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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 | |
---|---|---|---|---|---|---|---|---|
-0.51 | -0.40% | 127.00 | 127.73 | 126.76 | 127.32 | 6,551,960 | 00:31:23 |
Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2019.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200205005307/en/
“As evidenced by our results and our 2020 guidance, Merck had an extraordinary year and is in a position of operational and financial strength,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “It is this position of strength, born of our focused execution, that gives us the confidence to spin off our Women’s Health, trusted Legacy Brands and Biosimilar products into a new company, which will position us to deliver even greater value to patients and shareholders.”
Financial Summary
$ in millions, except EPS amounts
Fourth Quarter
Year Ended
2019
2018
Change
Change Ex- Exchange
Dec. 31, 2019
Dec. 31, 2018
Change
Change Ex- Exchange
Sales
$11,868
$10,998
8%
9%
$46,840
$42,294
11%
13%
GAAP net income1
2,357
1,827
29%
29%
9,843
6,220
58%
61%
Non-GAAP net income that excludes certain items1,2*
2,978
2,745
8%
8%
13,382
11,621
15%
16%
GAAP EPS
0.92
0.69
33%
32%
3.81
2.32
64%
67%
Non-GAAP EPS that excludes certain items2*
1.16
1.04
12%
12%
5.19
4.34
20%
21%
*Refer to table on page 10.
GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) was $0.92 for the fourth quarter and $3.81 for the full year of 2019. GAAP EPS for the full year of 2019 reflects a $993 million charge for the acquisition of Peloton Therapeutics, Inc. (Peloton) and a $612 million pretax intangible asset impairment charge related to SIVEXTRO (tedizolid phosphate). Non-GAAP EPS of $1.16 for the fourth quarter and $5.19 for the full year of 2019 excludes acquisition- and divestiture-related costs, restructuring costs and certain other items. Non-GAAP EPS for the full year of 2019 also excludes the charge for the acquisition of Peloton and the SIVEXTRO impairment charge.
Oncology Pipeline Highlights
Merck continued to advance the development programs for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy; Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca; and Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai).
Other Pipeline Highlights
Business Development
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 millionsFourth Quarter
Year Ended
2019
2018
Change
Change Ex Exchange
Dec. 31, 2019
Dec. 31, 2018
Change
Change Ex Exchange
Total Sales
$11,868
$10,998
8%
9%
$46,840
$42,294
11%
13%
Pharmaceutical
10,533
9,830
7%
8%
41,751
37,689
11%
14%
KEYTRUDA
3,111
2,151
45%
46%
11,084
7,171
55%
58%
JANUVIA / JANUMET
1,418
1,465
-3%
-2%
5,524
5,914
-7%
-4%
GARDASIL / GARDASIL 9
693
835
-17%
-16%
3,737
3,151
19%
21%
PROQUAD, M-M-R II and VARIVAX
481
455
6%
7%
2,275
1,798
27%
28%
PNEUMOVAX 23
334
322
4%
4%
926
907
2%
3%
BRIDION
313
256
22%
24%
1,131
917
23%
26%
ROTATEQ
227
188
21%
21%
791
728
9%
10%
ISENTRESS / ISENTRESS HD
223
280
-20%
-18%
975
1,140
-15%
-10%
IMPLANON / NEXPLANON
206
169
22%
23%
787
703
12%
14%
SIMPONI
205
220
-7%
-3%
830
893
-7%
-2%
Animal Health
1,122
1,036
8%
10%
4,393
4,212
4%
9%
Livestock
777
684
14%
16%
2,784
2,630
6%
11%
Companion Animals
345
352
-2%
0%
1,609
1,582
2%
5%
Other Revenues
213
132
61%
30%
696
393
77%
-26%
Pharmaceutical Revenue
Fourth-quarter pharmaceutical sales increased 7% to $10.5 billion, excluding the unfavorable effect from foreign exchange, sales grew 8%. The increase was driven primarily by growth in oncology, partially offset by the ongoing impacts of the loss of market exclusivity for several products. Additionally, fourth quarter 2019 sales were reduced by $120 million due to a previously disclosed borrowing of doses of GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) from the U.S. Centers for Disease Control and Prevention’s (CDC) Pediatric Vaccine Stockpile. Sales in the fourth quarter of 2018 were increased by $125 million due to the replenishment of previously borrowed doses of GARDASIL 9.
