- Third-Quarter 2019 Worldwide Sales Were $12.4 Billion, an
Increase of 15%; Sales Increased 16% Excluding Impact from Foreign
Exchange; Growth Driven by Oncology and Human Health Vaccines
- KEYTRUDA Sales Grew 62% to $3.1 Billion; Excluding the Impact
of Foreign Exchange, Sales Grew 64%
- Human Health Vaccines Sales Grew 17% to $2.5 Billion; Excluding
the Impact of Foreign Exchange, Sales Grew 18%
- Third-Quarter 2019 GAAP EPS was $0.74, an Increase of 1%;
Third-Quarter Non-GAAP EPS was $1.51, an Increase of 27%
- Company Narrows and Raises 2019 Full-Year Revenue Range to be
Between $46.5 Billion and $47.0 Billion, Including a Negative
Impact from Foreign Exchange of Approximately 2%
- Company Narrows and Reduces 2019 Full-Year GAAP EPS Range to be
Between $3.75 and $3.80; Narrows and Raises 2019 Full-Year Non-GAAP
EPS Range to be Between $5.12 and $5.17, Including a Negative
Impact from Foreign Exchange of Approximately 1%
Merck (NYSE: MRK), known as MSD outside the United States and
Canada, today announced financial results for the third quarter of
2019.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20191029005380/en/
“We achieved another quarter of strong revenue and earnings
growth as we continue to realize the benefits of our sustained
investment in research and development and our focus on commercial
execution,” said Kenneth C. Frazier, chairman and chief executive
officer, Merck. “We are confident that the investments we are
making now will allow us to convert cutting-edge science into
medicines and vaccines of great benefit to patients and value to
shareholders.”
Financial Summary
$ in millions, except EPS amounts
Third Quarter
2019
2018
Change
Change Ex- Exchange
Sales
$12,397
$10,794
15%
16%
GAAP net income1
1,901
1,950
-3%
-3%
Non-GAAP net income that excludes certain
items1,2*
3,873
3,178
22%
22%
GAAP EPS
0.74
0.73
1%
1%
Non-GAAP EPS that excludes certain
items2*
1.51
1.19
27%
27%
*Refer to table on page 9
GAAP (generally accepted accounting principles) earnings per
share assuming dilution (EPS) were $0.74 for the third quarter of
2019. Non-GAAP EPS of $1.51 for the third quarter of 2019 excludes
a $982 million charge for the acquisition of Peloton Therapeutics,
Inc. (Peloton), a $612 million pretax intangible asset impairment
charge, other 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 the following regulatory milestones for
KEYTRUDA:
- Approval in China as monotherapy for the first-line treatment
of patients with locally advanced or metastatic non-small cell lung
cancer (NSCLC) whose tumors express PD-L1 based on overall survival
results from the KEYNOTE-042 trial. KEYTRUDA is now the first
anti-PD-1 therapy approved in China as both monotherapy and in
combination with chemotherapy for the first-line treatment of
NSCLC;
- Approval in Europe in combination with axitinib for the
first-line treatment of advanced renal cell carcinoma (RCC) across
all International Metastatic RCC Database Consortium (IMDC) risk
groups based on overall survival results from the KEYNOTE-426
trial;
- Approval in the United States by the Food and Drug
Administration (FDA) as monotherapy for the treatment of patients
with recurrent locally advanced or metastatic squamous cell
carcinoma of the esophagus whose tumors express PD-L1 (Combined
Positive Score [CPS] > 10) with
disease progression after one or more prior lines of therapy based
on the results from the KEYNOTE-181 and KEYNOTE-180 trials;
- Adoption of a positive opinion by the Committee for Medicinal
Products for Human Use (CHMP) of the European Medicines Agency
(EMA) for two regimens of KEYTRUDA, as monotherapy or in
combination with platinum and 5-fluorouracil (5-FU) chemotherapy,
for the first-line treatment of metastatic or unresectable
recurrent head and neck squamous cell carcinoma (HNSCC) in adults
whose tumors express PD-L1 with a CPS ≥1 based on data from the
KEYNOTE-048 trial; and
- Filing acceptance by the FDA for a supplemental Biologics
License Application (sBLA) seeking use of KEYTRUDA for the
treatment of patients with recurrent and/or metastatic cutaneous
squamous cell carcinoma (cSCC) that is not curable by surgery or
radiation. The FDA has set a PDUFA date of June 29, 2020.
