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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 | |
---|---|---|---|---|---|---|---|---|
-0.01 | -0.01% | 128.25 | 655 | 10:54:22 |
Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the third quarter of 2020.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20201027005447/en/
“We continue to execute on our strategic priorities and remain confident we will achieve solid full-year revenue growth despite the impact of the ongoing COVID-19 pandemic. Demand for our products remains robust, and production, supply and distribution of our medicines, vaccines and animal health products are moving forward with minimal disruption,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “I am confident in our ability to advance our promising pipeline and clinical trials despite the challenging environment, and I believe that our leadership and track record of solid commercial execution will continue to drive long-term growth.”
Financial Summary
$ in millions, except EPS amounts
Third Quarter
2020
2019
Change
Change Ex- Exchange
Sales
$12,551
$12,397
1%
2%
GAAP net income1
2,941
1,901
55%
59%
Non-GAAP net income that excludes certain items1,2*
4,427
3,873
14%
17%
GAAP EPS
1.16
0.74
57%
62%
Non-GAAP EPS that excludes certain items2*
1.74
1.51
16%
18%
*Refer to table on page 11.
GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) was $1.16 for the third quarter of 2020. Non-GAAP EPS of $1.74 for the third quarter of 2020 excludes acquisition- and divestiture-related costs, restructuring costs, pretax charges of $1.1 billion related to certain license and collaboration agreements, and certain other items. Year-to-date results can be found in the attached tables.
COVID-19 Research Highlights
Building on the company’s experience with antivirals and vaccines, Merck advanced its multiple scientific programs in an effort to help combat SARS-CoV-2, specifically,
Oncology Pipeline Highlights
Merck continued to advance the development programs for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy; Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca; and Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai), in addition to other notable developments as follows:
Other Pipeline Highlights
Business Developments
Organon & Co.
Third-Quarter Financial Impact of COVID-19
In the third quarter, the estimated negative impact of the COVID-19 pandemic to Merck’s pharmaceutical revenue was approximately $475 million, bringing the company’s year-to-date negative impact on revenue to approximately $2.1 billion. Lower back-to-school demand negatively impacted vaccine sales, in particular GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) in the U.S. In addition, access to health care providers remains reduced, although improved from the second quarter. The negative impact to Animal Health sales in the third quarter was immaterial.
Operating expenses were positively impacted in the third quarter by approximately $115 million, primarily driven by lower promotional and selling costs as well as lower research and development (R&D) expenses, net of investments in COVID-19-related antiviral and vaccine research programs.
Third-Quarter Revenue Performance
The following table reflects sales of the company’s top pharmaceutical products, as well as sales of animal health products.
$ in millionsThird Quarter
2020
2019
Change
Change Ex- Exchange
Total Sales
$12,551
$12,397
1%
2%
Pharmaceutical
11,320
11,095
2%
2%
KEYTRUDA
3,715
3,070
21%
21%
JANUVIA / JANUMET
1,327
1,311
1%
2%
GARDASIL / GARDASIL 9
1,187
1,320
-10%
-10%
PROQUAD, M-M-R II and
VARIVAX
576
623
-8%
-7%
PNEUMOVAX 23
375
237
58%
58%
BRIDION
320
284
13%
13%
ROTATEQ
210
180
16%
17%
SIMPONI
209
203
3%
0%
ISENTRESS / ISENTRESS HD
205
250
-18%
-18%
Lynparza*
196
123
59%
58%
IMPLANON / NEXPLANON
189
199
-5%
-4%
Lenvima*
142
109
30%
29%
Animal Health
1,220
1,122
9%
12%
Livestock
758
726
5%
8%
Companion Animals
462
396
17%
18%
Other Revenues**
11
180
-94%
-33%
*Alliance revenue for these products represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. **Other revenues are comprised primarily of third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.
Pharmaceutical Revenue
Third-quarter pharmaceutical sales increased by $225 million, or 2%, to $11.3 billion. The increase was driven primarily by growth in oncology and certain hospital acute care products, partially offset by the negative impact of the COVID-19 pandemic and the ongoing impacts of the loss of market exclusivity for several products.
