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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Merck and Co Inc | NYSE:MRK | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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-0.16 | -0.13% | 127.35 | 55,898 | 13:39:11 |
Merck (NYSE:MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2015.
This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20160203005708/en/
“The past year was one of considerable progress and execution for Merck,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “I’m excited by the near-term opportunities, as we continue launching important new products like ZEPATIER and KEYTRUDA while augmenting and advancing our pipeline.”
Financial Summary Fourth Quarter Year Ended Dec. 31, Dec. 31, $ in millions, except EPS amounts 2015 2014 2015 2014 Sales $10,215 $10,482 $39,498 $42,237 GAAP EPS 0.35 2.54 1.56 4.07Non-GAAP EPS that excludes items listed below1
0.93 0.87 3.59 3.49GAAP net income2
976 7,316 4,442 11,920 Non-GAAP net income that excludes items listed below1,2 2,608 2,504 10,195 10,215Non-GAAP (generally accepted accounting principles) earnings per share (EPS) of $0.93 for the fourth quarter and $3.59 for the full year of 2015 exclude acquisition- and divestiture-related costs, restructuring costs and certain other items, as well as a net charge to settle Vioxx shareholder class action litigation.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow.
Fourth Quarter Year Ended Dec. 31, Dec. 31, $ in millions, except EPS amounts 2015 2014 2015 2014 EPS GAAP EPS $0.35 $2.54 $1.56 $4.07Difference3
0.58 (1.67) 2.03 (0.58) Non-GAAP EPS that excludes items listed below1 $ 0.93 $0.87 $3.59 $3.49 Net Income GAAP net income2 $976 $7,316 $4,442 $11,920 Difference 1,632 (4,812) 5,753 (1,705) Non-GAAP net income that excludes items listed below1,2 $2,608 $2,504 $10,195 $10,215 Decrease (Increase) in Net Income Due to Excluded Items:Acquisition- and divestiture-related costs4
$ 1,264 $1,394 $5,398 $5,946 Restructuring costs 340 619 1,110 1,978 Net charge to settle Vioxx shareholder class action litigation 680 – 680 – Foreign exchange losses related to Venezuela 161 – 876 – Loss on extinguishment of debt – 628 – 628 Additional year of health care reform fee – – – 193 Gain on divestiture of certain ophthalmic products (147) (84) (147) (480) Gain on divestiture of certain migraine clinical development programs – – (250) – Gain on sale of Merck Consumer Care – (11,209) – (11,209) Gain on AstraZeneca option exercise – – – (741) Other 13 (14) (34) (9) Net decrease (increase) in income before taxes 2,311 (8,666) 7,633 (3,694)Income tax (benefit) expense5
(679) 3,854 (1,880) 2,045 Acquisition- and divestiture-related costs attributable to non-controlling interests – – – (56) Decrease (increase) in net income $1,632 $(4,812) $5,753 $(1,705)1 Merck is providing certain 2015 and 2014 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 performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP. For description of the items, see Tables 2a and 2b, including the related footnotes, attached to this release.
2 Net income attributable to Merck & Co., Inc.
3 Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the period.
4 Includes expenses for the amortization of intangible assets 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 costs, as well as transaction and certain other costs related to business acquisitions and divestitures.
5 Includes the estimated tax impact on the reconciling items. In addition, amounts for fourth-quarter and full-year 2015 include net benefits of $40 million and $410 million, respectively, related to the settlement of certain federal income tax issues. Additionally, amount for full-year 2014 includes a net benefit of $517 million recorded in connection with AstraZeneca’s option exercise, as well as a benefit of approximately $300 million associated with a capital loss generated in the first quarter.
Additional Executive Commentary
“In 2016 we will build upon the strong foundation we established last year. We will continue to invest resources to launch and grow our strongest brands, support the most promising internal assets, enhance our pipeline with the best available external science and maintain a balanced and differentiated portfolio, with the goal of delivering long-term growth and shareholder value,” said Frazier.
“Global Human Health delivered a solid performance in 2015,” said Adam Schechter, president, Global Human Health, Merck. “In 2016 we will continue to prioritize resources focusing on JANUVIA, on our key launches, including KEYTRUDA and ZEPATIER, and on our hospital acute care and vaccines businesses.”
