We could not find any results for:
Make sure your spelling is correct or try broadening your search.
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 | |
---|---|---|---|---|---|---|---|---|
-0.88 | -0.68% | 127.92 | 129.76 | 127.985 | 129.76 | 7,446,078 | 01:00:00 |
Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2020.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210204005437/en/
“Despite extraordinary challenges brought on by the COVID-19 pandemic, Merck achieved solid growth and made meaningful progress in our pipeline in 2020. We remain focused on our science-led strategy and are confident that this approach will continue to deliver value to patients and shareholders,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “Our scientists continue to advance our internal pipeline of promising medicines and vaccines, including in oncology, HIV, and pneumococcal disease, and, more recently, therapeutics for COVID-19. These pipeline developments provide us with increasing line-of-sight to significant potential growth drivers later this decade and into the next.”
Financial Summary
$ in millions, except EPS amounts
Fourth Quarter
Year Ended
2020
2019
Change
Change Ex- Exchange
Dec. 31, 2020
Dec. 31, 2019
Change
Change Ex- Exchange
Sales
$12,514
$11,868
5%
5%
$47,994
$46,840
2%
4%
GAAP net (loss) income1
(2,094)
2,357
*
*
7,067
9,843
-28%
-25%
Non-GAAP net income that excludes certain items1,2**
3,350
2,978
12%
16%
15,082
13,382
13%
16%
GAAP EPS
(0.83)
0.92
*
*
2.78
3.81
-27%
-24%
Non-GAAP EPS that excludes certain items2**
1.32
1.16
14%
17%
5.94
5.19
14%
17%
*Greater than 100%.
**Refer to table on page 12.GAAP (generally accepted accounting principles) (loss) earnings per share assuming dilution (EPS) was $(0.83) for the fourth quarter and $2.78 for the full year of 2020. Non-GAAP EPS was $1.32 for the fourth quarter and $5.94 for the full year of 2020. GAAP EPS for the fourth quarter and full year of 2020 reflect a $2.7 billion charge for the acquisition of VelosBio Inc. (VelosBio). The fourth quarter and full year of 2020 also include a $1.6 billion pretax intangible asset impairment charge related to ZERBAXA (ceftolozane and tazobactam), resulting from a recall in December 2020 and a temporary suspension of sales which reduced expected future cash flows of this product. In addition, the full year of 2020 reflects pretax charges of $1.1 billion related to certain license and collaboration agreements. Non-GAAP EPS excludes the charges noted above, other acquisition- and divestiture-related costs, restructuring costs and certain other items. Refer to the GAAP to non-GAAP reconciliation table on page 12 for further details.
COVID-19 Research Highlights
Building on the company’s experience with antivirals, Merck advanced its scientific programs in an effort to help combat SARS-CoV-2, specifically:
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 Financial Impact of COVID-19
In the fourth quarter, the estimated negative impact of the COVID-19 pandemic to Merck’s pharmaceutical revenue was approximately $400 million. As expected, within the company’s human health business, revenue was negatively impacted by reduced access to health care providers given social distancing measures, which negatively affected vaccine sales in particular.
Operating expenses were positively impacted in the fourth quarter by approximately $50 million, primarily driven by lower promotional and selling costs, partially offset by higher research and development (R&D) expenses, net of investments in COVID-19-related antiviral and vaccine research programs.
The estimated overall negative impact of the COVID-19 pandemic to Merck’s revenue for the full year 2020 was approximately $2.5 billion, largely attributable to the human health business but including approximately $50 million attributable to Animal Health.
Operating expenses for the full year were positively impacted by approximately $600 million, primarily driven by lower promotional and selling costs, as well as lower R&D expenses, net of investments in COVID-19-related antiviral and vaccine research programs.
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
2020
2019
Change
Change Ex- Exchange
Dec. 31, 2020
Dec. 31, 2019
Change
Change Ex- Exchange
Total Sales
$12,514
$11,868
5%
5%
$47,994
$46,840
2%
4%
Pharmaceutical
11,367
10,533
8%
6%
43,021
41,751
3%
4%
KEYTRUDA
3,993
3,111
28%
27%
14,380
11,084
30%
30%
JANUVIA / JANUMET
1,328
1,418
-6%
-7%
5,276
5,524
-4%
-4%
GARDASIL / GARDASIL 9
998
693
44%
41%
3,938
3,737
5%
6%
PROQUAD, M-M-R II and VARIVAX
488
481
2%
1%
1,878
2,275
-17%
-17%
BRIDION
355
313
13%
13%
1,198
1,131
6%
7%
PNEUMOVAX 23
339
334
1%
0%
1,087
926
17%
18%
SIMPONI
223
205
9%
4%
838
830
1%
1%
ISENTRESS / ISENTRESS HD
211
223
-5%
-6%
857
975
-12%
-11%
Lynparza*
206
132
56%
53%
725
444
63%
62%
ROTATEQ
196
227
-14%
-14%
797
791
1%
1%
IMPLANON / NEXPLANON
165
206
-20%
-20%
680
787
-14%
-13%
Lenvima*
158
124
28%
26%
580
404
44%
43%
Animal Health
1,168
1,122
4%
6%
4,703
4,393
7%
10%
Livestock
794
777
2%
4%
2,939
2,784
6%
9%
Companion Animals
374
345
8%
9%
1,764
1,609
10%
11%
Other Revenues**
(21)
213
-110%
-45%
270
696
-61%
-22%
*Alliance revenue for these products represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. **Other revenues are comprised primarily of third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. The revenue hedging activities resulted in negative revenue in the fourth quarter of 2020.