- Merck presented results from the pivotal neoadjuvant/adjuvant
Phase 3 KEYNOTE-522 trial in patients with early-stage
triple-negative breast cancer (TNBC), the first randomized trial of
an anti-PD-1 therapy in this setting, at the 2019 European Society
for Medical Oncology (ESMO) Congress. Interim results from the
neoadjuvant phase showed the combination of KEYTRUDA plus
chemotherapy resulted in a statistically significant increase in
pathological complete response versus chemotherapy in patients with
early-stage TNBC.
- Merck presented first-time results of a pooled analysis of
three randomized KEYNOTE studies (KEYNOTE-189, KEYNOTE-407 and
KEYNOTE-021 [Cohort G]) evaluating KEYTRUDA in combination with
chemotherapy in advanced NSCLC in which the combination regimen
demonstrated an improvement in overall survival among newly
diagnosed patients whose tumors do not express PD-L1. The data were
presented at the IASLC 2019 World Conference on Lung Cancer.
Lynparza
- Merck and AstraZeneca presented results from the Phase 3
PROfound trial in patients with metastatic castration-resistant
prostate cancer (mCRPC) who have a mutation in their homologous
recombination repair (HRR) genes and whose disease has progressed
on prior treatment with new hormonal agent treatments at the 2019
ESMO Congress. In this study, Lynparza improved radiographic
progression-free survival versus standard of care in BRCA1/2 or
ATM-mutated tumors as well as reduced the risk of disease
progression or death in tumors with mutations in other genes
associated with HRR.
- Merck and AstraZeneca also presented results from the Phase 3
PAOLA-1 trial at the 2019 ESMO Congress, in which Lynparza added to
bevacizumab reduced the risk of disease progression or death (41%)
in the first-line maintenance setting for patients with advanced
ovarian cancer who had a complete or partial response to
platinum-based chemotherapy and bevacizumab.
- Merck and AstraZeneca received filing submission acceptances
from the FDA and EMA for the use of Lynparza in BRCAm pancreatic
cancer based on results from the Phase 3 POLO trial. A decision by
the FDA is expected in the fourth quarter of 2019 and from the EMA
in the second half of 2020.
Lenvima
- Merck and Eisai announced accelerated FDA approval of the
combination of KEYTRUDA and Lenvima for patients with certain types
of endometrial carcinoma based on data from the KEYNOTE-146/Study
111, marking the first approval of the combination and the first
time an anti-PD-1 therapy is approved in combination with a kinase
inhibitor for advanced endometrial carcinoma in the United States.
Approval was granted under the FDA’s Real-Time Oncology Review
pilot program as well as under a new FDA-initiated program in which
the FDA partnered with the Australian and Canadian regulatory
bodies to review the application, allowing for simultaneous
decisions in all three countries.
Other Pipeline
Highlights
- Merck announced FDA approval expanding the use of both PIFELTRO
(doravirine), in combination with other antiretroviral agents, and
DELSTRIGO (doravirine/lamivudine/tenofovir disoproxil fumarate) for
the treatment of adult patients with HIV-1 infection who are
virologically suppressed (HIV-1 RNA less than 50 copies per mL) on
a stable antiretroviral regimen with no history of treatment
failure.
- Merck announced FDA acceptance of a New Drug Application (NDA)
for DIFICID (fidaxomicin) for oral suspension and a supplemental
NDA (sNDA) for use of DIFICID tablets and oral suspension for the
treatment of Clostridium difficile infections in children aged six
months or older. The FDA has set a PDUFA date of Jan. 24, 2020 for
both applications.
- Merck announced the pivotal Phase 3 RESTORE-IMI 2 trial
evaluating RECARBRIO (imipenem, cilastatin and relebactam) for use
in adults with hospital-acquired bacterial pneumonia and
ventilator-associated bacterial pneumonia (HABP/VABP) met its
primary endpoint.
