- Fourth-Quarter and Full-Year 2022 Results Reflect Sustained
Strong Revenue Growth
- Fourth-Quarter 2022 Worldwide Sales Were $13.8 Billion, an
Increase of 2% From Fourth Quarter 2021; Growth Excluding the
Impact of Foreign Exchange Was 8%
- Fourth-Quarter 2022 GAAP EPS From Continuing Operations Was
$1.18; Fourth-Quarter 2022 Non-GAAP EPS Was $1.62
- Full-Year 2022 Worldwide Sales Were $59.3 Billion, an Increase
of 22% From Full Year 2021; Growth Excluding LAGEVRIO Was 12%;
Growth Excluding LAGEVRIO and the Impact of Foreign Exchange Was
15%
- KEYTRUDA Sales Grew 22% to $20.9 Billion; Excluding the Impact
of Foreign Exchange, Sales Grew 27%
- GARDASIL/GARDASIL 9 Sales Grew 22% to $6.9 Billion; Excluding
the Impact of Foreign Exchange, Sales Grew 27%
- Full-Year 2022 GAAP EPS From Continuing Operations Was $5.71;
Full-Year 2022 Non-GAAP EPS Was $7.48
- In 2022, Augmented Pipeline Through Strategic Business
Development, Including Acquisition of Imago and Key Agreements With
Moderna, Orna, Orion and Kelun-Biotech
- 2023 Financial Outlook
- Anticipates Full-Year 2023 Worldwide Sales To Be Between $57.2
Billion and $58.7 Billion; Outlook Includes Approximately $1.0
Billion of LAGEVRIO Sales
- Expects Full-Year 2023 GAAP EPS To Be Between $5.86 and $6.01;
Expects Non-GAAP EPS To Be Between $6.80 and $6.95
Merck (NYSE: MRK), known as MSD outside the United States and
Canada, today announced financial results for the fourth quarter
and full year of 2022.
"2022 was an exceptional year for Merck, which is a testament to
the profound impact our medicines and vaccines are having on
patients globally," said Robert M. Davis, chairman and chief
executive officer. “I am extremely proud of what our talented and
dedicated colleagues have accomplished scientifically, commercially
and operationally. Our science-led strategy is working as we
continue to build a sustainable engine that will drive innovation
and generate long-term value for patients and shareholders well
into the next decade.”
Financial Summary
Financial information presented in this release reflects Merck’s
results on a continuing operations basis, which excludes Organon
& Co. that was spun off in 2021.
$ in millions, except EPS
amounts
Fourth Quarter
Year Ended
2022
2021
Change
Change
Ex-Exchange
Dec. 31,
2022
Dec. 31,
2021
Change
Change
Ex-Exchange
Sales
$13,830
$13,521
2%
8%
$59,283
$48,704
22%
26%
GAAP net income1
3,017
3,820
-21%
-17%
14,519
12,345
18%
21%
Non-GAAP net income that excludes certain
items1,2*
4,129
4,592
-10%
-7%
19,005
13,623
40%
43%
GAAP EPS
1.18
1.51
-22%
-17%
5.71
4.86
17%
21%
Non-GAAP EPS that excludes certain
items2*
1.62
1.81
-10%
-7%
7.48
5.37
39%
43%
*Refer to table on page 11.
Generally Accepted Accounting Principles (GAAP) earnings per
share (EPS) assuming dilution was $1.18 for the fourth quarter and
$5.71 for the full year of 2022. Non-GAAP EPS was $1.62 for the
fourth quarter and $7.48 for the full year of 2022. The declines in
GAAP and non-GAAP EPS in the fourth quarter versus the prior year
were primarily due to lower fourth quarter 2021 effective tax rates
and the unfavorable impact of foreign exchange, partially offset by
strong underlying business performance. The GAAP EPS decline in the
fourth quarter also reflects the unfavorable impact of losses from
investments in equity securities compared with gains in the prior
year. Full-year 2022 and 2021 GAAP and non-GAAP EPS were negatively
impacted by $0.22 and $0.65, respectively, related to an asset
acquisition, and collaboration and licensing agreements.
Non-GAAP EPS excludes acquisition- and divestiture-related costs
(including pretax intangible asset impairment research and
development [R&D] charges of $780 million and $1.7 billion in
the fourth quarter and full year of 2022, respectively, largely
related to nemtabrutinib) and restructuring costs, as well as
income and losses from investments in equity securities.
In 2022, the company changed the treatment of certain items for
purposes of its non-GAAP reporting. Results for 2021 have been
recast to conform to the new presentation. For more information,
refer to the Form 8-K filed by the company on April 21, 2022.
Oncology Program
Highlights
- Merck announced the following regulatory and clinical
milestones for KEYTRUDA (pembrolizumab), Merck’s anti-PD-1 therapy:
- KEYTRUDA approved by the U.S. Food and Drug Administration
(FDA) as adjuvant treatment following resection and platinum-based
chemotherapy for adult patients with stage IB (T2a ≥4 centimeters),
II, or IIIA non-small cell lung cancer (NSCLC), based on the
pivotal Phase 3 KEYNOTE-091 trial.
- In collaboration with Moderna, Inc. (Moderna), positive topline
results from the Phase 2b KEYNOTE-942/mRNA-4157-P201 trial, which
showed that KEYTRUDA in combination with mRNA-4157/V940, an
investigational personalized mRNA therapeutic cancer vaccine,
demonstrated a statistically significant and clinically meaningful
improvement in the primary endpoint of recurrence-free survival
versus KEYTRUDA alone for the adjuvant treatment of patients with
stage III/IV melanoma following complete resection.