Growth in oncology was largely driven by higher sales of KEYTRUDA, which grew 21% to $3.7 billion in the quarter. In the U.S., sales of KEYTRUDA grew 24% to $2.2 billion. Global sales growth of KEYTRUDA reflects continued strong momentum from the NSCLC indications as well as continued uptake in other indications, including adjuvant melanoma, RCC, bladder, head and neck squamous cell carcinoma (HNSCC) and microsatellite instability-high (MSI-H) cancers as well as uptake following the recent launch of the Q6W dosing regimen in the U.S., partially offset by the negative impacts of the COVID-19 pandemic and pricing in Japan. Also contributing to growth in oncology was higher alliance revenue related to Lynparza and Lenvima reflecting continued uptake in approved indications in the U.S., Europe and China.
Performance in hospital acute care reflects higher demand globally for BRIDION (sugammadex), a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery and the ongoing launch of PREVYMIS (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant.
In addition, sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI) increased slightly in the quarter reflecting strong demand from certain international markets, partially offset by continued pricing pressure in the U.S.
Vaccine sales performance reflects higher sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, primarily driven by higher volumes in the U.S., Europe and Japan attributable in part to increased demand for pneumococcal vaccination during the COVID-19 pandemic.
Vaccine sales were negatively affected by declines in sales of GARDASIL [Human Papillomavirus Quadrivalent (Types 6,11,16 and 18) Vaccine, Recombinant]/GARDASIL 9, vaccines to prevent certain cancers and other diseases caused by HPV, largely due to lower demand in the U.S. and Hong Kong, SAR, PRC attributable to the COVID-19 pandemic, partially offset by higher volumes in China and in Europe.
Combined sales of pediatric vaccines VARIVAX (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox; PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a combination vaccine to help protect against measles, mumps, rubella and varicella; and M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help prevent measles, mumps and rubella, declined in the third quarter, primarily due to lower demand in the U.S. related to the COVID-19 pandemic.
Pharmaceutical sales in the quarter were negatively affected by the ongoing impacts from the loss of market exclusivity, including for NUVARING (etonogestrel/ethinyl estradiol vaginal ring), NOXAFIL (posaconazole) and EMEND (aprepitant)/EMEND (fosaprepitant dimeglumine) for Injection.
Animal Health Revenue
Animal Health sales totaled $1.2 billion in the third quarter of 2020, an increase of 9% compared with the third quarter of 2019; excluding the unfavorable effect from foreign exchange, Animal Health sales grew 12%. Growth in companion animal products was driven largely by higher demand in companion animal vaccines and higher demand for the BRAVECTO (fluralaner) line of products for parasitic control. Performance in livestock products reflects higher demand globally for ruminant, poultry and swine products.
Third-Quarter Expense, EPS and Related Information
The tables below present selected expense information.
$ in millions
Third-Quarter 2020
GAAP
Acquisition- and Divestiture- Related Costs3
Restructuring Costs
Certain Other Items
Non-GAAP2
Cost of sales
$3,481
$285
$38
$−
$3,158
Selling, general and administrative
2,450
207
15
−
2,228
Research and development
3,390
16
19
1,082
2,273
Restructuring costs
114
−
114
−
−
Other (income) expense, net
(312)
−
−
(1)
(311)
Third-Quarter 2019
Cost of sales
$3,990
$941
$62
$−
$2,987
Selling, general and administrative
2,589
22
1
−
2,566
Research and development
3,204
6
1
982
2,215
Restructuring costs
232
−
232
−
−
Other (income) expense, net
35
6
–
−
29
GAAP Expense, EPS and Related Information
Gross margin was 72.3% for the third quarter of 2020 compared to 67.8% for the third quarter of 2019. The increase reflects lower acquisition- and divestiture-related costs and the favorable effect of product mix, partially offset by the unfavorable effects of pricing pressure, inventory write-offs, higher amortization of intangible assets related to collaborations and foreign exchange.
