- Third-Quarter 2020 Worldwide Sales Were $12.6 Billion, an
Increase of 1%; Excluding the Impact from Foreign Exchange, Sales
Grew 2%
- KEYTRUDA Sales Grew 21% to $3.7 Billion
- Animal Health Sales Grew 9% to $1.2 Billion; Excluding the
Impact from Foreign Exchange, Sales Grew 12%
- Third-Quarter 2020 GAAP EPS Was $1.16; Third-Quarter Non-GAAP
EPS Was $1.74
- Advanced and Expanded Broad Pipeline
- Announced Additional Positive Phase 3 Results for
Investigational Pneumococcal Conjugate Vaccine (V114) in
Adults
- Presented Phase 3 Data for Investigational Gefapixant in
Development for Chronic Cough; Early Data for MK-4830 in Oncology
and MK-8507 for HIV
- Expanded Pipeline with Seagen Collaborations in Oncology
- Company Advances Research Programs and Clinical Trials for
COVID-19-Related Vaccine and Orally Available Antiviral Research
Candidates
- Company Narrows and Raises 2020 Full-Year Revenue Range to be
Between $47.6 Billion and $48.6 Billion, Including a Negative
Impact from Foreign Exchange of Approximately 1.5%
- Company Narrows and Lowers 2020 Full-Year GAAP EPS Range to be
Between $4.55 and $4.65; Narrows and Raises 2020 Full-Year Non-GAAP
EPS Range to be Between $5.91 and $6.01, Including a Negative
Impact from Foreign Exchange of Approximately 2.5%
Merck (NYSE: MRK), known as MSD outside the United States and
Canada, today announced financial results for the third quarter of
2020.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20201027005447/en/
“We continue to execute on our strategic priorities and remain
confident we will achieve solid full-year revenue growth despite
the impact of the ongoing COVID-19 pandemic. Demand for our
products remains robust, and production, supply and distribution of
our medicines, vaccines and animal health products are moving
forward with minimal disruption,” said Kenneth C. Frazier, chairman
and chief executive officer, Merck. “I am confident in our ability
to advance our promising pipeline and clinical trials despite the
challenging environment, and I believe that our leadership and
track record of solid commercial execution will continue to drive
long-term growth.”
Financial Summary
$ in millions, except EPS amounts
Third Quarter
2020
2019
Change
Change Ex- Exchange
Sales
$12,551
$12,397
1%
2%
GAAP net income1
2,941
1,901
55%
59%
Non-GAAP net income that excludes certain
items1,2*
4,427
3,873
14%
17%
GAAP EPS
1.16
0.74
57%
62%
Non-GAAP EPS that excludes certain
items2*
1.74
1.51
16%
18%
*Refer to table on page 11.
GAAP (generally accepted accounting principles) earnings per
share assuming dilution (EPS) was $1.16 for the third quarter of
2020. Non-GAAP EPS of $1.74 for the third quarter of 2020 excludes
acquisition- and divestiture-related costs, restructuring costs,
pretax charges of $1.1 billion related to certain license and
collaboration agreements, and certain other items. Year-to-date
results can be found in the attached tables.
COVID-19 Research Highlights
Building on the company’s experience with antivirals and
vaccines, Merck advanced its multiple scientific programs in an
effort to help combat SARS-CoV-2, specifically,
- Molnupiravir (formerly known as MK-4482) -- an orally
available antiviral candidate in development for the treatment of
COVID-19 in collaboration with Ridgeback Bio with the initiation of
two large pivotal Phase 2/3 trials: a trial anticipated to enroll
approximately 1,450 non-hospitalized adult COVID-19 patients
(outpatient) and another planned to enroll approximately 1,300
hospitalized adult COVID-19 patients;
- V591 -- a SARS-CoV-2 vaccine candidate that uses a
measles virus vector platform has entered Phase 1 development;
and
- V590 -- a SARS-CoV-2 vaccine candidate in development in
collaboration with the International AIDS Vaccine Initiative (IAVI)
that uses a recombinant vesicular stomatitis virus (rVSV) platform,
the same platform used for Merck’s approved Ebola Zaire virus
vaccine, will enter Phase 1 development shortly.
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), in
addition to other notable developments as follows:
- Merck announced the following regulatory milestones for
KEYTRUDA:
- Approval in the United States by the Food and Drug
Administration (FDA) of an expanded indication as monotherapy for
the treatment of adult patients with relapsed or refractory
classical Hodgkin lymphoma (cHL) based on the Phase 3 KEYNOTE-204
trial and an updated pediatric indication for the treatment of
pediatric patients with refractory cHL or cHL that has relapsed
after two or more lines of therapy, both of which were previously
approved under the FDA’s accelerated approval process; and
- Two approvals in Japan: (1) as monotherapy for the treatment of
patients whose tumors are PD-L1-positive and have radically
unresectable, advanced or recurrent esophageal squamous cell
carcinoma (ESCC) who have progressed after chemotherapy based on
the KEYNOTE-181 trial; and (2) use at an additional recommended
dosage of 400 mg every six weeks (Q6W) administered as an
intravenous infusion over 30 minutes across all adult indications,
including KEYTRUDA monotherapy and combination therapy.