Pharmaceutical Revenue
Fourth-quarter pharmaceutical sales increased 8% to $11.4 billion. Excluding the favorable effect from foreign exchange, sales grew 6%. The increase was driven by growth in oncology, vaccines, reflecting the replenishment of GARDASIL 9 doses previously borrowed from the U.S. Centers for Disease Control and Prevention (CDC) Pediatric Vaccine Stockpile as discussed below, and hospital acute care, partially offset by the negative impact of the COVID-19 pandemic and the ongoing impacts of the loss of market exclusivity for several products.
Growth in oncology was largely driven by sales of KEYTRUDA, which were $4.0 billion for the quarter. Global sales growth of KEYTRUDA reflects continued strong momentum from the non-small-cell lung cancer indications as well as continued uptake in other indications, including adjuvant melanoma, RCC, bladder, head and neck squamous cell carcinoma (HNSCC) and MSI-H cancers, as well as uptake following the recent launch of the 400mg every 6 week adult dosing regimen in the U.S., partially offset by the negative impacts of the COVID-19 pandemic and pricing in Japan. Also contributing to growth in oncology was higher alliance revenue related to Lynparza and Lenvima reflecting continued uptake in approved indications in the U.S., Europe and China.
Growth in vaccines for the fourth quarter was driven by higher sales of GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant). Fourth-quarter 2020 GARDASIL 9 sales were increased by $120 million due to the replenishment of doses that were borrowed in the fourth quarter of 2019 from the CDC Pediatric Vaccine Stockpile. GARDASIL 9 sales in the fourth quarter of 2019 were decreased by $120 million due to the borrowing. GARDASIL/GARDASIL 9 sales growth also reflects higher demand in China. Growth was partially offset by the negative impact of the COVID-19 pandemic globally. Excluding the borrowing-related activity in both periods, GARDASIL/GARDASIL 9 sales grew 8% in the quarter, or 6% excluding the favorable impact from foreign exchange.
Growth in hospital acute care reflects higher demand globally 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 continued uptake 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 in the quarter were negatively affected by the ongoing impacts from the loss of market exclusivity, including for NUVARING (etonogestrel/ethinyl estradiol vaginal ring), ZETIA (ezetimibe) and certain products in diversified brands. 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 in certain international markets.
Full-year 2020 pharmaceutical sales increased 3% to $43.0 billion; excluding the unfavorable effect from foreign exchange, sales grew 4%, primarily due to higher sales in oncology, reflecting strong growth in KEYTRUDA, higher sales of certain vaccines including PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, and higher sales of certain hospital acute care products, including PREVYMIS and BRIDION. As discussed above, the COVID-19 pandemic negatively affected sales in 2020. Also negatively affecting sales in 2020 was the ongoing impacts of the loss of market exclusivity for several products, lower sales of pediatric vaccines, as well as pricing pressure in diabetes.
Animal Health Revenue
Animal Health sales totaled $1.2 billion for the fourth quarter of 2020, an increase of 4% compared with the fourth quarter of 2019; excluding the unfavorable effect from foreign exchange, Animal Health sales grew 6%. Growth in the quarter reflects a net favorable impact of one-time items, including an additional month of sales in the current quarter related to the 2019 acquisition of Antelliq Corporation (Antelliq), partially offset by distributor purchasing patterns. Also contributing to growth were contributions from smaller acquisitions, as well as the underlying performance of the business driven by companion animal products, reflecting higher demand in companion animal vaccines and parasiticides.
Worldwide sales for the full year of 2020 were $4.7 billion, an increase of 7%; excluding the unfavorable effect from foreign exchange, sales grew 10%. Full-year sales growth was primarily driven by livestock sales which included an additional five months of sales in the year related to the 2019 acquisition of Antelliq, along with higher sales of companion animal products, primarily the BRAVECTO (fluralaner) line of products for parasitic control, and companion animal vaccines.
Fourth-Quarter and Full-Year Expense, EPS and Related Information
The tables below present selected expense information.
