- Fourth-Quarter 2019 Worldwide Sales Were $11.9 Billion, an
Increase of 8%; Excluding the Impact from Foreign Exchange, Sales
Grew 9%
- Fourth-Quarter 2019 GAAP EPS Was $0.92; Fourth-Quarter Non-GAAP
EPS Was $1.16
- Full-Year 2019 Worldwide Sales Were $46.8 Billion, an Increase
of 11%; Excluding the Impact from Foreign Exchange, Sales Grew 13%
- KEYTRUDA 2019 Worldwide Sales Grew 55% to $11.1 Billion;
Excluding the Impact from Foreign Exchange, Sales Grew 58%
- Human Health Vaccines 2019 Worldwide Sales Grew 15% to $8.4
Billion; Excluding the Impact from Foreign Exchange, Sales Grew
17%
- BRIDION 2019 Worldwide Sales Grew 23% to $1.1 Billion;
Excluding the Impact from Foreign Exchange, Sales Grew 26%
- Animal Health 2019 Worldwide Sales Grew 4% to $4.4 Billion;
Excluding the Impact from Foreign Exchange, Sales Grew 9%
- Full-Year 2019 GAAP EPS Was $3.81; Full-Year Non-GAAP EPS Was
$5.19
- 2020 Financial Outlook
- Anticipates Full-Year 2020 Worldwide Sales to Be Between $48.8
Billion and $50.3 Billion, Including a Negative Impact from Foreign
Exchange of Less Than 1%
- Expects Full-Year 2020 GAAP EPS to Be Between $4.57 and $4.72;
Expects Non-GAAP EPS to Be Between $5.62 and $5.77, Including a
Negative Impact from Foreign Exchange of Approximately 1.5%
- In Conjunction with Fourth-Quarter Results, Merck Announces its
Intention to Focus on Key Growth Pillars Through Spinoff of Women’s
Health, Trusted Legacy Brands and Biosimilar Products into
NewCo
Merck (NYSE: MRK), known as MSD outside the United States and
Canada, today announced financial results for the fourth quarter
and full year of 2019.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20200205005307/en/
“As evidenced by our results and our 2020 guidance, Merck had an
extraordinary year and is in a position of operational and
financial strength,” said Kenneth C. Frazier, chairman and chief
executive officer, Merck. “It is this position of strength, born of
our focused execution, that gives us the confidence to spin off our
Women’s Health, trusted Legacy Brands and Biosimilar products into
a new company, which will position us to deliver even greater value
to patients and shareholders.”
Financial Summary
$ in millions, except EPS amounts
Fourth Quarter
Year Ended
2019
2018
Change
Change Ex- Exchange
Dec. 31, 2019
Dec. 31, 2018
Change
Change Ex- Exchange
Sales
$11,868
$10,998
8%
9%
$46,840
$42,294
11%
13%
GAAP net income1
2,357
1,827
29%
29%
9,843
6,220
58%
61%
Non-GAAP net income that excludes certain
items1,2*
2,978
2,745
8%
8%
13,382
11,621
15%
16%
GAAP EPS
0.92
0.69
33%
32%
3.81
2.32
64%
67%
Non-GAAP EPS that excludes certain
items2*
1.16
1.04
12%
12%
5.19
4.34
20%
21%
*Refer to table on page 10.
GAAP (generally accepted accounting principles) earnings per
share assuming dilution (EPS) was $0.92 for the fourth quarter and
$3.81 for the full year of 2019. GAAP EPS for the full year of 2019
reflects a $993 million charge for the acquisition of Peloton
Therapeutics, Inc. (Peloton) and a $612 million pretax intangible
asset impairment charge related to SIVEXTRO (tedizolid phosphate).
Non-GAAP EPS of $1.16 for the fourth quarter and $5.19 for the full
year of 2019 excludes acquisition- and divestiture-related costs,
restructuring costs and certain other items. Non-GAAP EPS for the
full year of 2019 also excludes the charge for the acquisition of
Peloton and the SIVEXTRO impairment charge.
Oncology Pipeline Highlights
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).
- Merck announced the following regulatory milestones for
KEYTRUDA:
- Approval in the United States by the Food and Drug
Administration (FDA) as monotherapy for the treatment of certain
patients with high-risk, non-muscle invasive bladder cancer (NMIBC)
based on the KEYNOTE-057 trial;
- Approval in Japan for three new first-line indications across
advanced renal cell carcinoma (RCC) based on the KEYNOTE-426 trial
and recurrent or distant metastatic head and neck cancer based on
the KEYNOTE-048 trial;
- Approval in China for first-line treatment of metastatic
squamous non-small cell lung cancer (NSCLC) in combination with
chemotherapy based on the KEYNOTE-407 trial; and
- Approval in Europe for two new regimens of KEYTRUDA, as
monotherapy or in combination with 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 Combined Positive Score (CPS) >1 based on the KEYNOTE-048 trial.