Growth in oncology was largely driven by sales of KEYTRUDA, which were $3.1 billion for the quarter, reflecting strong momentum from the NSCLC indications as well as continued uptake in other indications, including the recently launched RCC and adjuvant melanoma indications. Additionally, oncology sales reflect alliance revenue of $132 million related to Lynparza and $124 million related to Lenvima, representing Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.
Performance in vaccines for the fourth quarter reflects the negative impact of borrowing doses of GARDASIL 9 from the CDC Pediatric Vaccine Stockpile as discussed above, partially offset by higher demand in Europe and China, as well as higher demand and pricing in the United States. Excluding the borrowing-related activity in both periods, GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and GARDASIL 9 sales grew 15% in the quarter, including a 1% negative impact from foreign exchange.
Performance in hospital acute care reflects higher demand globally, particularly in the United States, for BRIDION (sugammadex) Injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery; and the ongoing launch of PREVYMIS (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant.
Pharmaceutical sales growth for the quarter was partially offset by the ongoing impacts from the loss of market exclusivity, including for NOXAFIL (posaconazole), EMEND (aprepitant), ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), CUBICIN (daptomycin) and REMICADE (infliximab). A generic entrant of NUVARING (etonogestrel/ethinyl estradiol vaginal ring) in the U.S. also negatively affected sales for the quarter and will continue to negatively affect sales in the future. In addition, the decline in sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI) reflects continued pricing pressure in the United States, which more than offset higher demand globally.
Full-year 2019 pharmaceutical sales increased 11% to $41.8 billion; excluding the unfavorable effect from foreign exchange, sales grew 14%, primarily reflecting growth in oncology and vaccines, partially offset by the ongoing effects from the loss of market exclusivity for several products and continued pricing pressure in diabetes.
Animal Health Revenue
Animal Health sales totaled $1.1 billion for the fourth quarter of 2019, an increase of 8% compared with the fourth quarter of 2018; excluding the unfavorable effect from foreign exchange, Animal Health sales grew 10%. Growth for the quarter was mainly driven by livestock products due to the Antelliq acquisition.
Worldwide sales for the full year of 2019 were $4.4 billion, an increase of 4%; excluding the unfavorable effect from foreign exchange, sales grew 9%. Full-year sales growth was mainly driven by livestock products due to the Antelliq acquisition, along with higher sales of companion animal products, primarily the BRAVECTO (fluralaner) line of products for parasitic control.
Animal Health segment profits were $366 million in the fourth quarter of 2019, a decrease of 5% compared with $387 million in the fourth quarter of 2018, primarily driven by unfavorable product mix and higher investments in selling and product development, partially offset by higher sales. Segment profits were $1.6 billion for the full year of 2019, a decrease of 3% compared with $1.7 billion in 2018, primarily driven by the unfavorable effects of foreign exchange.3
Fourth-Quarter and Full-Year Expense, EPS and Related Information
The tables below present selected expense information.
