company along with other metrics. Senior management’s annual
compensation is derived in part using non-GAAP income and non-GAAP
EPS. This information should be considered in addition to, but not
as a substitute for or superior to, information prepared in
accordance with GAAP. (1) Amount included in cost of sales
primarily reflects $771 million of expenses for the amortization of
intangible assets recognized as a result of business acquisitions,
as well as $81 million of intangible asset impairment charges.
Amount included in selling, general and administrative expenses
primarily reflects integration, transaction and certain other costs
related to business acquisitions and divestitures, including costs
related to the acquisition of Antelliq Corporation. Amount included
in research and development expenses primarily reflects a reduction
in expenses related to a decrease in the estimated fair value
measurement of liabilities for contingent consideration. Amount
included in other (income) expense, net primarily reflects goodwill
impairment charges related to certain businesses in the Healthcare
Services segment and expenses related to an increase in the
estimated fair value measurement of liabilities for contingent
consideration, partially offset by royalty income related to the
termination of the Sanofi-Pasteur MSD joint venture. (2)
Amounts primarily include employee separation costs and accelerated
depreciation associated with facilities to be closed or divested
related to activities under the company's formal restructuring
programs. (3) Represents the estimated tax impact on the
reconciling items based on applying the statutory rate of the
originating territory of the non-GAAP adjustments. (4)
Represents the estimated tax impact on the reconciling items based
on applying the statutory rate of the originating territory of the
non-GAAP adjustments. Also includes a $360 million net tax benefit
related to the settlement of certain federal income tax matters and
a $67 million tax charge related to the finalization of treasury
regulations associated with the 2017 enactment of U.S. tax
legislation.
MERCK & CO., INC. FRANCHISE / KEY
PRODUCT SALES (AMOUNTS IN MILLIONS) (UNAUDITED)
Table 3
2019
2018
2Q
June YTD
1Q
2Q
June YTD
1Q
2Q
June YTD
3Q
4Q
Full Year
Nom %
Ex-Exch %
Nom %
Ex-Exch %
TOTAL SALES (1)
$
10,816
$
11,760
$
22,575
$
10,037
$
10,465
$
20,502
$
10,794
$
10,998
$
42,294
12
15
10
13
PHARMACEUTICAL
9,663
10,460
20,123
8,919
9,282
18,201
9,658
9,830
37,689
13
17
11
15
Oncology Keytruda
2,269
2,634
4,903
1,464
1,667
3,131
1,889
2,151
7,171
58
63
57
62
Emend
117
121
237
125
148
273
123
126
522
-18
-15
-13
-10
Alliance Revenue – Lynparza (2)
79
111
190
33
44
76
49
62
187
154
159
149
155
Alliance Revenue – Lenvima (2)
74
97
171
35
35
43
71
149
177
182
* *
Vaccines (3) Gardasil / Gardasil 9
838
886
1,724
660
608
1,269
1,048
835
3,151
46
50
36
40
ProQuad / M-M-R II / Varivax
496
675
1,171
392
426
818
525
455
1,798
58
61
43
46
RotaTeq
211
172
383
193
156
349
191
188
728
10
13
10
12
Pneumovax 23
185
170
355
179
193
372
214
322
907
-12
-10
-4
-3
Vaqta
47
58
105
37
65
101
66
72
239
-10
-8
4
6
Hospital Acute Care Bridion
255
278
533
204
240
444
217
256
917
16
20
20
25
Noxafil
190
193
383
176
188
363
188
191
742
3
7
5
10
Cubicin
88
67
155
98
94
192
95
80
367
-29
-25
-19
-16
Invanz
72
78
150
151
149
300
137
59
496
-48
-44
-50
-46
Primaxin
59
71
130
72
68
140
72
53
265
5
12
-7
-2
Cancidas
61
67
129
91
87
178
79
69
326
-22
-17
-28
-23
Immunology Simponi
208
214
422
231
233
464
210
220
893
-8
-1
-9
-2
Remicade
123
98
221
167
157
324
135
123
582
-37
-32
-32
-26
Neuroscience Belsomra
67
76
143
54
71
125
66
69
260
8
9
15
16
Virology Isentress / Isentress HD
255
247
502
281
305
586
275
280
1,140
-19
-13
-14
-8
Zepatier
114
108
221
131
113
243
104
108
455
-5
0
-9
-5
Cardiovascular Zetia
140
156
296
305
226
531
165
162
857
-31
-28
-44
-42
Vytorin
97
76
174
167
155
322
92
83
497
-51
-47
-46
-42
Atozet
94
92
186
73
101
174
84
89
347
-9
-3
7
14
Adempas
90
104
194
68
75
143
94
91
329
39
43
36
40
Diabetes (4) Januvia
824
908
1,732
880
949
1,829
927
930
3,686
-4
-2
-5
-3
Janumet
530
533
1,063
544
585
1,129
563
535
2,228
-9
-5
-6
-1
Women's Health NuvaRing
219
240
459
216
236
452
234
216
902
2
3
2
3
Implanon / Nexplanon
199
183
382
174
174
348
186
169
703
6
8
10
12
Diversified Brands Singulair
191
160
352
175
185
360
161
187
708
-13
-8
-2
3
Cozaar / Hyzaar
103
109
213
120
125
245
103
105
453
-13
-7
-13
-8
Nasonex
96
72
168
122
81
203
71
102
376
-11
-6
-17
-13
Arcoxia
75
75
149
83
84
166
83
86
335
-11
-5
-10
-4
Follistim AQ
57
63
121
67
70
138
60
70
268
-10
-6
-12
-9
Other Pharmaceutical (5)
1,140
1,268
2,406
1,186
1,189
2,378
1,109
1,215
4,705
7
11
1
6
ANIMAL HEALTH
1,025
1,124
2,149
1,065
1,090
2,155
1,021
1,036
4,212
3
9
0
6
Livestock
611
671
1,282
652
633
1,286
660
684
2,630
6
13
0
7
Companion Animals
414
453
867
413
457
869
361
352
1,582
-1
4
0
5
Other Revenues (6)
128
176
303
53
93
146
115
132
393
88
-62
107
-82
* 200% or greater Sum of quarterly amounts may not
equal year-to-date amounts due to rounding. (1) Only select
products are shown. (2) Alliance Revenue represents Merck’s share
of profits, which are product sales net of cost of sales and
commercialization costs. (3) Total Vaccines sales were $1,887
million and $2,037 million in the first and second quarters of
2019, respectively, and $1,561 million, $1,533 million, $2,159
million and $2,008 million for the first, second, third and fourth
quarters of 2018, respectively. (4) Total Diabetes sales were
$1,402 million and $1,480 million in the first and second quarters
of 2019, respectively, and $1,433 million, $1,571 million, $1,506
million and $1,485 million for the first, second, third and fourth
quarters of 2018, respectively. (5) Includes Pharmaceutical
products not individually shown above. (6) Other Revenues are
comprised primarily of Healthcare Services segment revenues,
third-party manufacturing sales and miscellaneous corporate
revenues, including revenue hedging activities.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190730005360/en/
Media: Jessica Fine (908) 740-1707
Pamela Eisele (267) 305-3558
Investors: Teri Loxam (908) 740-1986
Michael DeCarbo (908) 740-1807
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