- Merck announced that the EMA’s CHMP adopted a positive opinion
recommending a conditional marketing authorization for the
company’s investigational V920 vaccine, brand name ERVEBO
(rVSVΔG-ZEBOV-GP, live), for protection against Ebola Virus Disease
caused by Zaire Ebola virus, as well as FDA acceptance and priority
review for its Biologics License Application (BLA) for V920. The
FDA has set a PDUFA date of March 14, 2020.
Third-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
Third Quarter
2019
2018
Change
Change Ex- Exchange
Total Sales
$12,397
$10,794
15%
16%
Pharmaceutical
11,095
9,658
15%
16%
KEYTRUDA
3,070
1,889
62%
64%
GARDASIL / GARDASIL 9
1,320
1,048
26%
27%
JANUVIA / JANUMET
1,311
1,490
-12%
-11%
PROQUAD, M-M-R II and
VARIVAX
623
525
19%
19%
BRIDION
284
217
31%
32%
ISENTRESS / ISENTRESS HD
250
275
-9%
-6%
NUVARING
241
234
3%
4%
PNEUMOVAX 23
237
214
11%
11%
SIMPONI
203
210
-3%
1%
IMPLANON / NEXPLANON
199
186
7%
8%
Animal Health
1,122
1,021
10%
12%
Livestock
726
660
10%
12%
Companion Animals
396
361
10%
12%
Other Revenues
180
115
59%
-18%
Pharmaceutical Revenue
Third-quarter pharmaceutical sales were $11.1 billion, an
increase of 15% compared with the third quarter of 2018; excluding
the unfavorable effect of foreign exchange, sales grew 16% in the
third 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 as well as
lower sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and
metformin HCI). International pharmaceutical sales represented 54%
of total sales in the quarter. Performance in international markets
was led by China, which had pharmaceutical sales of $898 million
representing growth of 84% compared with the third quarter of 2018,
driven by vaccines, primarily GARDASIL [Human Papillomavirus
Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and
GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant),
and oncology. Excluding the unfavorable effect of foreign exchange,
pharmaceutical sales in China grew by 90%.
Growth in oncology was largely driven by a $1.2 billion increase
in sales for KEYTRUDA to $3.1 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 and
GARDASIL 9, vaccines to prevent certain cancers and other diseases
caused by HPV, primarily due to higher demand in Asia Pacific,
particularly in China. Also contributing to sales growth was higher
demand in Europe, driven primarily by increased vaccination rates
for both boys and girls, as well as higher pricing and demand in
the United States, partially offset by public sector buying
patterns.
In October 2019, the company borrowed doses of GARDASIL 9 from
the U.S. Centers for Disease and Control and Prevention’s (CDC)
Pediatric Vaccine Stockpile, which will reduce GARDASIL 9 sales in
the fourth quarter of 2019 by approximately $120 million. These
doses will be allocated to support routine vaccination in the
United States and will allow the company to manufacture doses for
other parts of the world, including regions where some of the most
vulnerable populations live.
Growth in pediatric vaccines was driven by 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 and pricing in the
United States and higher demand in Europe and Latin America.
Performance in hospital acute care reflects higher demand
globally, particularly 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 prophylaxis (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
INVANZ (ertapenem sodium), ZETIA (ezetimibe) and VYTORIN
(ezetimibe/simvastatin), CUBICIN (daptomycin) and REMICADE
(infliximab). In addition, the decline in sales of JANUVIA and
JANUMET 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 third quarter
of 2019, an increase of 10% compared with the third quarter of
2018. Excluding the unfavorable effect from foreign exchange,
Animal Health sales grew 12%. Growth in the third quarter was
primarily driven by livestock, due to products acquired in the
Antelliq acquisition, along with growth from companion animal
products, driven largely by higher sales of the BRAVECTO
(fluralaner) line of products for parasitic control.
Animal Health segment profits were $423 million in the third
quarter of 2019, an increase of 4% compared with $409 million in
the third quarter of 2018.3
Third-Quarter Expense, EPS and Related Information
The tables below present selected expense information.