$ in millions
Fourth-Quarter 2020
GAAP
Acquisition- and Divestiture- Related Costs3,4
Restructuring Costs
Certain Other Items
Non-GAAP2
Cost of sales
$5,532
$1,855
$44
$260
$3,373
Selling, general and administrative
3,086
287
10
−
2,789
Research and development
5,838
13
16
3,161
2,648
Restructuring costs
309
−
309
−
−
Other (income) expense, net
(258)
(2)
−
(3)
(253)
Fourth-Quarter 2019
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)
$ in millions
Year Ended Dec. 31, 2020
GAAP
Acquisition- and Divestiture- Related Costs3,4
Restructuring Costs
Certain Other Items
Non-GAAP2
Cost of sales
$15,485
$2,718
$175
$260
$12,332
Selling, general and administrative
10,468
935
47
−
9,486
Research and development
13,558
1
83
4,243
9,231
Restructuring costs
578
−
578
−
−
Other (income) expense, net
(886)
50
−
(20)
(916)
Year Ended Dec. 31, 2019
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)
GAAP Expense, EPS and Related Information
Gross margin was 55.8% for the fourth quarter of 2020 compared to 69.1% for the fourth quarter of 2019. The decrease reflects higher acquisition- and divestiture-related costs, including an impairment charge related to ZERBAXA, a charge related to the discontinuation of COVID-19 vaccine development programs, higher inventory write-offs due to a recall of ZERBAXA, pricing pressure and foreign exchange, partially offset by the favorable effects of product mix and manufacturing variances.
Gross margin was 67.7% for the full year of 2020 compared to 69.9% for the full year of 2019. The decrease in gross margin for the full year of 2020 reflects higher acquisition- and divestiture-related costs, including an impairment charge related to ZERBAXA, pricing pressure, a charge related to the discontinuation of COVID-19 vaccine development programs, higher amortization of intangible assets related to collaborations, and higher inventory write-offs, partially offset by the favorable effects of product mix and lower restructuring costs.
Selling, general and administrative expenses were $3.1 billion in the fourth quarter of 2020, an increase of 7% compared to the fourth quarter of 2019. The increase was largely driven by higher acquisition- and divestiture-related costs, primarily reflecting costs related to the company’s planned spinoff of Organon & Co. (Organon), as well as a $100 million contribution to the Merck Foundation to support philanthropic programs and initiatives that help address health disparities and strengthen communities in the U.S. and around the world; partially offset by lower selling and administrative costs, including less travel and meeting expenses, due in part to the COVID-19 pandemic. Full-year 2020 selling, general and administrative expenses were $10.5 billion, a decrease of 1% compared to the full year of 2019. The decrease primarily reflects lower administrative, selling and promotional costs, due in part to the COVID-19 pandemic, largely offset by higher acquisition- and divestiture-related costs, primarily reflecting costs related to the company’s planned spinoff of Organon.
R&D expenses were $5.8 billion in the fourth quarter of 2020, compared with $2.5 billion in the fourth quarter of 2019. R&D expenses were $13.6 billion for the full year of 2020, a 37% increase compared to the full year of 2019. The increase in both periods was primarily driven by higher upfront payments for acquisitions and collaborations, including a $2.7 billion charge in 2020 for the acquisition of VelosBio. In addition, the increase in both periods reflects higher expenses related to clinical development and increased investment in discovery research and early drug development. These increases were partially offset by lower travel and meeting expenses due to the COVID-19 pandemic, as well as lower acquisition- and divestiture-related costs.
Other (income) expense, net, was $258 million of income in the fourth quarter of 2020 compared to $223 million of income in the fourth quarter of 2019, primarily reflecting higher income from investments in equity securities, net, which was $375 million in 2020 compared with $119 million in 2019, largely from the recognition of unrealized gains on securities. Other (income) expense, net, was $886 million of income for the full year of 2020 compared to $139 million of expense for the full year of 2019, primarily reflecting higher income from investments in equity securities, net, which was $1.3 billion in 2020 compared with $170 million in 2019, largely from the recognition of unrealized gains on securities.
The effective income tax rates were (5.0)% for the fourth quarter and 19.4% for the full year of 2020. The effective income tax rates for the fourth quarter and full year of 2020 reflect the unfavorable impact of the charge for the acquisition of VelosBio for which no tax benefit was recognized.
GAAP EPS was $(0.83) for the fourth quarter of 2020 compared with $0.92 for the fourth quarter of 2019. GAAP EPS was $2.78 for the full year of 2020 compared with $3.81 for the full year of 2019.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 73.0% for the fourth quarter of 2020 compared to 72.6% for the fourth quarter of 2019. The increase in the fourth quarter reflects the favorable effects of product mix and manufacturing variances, partially offset by higher inventory write-offs due to a recall of ZERBAXA, pricing pressure and foreign exchange.
Non-GAAP gross margin was 74.3% for the full year of 2020 compared to 74.9% for the full year of 2019. The decrease reflects pricing pressure, higher amortization of intangible assets related to collaborations and higher inventory write-offs, partially offset by the favorable effect of product mix.