“We will pursue numerous filings and approvals in 2016,” said Dr. Roger M. Perlmutter, president, Merck Research Laboratories. “For example, we view KEYTRUDA as foundational in the next-generation treatment of malignant disease, and hence have embarked upon an exceptionally broad development program for this agent, with registration-enabling studies underway in more than a dozen tumor types. We will also pursue more than 100 studies involving combinations of KEYTRUDA with other drugs.”
“The fourth quarter was a strong finish to a solid year of execution. We expect this momentum to continue into 2016, as we further innovate in our labs, invest behind our launches and continue our focus on disciplined resource allocation and continuous productivity to deliver a leveraged P&L and shareholder returns,” said Robert Davis, chief financial officer, Merck.
Select Business Highlights
Worldwide sales were $10.2 billion for the fourth quarter of 2015, a decrease of 3 percent compared with the fourth quarter of 2014, including a 7 percent negative impact from foreign exchange and a 3 percent net positive impact primarily from the acquisition of Cubist Pharmaceuticals, Inc. (Cubist). Full-year 2015 worldwide sales were $39.5 billion, a decrease of 6 percent compared with the full year of 2014, including a 6 percent negative impact from foreign exchange and a 3 percent net negative impact resulting from the divestiture of the Consumer Care business and select products, partially offset by the Cubist acquisition.
The following table reflects sales of the company’s top pharmaceutical products, as well as total sales of Animal Health and Consumer Care products.
$ in millions
Fourth QuarterChange
ChangeEx-
Exchange
Year Ended Change ChangeEx-
Exchange
2015 2014 Dec. 31,2015
Dec. 31,2014
Total Sales $10,215 $10,482 -3% 4% $39,498 $42,237 -6% 0% Pharmaceutical 9,027 9,370 -4% 4% 34,782 36,042 -3% 4%JANUVIA /JANUMET
1,447 1,652 -12% -6% 6,014 6,002 0% 7%ZETIA /VYTORIN
999 1,032 -3% 4% 3,777 4,166 -9% -2%GARDASIL /GARDASIL 9
497 356 40% 42% 1,908 1,738 10% 11% PROQUAD, M-M-R II and VARIVAX 409 366 12% 14% 1,505 1,394 8% 10% REMICADE 396 557 -29% -18% 1,794 2,372 -24% -10% ISENTRESS 374 418 -11% -4% 1,511 1,673 -10% -2% CUBICIN 322 7* ** ** 1,127 25* ** ** SINGULAIR 273 319 -14% -7% 931 1,092 -15% -5% ZOSTAVAX 246 285 -14% -11% 749 765 -2% 0% NASONEX 231 268 -14% -8% 858 1,099 -22% -16% KEYTRUDA 214 50 ** ** 566 55 ** ** Animal Health 830 885 -6% 8% 3,324 3,454 -4% 9% Consumer Care*** – 16 ** ** 3 1,547 ** ** Other Revenues 358 211 69% 19% 1,389 1,194 16% -33% *Reflects licensing agreement with Cubist in Japan prior to acquisition by Merck on Jan. 21, 2015 **≥100% ***divested on Oct. 1, 2014Commercial and Pipeline Highlights
The company continued to make steady progress in advancing its late-stage pipeline, achieving key regulatory approvals and expanded indications for multiple products across its portfolio.
Pharmaceutical Revenue Performance
Fourth-quarter pharmaceutical sales declined 4 percent to $9.0 billion, including an 8 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by sales in hospital acute care, oncology and vaccines. Growth in hospital acute care was driven by the addition of the Cubist portfolio and sales growth of certain inline brands. Growth in oncology reflects higher sales of KEYTRUDA. Growth in vaccines reflects higher sales of GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), a vaccine to prevent cancers and other diseases caused by HPV, reflecting an increase in sales in the United States primarily due to public sector purchases, and higher sales of PROQUAD (Measles, Mumps, Rubella and Varicella Vaccine Live) driven by the timing of sales activity related to the Pediatric Vaccine Stockpile of the U.S. Centers for Disease Control and Prevention.
Fourth-quarter pharmaceutical sales reflect a decrease in PNEUMOVAX 23 (pneumococcal vaccine polyvalent), due to near-term market dynamics in the United States and the timing of vaccinations linked to the National Immunization Program in Japan, as well as lower sales in the diabetes franchise of JANUVIA (sitagliptin)/JANUMET (sitagliptin and metformin HCl), medicines that help lower blood sugar in adults with type 2 diabetes, driven in large part by an expected decline due to the timing of customer purchases in the third quarter of 2015. Pharmaceutical sales also reflect declines in REMICADE (infliximab), a treatment for inflammatory diseases, due to loss of exclusivity and the accelerating impact of biosimilar competition in the company’s marketing territories in Europe, and PEGINTRON (peginterferon alfa-2b), a medicine to treat chronic HCV.
Full-year 2015 pharmaceutical sales declined 3 percent to $34.8 billion, including a 7 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by sales in hospital acute care, oncology, diabetes and vaccines.
Animal Health Revenue Performance
Animal Health sales totaled $830 million for the fourth quarter of 2015, a decrease of 6 percent compared with the fourth quarter of 2014, including a 14 percent negative impact from foreign exchange. Worldwide sales for the full year of 2015 were $3.3 billion, a decrease of 4 percent, including a 13 percent negative impact from foreign exchange. Excluding the impact of exchange, growth in both periods was primarily driven by an increase in sales of companion animal products, including continued strong growth from BRAVECTO (fluralaner), a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks, and aqua and swine products.
Fourth-Quarter and Full-Year 2015 Expense and Other Information
The tables below present selected expense information for the fourth quarter and full year of 2015.
$ in millions Included in expenses for the period Acquisition- and Fourth Quarter Divestiture- Restructuring 2015 GAAPRelated Costs4
Costs Non-GAAP(1) Materials and production $3,850 $1,194 $81 $2,575 Marketing and administrative 2,615 47 8 2,560 Research and development 1,797 (24) 18 1,803 Restructuring costs 233 – 233 – Fourth Quarter2014
Materials and production $3,749 $984 $105 $2,660 Marketing and administrative 2,924 81 57 2,786 Research and development 2,283 329 108 1,846 Restructuring costs 349 – 349 – $ in millions Included in expenses for the period Acquisition- and Divestiture- Year Ended Related Restructuring Certain Dec. 31, 2015 GAAPCosts4
Costs Other Items Non-GAAP(1) Materials and production $14,934 $4,869 $361 $– $9,704 Marketing and administrative 10,313 436 78 – 9,799 Research and development 6,704 39 52 – 6,613 Restructuring costs 619 – 619 – – Year EndedDec. 31, 2014
Materials and production $16,768 $5,254 $482 $– $ 11,032 Marketing and administrative 11,606 234 200 193 10,979 Research and development 7,180 365 283 – 6,532 Restructuring costs 1,013 – 1,013 – –The gross margin was 62.3 percent for the fourth quarter of 2015 compared to 64.2 percent for the fourth quarter of 2014, reflecting 12.5 and 10.4 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs and restructuring costs noted above. The gross margin was 62.2 percent for the full year of 2015 compared to 60.3 percent for the full year of 2014, reflecting 13.2 and 13.6 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs and restructuring costs noted above. The rate increases in non-GAAP gross margin for the fourth quarter and full year of 2015 reflect the favorable impact of foreign exchange and lower inventory write-offs.
Marketing and administrative expenses, on a non-GAAP basis, were $2.6 billion in the fourth quarter of 2015, a decrease from $2.8 billion in the same period of 2014, which was primarily driven by the favorable impact of foreign exchange and operational efficiencies, partially offset by investments in key brands. Full-year 2015 marketing and administrative expenses, on a non-GAAP basis, were $9.8 billion, a decrease from $11.0 billion in 2014, which was primarily driven by the favorable impact of foreign exchange and the sale of the Consumer Care business, partially offset by investments in key brands.
Research and development (R&D) expenses, on a non-GAAP basis, were $1.8 billion in the fourth quarter of 2015, a 2 percent decrease compared to the fourth quarter of 2014. Full-year R&D expenses in 2015, on a non-GAAP basis, were $6.6 billion, an increase from $6.5 billion in 2014.
Other (income) expense, net, was $905 million of expense in the fourth quarter of 2015 compared to $10.6 billion of income in the fourth quarter of 2014 and $1.5 billion of expense for the full year of 2015 compared to $11.6 billion of income for the full year of 2014. Other (income) expense, net for the fourth quarter and full year of 2015 includes $161 million and $876 million, respectively, of foreign exchange losses related to the revaluation of the company’s net monetary assets in Venezuela and a $680 million net charge to settle Vioxx shareholder class action litigation. Other (income) expense, net in both the fourth quarter and full year of 2014 includes an $11.2 billion gain on the divestiture of the Consumer Care business and a $628 million loss on the extinguishment of debt.
The GAAP effective tax rates of (20.4) percent for the fourth quarter of 2015 and 17.4 percent for the full year of 2015 reflect the impacts of acquisition- and divestiture-related costs, restructuring costs and certain other items, including the impact of the net charge to settle Vioxx shareholder class action litigation being fully deductible at combined U.S. federal and state tax rates, as well as the unfavorable impact of non-deductible foreign exchange losses related to Venezuela. In addition, the GAAP effective tax rates for the fourth quarter and full year of 2015 include net benefits of $40 million and $410 million, respectively, related to the settlement of certain federal tax issues. The non-GAAP effective tax rates, which exclude these items, were 16.4 percent for the fourth quarter and 21.7 percent for the full year of 2015. Both the GAAP and non-GAAP effective tax rates for the fourth quarter and full year of 2015 include the favorable impact of tax legislation, including the renewal of the R&D tax credit, enacted in the fourth quarter of 2015.
Financial Outlook
Merck expects its full-year 2016 GAAP EPS to be between $1.96 and $2.23. Merck expects its full-year 2016 non-GAAP EPS to be between $3.60 and $3.75, including an approximately 4 percent negative impact from foreign exchange. The non-GAAP range excludes acquisition- and divestiture-related costs and costs related to restructuring programs.
At mid-January 2016 exchange rates, Merck anticipates full-year 2016 revenues to be between $38.7 billion and $40.2 billion, including an approximately 3 percent negative impact from foreign exchange.
In addition, the company expects full-year 2016 non-GAAP marketing and administrative expenses to be below 2015 levels and R&D expenses to be modestly above 2015 levels.
The company anticipates its full-year 2016 non-GAAP tax rate will be in the range of 21.5 to 22.5 percent, including a 2016 R&D tax credit.
A reconciliation of anticipated 2016 EPS, as reported in accordance with GAAP to non-GAAP EPS that excludes certain items, is provided in the table below.
Full Year $ in millions, except EPS amounts 2016 GAAP EPS $1.96 to $2.23 Difference3 1.64 to 1.52 Non-GAAP EPS that excludes items listed below $3.60 to $3.75 Acquisition- and divestiture-related costs $4,600 to $4,400 Restructuring costs 900 to 700 Net decrease (increase) in income before taxes 5,500 to 5,100 Estimated income tax (benefit) expense (935) to (860) Decrease (increase) in net income $4,565 to $4,240Total Employees
As of Dec. 31, 2015, Merck had approximately 68,000 employees worldwide.
Earnings Conference Call
Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EST on Merck’s website at http://www.merck.com/investors/events-and-presentations/home.html. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 4404803. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 4404803. 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
Today's Merck is a global health care leader working to help the world be well. Merck is known as MSD outside the United States and Canada. Through our prescription medicines, vaccines, biologic therapies and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to health care through far-reaching policies, programs and partnerships. For more information, visit www.merck.com and connect with us on Twitter, Facebook, YouTube and LinkedIn.
Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA
This news release of Merck & Co., Inc., Kenilworth, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.
Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.
The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2014 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).
MERCK & CO., INC. CONSOLIDATED STATEMENT OF INCOME - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 1GAAP
GAAP
4Q15 4Q14% Change
Full Year2015
Full Year2014
% Change
Sales $ 10,215 $ 10,482 -3% $ 39,498 $ 42,237 -6% Costs, Expenses and Other Materials and production (1) 3,850 3,749 3% 14,934 16,768 -11% Marketing and administrative (1) 2,615 2,924 -11% 10,313 11,606 -11% Research and development (1) 1,797 2,283 -21% 6,704 7,180 -7% Restructuring costs (2) 233 349 -33% 619 1,013 -39% Other (income) expense, net (1) (3) 905 (10,634) * 1,527 (11,613) * Income Before Taxes 815 11,811 -93% 5,401 17,283 -69% Income Tax (Benefit) Provision (166) 4,484 942 5,349 Net Income 981 7,327 -87% 4,459 11,934 -63% Less: Net Income Attributable to Noncontrolling Interests 5 11 17 14 Net Income Attributable to Merck & Co., Inc. $ 976 $ 7,316 -87% $ 4,442 $ 11,920 -63% Earnings per Common Share Assuming Dilution $ 0.35 $ 2.54 -86% $ 1.56 $ 4.07 -62% Average Shares Outstanding Assuming Dilution 2,813 2,880 2,841 2,928 Tax Rate (4) -20.4% 38.0% 17.4% 30.9%* 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) Other (income) expense, net in the fourth quarter and full year of 2015 includes a $680 million net charge to settle VIOXX shareholder class action litigation, as well as a $147 million gain on the divestiture of the company's remaining ophthalmics business in international markets. Other (income) expense, net in the fourth quarter and full year of 2015 includes foreign exchange losses of $161 million and $876 million, respectively, to revalue the company's net monetary assets in Venezuela. Other (income) expense, net for the full year of 2015 also includes a $250 million gain on the sale of certain migraine clinical development programs.
Other (income) expense, net in the fourth quarter and full year of 2014 includes an $11.2 billion gain on the divestiture of Merck's Consumer Care business and a $628 million loss on the extinguishment of debt. Other (income) expense, net for the full year of 2014 also includes a gain of $741 million related to AstraZeneca's option exercise, a gain of $480 million on the divestiture of certain ophthalmic products in several international markets, and a gain of $204 million related to the divestiture of the company's Sirna Therapeutics, Inc. subsidiary, as well as a $93 million goodwill impairment charge related to the company's joint venture with Supera Farma Laboratorios S.A.
Other (income) expense, net includes equity income from affiliates. Prior period amounts have been reclassified to conform to the current presentation.
(4) The effective income tax rates for the fourth quarter and full year of 2015 reflect the impact of the net charge to settle VIOXX shareholder class action litigation being fully deductible at combined U.S. federal and state tax rates, as well as the favorable impact of tax legislation enacted in the fourth quarter of 2015, partially offset by the unfavorable impact of non-deductible foreign exchange losses recorded in connection with the revaluation of the company's net monetary assets in Venezuela. The effective income tax rates for the fourth quarter and full year of 2015 also reflect net benefits of $40 million and $410 million, respectively, related to the settlement of certain federal income tax issues.
The effective income tax rates for the fourth quarter and full year of 2014 include the impact of the gain on the divestiture of Merck's Consumer Care business being taxed primarily at combined U.S. federal and state tax rates. The effective income tax rates for the fourth quarter and full year of 2014 also reflect the favorable impact of tax legislation enacted in the fourth quarter of 2014. In addition, the effective income tax rate for the full year of 2014 reflects a net benefit of $517 million recorded in connection with AstraZeneca's option exercise, as well as a benefit of approximately $300 million associated with a capital loss generated in the first quarter of 2014.
MERCK & CO., INC. CONSOLIDATED STATEMENT OF INCOME GAAP TO NON-GAAP RECONCILIATION FOURTH QUARTER 2015 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2a GAAPAcquisition andDivestiture-Related Costs (1)
RestructuringCosts (2)
Certain OtherItems (3)
AdjustmentSubtotal
Non-GAAP Sales $ 10,215 $ 10,215 Costs, Expenses and Other Materials and production 3,850 1,194 81 1,275 2,575 Marketing and administrative 2,615 47 8 55 2,560 Research and development 1,797 (24 ) 18 (6 ) 1,803 Restructuring costs 233 233 233 - Other (income) expense, net (4) 905 47 707 754 151 Income Before Taxes 815 (1,264 ) (340 ) (707 ) (2,311 ) 3,126 Income Tax (Benefit) Provision (166 ) (679 )(5)
513 Net Income 981 (1,632 ) 2,613 Less: Net Income Attributable to Noncontrolling Interests 5 5 Net Income Attributable to Merck & Co., Inc. $ 976 (1,632 ) $ 2,608 Earnings per Common Share Assuming Dilution $ 0.35 $ 0.93 Average Shares Outstanding Assuming Dilution 2,813 2,813 Tax Rate -20.4 % 16.4 %Merck is providing 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 performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
(1) Amounts included in materials and production costs reflect $1.1 billion of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as $29 million of amortization of purchase accounting adjustments to inventories as a result of the Cubist acquisition, and $33 million of impairment charges on intangible assets. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions, including severance costs which are not part of the company's formal restructuring programs, as well as transaction and certain other costs related to divestitures. Amounts included in research and development expenses primarily reflect income of $25 million resulting from a reduction in the estimated fair value of liabilities for contingent consideration. Amounts included in other (income) expense, net represent goodwill impairment charges related to certain of Merck's Healthcare Services businesses.