$ in millions
Third-Quarter 2019
GAAP
Acquisition- and Divestiture-
Related Costs4
Restructuring Costs
Certain Other Items
Non-GAAP2
Cost of sales
$3,990
$941
$62
$−
$2,987
Selling, general and administrative
2,589
22
1
−
2,566
Research and development
3,204
6
1
982
2,215
Restructuring costs
232
−
232
−
−
Other (income) expense, net
35
6
−
−
29
Third-Quarter 2018
Cost of sales
$3,619
$680
$2
$420
$2,517
Selling, general and administrative
2,443
2
−
−
2,441
Research and development
2,068
5
(4)
−
2,067
Restructuring costs
171
–
171
−
−
Other (income) expense, net
(172)
(10)
−
−
(162)
GAAP Expense, EPS and Related Information
Gross margin was 67.8% for the third quarter of 2019 compared to
66.5% for the third quarter of 2018. The increase in gross margin
for the third quarter of 2019 reflects the favorable impacts of a
charge in 2018 related to the termination of a collaboration
agreement with Samsung Bioepis Co., Ltd. and product mix, partially
offset by higher acquisition- and divestiture-related costs,
including the impact of a 2019 intangible asset impairment charge,
higher amortization of unfavorable manufacturing variances, higher
amortization of intangible assets related to collaborations, higher
restructuring costs, as well as manufacturing facilities startup
costs.
Selling, general and administrative expenses were $2.6 billion
in the third quarter of 2019, a 6% increase compared to the third
quarter of 2018. The increase primarily reflects higher promotion
and administrative costs primarily in support of strategic brands,
and higher acquisition- and divestiture-related costs, partially
offset by the favorable effects of foreign exchange.
Research and development (R&D) expenses were $3.2 billion in
the third quarter of 2019, an increase of 55% compared with the
third quarter of 2018. The increase was driven primarily by a $982
million charge recorded in the third quarter of 2019 for the
acquisition of Peloton coupled with higher expenses related to
clinical development and increased investment in discovery research
and early drug development.
Other (income) expense, net, was $35 million of expense in the
third quarter of 2019 compared to $172 million of income in the
third quarter of 2018 primarily reflecting lower income from
investments in equity securities and higher net interest
expense.
The effective income tax rate of 18.7% for the third quarter of
2019 includes the unfavorable impact of the charge for the
acquisition of Peloton for which no tax benefit was recognized and
the favorable impact of product mix.
GAAP EPS was $0.74 for the third quarter of 2019 compared with
$0.73 for the third quarter of 2018.
Non-GAAP Expense, EPS and Related Information
The non-GAAP gross margin was 75.9% for the third quarter of
2019 compared to 76.7% for the third quarter of 2018. The decrease
in non-GAAP gross margin primarily reflects higher amortization of
unfavorable manufacturing variances, higher amortization of
intangible assets related to collaborations, as well as
manufacturing facilities startup costs.
Non-GAAP selling, general and administrative expenses were $2.6
billion in the third quarter of 2019, a 5% increase compared to the
third quarter of 2018. The increase reflects higher promotion and
administrative costs primarily in support of strategic brands,
partially offset by the favorable effects of foreign exchange.
Non-GAAP R&D expenses were $2.2 billion in the third quarter
of 2019, a 7% increase compared to the third quarter of 2018. The
increase primarily reflects higher expenses related to clinical
development and increased investment in discovery research and
early drug development.
Non-GAAP other (income) expense, net, was $29 million of expense
in the third quarter of 2019 compared to $162 million of income in
the third quarter of 2018 primarily reflecting lower income from
investments in equity securities and higher net interest
expense.
The non-GAAP effective income tax rate of 15.7% for the third
quarter of 2019 reflects the favorable impact of product mix.
Non-GAAP EPS was $1.51 for the third quarter of 2019 compared
with $1.19 for the third 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
Third Quarter
2019
2018
EPS
GAAP EPS
$0.74
$0.73
Difference5
0.77
0.46
Non-GAAP EPS that excludes items listed
below2
$1.51
$1.19
Net Income
GAAP net income1
$1,901
$1,950
Difference
1,972
1,228
Non-GAAP net income that excludes items
listed below1,2
$3,873
$3,178
Decrease (Increase) in Net Income Due
to Excluded Items:
Acquisition- and divestiture-related
costs4
$975
$677
Restructuring costs
296
169
Charge for the acquisition of Peloton
982
−
Charge related to the termination of a
collaboration agreement with Samsung
−
420
Net decrease (increase) in income before
taxes
2,253
1,266
Estimated income tax (benefit) expense
(281)
(38)
Decrease (increase) in net income
$1,972
$1,228
Financial Outlook
Merck narrowed and raised its full-year 2019 revenue range to be
between $46.5 billion and $47.0 billion, including both the impact
of the GARDASIL 9 stockpile borrowing noted above and a negative
impact from foreign exchange of approximately 2% at mid-October
exchange rates.