- In collaboration with Seagen Inc. and Astellas Pharma Inc.,
acceptance by the FDA for priority review of the supplemental
Biologics License Application for KEYTRUDA in combination with
Padcev®3 (enfortumab vedotin-ejfv) for the treatment of patients
with locally advanced or metastatic urothelial cancer who are not
eligible to receive cisplatin-containing chemotherapy.
- Positive topline results from the pivotal Phase 3 KEYNOTE-859
trial investigating KEYTRUDA in combination with chemotherapy for
the first-line treatment of patients with human epidermal growth
factor receptor 2 (HER2)-negative locally advanced unresectable or
metastatic gastric or gastroesophageal junction
adenocarcinoma.
- Positive topline results from the Phase 3 KEYNOTE-966 trial
investigating KEYTRUDA in combination with standard of care
chemotherapy (gemcitabine and cisplatin) for the first-line
treatment of patients with advanced or unresectable biliary tract
cancer.
- Merck announced that Lynparza (olaparib), an oral PARP
inhibitor being co-developed and co-commercialized with
AstraZeneca, was approved in the European Union (EU) in combination
with abiraterone and prednisone or prednisolone for the treatment
of adult patients with metastatic castration-resistant prostate
cancer in whom chemotherapy is not clinically indicated, based on
the Phase 3 PROpel trial.
Vaccine Program
Highlights
- Merck announced that an updated systematic literature review of
138 peer-reviewed studies observed that use of GARDASIL [Human
Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine,
Recombinant] led to reductions in the rates of high-grade
(precancerous) and low-grade cervical lesions, as well as
reductions in certain non-cervical HPV-related diseases and HPV
infection in women and men.
Cardiovascular Program
Highlights
- Merck will present results from the Phase 3 STELLAR study
evaluating investigational sotatercept for the treatment of
patients with pulmonary arterial hypertension, and from the Phase 2
study evaluating MK-0616, the company’s investigational oral
macrocyclic peptide PCSK9 inhibitor for the treatment of patients
with hypercholesterolemia, at the American College of Cardiology’s
72nd Annual Scientific Session together with the World Heart
Federation’s World Congress of Cardiology (ACC.23/WCC). Merck will
host an investor event at ACC.23/WCC on March 6, 2023, to discuss
these results. Further details will be announced at a later
date.
Business Development
Highlights
- Merck announced and successfully completed the acquisition of
Imago BioSciences, Inc. (Imago), for an approximate total equity
value of $1.35 billion, expanding Merck’s growing hematology
portfolio.
- Merck announced that it has expanded its relationship and
entered into an exclusive license and collaboration agreement with
Kelun-Biotech (a holding subsidiary of Sichuan Kelun Pharmaceutical
Co., Ltd) to develop up to seven investigational preclinical
antibody-drug conjugates (ADCs) for the treatment of cancer.
Environmental, Social and Governance
(ESG) Updates
- Merck was named one of America’s most JUST companies by JUST
Capital and CNBC, ranking No. 1 in the pharmaceuticals and biotech
industry for the third straight year and No. 26 overall of all
companies named.
- Merck published its Sustainability Bond Allocation Report,
which highlighted how the company’s initial $1.0 billion
sustainability bond is helping to drive progress across ESG focus
areas.
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
2022
2021
Change
Change
Ex-Exchange
Dec. 31,
2022
Dec. 31,
2021
Change
Change
Ex-Exchange
Total Sales
$13,830
$13,521
2%
8%
$59,283
$48,704
22%
26%
Pharmaceutical
12,180
12,039
1%
9%
52,005
42,754
22%
28%
KEYTRUDA
5,450
4,577
19%
26%
20,937
17,186
22%
27%
GARDASIL / GARDASIL 9
1,470
1,528
-4%
6%
6,897
5,673
22%
27%
LAGEVRIO
825
952
-13%
2%
5,684
952
***
***
JANUVIA / JANUMET
913
1,393
-34%
-29%
4,513
5,288
-15%
-9%
PROQUAD, M-M-R II and VARIVAX
526
509
3%
6%
2,241
2,135
5%
7%
BRIDION
441
436
1%
7%
1,685
1,532
10%
16%
Lynparza*
292
268
9%
14%
1,116
989
13%
18%
Lenvima*
216
206
5%
9%
876
704
24%
28%
ROTATEQ
139
213
-35%
-31%
783
807
-3%
0%
SIMPONI
166
206
-19%
-8%
706
825
-14%
-4%
Animal Health
1,230
1,261
-2%
6%
5,550
5,568
0%
6%
Livestock
814
791
3%
12%
3,300
3,295
0%
7%
Companion Animals
416
470
-11%
-5%
2,250
2,273
-1%
4%
Other Revenues**
420
221
90%
-25%
1,728
382
***
87%
*Alliance revenue for this
product represents Merck’s share of profits, which are product
sales net of cost of sales and commercialization costs.
**Other revenues are comprised
primarily of revenues from third-party manufacturing arrangements
and miscellaneous corporate revenues, including revenue-hedging
activities.
***>100%
Pharmaceutical Revenue
Fourth-quarter pharmaceutical sales grew 1% to $12.2 billion.
Excluding the unfavorable impact of foreign exchange,
pharmaceutical sales grew 9%, primarily driven by oncology and
hospital acute care, partially offset by diabetes.