Non-GAAP selling, general and administrative expenses were $2.8 billion in the fourth quarter of 2020, a decrease of 2% compared to the fourth quarter of 2019. Full-year 2020 non-GAAP selling, general and administrative expenses were $9.5 billion, a decrease of 9% compared to the full year of 2019. The decrease in both periods primarily reflects lower administrative and selling costs, including less travel and meeting expenses, due in part to the COVID-19 pandemic. The declines were partially offset by the contribution to the Merck Foundation.
Non-GAAP R&D expenses were $2.6 billion in the fourth quarter of 2020, a 12% increase compared to the fourth quarter of 2019. Non-GAAP R&D expenses were $9.2 billion for the full year of 2020, a 6% increase compared to the full year of 2019. The increase in both periods was primarily driven by higher expenses related to clinical development and increased investment in discovery research and early drug development, partially offset by lower travel and meeting expenses due to the COVID-19 pandemic.
Non-GAAP other (income) expense, net, was $253 million of income in the fourth quarter of 2020 compared to $193 million of income in the fourth quarter of 2019, primarily reflecting higher income from investments in equity securities, net, which was $375 million in 2020 compared with $119 million in 2019, largely from the recognition of unrealized gains on securities. Non-GAAP other (income) expense, net, for the full year of 2020 was $916 million of income compared to $200 million of income for the full year of 2019, primarily driven by higher income from investments in equity securities, net, which was $1.3 billion in 2020 compared with $170 million in 2019, largely from the recognition of unrealized gains on securities.
The non-GAAP effective income tax rates were 15.3% for the fourth quarter of 2020 and 15.5% for the full year of 2020.
Non-GAAP EPS was $1.32 for the fourth quarter of 2020 compared with $1.16 for the fourth quarter of 2019. Non-GAAP EPS was $5.94 for the full year of 2020 compared with $5.19 for the full year of 2019.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.
$ in millions, except EPS amounts
Fourth Quarter
Year Ended
2020
2019
Dec. 31, 2020
Dec. 31, 2019
EPS
GAAP EPS
$(0.83)
$0.92
$2.78
$3.81
Difference
2.15
0.24
3.16
1.38
Non-GAAP EPS that excludes items listed below2
$1.32
$1.16
$5.94
$5.19
Net Income
GAAP net (loss) income1
$(2,094)
$2,357
$7,067
$9,843
Difference
5,444
621
8,015
3,539
Non-GAAP net income that excludes items listed below1,2
$3,350
$2,978
$15,082
$13,382
Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition-related intangible asset impairment charges4
$1,594
$12
$1,609
$705
Other acquisition- and divestiture-related costs3
559
486
2,095
1,976
Total acquisition- and divestiture-related costs
2,153
498
3,704
2,681
Restructuring costs
379
285
883
927
Charge for the acquisition of VelosBio
2,660
−
2,660
−
Charge for the acquisition of OncoImmune
462
−
462
−
Charge for the discontinuation of COVID-19 vaccine development programs
305
−
305
−
Charges for the formation of collaborations5
(6)
−
1,076
−
Charge for the acquisition of Peloton Therapeutics, Inc.
−
11
−
993
Other
(3)
7
(20)
55
Net decrease (increase) in income before taxes
5,950
801
9,070
4,656
Income tax (benefit) expense6
(506)
(180)
(1,055)
(1,028)
Acquisition- and divestiture-related costs attributable to non-controlling interests
−
−
−
(89)
Decrease (increase) in net income
$5,444
$621
$8,015
$3,539
Financial Outlook
The guidance provided below is based on the assumption that the Organon business will be part of Merck for all of 2021; however, the Company expects that the Organon spinoff will occur late in the second quarter of 2021. If the spinoff occurs, these financial estimates will be updated.
At mid-January 2021 exchange rates, Merck anticipates full-year 2021 revenue to be between $51.8 billion and $53.8 billion, including a positive impact from foreign exchange of approximately 2%.
Merck expects full-year 2021 GAAP EPS to be between $5.52 and $5.72.
Beginning in 2021, the Company will be changing the treatment of certain items for the purposes of its non-GAAP reporting. Historically, Merck’s non-GAAP results excluded the amortization of intangible assets recognized in connection with business acquisitions but did not exclude the amortization of intangibles originating from collaborations, asset acquisitions or licensing arrangements. Beginning in 2021, Merck’s non-GAAP results will no longer differentiate between the nature of the intangible assets being amortized and will exclude all amortization of intangible assets. Also, beginning in 2021, Merck’s non-GAAP results will exclude gains and losses on investments in equity securities.