$ in millions
Fourth-Quarter 2019
GAAP
Acquisition- and Divestiture- Related Costs4
Restructuring Costs
Certain Other Items
Non-GAAP2
Cost of sales
$3,669
$325
$90
$−
$3,254
Selling, general and administrative
2,888
44
1
−
2,843
Research and development
2,548
166
−
11
2,371
Restructuring costs
194
−
194
−
−
Other (income) expense, net
(223)
(37)
−
7
(193)
Fourth-Quarter 2018
Cost of sales
$3,289
$525
$10
$3
$2,751
Selling, general and administrative
2,643
6
1
−
2,636
Research and development
2,214
91
1
−
2,122
Restructuring costs
138
−
138
−
−
Other (income) expense, net
110
179
–
(3)
(66)
$ in millions
Year Ended Dec. 31, 2019
GAAP
Acquisition- and Divestiture- Related Costs4
Restructuring Costs
Certain Other Items
Non-GAAP2
Cost of sales
$14,112
$2,126
$251
$−
$11,735
Selling, general and administrative
10,615
126
34
−
10,455
Research and development
9,872
145
4
993
8,730
Restructuring costs
638
−
638
−
−
Other (income) expense, net
139
284
−
55
(200)
Year Ended Dec. 31, 2018
Cost of sales
$13,509
$2,672
$21
$423
$10,393
Selling, general and administrative
10,102
32
3
−
10,067
Research and development
9,752
98
2
1,744
7,908
Restructuring costs
632
−
632
−
−
Other (income) expense, net
(402)
264
−
(57)
(609)
GAAP Expense, EPS and Related Information
Gross margin was 69.1% for the fourth quarter of 2019 compared to 70.1% for the fourth quarter of 2018. The decrease reflects unfavorable manufacturing variances, inventory write-offs, higher amortization of intangible assets related to collaborations, the unfavorable effects of pricing pressure and restructuring costs, partially offset by favorable product mix and lower acquisition- and divestiture-related costs.
Gross margin was 69.9% for the full year of 2019 compared to 68.1% for the full year of 2018. The increase in gross margin for the full year of 2019 reflects a charge in 2018 related to the termination of a collaboration agreement with Samsung Bioepis Co., Ltd., favorable product mix and lower acquisition- and divestiture-related costs, partially offset by unfavorable manufacturing variances, inventory write-offs, the unfavorable effects of pricing pressure, higher amortization of intangible assets related to collaborations and higher restructuring costs.
Selling, general and administrative expenses were $2.9 billion in the fourth quarter of 2019, an increase of 9% compared to the fourth quarter of 2018. Full-year 2019 selling, general and administrative expenses were $10.6 billion, an increase of 5% compared to the full year of 2018. The increase in both periods reflects higher administrative costs, acquisition- and divestiture-related costs, and promotion costs primarily in support of strategic brands, partially offset by the favorable effects of foreign exchange.
Research and development (R&D) expenses were $2.5 billion in the fourth quarter of 2019, an increase of 15% compared with the fourth quarter of 2018. R&D expenses were $9.9 billion for the full year of 2019, a 1% increase compared to the full year of 2018. The increase in both periods primarily reflects higher expenses related to clinical development and increased investment in discovery research and early drug development. In addition, the increase for the full year of 2019 was driven by a $993 million charge for the acquisition of Peloton. The increase in R&D expenses for the full year of 2019 was partially offset by charges in 2018 including $1.4 billion related to the formation of an oncology collaboration with Eisai and $344 million related to the Viralytics Limited acquisition.
Other (income) expense, net, was $223 million of income in the fourth quarter of 2019 compared to $110 million of expense in the fourth quarter of 2018 primarily reflecting income from investments in equity securities in 2019 compared with losses in 2018. In addition, the fourth quarter of 2018 included goodwill impairment charges. Other (income) expense, net, was $139 million of expense for the full year of 2019 compared to $402 million of income for the full year of 2018 driven by lower income from investments in equity securities and higher net interest expense.
The effective income tax rates were 15.3% for the fourth quarter and 14.7% for full year of 2019. The effective income tax rate for the full year of 2019 reflects a net tax benefit of $364 million related to the settlement of certain federal income tax matters, partially offset by the unfavorable impact of the charge for the acquisition of Peloton for which no tax benefit was recognized.
GAAP EPS was $0.92 for the fourth quarter of 2019 compared with $0.69 for the fourth quarter of 2018. GAAP EPS was $3.81 for the full year of 2019 compared with $2.32 for the full year of 2018.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 72.6% for the fourth quarter of 2019 compared to 75.0% for the fourth quarter of 2018. Non-GAAP gross margin was 74.9% for the full year of 2019 compared to 75.4% for the full year of 2018. The decrease in both periods reflects unfavorable manufacturing variances, inventory write-offs, the unfavorable effects of pricing pressure and higher amortization of intangible assets related to collaborations, partially offset by favorable product mix.