Selling, general and administrative expenses were $2.5 billion in the third quarter of 2020, a decrease of 5% compared to the third quarter of 2019. The decrease primarily reflects lower administrative and selling costs, including less travel and meeting expenses, due in part to the COVID-19 pandemic, partially offset by higher acquisition- and divestiture-related costs, primarily reflecting costs related to the company’s planned spinoff of Organon.
Research and development expenses were $3.4 billion in the third quarter of 2020, an increase of 6% compared with the third quarter of 2019. The increase was primarily driven by higher upfront payments related to collaborations and license agreements, higher expenses related to clinical development and increased investment in discovery research and early drug development, partially offset by lower charges for the acquisitions of businesses, as well as lower laboratory, travel and meeting expenses due to the COVID-19 pandemic.
Other (income) expense, net, was $312 million of income in the third quarter of 2020 compared to $35 million of expense in the third quarter of 2019, primarily due to higher income from investments in equity securities, net, which was $360 million in 2020 compared with $16 million in 2019, largely from the recognition of unrealized gains on securities.
The effective income tax rate was 14.1% for the third quarter of 2020 compared to 18.7% in the third quarter of 2019. The effective income tax rate in 2019 reflects the unfavorable impact of a charge for the acquisition of Peloton Therapeutics, Inc. (Peloton) for which no tax benefit was recognized.
GAAP EPS was $1.16 for the third quarter of 2020 compared with $0.74 for the third quarter of 2019.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 74.8% for the third quarter of 2020 compared to 75.9% for the third quarter of 2019. The decrease in non-GAAP gross margin reflects the unfavorable effects of pricing pressure, inventory write-offs, higher amortization of intangible assets related to collaborations and foreign exchange, partially offset by the favorable effect of product mix.
Non-GAAP selling, general and administrative expenses were $2.2 billion in the third quarter of 2020, a decrease of 13% compared to the third quarter of 2019. The decrease primarily reflects lower administrative and selling costs, including less travel and meeting expenses, due in part to the COVID-19 pandemic.
Non-GAAP R&D expenses were $2.3 billion in the third quarter of 2020, a 3% increase compared to the third quarter of 2019. The increase was primarily driven by higher expenses related to clinical development and increased investment in discovery research and early drug development, partially offset by lower laboratory, travel and meeting expenses due to the COVID-19 pandemic.
Non-GAAP other (income) expense, net, was $311 million of income in the third quarter of 2020 compared to $29 million of expense in the third quarter of 2019, primarily due to higher income from investments in equity securities, net, which was $360 million in 2020 compared with $16 million in 2019, largely from the recognition of unrealized gains on securities.
The non-GAAP effective income tax rate was 14.8% for the third quarter of 2020 compared to 15.7% for the third quarter of 2019, reflecting the favorable impact of earnings mix.
Non-GAAP EPS was $1.74 for the third quarter of 2020 compared with $1.51 for the third quarter of 2019.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.
$ in millions, except EPS amountsThird Quarter
2020
2019
EPS
GAAP EPS
$1.16
$0.74
Difference
0.58
0.77
Non-GAAP EPS that excludes items listed below2
$1.74
$1.51
Net Income
GAAP net income1
$2,941
$1,901
Difference
1,486
1,972
Non-GAAP net income that excludes items listed below1,2
$4,427
$3,873
Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition- and divestiture-related costs3
$508
$975
Restructuring costs
186
296
Charges for acquisitions and collaborations4
1,082
982
Other
(1)
−
Net decrease (increase) in income before taxes
1,775
2,253
Income tax (benefit) expense5
(289)
(281)
Decrease (increase) in net income
$1,486
$1,972
Financial Outlook
The updated full-year guidance that Merck is providing below includes its current assumption of the impact from the COVID-19 pandemic, which is expected to continue to be offset by favorability from underlying business strength. The company continues to assume that the majority of the negative impact occurred during the second quarter. However, it now expects some residual negative impacts in the fourth quarter, largely in Europe and certain emerging markets. In addition, the phasing of the recovery of GARDASIL 9 demand is slower than originally anticipated, in particular in the U.S.