Growth in oncology was largely driven by higher sales of
KEYTRUDA, which rose 19% to $5.5 billion in the quarter. Global
sales growth of KEYTRUDA reflects continued strong momentum from
metastatic indications including certain types of NSCLC, renal cell
carcinoma, head and neck squamous cell carcinoma, triple-negative
breast cancer (TNBC) and microsatellite instability-high (MSI-H)
cancers, and increased uptake across recent earlier-stage launches,
including certain types of neoadjuvant/adjuvant TNBC in the U.S.
Also contributing to growth in oncology was increased alliance
revenue from Lynparza, which grew 9% to $292 million, driven
primarily by higher demand in the U.S. In addition, sales of
WELIREG (belzutifan), an oral hypoxia-inducible factor-2 alpha
inhibitor, increased to $40 million due to continued uptake in the
U.S. following the product’s launch in 2021.
Growth in hospital acute care reflects higher sales of ZERBAXA
(ceftolozane and tazobactam), a combination cephalosporin
antibacterial and beta-lactamase inhibitor for the treatment of
patients with certain bacterial infections. ZERBAXA sales of $49
million in the fourth quarter of 2022 increased from $10 million in
the fourth quarter of 2021, reflecting uptake from the completion
of the phased resupply in 2022 that was initiated in the fourth
quarter of 2021. Growth in hospital acute care also reflects higher
sales of PREVYMIS (letermovir), a medicine for prophylaxis of CMV
infection and disease in adult CMV-seropositive recipients of an
allogenic hematopoietic stem cell transplant, which increased 17%
to $118 million, reflecting higher demand globally.
Vaccines sales performance reflects lower combined sales of
GARDASIL and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine,
Recombinant), vaccines to prevent certain cancers and other
diseases caused by HPV, which declined 4% to $1.5 billion.
Excluding the unfavorable impact of foreign exchange,
GARDASIL/GARDASIL 9 sales grew 6%, reflecting higher demand outside
of the U.S., particularly in China. Vaccines sales performance also
reflects lower sales of PNEUMOVAX 23 (pneumococcal vaccine
polyvalent), a vaccine to help prevent pneumococcal disease, which
declined 50% to $145 million, primarily reflecting lower U.S.
demand as the market continues to shift toward newer adult
pneumococcal conjugate vaccines. In addition, sales of ROTATEQ
(Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help
protect against rotavirus gastroenteritis in infants and children,
declined 35% to $139 million, primarily due to lower sales in
China, which benefited in the fourth quarter of 2021 from increased
supply, and lower sales in the U.S. largely due to the timing of
public-sector purchases. Vaccines sales performance benefited from
the ongoing pediatric launch of VAXNEUVANCE (Pneumococcal 15-valent
Conjugate Vaccine), a vaccine to help prevent invasive pneumococcal
disease, which had sales of $138 million, largely due to inventory
stocking in the U.S.
Pharmaceutical sales growth was partially offset by lower
combined sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin
and metformin HCI), for the treatment of type 2 diabetes, which
declined 34% to $913 million, primarily reflecting generic
competition in certain international markets, particularly in
Europe and the Asia Pacific region, and lower demand and net
pricing in the U.S.
Sales of LAGEVRIO (molnupiravir), an investigational oral
antiviral COVID-19 medicine, decreased 13% to $825 million.
Excluding the unfavorable impact of foreign exchange, sales
increased 2%, primarily driven by strong growth in Japan and the
U.K. and the launch in Australia, offset by a decline in the
U.S.
Full-year 2022 pharmaceutical sales grew 22% to $52.0 billion.
Pharmaceutical sales growth was 16% excluding LAGEVRIO and the
unfavorable impact of foreign exchange, primarily driven by higher
sales in oncology, particularly KEYTRUDA, higher sales of vaccines,
reflecting strong growth of GARDASIL/GARDASIL 9 and the ongoing
pediatric launch of VAXNEUVANCE, as well as growth in hospital
acute care products, including ZERBAXA and BRIDION (sugammadex)
injection 100 mg/mL, a medicine for the reversal of neuromuscular
blockade induced by rocuronium bromide or vecuronium bromide in
adults and pediatric patients ages 2 years and older undergoing
surgery. Pharmaceutical sales growth in 2022 was partially offset
by lower sales of JANUVIA and JANUMET, primarily reflecting lower
demand in Europe as a result of generic competition, and a decline
in PNEUMOVAX 23 sales as the U.S. market continues to shift toward
newer adult pneumococcal conjugate vaccines. COVID-19-related
disruptions negatively affected sales in 2022, but to a lesser
extent than in 2021, which benefited year-over-year sales
growth.
Animal Health Revenue
Animal Health sales totaled $1.2 billion for the fourth quarter
of 2022, a 2% decline compared with the fourth quarter of 2021.
Excluding the unfavorable effect of foreign exchange, Animal Health
sales increased 6%. Sales growth of livestock products reflects
higher demand, notably in the ruminant and poultry product
portfolio, which includes technology solutions products, as well as
higher pricing. Sales of companion animal products were negatively
impacted by a reduction in veterinary visits in the broader
companion animal market following the more favorable trend during
the pandemic, as well as supply constraints for certain vaccines,
partially offset by higher pricing.
Full-year 2022 Animal Health sales were $5.5 billion, in line
with the prior year. Excluding the unfavorable effect of foreign
exchange, Animal Health sales grew 6%, primarily due to higher
pricing. Full-year sales growth was also driven by higher demand of
livestock products, led by ruminant, poultry and swine products.