- Merck presented results from the pivotal Phase 3 KEYNOTE-590
trial for the first-line treatment of patients with locally
advanced or metastatic esophageal and gastroesophageal junction
(GEJ) cancer at the European Society for Medical Oncology (ESMO)
Virtual Congress 2020. In the study, KEYTRUDA in combination with
platinum-based chemotherapy (cisplatin plus 5-fluorouracil [5-FU])
significantly improved overall survival (OS) and progression-free
survival (PFS) versus chemotherapy regardless of histology or PD-L1
expression status.
- Merck presented five-year survival results from the pivotal
Phase 3 KEYNOTE-024 trial at the ESMO Virtual Congress 2020, which
demonstrated a sustained, long-term survival benefit and durable
responses with KEYTRUDA versus chemotherapy as a first-line
treatment in patients with metastatic non-small cell lung cancer
(NSCLC) whose tumors express PD-L1 (tumor proportion score [TPS]
≥50%) with no EGFR or ALK genomic tumor aberrations. Results from
KEYNOTE-024 represent the longest follow-up survival data for an
immunotherapy in a randomized Phase 3 study for the first-line
treatment of metastatic NSCLC.
- Merck presented long-term findings from the
EORTC1325/KEYNOTE-054 trial evaluating KEYTRUDA as adjuvant therapy
in resected, high-risk stage III melanoma at the ESMO Virtual
Congress 2020.
- Merck presented three-year survival data from the KEYNOTE-021
(Cohort G) study that evaluated KEYTRUDA in combination with
chemotherapy in patients with advanced nonsquamous NSCLC regardless
of PD‑L1 expression with no EGFR or ALK genomic tumor aberrations
at the IASLC 2020 North America Conference on Lung Cancer (NACLC).
Updated follow-up data from a Phase 1/2 study of quavonlimab
(MK-1308), a novel investigational anti-CTLA-4 antibody, in
combination with KEYTRUDA in patients with advanced NSCLC also was
presented; a Phase 3 study of quavonlimab coformulated with
KEYTRUDA in first-line advanced NSCLC is planned.
- Merck and AstraZeneca announced the adoption of two positive
opinions by the Committee for Medicinal Products for Human Use
(CHMP) of the European Medicines Agency (EMA) for Lynparza:
- As a first-line maintenance treatment with bevacizumab for
homologous recombination deficient (HRD)-positive advanced ovarian
cancer who are in complete or partial response following completion
of first-line platinum-based chemotherapy in combination with
bevacizumab based on the Phase 3 PAOLA-1 trial, and
- As monotherapy for the treatment of BRCA1/2 metastatic
castration-resistant prostate cancer (mCRPC) patients who have
progressed following a prior therapy that included a new hormonal
agent based on the Phase 3 PROfound trial. Final results from this
study were recently presented at the ESMO Virtual Congress
2020.
- Merck and AstraZeneca presented positive five-year follow-up
data from the Phase 3 SOLO-1 trial, which demonstrated a long-term
PFS benefit of Lynparza versus placebo as a first-line maintenance
treatment in patients with newly diagnosed, advanced BRCA-mutated
(BRCAm) ovarian cancer who were in complete or partial response to
platinum-based chemotherapy.
- Merck and Eisai presented first-time data from two studies
evaluating KEYTRUDA plus Lenvima at the ESMO Virtual Congress 2020:
data from the Phase 2 LEAP-004 study for the second-line treatment
of patients with unresectable or advanced melanoma who progressed
on anti-PD-1/PD-L1 therapy and from the Phase 2 LEAP-005 study in
previously-treated patients with six tumor types, including biliary
tract cancer, colorectal cancer, gastric cancer, glioblastoma
multiforme, ovarian cancer and triple-negative breast cancer.
- Merck also presented new data for three investigational
medicines from its oncology pipeline at the ESMO Virtual Congress
2020:
- New Phase 1 data for the company’s anti-TIGIT therapy
vibostolimab (MK-7684) as monotherapy and in combination with
KEYTRUDA in patients with metastatic NSCLC,
- First-time Phase 1 results for the novel
anti-immunoglobulin-like transcript 4 (ILT4) therapy MK-4830 in
patients with advanced solid tumors, and
- New Phase 2 data evaluating the hypoxia-inducible factor-2
alpha (HIF-2α) inhibitor MK-6482 in von Hippel-Lindau (VHL)
patients with non-renal cell carcinoma (RCC) tumors and updated
data in VHL patients with clear cell RCC.