- Merck presented results from an exploratory analysis of the
pivotal Phase 3 KEYNOTE-042 trial that showed KEYTRUDA improved
overall survival as monotherapy for the first-line treatment of
metastatic NSCLC regardless of KRAS mutational status.
- Merck announced that the Phase 3 KEYNOTE-604 trial
investigating KEYTRUDA in combination with chemotherapy
significantly improved progression-free survival (PFS) compared to
chemotherapy alone in the first-line treatment of patients with
extensive-stage small cell lung cancer (ES-SCLC) but did not meet
the other dual primary endpoint of overall survival.
- Merck and AstraZeneca announced the following regulatory
milestones for Lynparza:
- Approval in the United States by the FDA as first-line
maintenance treatment of germline BRCA-mutated (BRCAm) metastatic
pancreatic cancer in patients whose disease had not progressed on
at least 16 weeks of a first-line platinum-based chemotherapy
regimen based on the Phase 3 POLO trial;
- Approval in China as a first-line maintenance therapy in BRCAm
advanced ovarian cancer following response to platinum-based
chemotherapy based on the Phase 3 SOLO-1 trial;
- Filing acceptance for priority review by the FDA for a
supplemental New Drug Application (sNDA) seeking approval of
Lynparza in combination with bevacizumab for the maintenance
treatment of women with advanced ovarian cancer whose disease
showed a complete or partial response to first-line treatment with
platinum-based chemotherapy and bevacizumab based on results from
the Phase 3 PAOLA-1 trial. A Prescription Drug User Fee Act (PDUFA)
date is set for the second quarter of 2020; and
- Filing acceptance for priority review by the FDA for a sNDA for
the treatment of patients with metastatic castration-resistant
prostate cancer (mCRPC) and deleterious or suspected deleterious
germline or somatic homologous recombination repair (HRR) gene
mutations, who have progressed following prior treatment with a new
hormonal agent based on results from the Phase 3 PROfound trial. A
PDUFA date is set for the second quarter of 2020.
- Merck and AstraZeneca announced filing acceptance for priority
review by the FDA of a New Drug Application (NDA) for selumetinib,
an oral MEK 1/2 inhibitor, for the treatment of certain pediatric
patients with neurofibromatosis Type 1 (NF1) based on the results
from the National Cancer Institute (NCI) Cancer Therapy Evaluation
Program (CTEP)-sponsored SPRINT Phase 2 Stratum 1 trial. A PDUFA
date is set for the second quarter of 2020.
Other Pipeline
Highlights
- Merck announced conditional approval in Europe as well as U.S.
approval for ERVEBO (Ebola Zaire Vaccine, Live) for the prevention
of disease caused by Zaire ebolavirus in individuals 18 years of
age and older.
- Merck announced FDA approval of DIFICID (fidaxomicin) tablets
and oral suspension for the treatment of Clostridioides
difficile-associated diarrhea (CDAD) in children aged six months
and older.
- Merck announced the adoption of a positive opinion by the
Committee for Medicinal Products for Human Use (CHMP) of the
European Medicines Agency (EMA) for RECARBRIO (imipenem,
cilastatin, and relebactam) for the treatment of infections due to
aerobic gram-negative organisms in adults with limited treatment
options.
- Merck announced filing acceptance for priority review by the
FDA for a sNDA seeking approval of RECARBRIO to treat adult
patients with hospital-acquired bacterial pneumonia and
ventilator-associated bacterial pneumonia (HABP/VABP) caused by
certain susceptible Gram-negative microorganisms. The PDUFA date is
June 4, 2020.
- Merck announced that the Phase 3 VICTORIA study evaluating
vericiguat, a soluble guanylate cyclase (sGC) stimulator being
jointly developed with Bayer AG, met its primary composite endpoint
in reducing the risk of heart failure hospitalization or
cardiovascular death in patients with worsening chronic heart
failure with reduced ejection fraction (HFrEF) compared to placebo
when given in combination with available heart failure
therapies.
Business Development
- Merck acquired ArQule, Inc., diversifying its oncology
portfolio with the expansion into targeted therapies that treat
hematological malignancies with the addition of ARQ 531, a novel,
oral Bruton’s tyrosine kinase (BTK) inhibitor currently in a Phase
2 development, among other candidates. The acquisition closed in
January 2020.