For the full-year 2020, Merck now expects an unfavorable impact to revenue of approximately $2.35 billion (excluding the impact of foreign exchange) due to the COVID-19 pandemic, comprised of approximately $2.3 billion for pharmaceuticals and approximately $50 million for Animal Health, including the impacts in the first three quarters of the year.
For the full-year 2020, Merck now expects a net favorable impact to operating expenses of approximately $625 million, reflecting continued lower spending due to the COVID-19 pandemic, partially offset by spending on its COVID-19-related antiviral and vaccine research programs.
Merck narrowed and raised its full-year 2020 revenue range to be between $47.6 billion and $48.6 billion, including a negative impact from foreign exchange of approximately 1.5% at mid-October exchange rates. The company’s guidance assumes $120 million of revenue for the replenishment of doses of GARDASIL 9 that were borrowed from the U.S. Centers for Disease Control and Prevention (CDC) Pediatric Vaccine Stockpile in the fourth quarter of 2019.
Merck narrowed and lowered its full-year 2020 GAAP EPS range to be between $4.55 and $4.65. Merck narrowed and raised its full-year 2020 non-GAAP EPS range to be between $5.91 and $6.01, including a negative impact from foreign exchange of approximately 2.5% at mid-October exchange rates. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs and certain other items.
The following table summarizes the company’s full-year 2020 financial guidance.
GAAP
Non-GAAP2
Revenue
$47.6 to $48.6 billion
$47.6 to $48.6 billion*
Operating expenses
Higher than 2019 by a low-single-digit rate
Lower than 2019 by a low-single-digit rate
Effective tax rate
Approximately 15%
Approximately 15.5%
EPS**
$4.55 to $4.65
$5.91 to $6.01
*The company does not have any non-GAAP adjustments to revenue. **EPS guidance for 2020 assumes a share count (assuming dilution) of approximately 2.54 billion shares.
A reconciliation of anticipated 2020 GAAP EPS to non-GAAP EPS and the items excluded from non-GAAP EPS are provided in the table below.
$ in millions, except EPS amountsFull-Year 2020
GAAP EPS
$4.55 to $4.65
Difference
1.36
Non-GAAP EPS that excludes items listed below2
$5.91 to $6.01
Acquisition- and divestiture-related costs
$2,300
Restructuring costs
800
Charges for collaborations
1,082
Net decrease (increase) in income before taxes
4,182
Income tax (benefit) expense5
(715)
Decrease (increase) in net income
$3,467
Earnings Conference Call
Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EDT on Merck’s website at https://www.merck.com/investor-relations/events-and-presentations/. Institutional investors and analysts can participate in the call (833) 353-0277 or toll free (469) 886-1947 and using ID code number 4664137. Members of the media are invited to monitor the call by dialing (833) 353-0277 or toll free (469) 886-1947 and using ID code number 4664137. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.
About Merck
For more than 125 years, Merck, known as MSD outside of the United States and Canada, has been inventing for life, bringing forward medicines and vaccines for many of the world’s most challenging diseases in pursuit of our mission to save and improve lives. We demonstrate our commitment to patients and population health by increasing access to health care through far-reaching policies, programs and partnerships. Today, Merck continues to be at the forefront of research to prevent and treat diseases that threaten people and animals – including cancer, infectious diseases such as HIV and Ebola, and emerging animal diseases – as we aspire to be the premier research-intensive biopharmaceutical company in the world. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.
Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA
This news release of Merck & Co., Inc., Kenilworth, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.
Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of the global outbreak of novel coronavirus disease (COVID-19); the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.
The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2019 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).
1
Net income attributable to Merck & Co., Inc.
2
Merck is providing certain 2020 and 2019 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the items, see Table 2a attached to this release.
3
Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also includes integration, transaction and certain other costs related to business acquisitions and divestitures.
4
2020 includes $832 million related to the Seagen collaborations; 2019 represents a charge for the acquisition of Peloton.
5
Includes the estimated tax impact on the reconciling items, as well as a tax cost of $67 million, representing an adjustment to the tax benefits recorded in conjunction with the 2015 acquisition of Cubist Pharmaceuticals, Inc.
MERCK & CO., INC. CONSOLIDATED STATEMENT OF INCOME - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 1 GAAP % Change GAAP % Change3Q20
3Q19
Sep YTD2020 Sep YTD2019 Sales$
12,551
$
12,397
1
%
$
35,479
$
34,972
1
%
Costs, Expenses and Other Cost of sales (1)
3,481
3,990
-13
%
9,952
10,443
-5
%
Selling, general and administrative (1)
2,450
2,589
-5
%
7,383
7,726
-4
%
Research and development (1)
3,390
3,204
6
%
7,721
7,324
5
%
Restructuring costs (2)
114
232
-51
%
269
444
-39
%
Other (income) expense, net (1)
(312
)
35
*
(630
)
362
*
Income Before Taxes
3,428
2,347
46
%
10,784
8,673
24
%
Taxes on Income (1)
483
440
1,611
1,259
Net Income
2,945
1,907
54
%
9,173
7,414
24
%
Less: Net Income (Loss) Attributable to Noncontrolling Interests (1)
4
6
12
(73
)
Net Income Attributable to Merck & Co., Inc.$
2,941
$
1,901
55
%
$
9,161
$
7,487
22
%
Earnings per Common Share Assuming Dilution$
1.16
$
0.74
57
%
$
3.61
$
2.89
25
%
Average Shares Outstanding Assuming Dilution
2,538
2,572
2,541
2,587
Tax Rate (3)
14.1
%
18.7
%
14.9
%
14.5
%
* 100% or greater (1) Amounts include the impact of acquisition and divestiture-related costs, restructuring costs and certain other items. See accompanying tables for details. (2) Represents separation and other related costs associated with restructuring activities under the company's formal restructuring programs. (3) The effective income tax rates for the third quarter and the first nine months of 2019 include the unfavorable impact of a charge for the acquisition of Peloton Therapeutics, Inc. for which no tax benefit was recognized and the favorable impact of product mix. The effective income tax rate for the first nine months of 2019 reflects a net tax benefit of $360 million related to the settlement of certain federal income tax matters. MERCK & CO., INC. GAAP TO NON-GAAP RECONCILIATION THIRD QUARTER 2020 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2a GAAPAcquisition andDivestiture-Related Costs (1) RestructuringCosts (2) Certain OtherItems (4) AdjustmentSubtotal Non-GAAP
Cost of sales
$
3,481
285
38
323
$
3,158
Selling, general and administrative
2,450
207
15
222
2,228
Research and development
3,390
16
19
1,082
1,117
2,273
Restructuring costs
114
114
114
-
Other (income) expense, net
(312
)
(1
)
(1
)
(311
)
Income Before Taxes
3,428
(508
)
(186
)
(1,081
)
(1,775
)
5,203
Income Tax Provision (Benefit)
483
(17
)
(3)
(25
)
(3)
(247
)
(3)
(289
)
772
Net Income
2,945
(491
)
(161
)
(834
)
(1,486
)
4,431
Net Income Attributable to Merck & Co., Inc.
2,941
(491
)
(161
)
(834
)
(1,486
)
4,427
Earnings per Common Share Assuming Dilution
$
1.16
(0.19
)
(0.06
)
(0.33
)
(0.58
)
$
1.74
Tax Rate
14.1
%
14.8
%
Only the line items that are affected by non-GAAP adjustments are shown. Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. (1) Amount included in cost of sales primarily reflects expenses for the amortization of intangible assets recognized as a result of business acquisitions. Amount included in selling, general and administrative expenses reflects $182 million related to the company's planned spin-off of Organon & Co., and other acquisition and divestiture-related costs. (2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs. (3) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. Acquisition and divestiture-related costs also includes a tax cost of $67 million, representing an adjustment to the tax benefits recorded in conjunction with the 2015 Cubist Pharmaceuticals, Inc. acquisition. (4) Amount included in research and development reflects expenses for upfront payments related to license and collaboration agreements. MERCK & CO., INC. GAAP TO NON-GAAP RECONCILIATION NINE MONTHS ENDED SEPTEMBER 30, 2020 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2b GAAP Acquisition andDivestiture-RelatedCosts (1) RestructuringCosts (2) Certain OtherItems (4) AdjustmentSubtotal Non-GAAP Cost of sales$
9,952
863
131
994
$
8,958
Selling, general and administrative
7,383
648
37
685
6,698
Research and development
7,721
(12
)
67
1,082
1,137
6,584
Restructuring costs
269
269
269
-
Other (income) expense, net
(630
)
52
(17
)
35
(665
)
Income Before Taxes
10,784
(1,551
)
(504
)
(1,065
)
(3,120
)
13,904
Income Tax Provision (Benefit)
1,611
(248
)
(3)
(59
)
(3)
(242
)
(3)
(549
)
2,160
Net Income
9,173
(1,303
)
(445
)
(823
)
(2,571
)
11,744
Net Income Attributable to Merck & Co., Inc.
9,161
(1,303
)
(445
)
(823
)
(2,571
)
11,732
Earnings per Common Share Assuming Dilution
$
3.61
(0.51
)
(0.18
)
(0.32
)
(1.01
)
$
4.62
Tax Rate
14.9
%
15.5
%
Only the line items that are affected by non-GAAP adjustments are shown. Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. (1) Amount included in cost of sales primarily reflects expenses for the amortization of intangible assets recognized as a result of business acquisitions. Amount included in selling, general and administrative expenses reflects $466 million related to the company's planned spin-off of Organon & Co., approximately $95 million of costs related to the acquisition of ArQule, Inc., and other acquisition and divestiture-related costs. Amount included in research and development expenses primarily reflects a reduction in expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration. Amount included in other (income) expense, net, primarily reflects an increase in the estimated fair value measurement of liabilities for contingent consideration related to the termination of the Sanofi-Pasteur MSD joint venture, partially offset by royalty income. (2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs. (3) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. Acquisition and divestiture-related costs also includes a tax cost of $67 million, representing an adjustment to the tax benefits recorded in conjunction with the 2015 Cubist Pharmaceuticals, Inc. acquisition. (4) Amount included in research and development reflects expenses for upfront payments related to license and collaboration agreements. MERCK & CO., INC. FRANCHISE / KEY PRODUCT SALES (AMOUNTS IN MILLIONS) (UNAUDITED) Table 32020
2019
3Q Sep YTD 1Q 2Q 3Q Sep YTD 1Q 2Q 3Q Sep YTD 4Q Full Year Nom % Ex-Exch % Nom % Ex-Exch % TOTAL SALES (1)$12,057
$10,872
$12,551
$35,479
$10,816
$11,760
$12,397
$34,972
$11,868
$46,840
1
2
1
3
PHARMACEUTICAL10,655
9,679
11,320
31,654
9,663
10,460
11,095
31,218
10,533
41,751
2
2
1
3
Oncology Keytruda3,284
3,388
3,715
10,387
2,269
2,634
3,070
7,973
3,111
11,084
21
21
30
31
Alliance Revenue – Lynparza (2)145
178
196
519
79
111
123
313
132
444
59
58
66
67
Alliance Revenue – Lenvima (2)128
151
142
421
74
97
109
280
124
404
30
29
50
50
Emend43
33
39
115
117
121
98
336
53
388
-60
-59
-66
-65
Vaccines (3) Gardasil / Gardasil 91,097
656
1,187
2,941
838
886
1,320
3,044
693
3,737
-10
-10
-3
-2
ProQuad / M-M-R II / Varivax435
378
576
1,390
496
675
623
1,794
481
2,275
-8
-7
-23
-22
Pneumovax 23256
117
375
748
185
170
237
592
334
926
58
58
26
27
RotaTeq222
168
210
601
211
172
180
564
227
791
16
17
7
8
Vaqta60
28
51
139
47
58
62
167
71
238
-18
-17
-17
-15
Hospital Acute Care Bridion299
224
320
843
255
278
284
817
313
1,131
13
13
3
4
Noxafil94
73
79
247
190
193
177
560
103
662
-55
-55
-56
-55
Prevymis60
63
77
200
32
38
45
115
50
165
72
69
74
74
Primaxin51
64
74
189
59
71
77
207
67
273
-4
-4
-9
-7
Invanz64
43
51
159
72
78
57
206
57
263
-10
-6
-23
-19
Cancidas55
43
50
148
61
67
62
191
58
249
-20
-19
-22
-20
Cubicin46
32
39
116
88
67
52
207
50
257
-26
-25
-44
-43
Zerbaxa37
32
43
112
26
27
35
88
32
121
22
24
27
29
Immunology Simponi215
191
209
615
208
214
203
625
205
830
3
-2
-1
Remicade88
73
82
242
123
98
101
322
89
411
-19
-20
-25
-24
Neuroscience Belsomra79
84
81
244
67
76
80
223
83
306
1
9
8
Virology Isentress / Isentress HD245
196
205
646
255
247
250
752
223
975
-18
-18
-14
-12
Zepatier55
39
28
122
114
108
83
304
66
370
-67
-67
-60
-59
Cardiovascular Zetia145
137
103
384
140
156
147
443
146
590
-30
-30
-13
-13
Vytorin53
39
47
139
97
76
57
231
54
285
-17
-16
-40
-38
Atozet122
115
111
348
94
92
97
283
108
391
14
12
23
25
Alliance Revenue - Adempas (4)53
79
83
216
42
51
50
144
60
204
67
67
50
50
Adempas (5)56
57
55
167
48
53
57
158
57
215
-5
-7
6
6
Diabetes (6) Januvia774
854
821
2,449
824
908
807
2,539
943
3,482
2
2
-4
-3
Janumet503
490
506
1,499
530
533
503
1,567
475
2,041
2
-4
-2
Women's Health Implanon / Nexplanon195
132
189
515
199
183
199
581
206
787
-5
-4
-11
-10
NuvaRing63
63
58
184
219
240
241
700
179
879
-76
-76
-74
-73
Diversified Brands Singulair155
100
82
338
191
160
152
503
195
698
-46
-46
-33
-32
Cozaar / Hyzaar102
98
91
292
103
109
116
329
113
442
-21
-20
-11
-9
Arcoxia70
65
68
204
75
75
72
221
67
288
-5
-2
-8
-5
Nasonex71
49
41
161
96
72
58
226
67
293
-30
-29
-29
-27
Follistim AQ41
44
50
136
57
63
62
182
58
241
-18
-18
-26
-25
Other Pharmaceutical (7)1,194
1,103
1,186
3,478
1,082
1,203
1,149
3,431
1,183
4,615
3
4
1
3
ANIMAL HEALTH1,214
1,101
1,220
3,535
1,025
1,124
1,122
3,271
1,122
4,393
9
12
8
12
Livestock739
648
758
2,145
611
671
726
2,007
777
2,784
5
8
7
11
Companion Animals475
453
462
1,390
414
453
396
1,264
345
1,609
17
18
10
12
Other Revenues (8)188
92
11
290
128
176
180
483
213
696
-94
-33
-40
-12
Sum of quarterly amounts may not equal year-to-date amounts due to rounding. (1) Only select products are shown. (2) Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. (3) Total Vaccines sales were $2,155 million, $1,418 million and $2,521 million in the first, second and third quarters of 2020 and $1,887 million, $2,037 million, $2,517 million and $1,928 million in the first, second, third and fourth quarters of 2019, respectively. (4) Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs. (5) Net product sales in Merck's marketing territories. (6) Total Diabetes sales were $1,353 million, $1,418 million and $1,405 million in the first, second and third quarters of 2020 and $1,402 million, $1,480 million, $1,360 million and $1,472 million in the first, second, third and fourth quarters of 2019, respectively. (7) Includes Pharmaceutical products not individually shown above. (8) Other Revenues are comprised primarily of Healthcare Services segment revenues, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.
View source version on businesswire.com: https://www.businesswire.com/news/home/20201027005447/en/
Media:
Pamela Eisele (267) 305-3558 Patrick Ryan (201) 452-2409
Investors:
Peter Dannenbaum (908) 740-1037 Michael DeCarbo (908) 740-1807
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