Sales of companion animal products also reflect higher demand for
the BRAVECTO (fluralaner) parasiticide line of products, which had
sales of $1.0 billion, partially offset by supply constraints for
certain vaccines.
Fourth-Quarter and Full-Year Expense,
EPS and Related Information
The tables below present selected expense information.
$ in millions
Fourth Quarter 2022
GAAP
Acquisition-
and
Divestiture-
Related Costs4
Restructuring
Costs
(Income) Loss
From
Investments in
Equity
Securities
Certain
Other
Items
Non-
GAAP2
Cost of sales
$3,881
$482
$38
$-
$-
$3,361
Selling, general and
administrative
2,687
39
20
-
-
2,628
Research and development
3,775
740
-
-
-
3,035
Restructuring costs
49
-
49
-
-
-
Other (income) expense, net
(75)
(69)
-
80
-
(86)
Fourth Quarter 2021
Cost of sales
$3,873
$419
$47
$-
$(4)
$3,411
Selling, general and
administrative
2,830
226
10
-
-
2,594
Research and development
3,068
397
7
-
-
2,664
Restructuring costs
174
-
174
-
-
-
Other (income) expense, net
(333)
(3)
-
(381)
-
51
$ in millions
Year Ended Dec. 31, 2022
GAAP
Acquisition-
and
Divestiture-
Related Costs4
Restructuring
Costs
(Income) Loss
From
Investments in
Equity
Securities
Certain
Other
Items
Non-
GAAP2
Cost of sales
$17,411
$2,059
$205
$-
$-
$15,147
Selling, general and administrative
10,042
176
94
-
-
9,772
Research and development
13,548
1,676
30
-
-
11,842
Restructuring costs
337
-
337
-
-
-
Other (income) expense, net
1,501
(207)
-
1,348
-
360
Year Ended Dec. 31, 2021
Cost of sales
$13,626
$1,607
$160
$-
$221
$11,638
Selling, general and administrative
9,634
322
19
-
-
9,293
Research and development
12,245
479
28
-
-
11,738
Restructuring costs
661
-
661
-
-
-
Other (income) expense, net
(1,341)
76
-
(1,884)
-
467
GAAP Expense, EPS and Related
Information
Gross margin was 71.9% for the fourth quarter of 2022 compared
with 71.4% for the fourth quarter of 2021. The increase primarily
reflects favorable product mix and foreign exchange. Gross margin
was 70.6% for the full year of 2022 compared to 72.0% for the full
year of 2021. The decline primarily reflects the unfavorable
impacts of higher amortization of intangible assets, as well as
higher revenue from third-party manufacturing arrangements and
sales of LAGEVRIO, both of which have lower gross margins. The
full-year gross margin decline was partially offset by the
favorable effects of product mix, foreign exchange and charges in
the prior year related to the discontinuation of COVID-19
development programs.
Selling, general and administrative (SG&A) expenses were
$2.7 billion in the fourth quarter of 2022, a decrease of 5%
compared to the fourth quarter of 2021. The decrease primarily
reflects lower acquisition- and divestiture-related costs and the
favorable effect of foreign exchange, partially offset by higher
promotional spending, as well as higher administrative costs.
Full-year SG&A expenses were $10.0 billion, an increase of 4%
compared to the full year of 2021. The increase primarily reflects
higher administrative costs, as well as higher promotional
spending, partially offset by the favorable impact of foreign
exchange and lower acquisition- and divestiture-related costs.
R&D expenses were $3.8 billion in the fourth quarter of
2022, an increase of 23% compared to the fourth quarter of 2021.
The increase was primarily driven by higher intangible asset
impairment charges related to nemtabrutinib, which were $780
million in the fourth quarter of 2022 compared with $275 million in
the fourth quarter of 2021, lower reimbursement of LAGEVRIO R&D
costs from Ridgeback Biotherapeutics (Ridgeback), higher
compensation and benefit costs reflecting in part increased
headcount to support expanded clinical development activity, and
higher clinical development spending. R&D expenses were $13.5
billion for the full year of 2022, an increase of 11% compared with
the full year of 2021. The increase was primarily driven by higher
intangible asset impairment charges, which were $1.7 billion in
2022 compared with $275 million in 2021, largely related to
nemtabrutinib, $690 million of charges in 2022 related to
collaboration and licensing agreements with Moderna, Orna
Therapeutics (Orna) and Orion Corporation (Orion), as well as
higher compensation and benefit costs and clinical development
spending. The increase was partially offset by a $1.7 billion
charge in the prior year for the acquisition of Pandion
Therapeutics, Inc. (Pandion).
Other (income) expense, net, was $75 million of income in the
fourth quarter of 2022 compared to $333 million of income in the
fourth quarter of 2021. Other (income) expense, net, was $1.5
billion of expense in the full year of 2022 compared to $1.3
billion of income in the full year of 2021. The change in both
periods is primarily due to net losses from investments in equity
securities in 2022 compared with net gains from investments in
equity securities in 2021.
The effective tax rate for the fourth quarter of 2022 of 14.1%
reflects the unfavorable impact of a higher than anticipated
full-year rate of 11.7% due to a less favorable mix of income and
expense than previously anticipated, while the effective tax rate
for the fourth quarter of 2021 of 2.2% reflects the favorable
impact of a lower than previously expected full-year 2021 rate of
11.0%.