On this new basis, Merck expects full-year 2021 non-GAAP EPS to be between $6.48 and $6.68, including an approximately 3% positive impact from foreign exchange. The non-GAAP range also excludes acquisition- and divestiture-related costs and costs related to restructuring programs. The changes to non-GAAP reporting resulted in a positive impact to projected 2021 non-GAAP EPS of approximately $0.08. For comparative purposes, Merck’s non-GAAP EPS in 2020 would have been $5.79 if reported under the new basis.
The full-year guidance includes Merck’s current assumption of the impact from the COVID-19 pandemic. Merck projects strong underlying business growth for 2021. This growth is partially offset by the anticipated continuing impacts of the pandemic into 2021. Merck believes that global health systems and patients have largely adapted to the impacts of COVID-19 disease, but the company’s assumption is that ongoing residual negative impacts will persist, particularly during the first half of 2021 and most notably with respect to vaccine sales, which are expected to be more acute in the United States.
For full-year 2021, Merck assumes an unfavorable impact to revenue of approximately 2% due to the COVID-19 pandemic, all of which relates to pharmaceutical segment sales. For full-year 2021, with respect to the COVID-19 pandemic, Merck expects a net negative impact on operating expenses, as spending on the development of its COVID-19 antiviral programs is expected to exceed the favorable impact of lower spending in other areas due to the COVID-19 pandemic. Neither the sales nor the EPS guidance ranges provided above include the impact of the potential launches of Merck’s COVID-19 antiviral drug candidates.
The following table summarizes the company’s full-year 2021 financial guidance.
GAAP
Non-GAAP2
Revenue
$51.8 to $53.8 billion
$51.8 to $53.8 billion*
Operating expenses
Lower than 2020 by a low-double-digit rate
Higher than 2020 by a high-single to low-double-digit rate
Effective tax rate
15% to 16%
15% to 16%
EPS**
$5.52 to $5.72
$6.48 to $6.68
*The company does not have any non-GAAP adjustments to revenue. **EPS guidance for 2021 assumes a share count (assuming dilution) of approximately 2.53 billion shares.
A reconciliation of anticipated 2021 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 2021
GAAP EPS
$5.52 to $5.72
Difference
$0.96
Non-GAAP EPS that excludes items listed below2
$6.48 to $6.68
Acquisition- and divestiture-related costs
$2,900
Restructuring costs
700
(Gains) losses on investments in equity securities
(800)
Net decrease (increase) in income before taxes
2,800
Estimated income tax (benefit) expense
(360)
Decrease (increase) in net income
$2,440
Organon Update
Merck expects the spinoff of Organon to be completed late in the second quarter of 2021. The transaction is expected to create two companies with enhanced strategic and operational focus, improved agility, simplified operating models, optimized capital structures and improved financial profiles. Merck believes the transaction will deliver significant benefits for both Merck and Organon and create value for Merck shareholders.
In 2020, the products that will comprise Organon achieved revenues of $6.5 billion. In 2021, assuming it operated as an independent company for the full year, Organon is expected to generate $6.0 billion to $6.5 billion in revenue. As it nears the end of loss of exclusivity exposure to key brands, Organon will be well positioned for growth led by its Women’s Health and Biosimilars portfolios, with expected low to mid-single digit annual revenue growth off of a 2021 base year.
As a standalone company post spinoff, Organon anticipates having non-GAAP operating margins in the mid-30% range. This compares to a non-GAAP operating margin of approximately 45% within Merck, with the difference reflecting additional costs Organon will incur to operate as an independent company. Earnings before interest, taxes, depreciation and amortization (EBITDA) margins are anticipated in the high 30% range post spinoff. Organon’s operating and EBITDA margins are expected to increase over time.
At this time, Organon is expected to have $9.0 billion to $9.5 billion in initial debt and is expected to pay a special tax-free dividend to Merck of approximately $8.5 billion to $9.0 billion. The remaining cash, as well as ongoing cash flows from operations, is expected to provide the company with ample cash flow and financial flexibility for potential business development opportunities, debt paydown and a meaningful dividend that will be incremental to the dividend Merck currently pays its shareholders. Actual debt balances will be determined based on market conditions and desired bond rating.
For Merck, the spinoff of Organon will allow it to increase focus on key growth pillars, result in higher revenue and EPS growth rates and enable incremental operating efficiencies of approximately $1.5 billion which are expected to be achieved ratably over three years, with approximately $500 million reflected in Merck’s 2021 financial outlook. Merck will continue to incur overhead costs previously allocated to the Organon products, which are estimated to be approximately $400 million on a full-year basis. These costs are expected to be reduced over time and are netted into the overall efficiency target. In addition, the special tax-free dividend from Organon will be allocated to business development or share repurchase.
As a result of stronger growth Organon is expected to achieve as a standalone company, combined with the benefit of operating efficiencies at Merck enabled by the spinoff, Merck expects combined non-GAAP EPS of the two companies to be higher within 12-24 months post-spinoff versus what would have been achieved assuming no transaction.