Merck reduced its expected full-year GAAP effective tax rate to
approximately 16.5% and its expected full-year non-GAAP effective
tax rate to approximately 17.5%. These reductions are primarily
attributable to favorable product mix.
Merck narrowed and reduced its full-year 2019 GAAP EPS range to
be between $3.75 and $3.80. The change in the GAAP EPS range
primarily reflects the impact of the intangible asset impairment
charge noted above. Merck narrowed and raised its full-year 2019
non-GAAP EPS range to be between $5.12 and $5.17, including a
negative impact from foreign exchange of approximately 1% at
mid-October 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
$46.5 to $47.0 billion
$46.5 to $47.0 billion*
Operating expenses
Higher than 2018 by a low-single
digit rate
Higher than 2018 by a mid-single
digit rate
Effective tax rate
Approximately 16.5%
Approximately 17.5%
EPS**
$3.75 to $3.80
$5.12 to $5.17
*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
$3.75 to $3.80
Difference5
1.37
Non-GAAP EPS that excludes items listed
below2
$5.12 to $5.17
Acquisition- and divestiture-related
costs4
$2,700
Restructuring costs
Charge for the acquisition of Peloton
750
982
Net decrease (increase) in income before
taxes
4,432
Income tax (benefit) expense6
(900)
Decrease (increase) in net income
$3,532
The expected full-year GAAP effective tax rate of 16.5% reflects
a net favorable impact of approximately one percentage point 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
5635157. Members of the media are invited to monitor the call by
dialing (706) 758-9928 or (800) 399-7917 and using ID code number
5635157. 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 3Q19
3Q18 Sep YTD2019 Sep YTD2018
Sales
$
12,397
$
10,794
15%
$
34,972
$
31,296
12%
Costs, Expenses and Other
Cost of sales (1)
3,990
3,619
10%
10,443
10,220
2%
Selling, general and administrative (1)
2,589
2,443
6%
7,726
7,459
4%
Research and development (1)(2)
3,204
2,068
55%
7,324
7,538
-3%
Restructuring costs (3)
232
171
36%
444
494
-10%
Other (income) expense, net (1)
35
(172
)
*
362
(512
)
*
Income Before Taxes
2,347
2,665
-12%
8,673
6,097
42%
Taxes on Income (1)
440
707
1,259
1,682
Net Income
1,907
1,958
-3%
7,414
4,415
68%
Less: Net Income (Loss) Attributable to Noncontrolling Interests
(1)
6
8
(73
)
22
Net Income Attributable to Merck & Co., Inc.
$
1,901
$
1,950
-3%
$
7,487
$
4,393
70%
Earnings per Common Share Assuming Dilution
$
0.74
$
0.73
1%
$
2.89
$
1.63
77%
Average Shares Outstanding Assuming Dilution
2,572
2,678
2,587
2,694
Tax Rate (4)
18.7
%
26.5
%
14.5
%
27.6
%
* 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 for the third quarter and
first nine months of 2019 include a $982 million charge for the
acquisition of Peloton Therapeutics (Peloton). Research and
development expenses in the first nine months of 2018 include a
$344 million charge for the acquisition of Viralytics Limited.