Non-GAAP selling, general and administrative expenses were $2.8 billion in the fourth quarter of 2019, an increase of 8% compared to the fourth quarter of 2018. Full-year 2019 non-GAAP selling, general and administrative expenses were $10.5 billion, an increase of 4% compared to the full year of 2018. The increase in both periods primarily reflects higher administrative costs and higher promotion costs primarily in support of strategic brands, partially offset by the favorable effects of foreign exchange.
Non-GAAP R&D expenses were $2.4 billion in the fourth quarter of 2019, a 12% increase compared to the fourth quarter of 2018. Non-GAAP R&D expenses were $8.7 billion for the full year of 2019, a 10% increase compared to the full year of 2018. The increases in both periods primarily reflect higher expenses related to clinical development and increased investment in discovery research and early drug development.
Non-GAAP other (income) expense, net, was $193 million of income in the fourth quarter of 2019 compared to $66 million of income in the fourth quarter of 2018, primarily reflecting income from investments in equity securities in 2019 compared with losses in 2018, partially offset by higher net interest expense. Non-GAAP other (income) expense, net, for the full year of 2019 was $200 million of income compared to $609 million of income for the full year of 2018, primarily driven by lower income from investments in equity securities and higher net interest expense.
The non-GAAP effective income tax rates were 16.9% for the fourth quarter of 2019 and 16.8% for the full year of 2019.
Non-GAAP EPS was $1.16 for the fourth quarter of 2019 compared with $1.04 for the fourth quarter of 2018. Non-GAAP EPS was $5.19 for the full year of 2019 compared with $4.34 for the full year of 2018.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.
$ in millions, except EPS amounts
Fourth Quarter
Year Ended
2019
2018
Dec. 31, 2019
Dec. 31, 2018
EPS
GAAP EPS
$0.92
$0.69
$3.81
$2.32
Difference5
0.24
0.35
1.38
2.02
Non-GAAP EPS that excludes items listed below2
$1.16
$1.04
$5.19
$4.34
Net Income
GAAP net income1
$2,357
$1,827
$9,843
$6,220
Difference
621
918
3,539
5,401
Non-GAAP net income that excludes items listed below1,2
$2,978
$2,745
$13,382
$11,621
Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition- and divestiture-related costs4
$498
$801
$2,681
$3,066
Restructuring costs
285
150
927
658
Charge for the acquisition of Peloton
11
−
993
−
Charge related to termination of a collaboration agreement with Samsung
−
3
−
423
Charge related to formation of a collaboration with Eisai
−
−
−
1,400
Charge for the acquisition of Viralytics
−
−
−
344
Other
7
(3)
55
(57)
Net decrease (increase) in income before taxes
801
951
4,656
5,834
Income tax (benefit) expense6
(180)
25
(1,028)
(375)
Acquisition- and divestiture-related costs attributable to non-controlling interests
−
(58)
(89)
(58)
Decrease (increase) in net income
$621
$918
$3,539
$5,401
Financial Outlook
At mid-January 2020 exchange rates, Merck anticipates full-year 2020 revenue to be between $48.8 billion and $50.3 billion, including a negative impact from foreign exchange of less than 1%.
Merck expects full-year 2020 GAAP EPS to be between $4.57 and $4.72. Merck expects full-year 2020 non-GAAP EPS to be between $5.62 and $5.77, including an approximately 1.5% negative impact from foreign exchange. The non-GAAP range excludes acquisition- and divestiture-related costs and costs related to restructuring programs.
The following table summarizes the company’s full-year 2020 financial guidance.
GAAP
Non-GAAP2
Revenue
$48.8 to $50.3 billion
$48.8 to $50.3 billion*
Operating expenses
Slightly lower than 2019
Higher than 2019 by a low-single-digit rate
Effective tax rate
17% to 18%
17.5% to 18.5%
EPS**
$4.57 to $4.72
$5.62 to $5.77
*The company does not have any non-GAAP adjustments to revenue.