- Merck entered into a strategic oncology collaboration with
Taiho Pharmaceutical Co., Ltd., and Astex Pharmaceuticals focused
on the development of small molecule inhibitors against several
drug targets, including the KRAS oncogene, which are currently
being investigated for the treatment of cancer.
- Merck Animal Health acquired Vaki, a leader in fish farming
monitoring equipment and real-time video monitoring technology to
advance fish health and welfare. The acquisition closed in
December.
Fourth-Quarter and Full-Year Revenue Performance
The following table reflects sales of the company’s top
pharmaceutical products, as well as sales of animal health
products.
$ in millions
Fourth Quarter
Year Ended
2019
2018
Change
Change Ex Exchange
Dec. 31, 2019
Dec. 31, 2018
Change
Change Ex Exchange
Total Sales
$11,868
$10,998
8%
9%
$46,840
$42,294
11%
13%
Pharmaceutical
10,533
9,830
7%
8%
41,751
37,689
11%
14%
KEYTRUDA
3,111
2,151
45%
46%
11,084
7,171
55%
58%
JANUVIA / JANUMET
1,418
1,465
-3%
-2%
5,524
5,914
-7%
-4%
GARDASIL / GARDASIL 9
693
835
-17%
-16%
3,737
3,151
19%
21%
PROQUAD, M-M-R II and VARIVAX
481
455
6%
7%
2,275
1,798
27%
28%
PNEUMOVAX 23
334
322
4%
4%
926
907
2%
3%
BRIDION
313
256
22%
24%
1,131
917
23%
26%
ROTATEQ
227
188
21%
21%
791
728
9%
10%
ISENTRESS / ISENTRESS HD
223
280
-20%
-18%
975
1,140
-15%
-10%
IMPLANON / NEXPLANON
206
169
22%
23%
787
703
12%
14%
SIMPONI
205
220
-7%
-3%
830
893
-7%
-2%
Animal Health
1,122
1,036
8%
10%
4,393
4,212
4%
9%
Livestock
777
684
14%
16%
2,784
2,630
6%
11%
Companion Animals
345
352
-2%
0%
1,609
1,582
2%
5%
Other Revenues
213
132
61%
30%
696
393
77%
-26%
Pharmaceutical Revenue
Fourth-quarter pharmaceutical sales increased 7% to $10.5
billion, excluding the unfavorable effect from foreign exchange,
sales grew 8%. The increase was driven primarily by growth in
oncology, partially offset by the ongoing impacts of the loss of
market exclusivity for several products. Additionally, fourth
quarter 2019 sales were reduced by $120 million due to a previously
disclosed borrowing of doses of GARDASIL 9 (Human Papillomavirus
9-valent Vaccine, Recombinant) from the U.S. Centers for Disease
Control and Prevention’s (CDC) Pediatric Vaccine Stockpile. Sales
in the fourth quarter of 2018 were increased by $125 million due to
the replenishment of previously borrowed doses of GARDASIL 9.
Growth in oncology was largely driven by sales of KEYTRUDA,
which were $3.1 billion for the quarter, reflecting strong momentum
from the NSCLC indications as well as continued uptake in other
indications, including the recently launched RCC and adjuvant
melanoma indications. Additionally, oncology sales reflect alliance
revenue of $132 million related to Lynparza and $124 million
related to Lenvima, representing Merck’s share of profits, which
are product sales net of cost of sales and commercialization
costs.
Performance in vaccines for the fourth quarter reflects the
negative impact of borrowing doses of GARDASIL 9 from the CDC
Pediatric Vaccine Stockpile as discussed above, partially offset by
higher demand in Europe and China, as well as higher demand and
pricing in the United States. Excluding the borrowing-related
activity in both periods, GARDASIL [Human Papillomavirus
Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and
GARDASIL 9 sales grew 15% in the quarter, including a 1% negative
impact from foreign exchange.
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,
including for NOXAFIL (posaconazole), EMEND (aprepitant), ZETIA
(ezetimibe) and VYTORIN (ezetimibe/simvastatin), CUBICIN
(daptomycin) and REMICADE (infliximab). A generic entrant of
NUVARING (etonogestrel/ethinyl estradiol vaginal ring) in the U.S.
also negatively affected sales for the quarter and will continue to
negatively affect sales in the future. 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.
Full-year 2019 pharmaceutical sales increased 11% to $41.8
billion; excluding the unfavorable effect from foreign exchange,
sales grew 14%, primarily reflecting growth in oncology and
vaccines, partially offset by the ongoing effects from the loss of
market exclusivity for several products and continued pricing
pressure in diabetes.
Animal Health Revenue
Animal Health sales totaled $1.1 billion for the fourth quarter
of 2019, an increase of 8% compared with the fourth quarter of
2018; excluding the unfavorable effect from foreign exchange,
Animal Health sales grew 10%. Growth for the quarter was mainly
driven by livestock products due to the Antelliq acquisition.