Merck will host an investor event prior to the completion of the spinoff at which time Organon management will present its strategy, opportunities for growth and financial outlook. Further details will be announced at a future date.
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://www.merck.com/investor-relations/events-and-presentations/. Institutional investors and analysts can participate in the call by dialing (833) 353-0277 or (469) 886-1947 and using ID code number 2268598. Members of the media are invited to monitor the call by dialing (833) 353-0277 or (469) 886-1947 and using ID code number 2268598. 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 130 years, Merck, known as MSD outside of the United States and Canada, has been inventing for life, bringing forward medicines and vaccines for many of the world’s most challenging diseases in pursuit of our mission to save and improve lives. We demonstrate our commitment to patients and population health by increasing access to health care through far-reaching policies, programs and partnerships. Today, Merck continues to be at the forefront of research to prevent and treat diseases that threaten people and animals – including cancer, infectious diseases such as HIV and Ebola, and emerging animal diseases – as we aspire to be the premier research-intensive biopharmaceutical company in the world. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.
Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA
This news release of Merck & Co., Inc., Kenilworth, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.
Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of the global outbreak of novel coronavirus disease (COVID-19); the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.
The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2019 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).
1Net (loss) income attributable to Merck & Co., Inc.
2Merck is providing certain 2020 and 2019 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the items, see Tables 2a and 2b attached to this release.
3Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions 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.
4Fourth-quarter and full-year 2020 include a $1.6 billion impairment charge related to ZERBAXA. Full-year 2019 includes a $612 million impairment charge related to SIVEXTRO (tedizolid phosphate).
5Amount for full-year 2020 includes $826 million related to collaborations with Seagen, Inc.
6Includes the estimated tax impact on the reconciling items. Amount for full-year 2020 includes a tax cost of $67 million, representing an adjustment to the tax benefits recorded in conjunction with the 2015 acquisition of Cubist Pharmaceuticals, Inc. Amount for full-year 2019 includes 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. CONSOLIDATED STATEMENT OF INCOME - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 1GAAP
% Change
GAAP
% Change
4Q20
4Q19
Full Year 2020
Full Year 2019
Sales
$
12,514
$
11,868
5
%
$
47,994
$
46,840
2
%
Costs, Expenses and Other Cost of sales (1)
5,532
3,669
51
%
15,485
14,112
10
%
Selling, general and administrative (1)
3,086
2,888
7
%
10,468
10,615
-1
%
Research and development (1)
5,838
2,548
*
13,558
9,872
37
%
Restructuring costs (2)
309
194
59
%
578
638
-9
%
Other (income) expense, net (1)
(258
)
(223
)
16
%
(886
)
139
* (Loss) Income Before Taxes
(1,993
)
2,792
*
8,791
11,464
-23
%
Income Tax Provision (1)
99
428
1,709
1,687
Net (Loss) Income
(2,092
)
2,364
*
7,082
9,777
-28
%
Less: Net Income (Loss) Attributable to Noncontrolling Interests (1)
2
7
15
(66
)
Net (Loss) Income Attributable to Merck & Co., Inc.$
(2,094
)
$
2,357
*
$
7,067
$
9,843
-28
%
(Loss) Earnings per Common Share Assuming Dilution (3)$
(0.83
)
$
0.92
*
$
2.78
$
3.81
-27
%
Average Shares Outstanding Assuming Dilution (3)
2,540
2,559
2,541
2,580
Tax Rate (4)
-5.0
%
15.3
%
19.4
%
14.7
%
* 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) Because the company recorded a net loss in the fourth quarter of 2020, no potential dilutive common shares were used in the computation of loss per common share assuming dilution as the effect would have been anti-dilutive. (4) The effective income tax rates for the fourth quarter and the full year of 2020 include the unfavorable impact of charges for the acquisitions of VelosBio Inc. and OncoImmune for which no tax benefits were recognized. 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 Therapeutics, Inc. 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 $364 million related to the settlement of certain federal income tax matters. MERCK & CO., INC. GAAP TO NON-GAAP RECONCILIATION FOURTH QUARTER 2020 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2a GAAP Acquisition andDivestiture-RelatedCosts (1) RestructuringCosts (2) Certain OtherItems (4) AdjustmentSubtotal Non-GAAP Cost of sales$
5,532
1,855
44
260
2,159
$
3,373
Selling, general and administrative
3,086
287
10
297
2,789
Research and development
5,838
13
16
3,161
3,190
2,648
Restructuring costs
309
309
309
-
Other (income) expense, net
(258
)
(2
)
(3
)
(5
)
(253
)
(Loss) Income Before Taxes
(1,993
)
(2,153
)
(379
)
(3,418
)
(5,950
)
3,957
Income Tax Provision (Benefit)
99
(423
)
(3
)
(22
)
(3
)
(61
)
(3
)
(506
)
605
Net (Loss) Income
(2,092
)
(1,730
)
(357
)
(3,357
)
(5,444
)
3,352
Net (Loss) Income Attributable to Merck & Co., Inc.