GAAP EPS was $1.18 for the fourth quarter of 2022 compared to
$1.51 for the fourth quarter of 2021. GAAP EPS was $5.71 for the
full year of 2022 compared to $4.86 for the full year of 2021.
Non-GAAP Expense, EPS and Related
Information
Non-GAAP gross margin was 75.7% for the fourth quarter of 2022
compared to 74.8% for the fourth quarter of 2021. The increase
primarily reflects the favorable effects of product mix and foreign
exchange. Non-GAAP gross margin was 74.4% for the full year of 2022
compared to 76.1% for the full year of 2021. The decrease primarily
reflects the impact of higher revenue from third-party
manufacturing arrangements and sales of LAGEVRIO, both of which
have lower gross margins, partially offset by the favorable effects
of product mix and foreign exchange.
Non-GAAP SG&A expenses were $2.6 billion in the fourth
quarter of 2022, an increase of 1% compared to the fourth quarter
of 2021. Non-GAAP SG&A expenses for the full year were $9.8
billion, an increase of 5% compared to the full year of 2021. The
increase in both periods primarily reflects higher administrative
costs, as well as higher promotional spending, partially offset by
the favorable impact of foreign exchange.
Non-GAAP R&D expenses were $3.0 billion in the fourth
quarter of 2022, an increase of 14% compared with the fourth
quarter of 2021. The increase was primarily driven by lower
reimbursement of LAGEVRIO R&D costs from Ridgeback, higher
compensation and benefit costs reflecting in part increased
headcount to support expanded clinical development activity, and
higher clinical development spending. Non-GAAP R&D expenses
were $11.8 billion for the full year of 2022, an increase of 1%
compared with the full year of 2021. The increase was primarily
driven by $690 million of charges in 2022 related to collaboration
and licensing agreements with Moderna, Orna and Orion, as well as
higher compensation and benefit costs and clinical development
spending. The increase was partially offset by a $1.7 billion
charge in the prior year for the acquisition of Pandion.
Non-GAAP other (income) expense, net, was $86 million of income
in the fourth quarter of 2022 compared to $51 million of expense in
the fourth quarter of 2021. Non-GAAP other (income) expense, net,
was $360 million of expense in the full year of 2022 compared to
$467 million of expense in the full year of 2021.
The non-GAAP effective tax rate for the fourth quarter of 2022
of 15.6% reflects the unfavorable impact of a higher than
anticipated full-year rate of 14.2% due to a less favorable mix of
income and expense than previously anticipated, while the non-GAAP
effective tax rate for the fourth quarter of 2021 of 4.3% reflects
the favorable impact of a lower than previously expected full-year
2021 rate of 12.4%.
Non-GAAP EPS was $1.62 for the fourth quarter of 2022 compared
to $1.81 for the fourth quarter of 2021. Non-GAAP EPS was $7.48 for
the full year of 2022 compared to $5.37 for the full year of
2021.
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
2022
2021
Dec. 31, 2022
Dec. 31, 2021
EPS
GAAP EPS
$1.18
$1.51
$5.71
$4.86
Difference
0.44
0.30
1.77
0.51
Non-GAAP EPS that excludes items listed
below2
$1.62
$1.81
$7.48
$5.37
Net Income
GAAP net income1
$3,017
$3,820
$14,519
$12,345
Difference
1,112
772
4,486
1,278
Non-GAAP net income that excludes items
listed below1,2
$4,129
$4,592
$19,005
$13,623
Decrease (Increase) in Net Income Due
to Excluded Items:
Acquisition- and divestiture-related
costs4
$1,192
$1,039
$3,704
$2,484
Restructuring costs
107
238
666
868
Loss (income) from investments in equity
securities
80
(381)
1,348
(1,884)
Charges for the discontinuation of
COVID-19 development programs
-
-
-
221
Other
-
(4)
-
-
Net decrease (increase) in income before
taxes
1,379
892
5,718
1,689
Income tax (benefit) expense5
(267)
(120)
(1,232)
(411)
Decrease (increase) in net income
$1,112
$772
$4,486
$1,278
Financial Outlook
The following table summarizes the company’s full-year 2023
financial guidance.
GAAP
Non-GAAP2
Revenue*
$57.2 to $58.7 billion
$57.2 to $58.7 billion
Gross margin
Approximately 73%
Approximately 77%
Operating expenses**
$23.3 to $24.3 billion
$23.1 to $24.1 billion
Effective tax rate
17% to 18%
17% to 18%
EPS***
$5.86 to $6.01
$6.80 to $6.95
*Includes approximately $1.0
billion of LAGEVRIO sales. The company does not have any non-GAAP
adjustments to revenue.
**Includes an aggregate $1.4
billion of R&D expenses related to the Imago acquisition and
upfront payment for a license and collaboration agreement with
Kelun-Biotech.
***Includes $0.53 of charges
related to the Imago acquisition and upfront payment to
Kelun-Biotech. EPS guidance for 2023 assumes a share count
(assuming dilution) of approximately 2.55 billion shares.
Merck anticipates full-year 2023 revenue to be between $57.2
billion and $58.7 billion, including a negative impact of foreign
exchange of approximately 2% at mid-January 2023 exchange rates.
The company expects a significant decline in sales of LAGEVRIO,
which are expected to be approximately $1.0 billion.
Merck expects full-year 2023 GAAP EPS to be between $5.86 and
$6.01.