Other Pipeline Highlights
- Merck announced that two Phase 3 adult studies [the pivotal
PNEU-AGE trial (V114-019) as well as the PNEU-TRUE trial
(V114-020)] and separately two other Phase 3 adult studies [the
PNEU-PATH (V114-016) and PNEU-DAY (V114-017) trials], evaluating
the safety, tolerability and immunogenicity of V114, the company’s
investigational 15-valent pneumococcal conjugate vaccine, each met
their primary immunogenicity objectives. These findings, and
additional Phase 3 data from the clinical program, will form the
basis of global regulatory licensure applications beginning with
the FDA before the end of the year.
- Merck presented results from two pivotal Phase 3 trials
(COUGH-1 and COUGH-2) evaluating gefapixant, an investigational,
orally administered selective P2X3 receptor antagonist, in which
gefapixant 45 mg twice daily demonstrated a statistically
significant reduction in 24-hour cough frequency compared to
placebo at Week 12 and 24 in adult patients with refractory or
unexplained chronic cough. The gefapixant 15 mg twice daily
treatment arms did not meet the primary efficacy endpoint in either
Phase 3 study. The results were presented at the Virtual European
Respiratory Society (ERS) International Congress 2020.
- Merck presented Week 96 data from the Phase 2b trial that
showed islatravir, the company’s investigational oral nucleoside
reverse transcriptase translocation inhibitor (NRTTI), in
combination with doravirine (PIFELTRO), maintained viral
suppression in treatment-naïve adults with HIV-1 infection. Also
presented at the virtual 2020 International Congress on Drug
Therapy in HIV Infection (HIV Glasgow 2020 Virtual) were results
from Phase 1/1b studies for MK-8507, the company’s investigational
once-weekly, oral non-nucleoside reverse transcriptase inhibitor
(NNRTI), that support further investigation for once-weekly oral
administration as part of combination antiretroviral therapy.
- The FDA has granted V181, the company’s investigational dengue
vaccine in Phase 1 development, Fast Track designation.
Business Developments
- Merck and Seagen Inc. (formerly known as Seattle Genetics,
Inc.) announced two strategic oncology collaborations, in which
Merck will make $810 million of upfront payments in the aggregate
as well as acquire a $1 billion equity stake in Seagen common
stock:
- Companies to co-develop and co-commercialize Seagen’s
ladiratuzumab vedotin, an investigational antibody-drug conjugate
targeting LIV-1, globally; and
- Companies enter into exclusive license and co-development
agreement to accelerate global reach of Tukysa (tucatinib), a small
molecule tyrosine kinase inhibitor for the treatment of HER-2
positive cancers. Merck was granted an exclusive license to
commercialize Tukysa in Asia, the Middle East and Latin America and
other regions outside of the U.S., Canada and Europe.
- Merck and Hanmi Pharmaceutical announced that the companies
have entered into an exclusive licensing agreement for the
development, manufacture and commercialization of efinopegdutide
(formerly HM12525A), Hanmi’s investigational once-weekly
glucagon-like peptide-1 (GLP-1)/glucagon receptor dual agonist, for
the treatment of nonalcoholic steatohepatitis (NASH);
- Merck announced the completion of its acquisition of IdentiGEN,
a leader in DNA-based animal traceability solutions for livestock
and aquaculture; and
- Merck announced the completion of its acquisition of the
worldwide rights to VECOXAN (diclazuril), an oral suspension for
the prevention of coccidiosis in calves and lambs.
Organon & Co.
- Merck continued to make progress on the Organon & Co.
(Organon) spinoff, including additional leadership appointments,
and expects the transaction to be completed in the second quarter
of 2021.
Third-Quarter Financial Impact of COVID-19
In the third quarter, the estimated negative impact of the
COVID-19 pandemic to Merck’s pharmaceutical revenue was
approximately $475 million, bringing the company’s year-to-date
negative impact on revenue to approximately $2.1 billion. Lower
back-to-school demand negatively impacted vaccine sales, in
particular GARDASIL 9 (Human Papillomavirus 9-valent Vaccine,
Recombinant) in the U.S. In addition, access to health care
providers remains reduced, although improved from the second
quarter. The negative impact to Animal Health sales in the third
quarter was immaterial.
Operating expenses were positively impacted in the third quarter
by approximately $115 million, primarily driven by lower
promotional and selling costs as well as lower research and
development (R&D) expenses, net of investments in
COVID-19-related antiviral and vaccine research programs.