**EPS guidance for 2020 assumes a share count (assuming dilution) of approximately 2.54 billion shares.
A reconciliation of anticipated 2020 GAAP EPS to non-GAAP EPS and the items excluded from non-GAAP EPS are provided in the table below.
$ in millions, except EPS amountsFull-Year 2020
GAAP EPS
$4.57 to $4.72
Difference5
1.05
Non-GAAP EPS that excludes items listed below2
$5.62 to $5.77
Acquisition- and divestiture-related costs
Restructuring costs
Net decrease (increase) in income before taxes
$2,500
800
3,300
Estimated income tax (benefit) expense
(640)
Decrease (increase) in net income
$2,660
Earnings Conference Call
Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EST on Merck’s website at https://investors.merck.com/events-and-presentations/default.aspx. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 8583879. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 8583879. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.
About Merck
For more than 125 years, Merck, known as MSD outside of the United States and Canada, has been inventing for life, bringing forward medicines and vaccines for many of the world’s most challenging diseases in pursuit of our mission to save and improve lives. We demonstrate our commitment to patients and population health by increasing access to health care through far-reaching policies, programs and partnerships. Today, Merck continues to be at the forefront of research to prevent and treat diseases that threaten people and animals – including cancer, infectious diseases such as HIV and Ebola, and emerging animal diseases – as we aspire to be the premier research-intensive biopharmaceutical company in the world. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.
Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA
This news release of Merck & Co., Inc., Kenilworth, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include statements with respect to the company’s plans to spin-off certain of its businesses into an independent company, the timing and structure of such spin-off, the characteristics of the business to be separated, the expected benefits of the spin-off to the company and the expected effect on the company’s dividends. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to whether the proposed spin-off will be completed on the proposed timetable or at all. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.
Risks and uncertainties include but are not limited to, uncertainties as to the timing of the proposed spin-off; uncertainties as to the status of any required regulatory approvals; the possibility that various conditions to the consummation of the spin-off may not be satisfied; the effects of disruption from the transactions contemplated in connection with the spin-off; general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.
The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2018 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).
_________________________1
Net income attributable to Merck & Co., Inc.
2
Merck is providing certain 2019 and 2018 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the items, see Tables 2a and 2b attached to this release.
3
Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment. For internal management reporting, Merck does not allocate general and administrative expenses not directly incurred by the segment, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits.
4
Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also includes integration, transaction and certain other costs related to business acquisitions and divestitures.
5
Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the period.
6
Includes the estimated tax impact on the reconciling items. Amounts for full-year 2019 include a $364 million net tax benefit related to the settlement of certain federal income tax matters, an $86 million tax benefit related to the reversal of tax reserves established in conjunction with the divestiture of Merck’s Consumer Care business in 2014 as a result of the lapse in the statute of limitations, and a $117 million tax charge related to the finalization of treasury regulations associated with the 2017 enactment of U.S. tax legislation. Amounts for fourth-quarter and full-year 2018 include adjustments to the provisional amounts recorded in 2017 related to the enactment of the U.S. tax legislation.
MERCK & CO., INC. CONSOLIDATED STATEMENT OF INCOME - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 1 GAAP % Change GAAP % Change 4Q19 4Q18 Full Year2019 Full Year2018 Sales$
11,868
$
10,998
8%
$
46,840
$
42,294
11%
Costs, Expenses and Other
Cost of sales (1)
3,669
3,289
12%
14,112
13,509
4%
Selling, general and administrative (1)
2,888
2,643
9%
10,615
10,102
5%
Research and development (1)(2)
2,548
2,214
15%
9,872
9,752
1%
Restructuring costs (3)
194
138
41%
638
632
1%
Other (income) expense, net (1)
(223
)
110
*
139
(402
)
*
Income Before Taxes
2,792
2,604
7%
11,464
8,701
32%
Taxes on Income (1)
428
826
1,687
2,508
Net Income
2,364
1,778
33%
9,777
6,193
58%
Less: Net Income (Loss) Attributable to Noncontrolling Interests (1)
7
(49
)
(66
)
(27
)
Net Income Attributable to Merck & Co., Inc.
$
2,357
$
1,827
29%
$
9,843
$
6,220
58%
Earnings per Common Share Assuming Dilution$
0.92
$
0.69
33%
$
3.81
$
2.32
64%
Average Shares Outstanding Assuming Dilution
2,559
2,634
2,580
2,679
Tax Rate (4)
15.3
%
31.7
%
14.7
%
28.8
%
* 100% or greater (1) Amounts include the impact of acquisition and divestiture-related costs, restructuring costs and certain other items. See accompanying tables for details. (2) Research and development expenses for the full year of 2019 include a $993 million charge for the acquisition of Peloton Therapeutics (Peloton). Research and development expenses for the full year of 2018 include a $1.4 billion charge related to the formation of a collaboration with Eisai Co., Ltd. (Eisai), as well as a $344 million charge for the acquisition of Viralytics Limited. (3) Represents separation and other related costs associated with restructuring activities under the company's formal restructuring programs. (4) The effective income tax rates for the fourth quarter and the full year of 2019 include the unfavorable impact of a charge for the acquisition of Peloton for which no tax benefit was recognized and the favorable impact of product mix. The effective income tax rate for the full year of 2019 also reflects a net tax benefit of $364 million related to the settlement of certain federal income tax matters. The effective income tax rates for the fourth quarter and full year of 2018 include the unfavorable impact of adjustments to the provisional amounts recorded in the prior year associated with the enactment of U.S. tax legislation, including $124 million related to the transition tax. The effective income tax rate for the full year of 2018 also includes the unfavorable impacts of a charge related to the formation of a collaboration with Eisai and a charge related to the termination of a collaboration agreement with Samsung for which no tax benefits were recognized. MERCK & CO., INC. GAAP TO NON-GAAP RECONCILIATION FOURTH QUARTER 2019 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2a GAAP Acquisition and Divestiture-Related Costs (1) Restructuring Costs (2) Certain Other Items Adjustment Subtotal Non-GAAP Cost of sales$
3,669
325
90
415
$
3,254
Selling, general and administrative
2,888
44
1
45
2,843
Research and development
2,548
166
11
177
2,371
Restructuring costs
194
194
194
-
Other (income) expense, net
(223
)
(37
)
7
(30
)
(193
)
Income Before Taxes
2,792
(498
)
(285
)
(18
)
(801
)
3,593
Income Tax Provision (Benefit)
428
(55
)
(3)
(49
)
(3)
(76
)
(4)
(180
)
608
Net Income
2,364
(443
)
(236
)
58
(621
)
2,985
Net Income Attributable to Merck & Co., Inc.
2,357
(443
)
(236
)
58
(621
)
2,978
Earnings per Common Share Assuming Dilution
$
0.92
(0.17
)
(0.09
)
0.02
(0.24
)
$
1.16
Tax Rate
15.3
%
16.9
%
Only the line items that are affected by non-GAAP adjustments are shown. Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. (1) Amount included in cost of sales primarily reflects $306 million of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as $12 million of intangible asset impairment charges. Amount included in selling, general and administrative expenses primarily reflects integration, transaction and certain other costs related to business acquisitions and divestitures. Amount included in research and development expenses primarily reflects $164 million of in-process research and development (IPR&D) impairment charges. (2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs. (3) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. (4) Primarily reflects an $86 million tax benefit related to the reversal of tax reserves established in conjunction with the divestiture of Merck's Consumer Care business in 2014 as a result of the lapse in the statute of limitations. MERCK & CO., INC. GAAP TO NON-GAAP RECONCILIATION FULL YEAR 2019 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2b GAAP Acquisition and Divestiture-Related Costs (1) Restructuring Costs (2) Certain Other Items (4) Adjustment Subtotal Non-GAAP Cost of sales$
14,112
2,126
251
2,377
$
11,735
Selling, general and administrative
10,615
126
34
160
10,455
Research and development
9,872
145
4
993
1,142
8,730
Restructuring costs
638
638
638
-
Other (income) expense, net
139
284
55
339
(200
)
Income Before Taxes
11,464
(2,681
)
(927
)
(1,048
)
(4,656
)
16,120
Income Tax Provision (Benefit)
1,687
(493
)
(3)
(155
)
(3)
(380
)
(5)
(1,028
)
2,715
Net Income
9,777
(2,188
)
(772
)
(668
)
(3,628
)
13,405
Less: Net (Loss) Income Attributable to Noncontrolling Interests
(66
)
(89
)
(89
)
23
Net Income Attributable to Merck & Co., Inc.