Research and development expenses in the first nine 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 rates for the third quarter and
the first nine months of 2019 include the unfavorable impact of a
charge for the acquisition of Peloton for which no tax benefit was
recognized and the favorable impact of product mix. The effective
income tax rate for the first nine 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 rates for the
third quarter and first nine months of 2018 include the unfavorable
impact of a charge related to the termination of a collaboration
agreement with Samsung for which no tax benefit was recognized. The
effective income tax rate for the first nine months of 2018
reflects the unfavorable impact of a 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 THIRD QUARTER 2019 (AMOUNTS IN
MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table
2a GAAP Acquisition
andDivestiture-RelatedCosts (1) RestructuringCosts (2)
Certain OtherItems (4) AdjustmentSubtotal
Non-GAAP Cost of sales
$
3,990
941
62
1,003
$
2,987
Selling, general and administrative
2,589
22
1
23
2,566
Research and development
3,204
6
1
982
989
2,215
Restructuring costs
232
232
232
-
Other (income) expense, net
35
6
6
29
Income Before Taxes
2,347
(975
)
(296
)
(982
)
(2,253
)
4,600
Income Tax Provision (Benefit)
440
(231
)
(3)
(50
)
(3)
-
(281
)
721
Net Income
1,907
(744
)
(246
)
(982
)
(1,972
)
3,879
Net Income Attributable to Merck & Co., Inc.
1,901
(744
)
(246
)
(982
)
(1,972
)
3,873
Earnings per Common Share Assuming Dilution
$
0.74
(0.29
)
(0.10
)
(0.38
)
(0.77
)
$
1.51
Tax Rate
18.7
%
15.7
%
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 $320 million of expenses for the amortization of
intangible assets recognized as a result of business acquisitions,
as well as $612 million of intangible asset impairment charges
related to SIVEXTRO. Amount included in selling, general and
administrative expenses primarily reflects integration, transaction
and certain other costs related to business acquisitions and
divestitures. (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) Amount included in research and development
represents the charge related to the acquisition of Peloton
Therapeutics.
MERCK & CO., INC. GAAP TO NON-GAAP
RECONCILIATION NINE MONTHS ENDED SEPTEMBER 30, 2019
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED) Table 2b GAAP
Acquisition andDivestiture-RelatedCosts (1)
RestructuringCosts (2) Certain OtherItems (4)
AdjustmentSubtotal Non-GAAP Cost of
sales
$
10,443
1,801
161
1,962
$
8,481
Selling, general and administrative
7,726
82
33
115
7,611
Research and development
7,324
(21
)
4
982
965
6,359
Restructuring costs
444
444
444
-
Other (income) expense, net
362
321
48
369
(7
)
Income Before Taxes
8,673
(2,183
)
(642
)
(1,030
)
(3,855
)
12,528
Income Tax Provision (Benefit)
1,259
(438
)
(3)
(106
)
(3)
(304
)
(5)
(848
)
2,107
Net Income
7,414
(1,745
)
(536
)
(726
)
(3,007
)
10,421
Less: Net (Loss) Income Attributable to Noncontrolling Interests
(73
)
(89
)
(89
)
16
Net Income Attributable to Merck & Co., Inc.
7,487
(1,656
)
(536
)
(726
)
(2,918
)
10,405
Earnings per Common Share Assuming Dilution
$
2.89
(0.64
)
(0.21
)
(0.28
)
(1.13
)
$
4.02
Tax Rate
14.5
%
16.8
%
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 $1.1 billion of expenses for the amortization of
intangible assets recognized as a result of business acquisitions,
as well as $693 million of intangible asset impairment charges,
including $612 million related to SIVEXTRO. 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
and intangible asset 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) Amount included in research and development
represents the charge related to the acquisition of Peloton
Therapeutics. (5) Primarily reflects 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
3Q
Sep YTD
1Q
2Q
3Q
Sep YTD
1Q
2Q
3Q
Sep YTD
4Q
Full Year
Nom %
Ex-Exch %
Nom %
Ex-Exch %
TOTAL SALES (1)
$
10,816
$
11,760
$
12,397
$
34,972
$
10,037
$
10,465
$
10,794
$
31,296
$
10,998
$
42,294
15
16
12
14
PHARMACEUTICAL
9,663
10,460
11,095
31,218
8,919
9,282
9,658
27,859
9,830
37,689
15
16
12
15
Oncology
Keytruda
2,269
2,634
3,070
7,973
1,464
1,667
1,889
5,020
2,151
7,171
62
64
59
63
Emend
117
121
98
336
125
148
123
396
126
522
-20
-19
-15
-13
Alliance Revenue – Lynparza
(2)
79
111
123
313
33
44
49
125
62
187
154
157
151
156
Alliance Revenue – Lenvima
(2)
74
97
109
280
35
43
78
71
149
154
156
*
*
Vaccines (3)
Gardasil / Gardasil 9
838
886
1,320
3,044
660
608
1,048
2,317
835
3,151
26
27
31
34
ProQuad / M-M-R II / Varivax
496
675
623
1,794
392
426
525
1,343
455
1,798
19
19
34
36
Pneumovax 23
185
170
237
592
179
193
214
586
322
907
11
11
1
2
RotaTeq
211
172
180
564
193
156
191
540
188
728
-5
-5
4
6
Vaqta
47
58
62
167
37
65
66
167
72
239
-6
-3
0
3
Hospital Acute Care
Bridion
255
278
284
817
204
240
217
661
256
917
31
32
24
27
Noxafil
190
193
177
560
176
188
188
551
191
742
-6
-4
1
5
Cubicin
88
67
52
207
98
94
95
287
80
367
-45
-44
-28
-25
Primaxin
59
71
77
207
72
68
72
212
53
265
7
10
-2
2
Invanz
72
78
57
206
151
149
137
437
59
496
-58
-57
-53
-50
Cancidas
61
67
62
191
91
87
79
257
69
326
-21
-19
-26
-22
Immunology
Simponi
208
214
203
625
231
233
210
673
220
893
-3
1
-7
-1
Remicade
123
98
101
322
167
157
135
459
123
582
-25
-23
-30
-25
Neuroscience
Belsomra
67
76
80
223
54
71
66
191
69
260
22
19
17
17
Virology
Isentress / Isentress HD
255
247
250
752
281
305
275
860
280
1,140
-9
-6
-13
-7
Zepatier
114
108
83
304
131
113
104
347
108
455
-20
-18
-12
-9
Cardiovascular
Zetia
140
156
147
443
305
226
165
696
162
857
-11
-12
-36
-35
Vytorin
97
76
57
231
167
155
92
414
83
497
-38
-36
-44
-41
Atozet
94
92
97
283
73
101
84
258
89
347
15
19
9
16
Adempas
90
104
107
302
68
75
94
238
91
329
14
15
27
30
Diabetes (4)
Januvia
824
908
807
2,539
880
949
927
2,756
930
3,686
-13
-12
-8
-6
Janumet
530
533
503
1,567
544
585
563
1,693
535
2,228
-11
-9
-7
-4
Women's Health
NuvaRing
219
240
241
700
216
236
234
686
216
902
3
4
2
3
Implanon / Nexplanon
199
183
199
581
174
174
186
535
169
703
7
8
9
10
Diversified Brands
Singulair
191
160
152
503
175
185
161
521
187
708
-6
-5
-3
0
Cozaar / Hyzaar
103
109
116
329
120
125
103
348
105
453
13
16
-6
-1
Nasonex
96
72
58
226
122
81
71
274
102
376
-17
-17
-17
-14
Arcoxia
75
75
72
221
83
84
83
249
86
335
-13
-11
-11
-6
Follistim AQ
57
63
62
182
67
70
60
198
70
268
2
4
-8
-5
Other Pharmaceutical
(5)
1,140
1,268
1,229
3,634
1,186
1,189
1,109
3,486
1,215
4,705
11
12
4
8
ANIMAL HEALTH
1,025
1,124
1,122
3,271
1,065
1,090
1,021
3,176
1,036
4,212
10
12
3
8
Livestock
611
671
726
2,007
652
633
660
1,946
684
2,630
10
12
3
9
Companion Animals
414
453
396
1,264
413
457
361
1,230
352
1,582
10
12
3
7
Other Revenues (6)
128
176
180
483
53
93
115
261
132
393
59
-18
86
-54
* 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, $2,037 million and $2,517 million in the first,
second and third 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, $1,480 million
and $1,360 million in the first, second and third 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/20191029005380/en/
Media: Jennifer Mauer (908) 740-1801
Pamela Eisele (267) 305-3558
Investors: Peter Dannenbaum (908) 740-1037
Michael DeCarbo (908) 740-1807
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