Merck expects full-year 2023 non-GAAP EPS to be between $6.80
and $6.95, including a negative impact of foreign exchange of
approximately 4%. The non-GAAP range excludes acquisition- and
divestiture-related costs, costs related to restructuring programs,
as well as income and losses from investment in equity
securities.
In the fourth quarter of 2022, Merck announced the acquisition
of Imago for an approximate total value of $1.35 billion and a
license and collaboration agreement with Kelun-Biotech, which
includes an upfront payment of $175 million. The Imago acquisition
closed in January 2023 and the collaboration with Kelun-Biotech is
expected to close in the first quarter of 2023, resulting in the
inclusion of an aggregate $1.4 billion of R&D expenses in
Merck’s GAAP and non-GAAP results for the first quarter and full
year of 2023. The Imago acquisition is also anticipated to result
in an approximate 1 percentage point unfavorable impact to Merck’s
expected full-year 2023 GAAP and non-GAAP tax rates. The impact of
these two transactions on expected full-year 2023 GAAP and non-GAAP
EPS is approximately $0.53. GAAP and non-GAAP EPS in 2022 were
negatively impacted by $0.22 of charges related to the
collaboration and licensing agreements with Moderna, Orna and
Orion.
Operating expenses include incremental R&D spending to
advance the development of the Imago and Kelun-Biotech programs, as
well as other promising programs related to the collaboration and
licensing agreements with Moderna, Orna and Orion.
The financial outlook does not assume additional significant
potential business development transactions.
A reconciliation of anticipated 2023 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 2023
GAAP EPS
$5.86 to $6.01
Difference
$0.94
Non-GAAP EPS that excludes items
listed below2
$6.80 to $6.95
Acquisition- and
divestiture-related costs
$2,500
Restructuring costs
400
(Income) loss from investments in
equity securities
(20)
Net decrease (increase) in income
before taxes
$2,880
Estimated income tax (benefit)
expense
(480)
Decrease (increase) in net
income
$2,400
Earnings Conference Call
Investors, journalists and the general public may access a live
audio webcast of the earnings conference call on Thursday, Feb. 2,
at 8:00 a.m. ET via this weblink. A replay of the webcast, along
with the sales and earnings news release, supplemental financial
disclosures, and slides highlighting the results, will be available
at www.merck.com.
All participants may join the call by dialing (888) 769-8514
(U.S. Toll-Free) or (517) 308-9208 (International) and using the
access code 8206435.
About Merck
At Merck, known as MSD outside of the United States and Canada,
we are unified around our purpose: We use the power of leading-edge
science to save and improve lives around the world. For more than
130 years, we have brought hope to humanity through the development
of important medicines and vaccines. We aspire to be the premier
research-intensive biopharmaceutical company in the world – and
today, we are at the forefront of research to deliver innovative
health solutions that advance the prevention and treatment of
diseases in people and animals. We foster a diverse and inclusive
global workforce and operate responsibly every day to enable a
safe, sustainable and healthy future for all people and
communities. 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., Rahway,
N.J., USA
This news release of Merck & Co., Inc., Rahway, 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 candidates that
the candidates 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 Annual
Report on Form 10-K for the year ended December 31, 2021, 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 from continuing operations
attributable to Merck & Co., Inc.
2 Merck is providing certain 2022 and 2021
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 because management uses non-GAAP results
to assess performance. Management uses non-GAAP 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 a
non-GAAP pre-tax income metric. 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 non-GAAP adjustments, see Table 2a attached to this release.
Non-GAAP results for 2021 have been recast to conform to
presentation changes implemented in 2022.
3 Registered trademark of Seagen and
Agensys.
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. R&D expenses include intangible asset
impairment charges of $780 million and $1.7 billion in fourth
quarter and full year 2022, respectively, and $275 million in both
fourth quarter and full year 2021, largely related to
nemtabrutinib, which was obtained as part of the 2020 acquisition
of ArQule, Inc. Also includes integration, transaction and certain
other costs related to acquisitions and divestitures.
5 Includes the estimated tax impact on the
reconciling items. In addition, the amount for full-year 2021
includes a $207 million net tax benefit related to the settlement
of certain federal income tax matters.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF
INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT
PER SHARE FIGURES)
(UNAUDITED)
Table 1
On June 2, 2021, Merck completed
the spinoff of products from its women’s health, biosimilars and
established brands businesses into a new, independent, publicly
traded company named Organon & Co. (Organon). The historical
results of the businesses that were contributed to Organon in the
spin-off are excluded from sales and expenses below and reflected
as discontinued operations in the company’s Consolidated Statements
of Income provided below.
GAAP
% Change
GAAP
% Change
4Q22
4Q21
Full Year
2022
Full Year
2021
Sales
$
13,830
$
13,521
2
%
$
59,283
$
48,704
22
%
Costs, Expenses and Other Cost of sales
3,881
3,873
0
%
17,411
13,626
28
%
Selling, general and administrative
2,687
2,830
-5
%
10,042
9,634
4
%
Research and development
3,775
3,068
23
%
13,548
12,245
11
%
Restructuring costs
49
174
-72
%
337
661
-49
%
Other (income) expense, net
(75
)
(333
)
-77
%
1,501
(1,341
)
* Income from Continuing Operations Before Taxes
3,513
3,909
-10
%
16,444
13,879
18
%
Income Tax Provision
495
85
1,918
1,521
Net Income from Continuing Operations
3,018
3,824
-21
%
14,526
12,358
18
%
Less: Net Income Attributable to Noncontrolling Interests
1
4
7
13
Net Income from Continuing Operations Attributable to Merck &
Co., Inc.