(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) Primarily reflects a $680 million net charge to settle VIOXX shareholder class action litigation, foreign exchange losses of $161 million to revalue the company's net monetary assets in Venezuela and a $147 million gain on the divestiture of the company's remaining ophthalmics business in international markets.
(4) Other (income) expense, net includes equity income from affiliates.
(5) Represents the estimated tax impact on the reconciling items, as well as a net benefit of $40 million on the settlement of certain federal income tax issues.
MERCK & CO., INC. CONSOLIDATED STATEMENT OF INCOME GAAP TO NON-GAAP RECONCILIATION YEAR ENDED DECEMBER 31, 2015 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2b GAAPAcquisition andDivestiture-Related Costs (1)
RestructuringCosts (2)
Certain OtherItems (3)
AdjustmentSubtotal
Non-GAAP Sales $ 39,498 $ 39,498 Costs, Expenses and Other Materials and production 14,934 4,869 361 5,230 9,704 Marketing and administrative 10,313 436 78 514 9,799 Research and development 6,704 39 52 91 6,613 Restructuring costs 619 619 619 - Other (income) expense, net (4) 1,527 54 1,125 1,179 348 Income Before Taxes 5,401 (5,398 ) (1,110 ) (1,125 ) (7,633 ) 13,034 Taxes on Income 942 (1,880 )(5)
2,822 Net Income 4,459 (5,753 ) 10,212 Less: Net Income Attributable to Noncontrolling Interests 17 17 Net Income Attributable to Merck & Co., Inc. $ 4,442 (5,753 ) $ 10,195 Earnings per Common Share Assuming Dilution $ 1.56 $ 3.59 Average Shares Outstanding Assuming Dilution 2,841 2,841 Tax Rate 17.4 % 21.7 %Merck is providing 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 performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
(1) Amounts included in materials and production costs reflect $4.7 billion of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as $105 million of amortization of purchase accounting adjustments to inventories as a result of the Cubist acquisition, and $45 million of impairment charges on intangible assets. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions, including severance costs which are not part of the company's formal restructuring programs, as well as transaction and certain other costs related to divestitures. Amounts included in research and development expenses reflect $63 million of in-process research and development (IPR&D) impairment charges and income of $24 million resulting from a reduction in the estimated fair value of liabilities for contingent consideration. Amounts included in other (income) expense, net represent goodwill impairment charges related to certain of Merck's Healthcare Services businesses.
(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) Primarily reflects foreign exchange losses of $876 million to revalue the company's net monetary assets in Venezuela, a $680 million net charge to settle VIOXX shareholder class action litigation, a $250 million gain on the divestiture of certain migraine clinical development programs and a $147 million gain on the divestiture of the company's remaining ophthalmics business in international markets.
(4) Other (income) expense, net includes equity income from affiliates.
(5) Represents the estimated tax impact on the reconciling items, as well as a net benefit of $410 million on the settlement of certain federal income tax issues.
MERCK & CO., INC. FRANCHISE / KEY PRODUCT SALES (AMOUNTS IN MILLIONS) Table 3 2015 2014 % Change Full Full Full 1Q 2Q 3Q 4Q Year 1Q 2Q 3Q 4Q Year 4Q Year TOTAL SALES (1) $ 9,425 $ 9,785 $ 10,073 $ 10,215 $ 39,498 $ 10,264 $ 10,934 $ 10,557 $ 10,482 $ 42,237 -3 -6 PHARMACEUTICAL 8,266 8,564 8,925 9,027 34,782 8,451 9,087 9,134 9,370 36,042 -4 -3 Primary Care & Women's Health Cardiovascular Zetia 568 635 633 691 2,526 611 717 660 662 2,650 4 -5 Vytorin 320 320 302 308 1,251 361 417 369 370 1,516 -17 -17 Diabetes Januvia 884 1,044 1,014 921 3,863 858 1,058 933 1,082 3,931 -15 -2 Janumet 509 554 562 526 2,151 476 519 505 570 2,071 -8 4 General Medicine & Women's Health NuvaRing 166 182 190 193 732 168 178 186 191 723 1 1 Implanon / Nexplanon 137 124 176 151 588 102 119 158 123 502 23 17 Dulera 130 120 133 153 536 102 103 124 132 460 16 16 Follistim AQ 82 111 95 95 383 110 102 97 102 412 -7 -7 Hospital and Specialty Hepatitis PegIntron 56 52 40 34 182 112 103 84 81 381 -58 -52 HIV Isentress 385 375 377 374 1,511 390 453 412 418 1,673 -11 -10 Hospital Acute Care Cubicin(2) 187 293 325 322 1,127 5 6 7 7 25 * * Cancidas 163 134 139 137 573 166 156 183 175 681 -22 -16 Invanz 132 139 153 144 569 114 134 141 139 529 4 8 Noxafil 111 117 132 128 487 74 98 107 122 402 4 21 Bridion 85 87 89 92 353 73 82 90 95 340 -3 4 Primaxin 65 88 75 86 313 71 81 91 86 329 0 -5 Immunology Remicade 501 455 442 396 1,794 604 607 604 557 2,372 -29 -24 Simponi 158 169 178 185 690 157 174 170 188 689 -2 0 Oncology Keytruda 83 110 159 214 566 0 0 4 50 55 * * Emend 122 134 141 139 535 122 144 136 151 553 -8 -3 Temodar 74 80 83 75 312 83 93 88 86 350 -14 -11 Diversified Brands Respiratory Singulair 245 212 201 273 931 271 284 218 319 1,092 -14 -15 Nasonex 289 215 121 231 858 312 258 261 268 1,099 -14 -22 Clarinex 51 55 39 42 187 62 69 49 52 232 -20 -20 Other Cozaar / Hyzaar 185 189 150 143 667 205 214 195 192 806 -25 -17 Arcoxia 123 115 123 110 471 128 141 132 118 519 -7 -9 Fosamax 94 96 86 82 359 123 121 114 112 470 -27 -24 Zocor 49 63 56 49 217 64 69 61 64 258 -22 -16 Propecia 53 39 41 50 183 74 58 66 67 264 -26 -31 Vaccines Gardasil / Gardasil 9 359 427 625 497 1,908 383 409 590 356 1,738 40 10 ProQuad, M-M-R II and Varivax 348 358 390 409 1,505 280 326 421 366 1,394 12 8 Zostavax 175 149 179 246 749 142 156 181 285 765 -14 -2 RotaTeq 192 89 160 169 610 169 147 174 169 659 0 -7 Pneumovax 23 110 106 138 188 542 101 102 197 346 746 -46 -27 Other Pharmaceutical (3) 1,075 1,128 1,178 1,174 4,553 1,378 1,389 1,326 1,269 5,356 -7 -15 ANIMAL HEALTH 829 840 825 830 3,324 813 872 885 885 3,454 -6 -4 CONSUMER CARE (4) 2 0 0 0 3 546 583 401 16 1,547 * * Other Revenues (5) 328 381 323 358 1,389 454 392 137 211 1,194 69 16* 100% or greater
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
(1) Only select products are shown.
(2) Cubicin results for the first quarter 2015 represent sales for the two months following Merck's acquisition of Cubist. Cubicin sales for 2014 represent the previous licensing agreement in Japan prior to the acquisition.
(3) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $78 million, $76 million, $99 million, and $148 million for the first, second, third, and fourth quarters of 2015, respectively. Other Vaccines sales included in Other Pharmaceutical were $98 million, $76 million, $116 million and $88 million for the first, second, third and fourth quarters of 2014, respectively.
(4) On October 1, 2014, the company divested the Consumer Care business.
(5) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. On June 30, 2014, AstraZeneca exercised its option to buy Merck's interest in a subsidiary and through it, Merck's interest in Nexium and Prilosec. As a result, the company no longer records supply sales for these products. Other revenues in the first quarter 2014 include $232 million of revenue recognized in connection with the sale of U.S. Saphris rights.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160203005708/en/
MerckMedia:Lainie Keller, 908-236-5036Steven Cragle, 908-740-1801orInvestors:Teri Loxam, 908-740-1986Justin Holko, 908-740-1879
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