9,843
(2,099
)
(772
)
(668
)
(3,539
)
13,382
Earnings per Common Share Assuming Dilution
$
3.81
(0.82
)
(0.30
)
(0.26
)
(1.38
)
$
5.19
Tax Rate
14.7
%
16.8
%
Only the line items that are affected by non-GAAP adjustments are shown. Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. (1) Amount included in cost of sales primarily reflects $1.4 billion of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as $705 million of intangible asset impairment charges, including $612 million related to SIVEXTRO. Amount included in selling, general and administrative expenses primarily reflects integration, transaction and certain other costs related to business acquisitions and divestitures, including costs related to the acquisition of Antelliq Corporation. Amounts included in research and development expenses primarily reflect $172 million of in-process research and development (IPR&D) impairment charges, partially offset by a reduction in expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration. Amount included in other (income) expense, net primarily reflects goodwill and intangible asset impairment charges related to certain businesses in the Healthcare Services segment and expenses related to an increase in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD joint venture. (2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs. (3) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. (4) Amount included in research and development represents the charge related to the acquisition of Peloton. (5) Primarily reflects a $364 million net tax benefit related to the settlement of certain federal income tax matters, an $86 million tax benefit related to the reversal of tax reserves established in conjunction with the divestiture of Merck's Consumer Care business in 2014 as a result of the lapse in the statute of limitations, and a $117 million tax charge related to the finalization of treasury regulations associated with the 2017 enactment of U.S. tax legislation. MERCK & CO., INC. FRANCHISE / KEY PRODUCT SALES (AMOUNTS IN MILLIONS) (UNAUDITED) Table 32019
2018
4Q
Full Year
1Q
2Q
3Q
4Q
Full Year
1Q
2Q
3Q
4Q
Full Year
Nom %
Ex-Exch %
Nom %
Ex-Exch %
TOTAL SALES (1)$10,816
$11,760
$12,397
$11,868
$46,840
$10,037
$10,465
$10,794
$10,998
$42,294
8
9
11
13
PHARMACEUTICAL9,663
10,460
11,095
10,533
41,751
8,919
9,282
9,658
9,830
37,689
7
8
11
14
Oncology Keytruda2,269
2,634
3,070
3,111
11,084
1,464
1,667
1,889
2,151
7,171
45
46
55
58
Alliance Revenue – Lynparza (2)79
111
123
132
444
33
44
49
62
187
111
112
137
141
Alliance Revenue – Lenvima (2)74
97
109
124
404
35
43
71
149
74
73
171
173
Emend117
121
98
53
388
125
148
123
126
522
-58
-58
-26
-24
Vaccines (3) Gardasil / Gardasil 9838
886
1,320
693
3,737
660
608
1,048
835
3,151
-17
-16
19
21
ProQuad / M-M-R II / Varivax496
675
623
481
2,275
392
426
525
455
1,798
6
7
27
28
Pneumovax 23185
170
237
334
926
179
193
214
322
907
4
4
2
3
RotaTeq211
172
180
227
791
193
156
191
188
728
21
21
9
10
Vaqta47
58
62
71
238
37
65
66
72
239
-2
-1
0
2
Hospital Acute Care Bridion255
278
284
313
1,131
204
240
217
256
917
22
24
23
26
Noxafil190
193
177