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
2020
2019
Change
Change Ex- Exchange
Total Sales
$12,551
$12,397
1%
2%
Pharmaceutical
11,320
11,095
2%
2%
KEYTRUDA
3,715
3,070
21%
21%
JANUVIA / JANUMET
1,327
1,311
1%
2%
GARDASIL / GARDASIL 9
1,187
1,320
-10%
-10%
PROQUAD, M-M-R II and
VARIVAX
576
623
-8%
-7%
PNEUMOVAX 23
375
237
58%
58%
BRIDION
320
284
13%
13%
ROTATEQ
210
180
16%
17%
SIMPONI
209
203
3%
0%
ISENTRESS / ISENTRESS HD
205
250
-18%
-18%
Lynparza*
196
123
59%
58%
IMPLANON / NEXPLANON
189
199
-5%
-4%
Lenvima*
142
109
30%
29%
Animal Health
1,220
1,122
9%
12%
Livestock
758
726
5%
8%
Companion Animals
462
396
17%
18%
Other Revenues**
11
180
-94%
-33%
*Alliance revenue for these products represents Merck’s share of
profits, which are product sales net of cost of sales and
commercialization costs. **Other revenues are comprised primarily
of third-party manufacturing sales and miscellaneous corporate
revenues, including revenue hedging activities.
Pharmaceutical Revenue
Third-quarter pharmaceutical sales increased by $225 million, or
2%, to $11.3 billion. The increase was driven primarily by growth
in oncology and certain hospital acute care products, partially
offset by the negative impact of the COVID-19 pandemic and the
ongoing impacts of the loss of market exclusivity for several
products.
Growth in oncology was largely driven by higher sales of
KEYTRUDA, which grew 21% to $3.7 billion in the quarter. In the
U.S., sales of KEYTRUDA grew 24% to $2.2 billion. Global sales
growth of KEYTRUDA reflects continued strong momentum from the
NSCLC indications as well as continued uptake in other indications,
including adjuvant melanoma, RCC, bladder, head and neck squamous
cell carcinoma (HNSCC) and microsatellite instability-high (MSI-H)
cancers as well as uptake following the recent launch of the Q6W
dosing regimen in the U.S., partially offset by the negative
impacts of the COVID-19 pandemic and pricing in Japan. Also
contributing to growth in oncology was higher alliance revenue
related to Lynparza and Lenvima reflecting continued uptake in
approved indications in the U.S., Europe and China.
Performance in hospital acute care reflects higher demand
globally for BRIDION (sugammadex), 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.
In addition, sales of JANUVIA (sitagliptin) and JANUMET
(sitagliptin and metformin HCI) increased slightly in the quarter
reflecting strong demand from certain international markets,
partially offset by continued pricing pressure in the U.S.
Vaccine sales performance reflects higher sales of PNEUMOVAX 23
(pneumococcal vaccine polyvalent), a vaccine to help prevent
pneumococcal disease, primarily driven by higher volumes in the
U.S., Europe and Japan attributable in part to increased demand for
pneumococcal vaccination during the COVID-19 pandemic.
Vaccine sales were negatively affected by declines in sales of
GARDASIL [Human Papillomavirus Quadrivalent (Types 6,11,16 and 18)
Vaccine, Recombinant]/GARDASIL 9, vaccines to prevent certain
cancers and other diseases caused by HPV, largely due to lower
demand in the U.S. and Hong Kong, SAR, PRC attributable to the
COVID-19 pandemic, partially offset by higher volumes in China and
in Europe.
Combined sales of pediatric vaccines VARIVAX (Varicella Virus
Vaccine Live), a vaccine to help prevent chickenpox; PROQUAD
(Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a
combination vaccine to help protect against measles, mumps, rubella
and varicella; and M-M-R II (Measles, Mumps and Rubella Virus
Vaccine Live), a vaccine to help prevent measles, mumps and
rubella, declined in the third quarter, primarily due to lower
demand in the U.S. related to the COVID-19 pandemic.
Pharmaceutical sales in the quarter were negatively affected by
the ongoing impacts from the loss of market exclusivity, including
for NUVARING (etonogestrel/ethinyl estradiol vaginal ring), NOXAFIL
(posaconazole) and EMEND (aprepitant)/EMEND (fosaprepitant
dimeglumine) for Injection.
Animal Health Revenue
Animal Health sales totaled $1.2 billion in the third quarter of
2020, an increase of 9% compared with the third quarter of 2019;
excluding the unfavorable effect from foreign exchange, Animal
Health sales grew 12%. Growth in companion animal products was
driven largely by higher demand in companion animal vaccines and
higher demand for the BRAVECTO (fluralaner) line of products for
parasitic control. Performance in livestock products reflects
higher demand globally for ruminant, poultry and swine
products.
Third-Quarter Expense, EPS and Related Information
The tables below present selected expense information.