Worldwide sales for the full year of 2019 were $4.4 billion, an
increase of 4%; excluding the unfavorable effect from foreign
exchange, sales grew 9%. Full-year sales growth was mainly driven
by livestock products due to the Antelliq acquisition, along with
higher sales of companion animal products, primarily the BRAVECTO
(fluralaner) line of products for parasitic control.
Animal Health segment profits were $366 million in the fourth
quarter of 2019, a decrease of 5% compared with $387 million in the
fourth quarter of 2018, primarily driven by unfavorable product mix
and higher investments in selling and product development,
partially offset by higher sales. Segment profits were $1.6 billion
for the full year of 2019, a decrease of 3% compared with $1.7
billion in 2018, primarily driven by the unfavorable effects of
foreign exchange.3
Fourth-Quarter and Full-Year Expense, EPS and Related
Information
The tables below present selected expense information.
$ in millions
Fourth-Quarter 2019
GAAP
Acquisition- and Divestiture-
Related Costs4
Restructuring Costs
Certain Other Items
Non-GAAP2
Cost of sales
$3,669
$325
$90
$−
$3,254
Selling, general and administrative
2,888
44
1
−
2,843
Research and development
2,548
166
−
11
2,371
Restructuring costs
194
−
194
−
−
Other (income) expense, net
(223)
(37)
−
7
(193)
Fourth-Quarter 2018
Cost of sales
$3,289
$525
$10
$3
$2,751
Selling, general and administrative
2,643
6
1
−
2,636
Research and development
2,214
91
1
−
2,122
Restructuring costs
138
−
138
−
−
Other (income) expense, net
110
179
–
(3)
(66)
$ in millions
Year Ended Dec. 31, 2019
GAAP
Acquisition- and Divestiture-
Related Costs4
Restructuring Costs
Certain Other Items
Non-GAAP2
Cost of sales
$14,112
$2,126
$251
$−
$11,735
Selling, general and administrative
10,615
126
34
−
10,455
Research and development
9,872
145
4
993
8,730
Restructuring costs
638
−
638
−
−
Other (income) expense, net
139
284
−
55
(200)
Year Ended Dec. 31, 2018
Cost of sales
$13,509
$2,672
$21
$423
$10,393
Selling, general and administrative
10,102
32
3
−
10,067
Research and development
9,752
98
2
1,744
7,908
Restructuring costs
632
−
632
−
−
Other (income) expense, net
(402)
264
−
(57)
(609)
GAAP Expense, EPS and Related Information
Gross margin was 69.1% for the fourth quarter of 2019 compared
to 70.1% for the fourth quarter of 2018. The decrease reflects
unfavorable manufacturing variances, inventory write-offs, higher
amortization of intangible assets related to collaborations, the
unfavorable effects of pricing pressure and restructuring costs,
partially offset by favorable product mix and lower acquisition-
and divestiture-related costs.
Gross margin was 69.9% for the full year of 2019 compared to
68.1% for the full year of 2018. The increase in gross margin for
the full year of 2019 reflects a charge in 2018 related to the
termination of a collaboration agreement with Samsung Bioepis Co.,
Ltd., favorable product mix and lower acquisition- and
divestiture-related costs, partially offset by unfavorable
manufacturing variances, inventory write-offs, the unfavorable
effects of pricing pressure, higher amortization of intangible
assets related to collaborations and higher restructuring
costs.
Selling, general and administrative expenses were $2.9 billion
in the fourth quarter of 2019, an increase of 9% compared to the
fourth quarter of 2018. Full-year 2019 selling, general and
administrative expenses were $10.6 billion, an increase of 5%
compared to the full year of 2018. The increase in both periods
reflects higher administrative costs, acquisition- and
divestiture-related costs, and promotion costs primarily in support
of strategic brands, partially offset by the favorable effects of
foreign exchange.
Research and development (R&D) expenses were $2.5 billion in
the fourth quarter of 2019, an increase of 15% compared with the
fourth quarter of 2018. R&D expenses were $9.9 billion for the
full year of 2019, a 1% increase compared to the full year of 2018.
The increase in both periods primarily reflects higher expenses
related to clinical development and increased investment in
discovery research and early drug development. In addition, the
increase for the full year of 2019 was driven by a $993 million
charge for the acquisition of Peloton. The increase in R&D
expenses for the full year of 2019 was partially offset by charges
in 2018 including $1.4 billion related to the formation of an
oncology collaboration with Eisai and $344 million related to the
Viralytics Limited acquisition.
Other (income) expense, net, was $223 million of income in the
fourth quarter of 2019 compared to $110 million of expense in the
fourth quarter of 2018 primarily reflecting income from investments
in equity securities in 2019 compared with losses in 2018. In
addition, the fourth quarter of 2018 included goodwill impairment
charges. Other (income) expense, net, was $139 million of expense
for the full year of 2019 compared to $402 million of income for
the full year of 2018 driven by lower income from investments in
equity securities and higher net interest expense.
The effective income tax rates were 15.3% for the fourth quarter
and 14.7% for full year of 2019. The effective income tax rate for
the full year of 2019 reflects a net tax benefit of $364 million
related to the settlement of certain federal income tax matters,
partially offset by the unfavorable impact of the charge for the
acquisition of Peloton for which no tax benefit was recognized.
GAAP EPS was $0.92 for the fourth quarter of 2019 compared with
$0.69 for the fourth quarter of 2018. GAAP EPS was $3.81 for the
full year of 2019 compared with $2.32 for the full year of
2018.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 72.6% for the fourth quarter of 2019
compared to 75.0% for the fourth quarter of 2018. Non-GAAP gross
margin was 74.9% for the full year of 2019 compared to 75.4% for
the full year of 2018. The decrease in both periods reflects
unfavorable manufacturing variances, inventory write-offs, the
unfavorable effects of pricing pressure and higher amortization of
intangible assets related to collaborations, partially offset by
favorable product mix.
Non-GAAP selling, general and administrative expenses were $2.8
billion in the fourth quarter of 2019, an increase of 8% compared
to the fourth quarter of 2018. Full-year 2019 non-GAAP selling,
general and administrative expenses were $10.5 billion, an increase
of 4% compared to the full year of 2018. The increase in both
periods primarily reflects higher administrative costs and higher
promotion costs primarily in support of strategic brands, partially
offset by the favorable effects of foreign exchange.
Non-GAAP R&D expenses were $2.4 billion in the fourth
quarter of 2019, a 12% increase compared to the fourth quarter of
2018. Non-GAAP R&D expenses were $8.7 billion for the full year
of 2019, a 10% increase compared to the full year of 2018. The
increases in both periods primarily reflect higher expenses related
to clinical development and increased investment in discovery
research and early drug development.
Non-GAAP other (income) expense, net, was $193 million of income
in the fourth quarter of 2019 compared to $66 million of income in
the fourth quarter of 2018, primarily reflecting income from
investments in equity securities in 2019 compared with losses in
2018, partially offset by higher net interest expense. Non-GAAP
other (income) expense, net, for the full year of 2019 was $200
million of income compared to $609 million of income for the full
year of 2018, primarily driven by lower income from investments in
equity securities and higher net interest expense.
The non-GAAP effective income tax rates were 16.9% for the
fourth quarter of 2019 and 16.8% for the full year of 2019.
Non-GAAP EPS was $1.16 for the fourth quarter of 2019 compared
with $1.04 for the fourth quarter of 2018. Non-GAAP EPS was $5.19
for the full year of 2019 compared with $4.34 for the full year 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
Fourth Quarter
Year Ended
2019
2018
Dec. 31, 2019
Dec. 31, 2018
EPS
GAAP EPS
$0.92
$0.69
$3.81
$2.32
Difference5
0.24
0.35
1.38
2.02
Non-GAAP EPS that excludes items listed
below2
$1.16
$1.04
$5.19
$4.34
Net Income
GAAP net income1
$2,357
$1,827
$9,843
$6,220
Difference
621
918
3,539
5,401
Non-GAAP net income that excludes items
listed below1,2
$2,978
$2,745
$13,382
$11,621
Decrease (Increase) in Net Income Due
to Excluded Items:
Acquisition- and divestiture-related
costs4
$498
$801
$2,681
$3,066
Restructuring costs
285
150
927
658
Charge for the acquisition of Peloton
11
−
993
−
Charge related to termination of a
collaboration agreement with Samsung
−
3
−
423
Charge related to formation of a
collaboration with Eisai
−
−
−
1,400
Charge for the acquisition of
Viralytics
−
−
−
344
Other
7
(3)
55
(57)
Net decrease (increase) in income before
taxes
801
951
4,656
5,834
Income tax (benefit) expense6
(180)
25
(1,028)
(375)
Acquisition- and divestiture-related costs
attributable to non-controlling interests
−
(58)
(89)
(58)
Decrease (increase) in net income
$621
$918
$3,539
$5,401
Financial Outlook
At mid-January 2020 exchange rates, Merck anticipates full-year
2020 revenue to be between $48.8 billion and $50.3 billion,
including a negative impact from foreign exchange of less than
1%.
Merck expects full-year 2020 GAAP EPS to be between $4.57 and
$4.72. Merck expects full-year 2020 non-GAAP EPS to be between
$5.62 and $5.77, including an approximately 1.5% negative impact
from foreign exchange. The non-GAAP range excludes acquisition- and
divestiture-related costs and costs related to restructuring
programs.
The following table summarizes the company’s full-year 2020
financial guidance.
GAAP
Non-GAAP2
Revenue
$48.8 to $50.3 billion
$48.8 to $50.3 billion*
Operating expenses
Slightly lower than 2019
Higher than 2019 by a
low-single-digit rate
Effective tax rate
17% to 18%
17.5% to 18.5%
EPS**
$4.57 to $4.72
$5.62 to $5.77
*The company does not have any
non-GAAP adjustments to revenue.
**EPS guidance for 2020 assumes a
share count (assuming dilution) of approximately 2.54 billion
shares.
A reconciliation of anticipated 2020 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 2020
GAAP EPS
$4.57 to $4.72
Difference5
1.05
Non-GAAP EPS that excludes items listed
below2
$5.62 to $5.77
Acquisition- and divestiture-related
costs
Restructuring costs
Net decrease (increase) in income before
taxes
$2,500
800
3,300
Estimated income tax (benefit) expense
(640)
Decrease (increase) in net income
$2,660
Earnings Conference Call
Investors, journalists and the general public may access a live
audio webcast of the call today at 8:00 a.m. EST on Merck’s website
at
https://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
8583879. Members of the media are invited to monitor the call by
dialing (706) 758-9928 or (800) 399-7917 and using ID code number
8583879. 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 125 years, Merck, 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 in pursuit of our mission to save and improve
lives. We demonstrate our commitment to patients and population
health by increasing access to health care through far-reaching
policies, programs and partnerships. Today, Merck continues to be
at the forefront of research to prevent and treat diseases that
threaten people and animals – including cancer, infectious diseases
such as HIV and Ebola, and emerging animal diseases – as we aspire
to be the premier research-intensive biopharmaceutical company in
the world. 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. Examples of
forward-looking statements include statements with respect to the
company’s plans to spin-off certain of its businesses into an
independent company, the timing and structure of such spin-off, the
characteristics of the business to be separated, the expected
benefits of the spin-off to the company and the expected effect on
the company’s dividends. 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 whether the proposed spin-off will be
completed on the proposed timetable or at all. 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,
uncertainties as to the timing of the proposed spin-off;
uncertainties as to the status of any required regulatory
approvals; the possibility that various conditions to the
consummation of the spin-off may not be satisfied; the effects of
disruption from the transactions contemplated in connection with
the spin-off; 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 Tables 2a and 2b 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. Amounts for full-year 2019 include a $364
million net tax benefit related to the settlement of certain
federal income tax matters, an $86 million tax benefit related to
the reversal of tax reserves established in conjunction with the
divestiture of Merck’s Consumer Care business in 2014 as a result
of the lapse in the statute of limitations, and a $117 million tax
charge related to the finalization of treasury regulations
associated with the 2017 enactment of U.S. tax legislation. Amounts
for fourth-quarter and full-year 2018 include adjustments to the
provisional amounts recorded in 2017 related to the enactment of
the U.S. tax legislation.
MERCK & CO., INC. CONSOLIDATED STATEMENT OF INCOME -
GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED) Table 1 GAAP %
Change GAAP % Change 4Q19
4Q18 Full Year2019 Full Year2018
Sales
$
11,868
$
10,998
8%
$
46,840
$
42,294
11%
Costs, Expenses and Other
Cost of sales (1)
3,669
3,289
12%
14,112
13,509
4%
Selling, general and administrative (1)
2,888
2,643
9%
10,615
10,102
5%
Research and development (1)(2)
2,548
2,214
15%
9,872
9,752
1%
Restructuring costs (3)
194
138
41%
638
632
1%
Other (income) expense, net (1)
(223
)
110
*
139
(402
)
*
Income Before Taxes
2,792
2,604
7%
11,464
8,701
32%
Taxes on Income (1)
428
826
1,687
2,508
Net Income
2,364
1,778
33%
9,777
6,193
58%
Less: Net Income (Loss) Attributable to Noncontrolling Interests
(1)
7
(49
)
(66
)
(27
)
Net Income Attributable to Merck & Co., Inc.