103
662
176
188
188
191
742
-46
-44
-11
-7
Primaxin59
71
77
67
273
72
68
72
53
265
25
27
3
7
Invanz72
78
57
57
263
151
149
137
59
496
-5
-2
-47
-44
Cubicin88
67
52
50
257
98
94
95
80
367
-38
-37
-30
-28
Cancidas61
67
62
58
249
91
87
79
69
326
-17
-15
-24
-20
Immunology Simponi208
214
203
205
830
231
233
210
220
893
-7
-3
-7
-2
Remicade123
98
101
89
411
167
157
135
123
582
-27
-25
-29
-25
Neuroscience Belsomra67
76
80
83
306
54
71
66
69
260
19
16
18
17
Virology Isentress / Isentress HD255
247
250
223
975
281
305
275
280
1,140
-20
-18
-15
-10
Zepatier114
108
83
66
370
131
113
104
108
455
-38
-38
-19
-16
Cardiovascular Zetia140
156
147
146
590
305
226
165
162
857
-9
-11
-31
-30
Vytorin97
76
57
54
285
167
155
92
83
497
-35
-33
-43
-40
Atozet94
92
97
108
391
73
101
84
89
347
22
26
13
18
Adempas90
104
107
117
419
68
75
94
91
329
28
29
27
30
Diabetes (4) Januvia824
908
807
943
3,482
880
949
927
930
3,686
1
2
-6
-4
Janumet530
533
503
475
2,041
544
585
563
535
2,228
-11
-9
-8
-5
Women's Health NuvaRing219
240
241
179
879
216
236
234
216
902
-17
-17
-3
-2
Implanon / Nexplanon199
183
199
206
787
174
174
186
169
703
22
23
12
14
Diversified Brands Singulair191
160
152
195
698
175
185
161
187
708
4
5
-1
1
Cozaar / Hyzaar103
109
116
113
442
120
125
103
105
453
8
9
-3
2
Nasonex96
72
58
67
293
122
81
71
102
376
-34
-34
-22
-19
Arcoxia75
75
72
67
288
83
84
83
86
335
-23
-22
-14
-10
Follistim AQ57
63
62
58
241
67
70
60
70
268
-16
-15
-10
-7
Other Pharmaceutical (5)1,140
1,268
1,229
1,265
4,901
1,186
1,189
1,109
1,215
4,705
4
6
4
7
ANIMAL HEALTH1,025
1,124
1,122
1,122
4,393
1,065
1,090
1,021
1,036
4,212
8
10
4
9
Livestock611
671
726
777
2,784
652
633
660
684
2,630
14
16
6
11
Companion Animals414
453
396
345
1,609
413
457
361
352
1,582
-2
0
2
5
Other Revenues (6)128
176
180
213
696
53
93
115
132
393
61
30
77
-26
* 200% or greater Sum of quarterly amounts may not equal year-to-date amounts due to rounding. (1) Only select products are shown. (2) Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. (3) Total Vaccines sales were $1,887 million, $2,037 million, $2,517 million and $1,928 million in the first, second, third and fourth quarters of 2019, respectively, and $1,561 million, $1,533 million, $2,159 million and $2,008 million for the first, second, third and fourth quarters of 2018, respectively. (4) Total Diabetes sales were $1,402 million, $1,480 million, $1,360 million and $1,472 million in the first, second, third and fourth quarters of 2019, respectively, and $1,433 million, $1,571 million, $1,506 million and $1,485 million for the first, second, third and fourth quarters of 2018, respectively. (5) Includes Pharmaceutical products not individually shown above. (6) Other Revenues are comprised primarily of Healthcare Services segment revenues, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.
View source version on businesswire.com: https://www.businesswire.com/news/home/20200205005307/en/
Media: Jennifer Mauer (908) 740-1801
Pamela Eisele (267) 305-3558
Investors: Peter Dannenbaum (908) 740-1037
Michael DeCarbo (908) 740-1807
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