$ in millions
Third-Quarter 2020
GAAP
Acquisition- and Divestiture-
Related Costs3
Restructuring Costs
Certain Other Items
Non-GAAP2
Cost of sales
$3,481
$285
$38
$−
$3,158
Selling, general and administrative
2,450
207
15
−
2,228
Research and development
3,390
16
19
1,082
2,273
Restructuring costs
114
−
114
−
−
Other (income) expense, net
(312)
−
−
(1)
(311)
Third-Quarter 2019
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
GAAP Expense, EPS and Related Information
Gross margin was 72.3% for the third quarter of 2020 compared to
67.8% for the third quarter of 2019. The increase reflects lower
acquisition- and divestiture-related costs and the favorable effect
of product mix, partially offset by the unfavorable effects of
pricing pressure, inventory write-offs, higher amortization of
intangible assets related to collaborations and foreign
exchange.
Selling, general and administrative expenses were $2.5 billion
in the third quarter of 2020, a decrease of 5% compared to the
third quarter of 2019. The decrease primarily reflects lower
administrative and selling costs, including less travel and meeting
expenses, due in part to the COVID-19 pandemic, partially offset by
higher acquisition- and divestiture-related costs, primarily
reflecting costs related to the company’s planned spinoff of
Organon.
Research and development expenses were $3.4 billion in the third
quarter of 2020, an increase of 6% compared with the third quarter
of 2019. The increase was primarily driven by higher upfront
payments related to collaborations and license agreements, higher
expenses related to clinical development and increased investment
in discovery research and early drug development, partially offset
by lower charges for the acquisitions of businesses, as well as
lower laboratory, travel and meeting expenses due to the COVID-19
pandemic.
Other (income) expense, net, was $312 million of income in the
third quarter of 2020 compared to $35 million of expense in the
third quarter of 2019, primarily due to higher income from
investments in equity securities, net, which was $360 million in
2020 compared with $16 million in 2019, largely from the
recognition of unrealized gains on securities.
The effective income tax rate was 14.1% for the third quarter of
2020 compared to 18.7% in the third quarter of 2019. The effective
income tax rate in 2019 reflects the unfavorable impact of a charge
for the acquisition of Peloton Therapeutics, Inc. (Peloton) for
which no tax benefit was recognized.
GAAP EPS was $1.16 for the third quarter of 2020 compared with
$0.74 for the third quarter of 2019.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 74.8% for the third quarter of 2020
compared to 75.9% for the third quarter of 2019. The decrease in
non-GAAP gross margin reflects the unfavorable effects of pricing
pressure, inventory write-offs, higher amortization of intangible
assets related to collaborations and foreign exchange, partially
offset by the favorable effect of product mix.
Non-GAAP selling, general and administrative expenses were $2.2
billion in the third quarter of 2020, a decrease of 13% compared to
the third quarter of 2019. The decrease primarily reflects lower
administrative and selling costs, including less travel and meeting
expenses, due in part to the COVID-19 pandemic.
Non-GAAP R&D expenses were $2.3 billion in the third quarter
of 2020, a 3% increase compared to the third quarter of 2019. The
increase was primarily driven by higher expenses related to
clinical development and increased investment in discovery research
and early drug development, partially offset by lower laboratory,
travel and meeting expenses due to the COVID-19 pandemic.
Non-GAAP other (income) expense, net, was $311 million of income
in the third quarter of 2020 compared to $29 million of expense in
the third quarter of 2019, primarily due to higher income from
investments in equity securities, net, which was $360 million in
2020 compared with $16 million in 2019, largely from the
recognition of unrealized gains on securities.
The non-GAAP effective income tax rate was 14.8% for the third
quarter of 2020 compared to 15.7% for the third quarter of 2019,
reflecting the favorable impact of earnings mix.
Non-GAAP EPS was $1.74 for the third quarter of 2020 compared
with $1.51 for the third quarter of 2019.
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
2020
2019
EPS
GAAP EPS
$1.16
$0.74
Difference
0.58
0.77
Non-GAAP EPS that excludes items listed
below2
$1.74
$1.51
Net Income
GAAP net income1
$2,941
$1,901
Difference
1,486
1,972
Non-GAAP net income that excludes items
listed below1,2
$4,427
$3,873
Decrease (Increase) in Net Income Due
to Excluded Items:
Acquisition- and divestiture-related
costs3
$508
$975
Restructuring costs
186
296
Charges for acquisitions and
collaborations4
1,082
982
Other
(1)
−
Net decrease (increase) in income before
taxes
1,775
2,253
Income tax (benefit) expense5
(289)
(281)
Decrease (increase) in net income
$1,486
$1,972
Financial Outlook
The updated full-year guidance that Merck is providing below
includes its current assumption of the impact from the COVID-19
pandemic, which is expected to continue to be offset by
favorability from underlying business strength. The company
continues to assume that the majority of the negative impact
occurred during the second quarter. However, it now expects some
residual negative impacts in the fourth quarter, largely in Europe
and certain emerging markets. In addition, the phasing of the
recovery of GARDASIL 9 demand is slower than originally
anticipated, in particular in the U.S.
For the full-year 2020, Merck now expects an unfavorable impact
to revenue of approximately $2.35 billion (excluding the impact of
foreign exchange) due to the COVID-19 pandemic, comprised of
approximately $2.3 billion for pharmaceuticals and approximately
$50 million for Animal Health, including the impacts in the first
three quarters of the year.
For the full-year 2020, Merck now expects a net favorable impact
to operating expenses of approximately $625 million, reflecting
continued lower spending due to the COVID-19 pandemic, partially
offset by spending on its COVID-19-related antiviral and vaccine
research programs.
Merck narrowed and raised its full-year 2020 revenue range to be
between $47.6 billion and $48.6 billion, including a negative
impact from foreign exchange of approximately 1.5% at mid-October
exchange rates. The company’s guidance assumes $120 million of
revenue for the replenishment of doses of GARDASIL 9 that were
borrowed from the U.S. Centers for Disease Control and Prevention
(CDC) Pediatric Vaccine Stockpile in the fourth quarter of
2019.
Merck narrowed and lowered its full-year 2020 GAAP EPS range to
be between $4.55 and $4.65. Merck narrowed and raised its full-year
2020 non-GAAP EPS range to be between $5.91 and $6.01, including a
negative impact from foreign exchange of approximately 2.5% at
mid-October exchange rates. The non-GAAP range excludes
acquisition- and divestiture-related costs, costs related to
restructuring programs and certain other items.
The following table summarizes the company’s full-year 2020
financial guidance.
GAAP
Non-GAAP2
Revenue
$47.6 to $48.6 billion
$47.6 to $48.6 billion*
Operating expenses
Higher than 2019 by a
low-single-digit rate
Lower than 2019 by a
low-single-digit rate
Effective tax rate
Approximately 15%
Approximately 15.5%
EPS**
$4.55 to $4.65
$5.91 to $6.01
*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
$4.55 to $4.65
Difference
1.36
Non-GAAP EPS that excludes items listed
below2
$5.91 to $6.01
Acquisition- and divestiture-related
costs
$2,300
Restructuring costs
800
Charges for collaborations
1,082
Net decrease (increase) in income before
taxes
4,182
Income tax (benefit) expense5
(715)
Decrease (increase) in net income
$3,467
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
https://www.merck.com/investor-relations/events-and-presentations/.
Institutional investors and analysts can participate in the call
(833) 353-0277 or toll free (469) 886-1947 and using ID code number
4664137. Members of the media are invited to monitor the call by
dialing (833) 353-0277 or toll free (469) 886-1947 and using ID
code number 4664137. 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. 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 the global outbreak of novel coronavirus disease
(COVID-19); 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 2019
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 2020 and 2019
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. In addition,
senior management’s annual compensation is derived in part using
non-GAAP pretax income. 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
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.
4
2020 includes $832 million related to the
Seagen collaborations; 2019 represents a charge for the acquisition
of Peloton.
5
Includes the estimated tax impact on the
reconciling items, as well as a tax cost of $67 million,
representing an adjustment to the tax benefits recorded in
conjunction with the 2015 acquisition of Cubist Pharmaceuticals,
Inc.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP (AMOUNTS
IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED) Table 1
GAAP % Change GAAP % Change
3Q20
3Q19
Sep YTD2020 Sep YTD2019
Sales
$
12,551
$
12,397
1
%
$
35,479
$
34,972
1
%
Costs, Expenses and Other Cost
of sales (1)
3,481
3,990
-13
%
9,952
10,443
-5
%
Selling, general and administrative (1)
2,450
2,589
-5
%
7,383
7,726
-4
%
Research and development (1)
3,390
3,204
6
%
7,721
7,324
5
%
Restructuring costs (2)
114
232
-51
%
269
444
-39
%
Other (income) expense, net (1)
(312
)
35
*
(630
)
362
*
Income Before Taxes
3,428
2,347
46
%
10,784
8,673
24
%
Taxes on Income (1)
483
440
1,611
1,259
Net Income
2,945
1,907
54
%
9,173
7,414
24
%
Less: Net Income (Loss) Attributable to Noncontrolling Interests
(1)
4
6
12
(73
)
Net Income Attributable to Merck & Co., Inc.
$
2,941
$
1,901
55
%
$
9,161
$
7,487
22
%
Earnings per Common Share Assuming Dilution
$
1.16
$
0.74
57
%
$
3.61
$
2.89
25
%
Average Shares Outstanding Assuming Dilution
2,538
2,572
2,541
2,587
Tax Rate (3)
14.1
%
18.7
%
14.9
%
14.5
%
* 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) Represents separation and other related costs associated
with restructuring activities under the company's formal
restructuring programs. (3) 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 Therapeutics, Inc. 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.
MERCK & CO., INC. GAAP TO NON-GAAP
RECONCILIATION THIRD QUARTER 2020 (AMOUNTS IN
MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table
2a GAAP
Acquisition andDivestiture-Related Costs (1)
RestructuringCosts (2) Certain OtherItems (4)
AdjustmentSubtotal Non-GAAP
Cost of sales
$
3,481
285
38
323
$
3,158
Selling, general and administrative
2,450
207
15
222
2,228
Research and development
3,390
16
19
1,082
1,117
2,273
Restructuring costs
114
114
114
-
Other (income) expense, net
(312
)
(1
)
(1
)
(311
)
Income Before Taxes
3,428
(508
)
(186
)
(1,081
)
(1,775
)
5,203
Income Tax Provision (Benefit)
483
(17
)
(3)
(25
)
(3)
(247
)
(3)
(289
)
772
Net Income
2,945
(491
)
(161
)
(834
)
(1,486
)
4,431
Net Income Attributable to Merck & Co., Inc.
2,941
(491
)
(161
)
(834
)
(1,486
)
4,427
Earnings per Common Share Assuming Dilution
$
1.16
(0.19
)
(0.06
)
(0.33
)
(0.58
)
$
1.74
Tax Rate
14.1
%
14.8
%
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. In addition, senior
management’s annual compensation is derived in part using non-GAAP
pretax income. 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 expenses for the amortization of
intangible assets recognized as a result of business acquisitions.
Amount included in selling, general and administrative expenses
reflects $182 million related to the company's planned spin-off of
Organon & Co., and other acquisition and divestiture-related
costs. (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.
Acquisition and divestiture-related costs also includes a tax cost
of $67 million, representing an adjustment to the tax benefits
recorded in conjunction with the 2015 Cubist Pharmaceuticals, Inc.
acquisition. (4) Amount included in research and development
reflects expenses for upfront payments related to license and
collaboration agreements.
MERCK & CO., INC.
GAAP TO NON-GAAP RECONCILIATION NINE MONTHS ENDED
SEPTEMBER 30, 2020 (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
$
9,952
863
131
994
$
8,958
Selling, general and administrative
7,383
648
37
685
6,698
Research and development
7,721
(12
)
67
1,082
1,137
6,584
Restructuring costs
269
269
269
-
Other (income) expense, net
(630
)
52
(17
)
35
(665
)
Income Before Taxes
10,784
(1,551
)
(504
)
(1,065
)
(3,120
)
13,904
Income Tax Provision (Benefit)
1,611
(248
)
(3)
(59
)
(3)
(242
)
(3)
(549
)
2,160
Net Income
9,173
(1,303
)
(445
)
(823
)
(2,571
)
11,744
Net Income Attributable to Merck & Co., Inc.
9,161
(1,303
)
(445
)
(823
)
(2,571
)
11,732
Earnings per Common Share Assuming Dilution
$
3.61
(0.51
)
(0.18
)
(0.32
)
(1.01
)
$
4.62
Tax Rate
14.9
%
15.5
%
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. In addition, senior
management’s annual compensation is derived in part using non-GAAP
pretax income. 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 expenses for the amortization of
intangible assets recognized as a result of business acquisitions.
Amount included in selling, general and administrative expenses
reflects $466 million related to the company's planned spin-off of
Organon & Co., approximately $95 million of costs related to
the acquisition of ArQule, Inc., and other acquisition and
divestiture-related costs. 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 an increase in the
estimated fair value measurement of liabilities for contingent
consideration related to the termination of the Sanofi-Pasteur MSD
joint venture, partially offset by royalty income. (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. Acquisition and
divestiture-related costs also includes a tax cost of $67 million,
representing an adjustment to the tax benefits recorded in
conjunction with the 2015 Cubist Pharmaceuticals, Inc. acquisition.
(4) Amount included in research and development reflects
expenses for upfront payments related to license and collaboration
agreements.
MERCK & CO., INC. FRANCHISE / KEY PRODUCT
SALES (AMOUNTS IN MILLIONS) (UNAUDITED) Table
3
2020
2019
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)
$12,057
$10,872
$12,551
$35,479
$10,816
$11,760
$12,397
$34,972
$11,868
$46,840
1
2
1
3
PHARMACEUTICAL
10,655
9,679
11,320
31,654
9,663
10,460
11,095
31,218
10,533
41,751
2
2
1
3
Oncology Keytruda
3,284
3,388
3,715
10,387
2,269
2,634
3,070
7,973
3,111
11,084
21
21
30
31
Alliance Revenue – Lynparza (2)
145
178
196
519
79
111
123
313
132
444
59
58
66
67
Alliance Revenue – Lenvima (2)
128
151
142
421
74
97
109
280
124
404
30
29
50
50
Emend
43
33
39
115
117
121
98
336
53
388
-60
-59
-66
-65
Vaccines (3) Gardasil / Gardasil 9
1,097
656
1,187
2,941
838
886
1,320
3,044
693
3,737
-10
-10
-3
-2
ProQuad / M-M-R II / Varivax
435
378
576
1,390
496
675
623
1,794
481
2,275
-8
-7
-23
-22
Pneumovax 23
256
117
375
748
185
170
237
592
334
926
58
58
26
27
RotaTeq
222
168
210
601
211
172
180
564
227
791
16
17
7
8
Vaqta
60
28
51
139
47
58
62
167
71
238
-18
-17
-17
-15
Hospital Acute Care Bridion
299
224
320
843
255
278
284
817
313
1,131
13
13
3
4
Noxafil
94
73
79
247
190
193
177
560
103
662
-55
-55
-56
-55
Prevymis
60
63
77
200
32
38
45
115
50
165
72
69
74
74
Primaxin
51
64
74
189
59
71
77
207
67
273
-4
-4
-9
-7
Invanz
64
43
51
159
72
78
57
206
57
263
-10
-6
-23
-19
Cancidas
55
43
50
148
61
67
62
191
58
249
-20
-19
-22
-20
Cubicin
46
32
39
116
88
67
52
207
50
257
-26
-25
-44
-43
Zerbaxa
37
32
43
112
26
27
35
88
32
121
22
24
27
29
Immunology Simponi
215
191
209
615
208
214
203
625
205
830
3
-2
-1
Remicade
88
73
82
242
123
98
101
322
89
411
-19
-20
-25
-24
Neuroscience Belsomra
79
84
81
244
67
76
80
223
83
306
1
9
8
Virology Isentress / Isentress HD
245
196
205
646
255
247
250
752
223
975
-18
-18
-14
-12
Zepatier
55
39
28
122
114
108
83
304
66
370
-67
-67
-60
-59
Cardiovascular Zetia
145
137
103
384
140
156
147
443
146
590
-30
-30
-13
-13
Vytorin
53
39
47
139
97
76
57
231
54
285
-17
-16
-40
-38
Atozet
122
115
111
348
94
92
97
283
108
391
14
12
23
25
Alliance Revenue - Adempas (4)
53
79
83
216
42
51
50
144
60
204
67
67
50
50
Adempas (5)
56
57
55
167
48
53
57
158
57
215
-5
-7
6
6
Diabetes (6) Januvia
774
854
821
2,449
824
908
807
2,539
943
3,482
2
2
-4
-3
Janumet
503
490
506
1,499
530
533
503
1,567
475
2,041
2
-4
-2
Women's Health Implanon / Nexplanon
195
132
189
515
199
183
199
581
206
787
-5
-4
-11
-10
NuvaRing
63
63
58
184
219
240
241
700
179
879
-76
-76
-74
-73
Diversified Brands Singulair
155
100
82
338
191
160
152
503
195
698
-46
-46
-33
-32
Cozaar / Hyzaar
102
98
91
292
103
109
116
329
113
442
-21
-20
-11
-9
Arcoxia
70
65
68
204
75
75
72
221
67
288
-5
-2
-8
-5
Nasonex
71
49
41
161
96
72
58
226
67
293
-30
-29
-29
-27
Follistim AQ
41
44
50
136
57
63
62
182
58
241
-18
-18
-26
-25
Other Pharmaceutical (7)
1,194
1,103
1,186
3,478
1,082
1,203
1,149
3,431
1,183
4,615
3
4
1
3
ANIMAL HEALTH
1,214
1,101
1,220
3,535
1,025
1,124
1,122
3,271
1,122
4,393
9
12
8
12
Livestock
739
648
758
2,145
611
671
726
2,007
777
2,784
5
8
7
11
Companion Animals
475
453
462
1,390
414
453
396
1,264
345
1,609
17
18
10
12
Other Revenues (8)
188
92
11
290
128
176
180
483
213
696
-94
-33
-40
-12
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 $2,155 million, $1,418
million and $2,521 million in the first, second and third quarters
of 2020 and $1,887 million, $2,037 million, $2,517 million and
$1,928 million in the first, second, third and fourth quarters of
2019, respectively. (4) Alliance Revenue represents Merck's
share of profits from sales in Bayer's marketing territories, which
are product sales net of cost of sales and commercialization costs.
(5) Net product sales in Merck's marketing territories.
(6) Total Diabetes sales were $1,353 million, $1,418 million
and $1,405 million in the first, second and third quarters of 2020
and $1,402 million, $1,480 million, $1,360 million and $1,472
million in the first, second, third and fourth quarters of 2019,
respectively. (7) Includes Pharmaceutical products not
individually shown above. (8) 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/20201027005447/en/
Media:
Pamela Eisele (267) 305-3558 Patrick Ryan (201) 452-2409
Investors:
Peter Dannenbaum (908) 740-1037 Michael DeCarbo (908)
740-1807
Merck (NYSE:MRK)
Historical Stock Chart
From Mar 2024 to Apr 2024
Merck (NYSE:MRK)
Historical Stock Chart
From Apr 2023 to Apr 2024