3,017
3,820
-21
%
14,519
12,345
18
%
(Loss) Income from Discontinued Operations, Net of Taxes and
Amounts Attributable to Noncontrolling Interests
-
(62
)
*
-
704
* Net Income Attributable to Merck & Co., Inc.
$
3,017
$
3,758
-20
%
$
14,519
$
13,049
11
%
Basic Earnings (Loss) per Common Share Attributable to Merck
& Co., Inc. Common Shareholders: Income from Continuing
Operations
$
1.19
$
1.51
-21
%
$
5.73
$
4.88
17
%
(Loss) Income from Discontinued Operations
-
(0.02
)
*
-
0.28
* Net Income
$
1.19
$
1.49
-20
%
$
5.73
$
5.16
11
%
Earnings (Loss) per Common Share Assuming Dilution
Attributable to Merck & Co., Inc. Common Shareholders: Income
from Continuing Operations
$
1.18
$
1.51
-22
%
$
5.71
$
4.86
17
%
(Loss) Income from Discontinued Operations
-
(0.02
)
*
-
0.28
* Net Income
$
1.18
$
1.48
-20
%
$
5.71
$
5.14
11
%
Average Shares Outstanding
2,536
2,527
2,532
2,530
Average Shares Outstanding Assuming Dilution
2,548
2,535
2,542
2,538
Tax Rate from Continuing Operations
14.1
%
2.2
%
11.7
%
11.0
%
* 100% or greater
MERCK & CO., INC. FOURTH QUARTER AND FULL YEAR 2022
GAAP TO NON-GAAP RECONCILIATION - CONTINUING OPERATIONS
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED) Table 2a
GAAP
Acquisition and
Divestiture-
Related Costs (1)
Restructuring Costs
(2)
(Income) Loss from
Investments in Equity
Securities
Adjustment Subtotal
Non-GAAP
Fourth Quarter Cost of sales
$
3,881
482
38
520
$
3,361
Selling, general and administrative
2,687
39
20
59
2,628
Research and development
3,775
740
740
3,035
Restructuring costs
49
49
49
-
Other (income) expense, net
(75
)
(69
)
80
11
(86
)
Income from Continuing Operations Before Taxes
3,513
(1,192
)
(107
)
(80
)
(1,379
)
4,892
Income Tax Provision (Benefit)
495
(222
)
(3)
(32
)
(3)
(13
)
(3)
(267
)
762
Net Income from Continuing Operations
3,018
(970
)
(75
)
(67
)
(1,112
)
4,130
Net Income from Continuing Operations Attributable to Merck &
Co., Inc.
3,017
(970
)
(75
)
(67
)
(1,112
)
4,129
Earnings per Common Share Assuming Dilution from Continuing
Operations
$
1.18
(0.38
)
(0.03
)
(0.03
)
(0.44
)
$
1.62
Tax Rate
14.1
%
15.6
%
Full Year Cost of sales
$
17,411
2,059
205
2,264
$
15,147
Selling, general and administrative
10,042
176
94
270
9,772
Research and development
13,548
1,676
30
1,706
11,842
Restructuring costs
337
337
337
-
Other (income) expense, net
1,501
(207
)
1,348
1,141
360
Income from Continuing Operations Before Taxes
16,444
(3,704
)
(666
)
(1,348
)
(5,718
)
22,162
Income Tax Provision (Benefit)
1,918
(809
)
(3)
(129
)
(3)
(294
)
(3)
(1,232
)
3,150
Net Income from Continuing Operations
14,526
(2,895
)
(537
)
(1,054
)
(4,486
)
19,012
Net Income from Continuing Operations Attributable to Merck &
Co., Inc.
14,519
(2,895
)
(537
)
(1,054
)
(4,486
)
19,005
Earnings per Common Share Assuming Dilution from Continuing
Operations
$
5.71
(1.14
)
(0.21
)
(0.42
)
(1.77
)
$
7.48
Tax Rate
11.7
%
14.2
%
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 non-GAAP information enhances investors’
understanding of the company’s results because management uses
non-GAAP measures to assess performance. Management uses non-GAAP
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 a non-GAAP pretax income metric. The non-GAAP
information presented should be considered in addition to, but not
as a substitute for or superior to, information prepared in
accordance with GAAP.
(1) Amounts included in cost of
sales primarily reflect expenses for the amortization of intangible
assets. Amounts included in selling, general and administrative
expenses reflect integration, transaction and certain other costs
related to acquisitions and divestitures. Amounts included in
research and development expenses for the fourth quarter and full
year primarily reflect $780 million and $1.7 billion, respectively,
of intangible asset impairment charges largely related to
nemtabrutinib, which was obtained as part of the 2020 ArQule, Inc.
acquisition, and expenses for the amortization of intangible
assets, partially offset by a reduction in expenses related to
changes in the estimated fair value of liabilities for contingent
consideration. Amounts included in other (income) expense, net, for
the fourth quarter and full year reflect royalty income and
decreases in the estimated fair value measurement of liabilities
for contingent consideration related to the prior 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
impacts on the reconciling items based on applying the statutory
rate of the originating territory of the non-GAAP adjustments.