(2,094
)
(1,730
)
(357
)
(3,357
)
(5,444
)
3,350
(Loss) Earnings per Common Share Assuming Dilution
$
(0.83
)
(0.68
)
(0.15
)
(1.32
)
(2.15
)
$
1.32
Tax Rate
-5.0
%
15.3
%
Only the line items that are affected by non-GAAP adjustments are shown. Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. (1) Amount included in cost of sales primarily reflects a $1.6 billion intangible asset impairment charge related to ZERBAXA and $274 million for the amortization of intangible assets recognized as a result of business acquisitions. Amount included in selling, general and administrative expenses reflects $244 million related to the company's planned spin-off of Organon & Co., and other acquisition and divestiture-related costs. (2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs. (3) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. (4) Amount included in cost of sales represents a charge for the discontinuation of COVID-19 vaccine development programs. Amount included in research and development represents the charges of $2.7 billion for the acquisition of VelosBio Inc., $462 million for the acquisition of OncoImmune and $45 million for the discontinuation of COVID-19 vaccine development programs. MERCK & CO., INC. GAAP TO NON-GAAP RECONCILIATION FULL YEAR 2020 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2b GAAP Acquisition andDivestiture-RelatedCosts (1) RestructuringCosts (2) Certain OtherItems (4) AdjustmentSubtotal Non-GAAP Cost of sales$
15,485
2,718
175
260
3,153
$
12,332
Selling, general and administrative
10,468
935
47
982
9,486
Research and development
13,558
1
83
4,243
4,327
9,231
Restructuring costs
578
578
578
-
Other (income) expense, net
(886
)
50
(20
)
30
(916
)
Income Before Taxes
8,791
(3,704
)
(883
)
(4,483
)
(9,070
)
17,861
Income Tax Provision (Benefit)
1,709
(671
)
(3
)
(81
)
(3
)
(303
)
(3
)
(1,055
)
2,764
Net Income
7,082
(3,033
)
(802
)
(4,180
)
(8,015
)
15,097
Net Income Attributable to Merck & Co., Inc.
7,067
(3,033
)
(802
)
(4,180
)
(8,015
)
15,082
Earnings per Common Share Assuming Dilution
$
2.78
(1.19
)
(0.32
)
(1.65
)
(3.16
)
$
5.94
Tax Rate
19.4
%
15.5
%
Only the line items that are affected by non-GAAP adjustments are shown. Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. (1) Amount included in cost of sales primarily reflects a $1.6 billion intangible asset impairment charge related to ZERBAXA and $1.1 billion for the amortization of intangible assets recognized as a result of business acquisitions. Amount included in selling, general and administrative expenses reflects $710 million related to the company's planned spin-off of Organon & Co., approximately $95 million of costs related to the acquisition of ArQule, Inc., and other acquisition and divestiture-related costs. Amount included in other (income) expense, net, primarily reflects 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. Acquisition and divestiture-related costs also includes a tax cost of $67 million, representing an adjustment to the tax benefits recorded in conjunction with the 2015 Cubist Pharmaceuticals, Inc. acquisition. (4) Amount included in cost of sales represents a charge for the discontinuation of COVID-19 vaccine development programs. Amount included in research and development represents the charges for the acquisitions of VelosBio Inc. and OncoImmune, a charge for the discontinuation of COVID-19 vaccine development programs, and upfront payments related to license and collaboration agreements. MERCK & CO., INC. FRANCHISE / KEY PRODUCT SALES (AMOUNTS IN MILLIONS) (UNAUDITED) Table 32020
2019
4Q
Full Year
1Q
2Q
3Q
4Q
Full Year
1Q
2Q
3Q
4Q
Full Year
Nom %
Ex-Exch %
Nom %
Ex-Exch %
TOTAL SALES (1)$12,057
$10,872
$12,551
$12,514
$47,994
$10,816
$11,760
$12,397
$11,868
$46,840
5
5
2
4
PHARMACEUTICAL10,655
9,679
11,320
11,367
43,021
9,663
10,460
11,095
10,533
41,751
8
6
3
4
Oncology Keytruda3,284
3,388
3,715
3,993
14,380
2,269
2,634
3,070
3,111
11,084
28
27
30
30
Alliance Revenue – Lynparza (2)145
178