$
2,357
$
1,827
29%
$
9,843
$
6,220
58%
Earnings per Common Share Assuming Dilution
$
0.92
$
0.69
33%
$
3.81
$
2.32
64%
Average Shares Outstanding Assuming Dilution
2,559
2,634
2,580
2,679
Tax Rate (4)
15.3
%
31.7
%
14.7
%
28.8
%
* 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 full year of 2019
include a $993 million charge for the acquisition of Peloton
Therapeutics (Peloton). Research and development expenses for the
full year of 2018 include a $1.4 billion charge related to the
formation of a collaboration with Eisai Co., Ltd. (Eisai), as well
as a $344 million charge for the acquisition of Viralytics Limited.
(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 fourth quarter and the full year 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 full year of
2019 also reflects a net tax benefit of $364 million related to the
settlement of certain federal income tax matters. The
effective income tax rates for the fourth quarter and full year of
2018 include the unfavorable impact of adjustments to the
provisional amounts recorded in the prior year associated with the
enactment of U.S. tax legislation, including $124 million related
to the transition tax. The effective income tax rate for the full
year of 2018 also includes the unfavorable impacts of a charge
related to the formation of a collaboration with Eisai and a charge
related to the termination of a collaboration agreement with
Samsung for which no tax benefits were recognized.
MERCK &
CO., INC. GAAP TO NON-GAAP RECONCILIATION FOURTH
QUARTER 2019 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE
FIGURES) (UNAUDITED) Table 2a GAAP
Acquisition and Divestiture-Related Costs (1)
Restructuring Costs (2) Certain Other Items
Adjustment Subtotal Non-GAAP Cost of
sales
$
3,669
325
90
415
$
3,254
Selling, general and administrative
2,888
44
1
45
2,843
Research and development
2,548
166
11
177
2,371
Restructuring costs
194
194
194
-
Other (income) expense, net
(223
)
(37
)
7
(30
)
(193
)
Income Before Taxes
2,792
(498
)
(285
)
(18
)
(801
)
3,593
Income Tax Provision (Benefit)
428
(55
)
(3)
(49
)
(3)
(76
)
(4)
(180
)
608
Net Income
2,364
(443
)
(236
)
58
(621
)
2,985
Net Income Attributable to Merck & Co., Inc.
2,357
(443
)
(236
)
58
(621
)
2,978
Earnings per Common Share Assuming Dilution
$
0.92
(0.17
)
(0.09
)
0.02
(0.24
)
$
1.16
Tax Rate
15.3
%
16.9
%
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 $306 million of expenses for the amortization of
intangible assets recognized as a result of business acquisitions,
as well as $12 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. Amount included
in research and development expenses primarily reflects $164
million of in-process research and development (IPR&D)
impairment charges. (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) Primarily reflects an $86 million tax
benefit related to the reversal of tax reserves established in
conjunction with the divestiture of Merck's Consumer Care business
in 2014 as a result of the lapse in the statute of limitations.
MERCK & CO., INC. GAAP TO NON-GAAP RECONCILIATION
FULL YEAR 2019 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE
FIGURES) (UNAUDITED) Table 2b GAAP
Acquisition and Divestiture-Related Costs (1)
Restructuring Costs (2) Certain Other Items (4)
Adjustment Subtotal Non-GAAP Cost of
sales
$
14,112
2,126
251
2,377
$
11,735
Selling, general and administrative
10,615
126
34
160
10,455
Research and development
9,872
145
4
993
1,142
8,730
Restructuring costs
638
638
638
-
Other (income) expense, net
139
284
55
339
(200
)
Income Before Taxes
11,464
(2,681
)
(927
)
(1,048
)
(4,656
)
16,120
Income Tax Provision (Benefit)
1,687
(493
)
(3)
(155
)
(3)
(380
)
(5)
(1,028
)
2,715
Net Income
9,777
(2,188
)
(772
)
(668
)
(3,628
)
13,405
Less: Net (Loss) Income Attributable to Noncontrolling Interests
(66
)
(89
)
(89
)
23
Net Income Attributable to Merck & Co., Inc.
9,843
(2,099
)
(772
)
(668
)
(3,539
)
13,382
Earnings per Common Share Assuming Dilution
$
3.81
(0.82
)
(0.30
)
(0.26
)
(1.38
)
$
5.19
Tax Rate
14.7
%
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 $1.4 billion of expenses for the amortization of
intangible assets recognized as a result of business acquisitions,
as well as $705 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. Amounts included in
research and development expenses primarily reflect $172 million of
in-process research and development (IPR&D) impairment charges,
partially offset by 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. (5) Primarily
reflects a $364 million net tax benefit related to the settlement
of certain federal income tax matters, an $86 million tax benefit
related to the reversal of tax reserves established in conjunction
with the divestiture of Merck's Consumer Care business in 2014 as a
result of the lapse in the statute of limitations, and a $117
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
4Q
Full Year
1Q
2Q
3Q
4Q
Full Year
1Q
2Q
3Q
4Q
Full Year
Nom %
Ex-Exch %
Nom %
Ex-Exch %
TOTAL
SALES (1)
$10,816
$11,760
$12,397
$11,868
$46,840
$10,037
$10,465
$10,794
$10,998
$42,294
8
9
11
13
PHARMACEUTICAL
9,663
10,460
11,095
10,533
41,751
8,919
9,282
9,658
9,830
37,689
7
8
11
14
Oncology
Keytruda
2,269
2,634
3,070
3,111
11,084
1,464
1,667
1,889
2,151
7,171
45
46
55
58
Alliance Revenue – Lynparza (2)
79
111
123
132
444
33
44
49
62
187
111
112
137
141
Alliance Revenue – Lenvima (2)
74
97
109
124
404
35
43
71
149
74
73
171
173
Emend
117
121
98
53
388
125
148
123
126
522
-58
-58
-26
-24
Vaccines (3)
Gardasil / Gardasil 9
838
886
1,320
693
3,737
660
608
1,048
835
3,151
-17
-16
19
21
ProQuad / M-M-R II / Varivax
496
675
623
481
2,275
392
426
525
455
1,798
6
7
27
28
Pneumovax 23
185
170
237
334
926
179
193
214
322
907
4
4
2
3
RotaTeq
211
172
180
227
791
193
156
191
188
728
21
21
9
10
Vaqta
47
58
62
71
238
37
65
66
72
239
-2
-1
0
2
Hospital Acute Care
Bridion
255
278
284
313
1,131
204
240
217
256
917
22
24
23
26
Noxafil
190
193
177
103
662
176
188
188
191
742
-46
-44
-11
-7
Primaxin
59
71
77
67
273
72
68
72
53
265
25
27
3
7
Invanz
72
78
57
57
263
151
149
137
59
496
-5
-2
-47
-44
Cubicin
88
67
52
50
257
98
94
95
80
367
-38
-37
-30
-28
Cancidas
61
67
62
58
249
91
87
79
69
326
-17
-15
-24
-20
Immunology
Simponi
208
214
203
205
830
231
233
210
220
893
-7
-3
-7
-2
Remicade
123
98
101
89
411
167
157
135
123
582
-27
-25
-29
-25
Neuroscience
Belsomra
67
76
80
83
306
54
71
66
69
260
19
16
18
17
Virology
Isentress / Isentress HD
255
247
250
223
975
281
305
275
280
1,140
-20
-18
-15
-10
Zepatier
114
108
83
66
370
131
113
104
108
455
-38
-38
-19
-16
Cardiovascular
Zetia
140
156
147
146
590
305
226
165
162
857
-9
-11
-31
-30
Vytorin
97
76
57
54
285
167
155
92
83
497
-35
-33
-43
-40
Atozet
94
92
97
108
391
73
101
84
89
347
22
26
13
18
Adempas
90
104
107
117
419
68
75
94
91
329
28
29
27
30
Diabetes (4)
Januvia
824
908
807
943
3,482
880
949
927
930
3,686
1
2
-6
-4
Janumet
530
533
503
475
2,041
544
585
563
535
2,228
-11
-9
-8
-5
Women's Health
NuvaRing
219
240
241
179
879
216
236
234
216
902
-17
-17
-3
-2
Implanon / Nexplanon
199
183
199
206
787
174
174
186
169
703
22
23
12
14
Diversified Brands
Singulair
191
160
152
195
698
175
185
161
187
708
4
5
-1
1
Cozaar / Hyzaar
103
109
116
113
442
120
125
103
105
453
8
9
-3
2
Nasonex
96
72
58
67
293
122
81
71
102
376
-34
-34
-22
-19
Arcoxia
75
75
72
67
288
83
84
83
86
335
-23
-22
-14
-10
Follistim AQ
57
63
62
58
241
67
70
60
70
268
-16
-15
-10
-7
Other Pharmaceutical (5)
1,140
1,268
1,229
1,265
4,901
1,186
1,189
1,109
1,215
4,705
4
6
4
7
ANIMAL
HEALTH
1,025
1,124
1,122
1,122
4,393
1,065
1,090
1,021
1,036
4,212
8
10
4
9
Livestock
611
671
726
777
2,784
652
633
660
684
2,630
14
16
6
11
Companion Animals
414
453
396
345
1,609
413
457
361
352
1,582
-2
0
2
5
Other
Revenues (6)
128
176
180
213
696
53
93
115
132
393
61
30
77
-26
* 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, $2,517 million and $1,928 million in the
first, second, third and fourth 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, $1,360 million and $1,472 million in the first, second,
third and fourth 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/20200205005307/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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