MERCK & CO., INC. FRANCHISE / KEY PRODUCT SALES -
CONTINUING OPERATIONS (AMOUNTS IN MILLIONS)
(UNAUDITED) Table 3
2022
2021
4Q
Full Year
1Q
2Q
3Q
4Q
Full Year
1Q
2Q
3Q
4Q
Full Year
Nom %
Ex-Exch %
Nom %
Ex-Exch %
TOTAL SALES (1)
$15,901
$14,593
$14,959
$13,830
$59,283
$10,627
$11,402
$13,154
$13,521
$48,704
2
8
22
26
PHARMACEUTICAL
14,107
12,756
12,963
12,180
52,005
9,238
9,980
11,496
12,039
42,754
1
9
22
28
Oncology
Keytruda
4,809
5,252
5,426
5,450
20,937
3,899
4,176
4,534
4,577
17,186
19
26
22
27
Alliance Revenue – Lynparza (2)
266
275
284
292
1,116
228
248
246
268
989
9
14
13
18
Alliance Revenue – Lenvima (2)
227
231
202
216
876
130
181
188
206
704
5
9
24
28
Alliance Revenue – Reblozyl (3)
52
33
39
41
166
17
17
145
145
*
*
Vaccines (4)
Gardasil / Gardasil 9
1,460
1,674
2,294
1,470
6,897
917
1,234
1,993
1,528
5,673
-4
6
22
27
ProQuad / M-M-R II / Varivax
470
578
668
526
2,241
449
516
661
509
2,135
3
6
5
7
RotaTeq
216
173
256
139
783
158
208
227
213
807
-35
-31
-3
0
Pneumovax 23
173
153
131
145
602
171
152
277
292
893
-50
-47
-33
-30
Vaqta
36
35
64
39
173
34
56
48
41
179
-5
-2
-3
-2
Hospital Acute Care
Bridion
395
426
423
441
1,685
340
387
369
436
1,532
1
7
10
16
Prevymis
94
103
114
118
428
82
93
96
100
370
17
28
16
24
Dificid
52
66
77
67
263
27
34
54
60
175
12
12
50
50
Primaxin
58
64
63
54
239
65
60
70
65
259
-17
-7
-8
-4
Noxafil
57
60
62
58
238
67
66
64
62
259
-5
7
-8
-1
Invanz
52
46
50
40
189
57
48
53
45
202
-10
-2
-7
-1
Cancidas
53
42
43
36
174
57
54
56
45
212
-19
-10
-18
-14
Zerbaxa
30
46
43
49
169
(8)
(1)
(2)
10
(1)
*
*
*
*
Cardiovascular
Alliance Revenue - Adempas/Verquvo (5)
72
98
88
82
341
74
74
100
94
342
-12
-12
-
-
Adempas (6)
61
63
57
57
238
55
74
59
63
252
-10
6
-6
7
Virology
Lagevrio
3,247
1,177
436
825
5,684
952
952
-13
2
*
*
Isentress / Isentress HD
158
147
161
167
633
209
192
189
178
769
-7
-1
-18
-13
Neuroscience
Belsomra
69
69
62
59
258
79
78
81
80
318
-27
-14
-19
-9
Immunology
Simponi
186
181
173
166
706
214
202
203
206
825
-19
-8
-14
-4
Remicade
61
53
49
44
207
85
75
73
67
299
-34
-22
-31
-21
Diabetes (7)
Januvia
779
756
717
561
2,813
809
784
852
878
3,324
-36
-31
-15
-11
Janumet
454
476
417
353
1,700
486
477
487
514
1,964
-31
-25
-13
-7
Other Pharmaceutical (8)
520
479
564
685
2,249
554
512
518
533
2,118
29
37
6
12
ANIMAL HEALTH
1,482
1,467
1,371
1,230
5,550
1,418
1,472
1,417
1,261
5,568
-2
6
-
6
Livestock
832
826
829
814
3,300
819
821
864
791
3,295
3
12
-
7
Companion Animals
650
641
542
416
2,250
599
651
553
470
2,273
-11
-5
-1
4
Other Revenues (9)
312
370
625
420
1,728
(29)
(50)
241
221
382
90
-25
*
87
* 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) Alliance Revenue represents
royalties and a milestone payment.
(4) Total Vaccines sales were
$2,481 million, $2,709 million, $3,552 million and $2,554 million
in the first, second, third and fourth quarter of 2022,
respectively, and $1,809 million, $2,293 million, $3,315 million
and $2,715 million in the first, second, third and fourth quarter
of 2021, respectively.
(5) 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.
(6) Net product sales in Merck's
marketing territories.
(7) Total Diabetes sales were
$1,305 million, $1,300 million, $1,231 million and $1,012 million
in the first, second, third quarter and fourth quarter of 2022,
respectively, and $1,363 million, $1,330 million, $1,417 million
and $1,475 million in the first, second, third and fourth quarter
of 2021, respectively.
(8) Includes Pharmaceutical
products not individually shown above.
(9) Other Revenues are comprised
primarily of revenues from third-party manufacturing arrangements
and miscellaneous corporate revenues, including revenue-hedging
activities. Other Revenues related to the receipt of upfront and
milestone payments for out-licensed products were $114 million, $32
million, $10 million and $10 million in the first, second, third
and fourth quarter of 2022, respectively, and $56 million, $135
million and $27 million in the first, third and fourth quarter of
2021, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230202005285/en/
Media:
Robert Josephson (203) 914-2372 robert.josephson@merck.com
Michael Levey (215) 872-1462 michael.levey@merck.com
Investors:
Peter Dannenbaum (908) 740-1037 peter.dannenbaum@merck.com
Steven Graziano (908) 740-6582 steven.graziano@merck.com
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