196
206
725
79
111
123
132
444
56
53
63
62
Alliance Revenue – Lenvima (2)128
151
142
158
580
74
97
109
124
404
28
26
44
43
Emend43
33
39
31
145
117
121
98
53
388
-42
-42
-63
-62
Vaccines (3) Gardasil / Gardasil 91,097
656
1,187
998
3,938
838
886
1,320
693
3,737
44
41
5
6
ProQuad / M-M-R II / Varivax435
378
576
488
1,878
496
675
623
481
2,275
2
1
-17
-17
Pneumovax 23256
117
375
339
1,087
185
170
237
334
926
1
17
18
RotaTeq222
168
210
196
797
211
172
180
227
791
-14
-14
1
1
Vaqta60
28
51
31
170
47
58
62
71
238
-56
-56
-29
-27
Hospital Acute Care Bridion299
224
320
355
1,198
255
278
284
313
1,131
13
13
6
7
Noxafil94
73
79
82
329
190
193
177
103
662
-20
-22
-50
-50
Prevymis60
63
77
80
281
32
38
45
50
165
61
57
70
69
Primaxin51
64
74
62
251
59
71
77
67
273
-8
-12
-8
-8
Cancidas55
43
50
65
213
61
67
62
58
249
13
11
-14
-13
Invanz64
43
51
53
211
72
78
57
57
263
-7
-4
-20
-16
Cubicin46
32
39
36
152
88
67
52
50
257
-27
-28
-41
-40
Zerbaxa37
32
43
19
130
26
27
35
32
121
-42
-42
8
10
Immunology Simponi215
191
209
223
838
208
214
203
205
830
9
4
1
1
Remicade88
73
82
88
330
123
98
101
89
411
-2
-5
-20
-20
Neuroscience Belsomra79
84
81
83
327
67
76
80
83
306
1
-2
7
5
Virology Isentress / Isentress HD245
196
205
211
857
255
247
250
223
975
-5
-6
-12
-11
Zepatier55
39
28
45
167
114
108
83
66
370
-32
-32
-55
-54
Cardiovascular Zetia145
137
103
98
482
140
156
147
146
590
-33
-36
-18
-19
Vytorin53
39
47
43
182
97
76
57
54
285
-19
-20
-36
-34
Atozet122
115
111
105
453
94
92
97
108
391
-3
-7
16
16
Alliance Revenue - Adempas (4)53
79
83
65
281
42
51
50
60
204
8
8
38
38
Adempas (5)56
57
55
53
220
48
53
57
57
215
-7
-11
3
2
Diabetes (6) Januvia774
854
821
857
3,306
824
908
807
943
3,482
-9
-11
-5
-5
Janumet503
490
506
472
1,971
530
533
503
475
2,041
-1
-1
-3
-2
Women's Health Implanon / Nexplanon195
132
189
165
680
199
183
199
206
787
-20
-20
-14
-13
NuvaRing63
63
58
53
236
219
240
241
179
879
-70
-70
-73
-73
Diversified Brands Singulair155
100
82
124
462
191
160
152
195
698
-36
-38
-34
-34
Cozaar / Hyzaar102
98
91
94
386
103
109
116
113
442
-17
-18
-13
-11
Arcoxia70
65
68
54
258
75
75
72
67
288
-19
-18
-11
-8
Nasonex71
49
41
57
218
96
72
58
67
293
-14
-13
-26
-24
Follistim AQ41
44
50
57
193
57
63
62
58
241
-2
-4
-20
-20
Other Pharmaceutical (7)1,194
1,103
1,186
1,228
4,709
1,082
1,203
1,149
1,183
4,615
4
2
2
3
ANIMAL HEALTH1,214
1,101
1,220
1,168
4,703
1,025
1,124
1,122
1,122
4,393
4
6
7
10
Livestock739
648
758
794
2,939
611
671
726
777
2,784
2
4
6
9
Companion Animals475
453
462
374
1,764
414
453
396
345
1,609
8
9
10
11
Other Revenues (8)188
92
11
(21)
270
128
176
180
213
696
-110
-45
-61
-22
Sum of quarterly amounts may not equal year-to-date amounts due to rounding. (1) Only select products are shown. (2) Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. (3) Total Vaccines sales were $2,155 million, $1,418 million, $2,521 million and $2,163 million in the first, second, third and fourth quarters of 2020 and $1,887 million, $2,037 million, $2,517 million and $1,928 million in the first, second, third and fourth quarters of 2019, respectively. (4) Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs. (5) Net product sales in Merck's marketing territories. (6) Total Diabetes sales were $1,353 million, $1,418 million, $1,405 million and $1,412 million in the first, second, third and fourth quarters of 2020 and $1,402 million, $1,480 million, $1,360 million and $1,472 million in the first, second, third and fourth quarters of 2019, respectively. (7) Includes Pharmaceutical products not individually shown above. (8) Other Revenues are comprised primarily of Healthcare Services segment revenues, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.
View source version on businesswire.com: https://www.businesswire.com/news/home/20210204005437/en/
Media Contact:
Patrick Ryan (973) 275-7075
Investor Contacts:
Peter Dannenbaum (908) 740-1037
Michael DeCarbo (908) 740-1807
1 Year Merck Chart |
1 Month Merck Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions