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EX-99.2 - EX-99.2 - Merck & Co., Inc.a14-17821_1ex99d2.htm
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Exhibit 99.1

 

GRAPHIC

 

News Release

 

 

Media Contacts:

Steve Cragle

Investor Contacts:

Joe Romanelli

 

(908) 423-3461

 

(908) 423-5185

 

 

 

 

 

Lainie Keller

 

Justin Holko

 

(908) 423-4187

 

(908) 423-5088

 

Merck Announces Second-Quarter 2014 Financial Results

 

·                  Second-Quarter 2014 Non-GAAP EPS of $0.85, Excluding Certain Items, and GAAP EPS of $0.68

 

·                  2014 Full-Year Non-GAAP EPS Target of $3.43 to $3.53, Excluding Potential Venezuelan Bolivar Devaluation and Certain Other Items; 2014 Full-Year GAAP EPS Target of $4.44 to $4.77

 

·                  2014 Full-Year Non-GAAP EPS Target Includes $0.06 to $0.09 Anticipated Dilution From Planned Sale of Merck Consumer Care and Research Collaboration With Bayer, and Planned Acquisition of Idenix

 

·                  Generated Worldwide Sales of $10.9 Billion, a Decrease of 1 Percent, Reflecting Unfavorable Impact of Patent Expiries, Divested Products and Decline in Sales of Hepatitis C Products

 

·                  Grew Top Five Franchises by 6 Percent in Total

 

·                  Pembrolizumab (MK-3475), an Investigational Anti-PD-1 Antibody, Accepted in Second Quarter for Regulatory Review in Both the United States and European Union

 

WHITEHOUSE STATION, N.J., July 29, 2014 — Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the second quarter of 2014.

 

$ in millions, except EPS amounts

 

Second Quarter
2014

 

Second Quarter 
2013

 

Sales

 

$10,934

 

$11,010

 

GAAP EPS

 

0.68

 

0.30

 

Non-GAAP EPS that excludes items listed below1

 

0.85

 

0.84

 

GAAP Net Income2

 

2,004

 

906

 

Non-GAAP Net Income that excludes items listed below1,2

 

2,493

 

2,530

 

 


1 Merck is providing certain 2014 and 2013 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP. For description of the items, see Table 2a, including the related footnotes, attached to this release.

2 Net income attributable to Merck & Co., Inc.

 



 

Non-GAAP (generally accepted accounting principles) earnings per share (EPS) for the second quarter of $0.85 exclude acquisition- and divestiture-related costs, restructuring costs and certain other items.

 

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow. Year-to-date results can be found in the attached tables.

 

$ in millions, except EPS amounts

 

Second Quarter 
2014

 

Second Quarter 
2013

 

EPS

 

 

 

 

 

GAAP EPS

 

$0.68

 

$0.30

 

Difference3

 

0.17

 

0.54

 

Non-GAAP EPS that excludes items listed below1

 

$0.85

 

$0.84

 

 

 

 

 

 

 

Net Income

 

 

 

 

 

GAAP net income2

 

$2,004

 

$906

 

Difference

 

489

 

1,624

 

Non-GAAP net income that excludes items listed below1,2

 

$2,493

 

$2,530

 

 

 

 

 

 

 

Decrease (Increase) in Net Income Due to Excluded Items:

 

 

 

 

 

Acquisition- and divestiture-related costs4

 

$1,756

 

$1,768

 

Restructuring costs

 

421

 

278

 

Gain on AstraZeneca option exercise

 

(741

)

 

Other

 

 

(13

)

Net decrease (increase) in income before taxes

 

1,436

 

2,033

 

Income tax (benefit) expense5

 

(947

)

(409

)

Decrease (increase) in net income

 

$489

 

$1,624

 

 

“We delivered a strong first half of the year, making progress in transforming our operating model, fueling innovation and managing costs, while focusing on our best opportunities,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “I’m excited as we are preparing for a series of important and promising product launches later this year that we believe will make a meaningful difference to patients, healthcare providers and payers, while creating value for society and shareholders.”

 

Select Revenue Highlights

 

Worldwide sales were $10.9 billion for the second quarter of 2014, a decrease of 1 percent compared with the second quarter of 2013, with no net impact from foreign exchange.

 


3 Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the period.

4  Includes expenses of $1.1 billion and $1.2 billion in the second quarter of 2014 and 2013, respectively, for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as intangible asset impairment charges of $660 million and $564 million in the second quarter of 2014 and 2013, respectively. Also includes merger integration costs, as well as transaction and certain other costs related to business acquisitions and divestitures.

5  Includes the estimated tax impact on the reconciling items, which for the second quarter of 2014 includes a net benefit of $517 million recorded in connection with AstraZeneca’s option exercise.

 

Page 2



 

The following table reflects sales of the company’s top pharmaceutical products, as well as total sales of Animal Health and Consumer Care products.

 

$ in millions

 

Second Quarter
2014

 

Second Quarter
2013

 

Change

 

Change
Ex-exchange

 

Total Sales

 

$10,934

 

$11,010

 

-1

%

-1

%

Pharmaceutical

 

9,087

 

9,310

 

-2

%

-2

%

JANUVIA/JANUMET

 

1,577

 

1,547

 

2

%

2

%

ZETIA/VYTORIN

 

1,134

 

1,067

 

6

%

5

%

REMICADE

 

607

 

527

 

15

%

9

%

ISENTRESS

 

453

 

412

 

10

%

10

%

GARDASIL

 

409

 

383

 

7

%

9

%

PROQUAD, M-M-R II and VARIVAX

 

326

 

339

 

-4

%

-3

%

SINGULAIR

 

284

 

281

 

1

%

3

%

NASONEX

 

258

 

325

 

-21

%

-20

%

Animal Health

 

872

 

851

 

2

%

3

%

Consumer Care

 

583

 

490

 

19

%

20

%

Other Revenues

 

392

 

359

 

9

%

6

%

 

Pharmaceutical Revenue Performance

 

Second-quarter pharmaceutical sales declined 2 percent to $9.1 billion. Expected declines occurred due to the ongoing impact of the loss of market exclusivity for TEMODAR (temozolomide) and NASONEX (mometasone furoate monohydrate). Additionally, sales from the hepatitis franchise of VICTRELIS (boceprevir) and PEGINTRON (peginterferon alfa-2b) declined as a result of increased competition. These declines were partially offset by growth in REMICADE (infliximab), SIMPONI (golimumab) and ISENTRESS (raltegravir), as well as the cardiovascular franchise of ZETIA (ezetimibe)/VYTORIN (ezetimibe/simvastatin) and the diabetes franchise of JANUVIA (sitagliptin)/JANUMET (sitagliptin and metformin HCI).

 

Combined sales of JANUVIA and JANUMET, medicines that help lower blood sugar levels in adults with type 2 diabetes, grew 2 percent to $1.6 billion in the second quarter. The growth reflects higher sales in Europe and the emerging markets, which were partially offset by declines in Japan. Sales in the United States decreased 1 percent.

 

Combined sales of ZETIA and VYTORIN, medicines for lowering LDL cholesterol, increased 6 percent to $1.1 billion in the second quarter, including a 1 percent positive impact from foreign exchange. The growth was driven by higher sales of ZETIA in the United States, reflecting wholesaler purchases and price increases.

 

Combined sales of REMICADE and SIMPONI, treatments for inflammatory diseases, grew 21 percent to $781 million in the second quarter, including a 6 percent positive impact from foreign exchange.

 

Page 3



 

Worldwide sales of ISENTRESS, an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, increased 10 percent to $453 million in the second quarter. The increase was driven by strong growth in Europe and the emerging markets.

 

Animal Health Revenue Performance

 

Animal Health sales totaled $872 million for the second quarter of 2014, a 2 percent increase compared with the second quarter of 2013, including a 1 percent negative impact due to foreign exchange. The growth was primarily driven by BRAVECTO (fluralaner), a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks, which launched in Europe and the United States, as well as higher sales in poultry and aqua products. This growth was partially offset by the loss of sales of ZILMAX (zilpaterol hydrochloride), a feed supplement for beef cattle. The company decided last year to voluntarily suspend sales of ZILMAX in the United States and Canada. Excluding the impact of the ZILMAX sales suspension, Animal Health sales increased 9 percent in the second quarter.

 

Consumer Care Revenue Performance

 

Second-quarter global sales of Consumer Care products were $583 million, an increase of 19 percent compared to the second quarter of 2013, including a 1 percent negative impact due to foreign exchange. The increase reflects sales reversals in the second quarter of 2013 from the termination in China of certain Consumer Care distribution arrangements together with associated termination costs. Excluding those actions, Consumer Care global sales grew 4 percent, including the 1 percent negative impact due to foreign exchange. Consumer Care global sales in the second quarter of 2014 benefited from the strong performance of CLARITIN and COPPERTONE.

 

Other Revenue Performance

 

Other revenues — primarily comprising alliance revenue, miscellaneous corporate revenues and third-party manufacturing sales — increased 9 percent to $392 million compared to the second quarter of 2013. The increase was primarily driven by higher revenue from AstraZeneca (AZ) recorded by Merck, which grew 29 percent to $316 million in the second quarter of 2014, partially offset by lower third-party manufacturing sales.

 

On June 30, 2014, AZ exercised its option to buy the company’s interest in a subsidiary and, through it, the company’s interest in Nexium and Prilosec. As of July 1, 2014, Merck no longer records equity income from AZ and supply sales to AZ have ended.

 

Page 4


 


 

Second-Quarter Expense and Other Information

 

The costs detailed below totaled $9.7 billion on a GAAP basis during the second quarter of 2014 and include $2.2 billion of acquisition- and divestiture-related costs and restructuring costs.

 

 

 

Included in expenses for the period

 

$ in millions

 

GAAP

 

Acquisition-
and
Divestiture-
Related
Costs
4

 

Restructuring
Costs

 

Non-GAAP1

 

Second Quarter 2014

 

 

 

 

 

 

 

 

 

Materials and production

 

$4,893

 

$1,724

 

$171

 

$2,998

 

Marketing and administrative

 

2,973

 

32

 

44

 

2,897

 

Research and development

 

1,664

 

 

43

 

1,621

 

Restructuring costs

 

163

 

 

163

 

 

 

 

 

 

 

 

 

 

 

 

Second Quarter 2013

 

 

 

 

 

 

 

 

 

Materials and production

 

$4,284

 

$1,515

 

$93

 

$2,676

 

Marketing and administrative

 

3,140

 

19

 

16

 

3,105

 

Research and development

 

2,101

 

234

 

14

 

1,853

 

Restructuring costs

 

155

 

 

155

 

 

 

The gross margin was 55.2 percent for the second quarter of 2014 compared to 61.1 percent for the second quarter of 2013, reflecting 17.4 and 14.6 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs, and restructuring costs noted above. The non-GAAP gross margin decline primarily reflects the impacts of product mix, patent expiries, foreign exchange and inventory write-offs, primarily VICTRELIS.

 

Marketing and administrative expenses, on a non-GAAP basis, were $2.9 billion in the second quarter of 2014, a decrease from $3.1 billion in the same period of 2013. The decline was primarily due to productivity measures.

 

Research and development (R&D) expenses, on a non-GAAP basis, were $1.6 billion in the second quarter of 2014, a decrease from $1.9 billion in the second quarter of 2013. The decline reflects targeted reductions and lower clinical development spending as a result of portfolio prioritization and increased focus on the company’s key therapeutic opportunities, as well as timing of certain programs set to begin in the second half of 2014.

 

Equity income from affiliates was $92 million for the second quarter, primarily reflecting the performance of partnerships with AZ and Sanofi Pasteur MSD.

 

Page 5



 

Other (income) expense, net, was $558 million of income in the second quarter of 2014, compared to $201 million of expense in the second quarter of 2013. The second quarter of 2014 includes a $741 million gain recorded in connection with AZ’s option exercise.

 

The GAAP effective tax rate of (7.5) percent for the second quarter of 2014 reflects the impacts of acquisition- and divestiture-related costs and restructuring costs, as well as a net benefit of $517 million associated with AZ’s option exercise. The non-GAAP effective tax rate, which excludes these items, was 24.2 percent for the quarter.

 

Key Developments

 

·                  Merck announced an agreement to acquire Idenix Pharmaceuticals, Inc. for $24.50 per share in cash (approximately $3.85 billion) to expand its portfolio of investigational therapies for hepatitis C. The company commenced a tender offer, which is expected to close on Aug. 4, 2014.

·                  The U.S. Food and Drug Administration (FDA) and European Medicines Agency have accepted regulatory applications for pembrolizumab (MK-3475), an investigational anti-PD-1 antibody, for the treatment of patients with advanced melanoma. Regulatory action in the United States is expected by Oct. 28, 2014.

·                  Bayer AG agreed to purchase Merck Consumer Care for $14.2 billion; the sale is expected to close in the second half of 2014. The companies also announced that Merck will pay Bayer AG $1 billion as part of a clinical development collaboration.

·                  Merck received a Complete Response Letter from the U.S. FDA for its New Drug Application for corifollitropin alfa, a sustained follicle stimulant for controlled ovarian stimulation in women participating in assisted reproductive technologies. Merck is evaluating the information provided in the Complete Response Letter. Corifollitropin alfa is marketed as ELONVA in more than 75 countries.

 

For a full listing of company developments that occurred in the second quarter of 2014, visit the newsroom at www.merck.com.

 

Financial Outlook

 

Merck expects full-year 2014 non-GAAP EPS to be between $3.43 and $3.53, which excludes the potential impact of a Venezuelan Bolivar devaluation that was previously included in the range. The full-year 2014 non-GAAP EPS range reflects strong performance in the first half of the year and also includes anticipated dilution of $0.06 to $0.09 from the planned sale of Merck Consumer Care and the research collaboration with Bayer, and the planned acquisition of Idenix. The 2014 non-GAAP EPS range excludes acquisition- and divestiture-related costs and costs related to restructuring programs. The 2014 non-GAAP EPS range also excludes

 

Page 6



 

one-time gains associated with AZ’s option exercise, the sale of the company’s ophthalmics business in certain international markets and the planned sale of Merck Consumer Care, as well as certain other items. Merck now expects full-year 2014 GAAP EPS to be between $4.44 and $4.77.

 

At current exchange rates, Merck continues to expect full-year 2014 revenues to be between $42.4 billion and $43.2 billion.

 

In addition, the company continues to expect full-year 2014 non-GAAP marketing and administrative as well as R&D expenses to be below 2013 levels. The company continues to anticipate its full-year 2014 non-GAAP tax rate to be in the range of 24 to 26 percent; the rate does not include a 2014 benefit of an R&D tax credit.

 

A reconciliation of anticipated 2014 EPS, as reported in accordance with GAAP to non-GAAP EPS that excludes certain items, is provided in the table below.

 

$ in millions, except EPS amounts

 

Full Year
2014

 

GAAP EPS

 

$4.44 to $4.77

 

Difference3

 

(1.01) to (1.24)

 

Non-GAAP EPS that excludes items listed below

 

$3.43 to $3.53

 

 

 

 

 

Acquisition- and divestiture-related costs

 

$5,300 to $5,000

 

Restructuring costs

 

1,500 to 1,200

 

Gain on AZ option exercise

 

(741)

 

Gain on sale of ophthalmics business

 

(500) to (550)

 

Gain on planned sale of Merck Consumer Care

 

(11,000) to (11,300)

 

Net decrease (increase) in income before taxes

 

(5,441) to (6,391)

 

Estimated income tax (benefit) expense

 

2,485 to 2,755

 

Decrease (increase) in net income

 

($2,956) to ($3,636)

 

 

Total Employees

 

As of June 30, 2014, Merck had approximately 73,000 employees worldwide. In addition, the company’s joint ventures in China and Brazil, which are included in the consolidated results of Merck, had about 1,100 employees.

 

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 http://www.merck.com/investors/events-and-presentations/home.html. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 62998996. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code

 

Page 7



 

number 62998996. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

 

About Merck

 

Today’s Merck is a global healthcare leader working to help the world be well. Merck is known as MSD outside the United States and Canada. Through our prescription medicines, vaccines, biologic therapies, and consumer care and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to healthcare through far-reaching policies, programs and partnerships. For more information, visit www.merck.com and connect with us on Twitter, Facebook and YouTube. You can also follow our Twitter conversation at $MRK.

 

Forward-Looking Statement

 

This news release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of Merck’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

 

Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; Merck’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 Merck’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

 

Merck 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

 

Page 8



 

found in Merck’s 2013 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).

 

###

 

Page 9


 


 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1

 

 

 

 

 

 

 

 

 

GAAP

 

 

 

 

 

GAAP

 

 

 

June YTD

 

June YTD

 

 

 

 

 

2Q14

 

2Q13

 

% Change

 

2014

 

2013

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

10,934

 

$

11,010

 

-1

%

$

21,198

 

$

21,681

 

-2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production (1)

 

4,893

 

4,284

 

14

%

8,796

 

8,243

 

7

%

Marketing and administrative (1)

 

2,973

 

3,140

 

-5

%

5,707

 

6,126

 

-7

%

Research and development (1)

 

1,664

 

2,101

 

-21

%

3,238

 

4,008

 

-19

%

Restructuring costs (2)

 

163

 

155

 

5

%

288

 

274

 

5

%

Equity income from affiliates (3)

 

(92

)

(116

)

-21

%

(217

)

(249

)

-13

%

Other (income) expense, net (1) (4)

 

(558

)

201

 

*

 

(596

)

484

 

*

 

Income Before Taxes

 

1,891

 

1,245

 

52

%

3,982

 

2,795

 

42

%

Income Tax (Benefit) Provision

 

(142

)

310

 

 

 

218

 

244

 

 

 

Net Income

 

2,033

 

935

 

*

 

3,764

 

2,551

 

48

%

Less: Net Income Attributable to Noncontrolling Interests

 

29

 

29

 

 

 

55

 

52

 

 

 

Net Income Attributable to Merck & Co., Inc.

 

$

2,004

 

$

906

 

*

 

$

3,709

 

$

2,499

 

48

%

Earnings per Common Share Assuming Dilution

 

$

0.68

 

$

0.30

 

*

 

$

1.25

 

$

0.82

 

52

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

2,949

 

3,010

 

 

 

2,957

 

3,030

 

 

 

Tax Rate (5)

 

-7.5

%

24.9

%

 

 

5.5

%

8.7

%

 

 

 

* 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) Primarily reflects equity income from the AstraZeneca LP and Sanofi Pasteur MSD partnerships.

 

(4) Other (income) expense, net in the second quarter and first six months of 2014 includes a gain of $741 million related to AstraZeneca’s option exercise. In addition, other (income) expense, net in the first six months of 2014 includes net gains of $168 million related to the divestiture of the company’s Sirna Therapeutics, Inc. subsidiary. Other (income) expense, net in the first six months of 2013 reflects approximately $140 million of exchange losses as a result of a Venezuelan currency devaluation.

 

(5) The effective income tax rates for the second quarter and first six months of 2014 reflect a net benefit of $517 million recorded in connection with AstraZeneca’s option exercise. In addition, the effective income tax rate for the first six months of 2014 reflects a benefit of approximately $300 million associated with a capital loss generated in the first quarter of 2014.

 

The effective income tax rates for the second quarter and first six months of 2013 reflect benefits from reductions in tax reserves upon expiration of applicable statute of limitations. In addition, the effective tax rate for the first six months of 2013 reflects the favorable impact of tax legislation enacted in the first quarter of 2013, as well as a benefit of approximately $160 million associated with the resolution of a previously disclosed federal income tax issue.

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME

GAAP TO NON-GAAP RECONCILIATION

SECOND QUARTER 2014

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2a

 

 

 

 

 

Acquisition and

 

 

 

 

 

 

 

 

 

 

 

 

 

Divestiture-

 

Restructuring

 

Certain Other

 

Adjustment

 

 

 

 

 

GAAP

 

Related Costs (1)

 

Costs (2)

 

Items (3)

 

Subtotal

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

10,934

 

 

 

 

 

 

 

 

 

$

10,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

4,893

 

1,724

 

171

 

 

 

1,895

 

2,998

 

Marketing and administrative

 

2,973

 

32

 

44

 

 

 

76

 

2,897

 

Research and development

 

1,664

 

 

 

43

 

 

 

43

 

1,621

 

Restructuring costs

 

163

 

 

 

163

 

 

 

163

 

 

Equity income from affiliates

 

(92

)

 

 

 

 

 

 

 

 

(92

)

Other (income) expense, net

 

(558

)

 

 

 

 

(741

)

(741

)

183

 

Income Before Taxes

 

1,891

 

(1,756

)

(421

)

741

 

(1,436

)

3,327

 

Taxes on Income

 

(142

)

 

 

 

 

 

 

(947

)(4)

805

 

Net Income

 

2,033

 

 

 

 

 

 

 

(489

)

2,522

 

Less: Net Income Attributable to Noncontrolling Interests

 

29

 

 

 

 

 

 

 

 

 

29

 

Net Income Attributable to Merck & Co., Inc.

 

$

2,004

 

 

 

 

 

 

 

$

(489

)

$

2,493

 

Earnings per Common Share Assuming Dilution

 

$

0.68

 

 

 

 

 

 

 

 

 

$

0.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

2,949

 

 

 

 

 

 

 

 

 

2,949

 

Tax Rate

 

-7.5

%

 

 

 

 

 

 

 

 

24.2

%

 

Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

 

(1) Amounts included in materials and production costs reflect expenses of $1.1 billion for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as $660 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect merger integration costs, as well as transaction and certain other costs related to business acquisitions and divestitures.

 

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company’s formal restructuring programs.

 

(3) Represents the gain related to AstraZeneca’s option exercise.

 

(4) Represents the estimated tax impact on the reconciling items, including a net benefit of $517 million recorded in connection with AstraZeneca’s option exercise.

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME

GAAP TO NON-GAAP RECONCILIATION

SIX MONTHS ENDED JUNE 30, 2014

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2b

 

 

 

 

 

Acquisition and

 

 

 

 

 

 

 

 

 

 

 

 

 

Divestiture-

 

Restructuring

 

Certain Other

 

Adjustment

 

 

 

 

 

GAAP

 

Related Costs (1)

 

Costs (2)

 

Items (3)

 

Subtotal

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

21,198

 

 

 

 

 

 

 

 

 

$

21,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

8,796

 

2,850

 

290

 

 

 

3,140

 

5,656

 

Marketing and administrative

 

5,707

 

43

 

75

 

 

 

118

 

5,589

 

Research and development

 

3,238

 

 

 

94

 

 

 

94

 

3,144

 

Restructuring costs

 

288

 

 

 

288

 

 

 

288

 

 

Equity income from affiliates

 

(217

)

 

 

 

 

 

 

 

 

(217

)

Other (income) expense, net

 

(596

)

 

 

 

 

(741

)

(741

)

145

 

Income Before Taxes

 

3,982

 

(2,893

)

(747

)

741

 

(2,899

)

6,881

 

Taxes on Income

 

218

 

 

 

 

 

 

 

(1,514

)(4)

1,732

 

Net Income

 

3,764

 

 

 

 

 

 

 

(1,385

)

5,149

 

Less: Net Income Attributable to Noncontrolling Interests

 

55

 

 

 

 

 

 

 

 

 

55

 

Net Income Attributable to Merck & Co., Inc.

 

$

3,709

 

 

 

 

 

 

 

$

(1,385

)

$

5,094

 

Earnings per Common Share Assuming Dilution

 

$

1.25

 

 

 

 

 

 

 

 

 

$

1.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

2,957

 

 

 

 

 

 

 

 

 

2,957

 

Tax Rate

 

5.5

%

 

 

 

 

 

 

 

 

25.2

%

 

Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.

 

(1) Amounts included in materials and production costs reflect expenses of $2.2 billion for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as $660 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect merger integration costs, as well as transaction and certain other costs related to business acquisitions and divestitures.

 

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company’s formal restructuring programs.

 

(3) Represents the gain related to AstraZeneca’s option exercise.

 

(4) Represents the estimated tax impact on the reconciling items, including a net benefit of approximately $517 million recorded in connection with AstraZeneca’s option exercise, as well as a benefit of approximately $300 million associated with a capital loss generated in the first quarter.

 



 

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

Table 3

 

 

 

2014

 

2013

 

% Change

 

 

 

1Q

 

2Q

 

June
YTD

 

1Q

 

2Q

 

June
YTD

 

3Q

 

4Q

 

Full
Year

 

2Q

 

June
YTD

 

TOTAL SALES (1)

 

$

10,264

 

$

10,934

 

$

21,198

 

$

10,671

 

$

11,010

 

$

21,681

 

$

11,032

 

$

11,319

 

$

44,033

 

-1

 

-2

 

PHARMACEUTICAL

 

8,451

 

9,087

 

17,538

 

8,891

 

9,310

 

18,201

 

9,475

 

9,760

 

37,437

 

-2

 

-4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Care and Women’s Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cardiovascular

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Zetia

 

611

 

717

 

1,328

 

629

 

650

 

1,279

 

662

 

716

 

2,658

 

10

 

4

 

Vytorin

 

361

 

417

 

777

 

394

 

417

 

810

 

396

 

436

 

1,643

 

 

 

-4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diabetes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Januvia

 

858

 

1,058

 

1,916

 

884

 

1,072

 

1,956

 

927

 

1,121

 

4,004

 

-1

 

-2

 

Janumet

 

476

 

519

 

995

 

409

 

474

 

883

 

442

 

503

 

1,829

 

9

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General Medicine & Women’s Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NuvaRing

 

168

 

178

 

346

 

151

 

171

 

322

 

170

 

193

 

686

 

4

 

7

 

Implanon

 

102

 

119

 

221

 

84

 

102

 

187

 

96

 

120

 

403

 

16

 

18

 

Follistim AQ

 

110

 

102

 

213

 

122

 

134

 

257

 

124

 

101

 

481

 

-24

 

-17

 

Dulera

 

102

 

103

 

205

 

68

 

79

 

147

 

82

 

95

 

324

 

30

 

39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hospital and Specialty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hepatitis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PegIntron

 

112

 

103

 

216

 

126

 

142

 

268

 

104

 

124

 

496

 

-27

 

-19

 

Victrelis

 

59

 

46

 

105

 

110

 

116

 

226

 

121

 

81

 

428

 

-60

 

-53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HIV

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Isentress

 

390

 

453

 

843

 

362

 

412

 

775

 

427

 

442

 

1,643

 

10

 

9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hospital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancidas

 

166

 

156

 

322

 

162

 

163

 

326

 

151

 

183

 

660

 

-5

 

-1

 

Invanz

 

114

 

134

 

249

 

110

 

120

 

230

 

130

 

128

 

488

 

12

 

8

 

Noxafil

 

74

 

98

 

172

 

65

 

71

 

136

 

75

 

98

 

309

 

38

 

26

 

Bridion

 

73

 

82

 

155

 

63

 

69

 

131

 

75

 

82

 

288

 

20

 

18

 

Primaxin

 

71

 

81

 

151

 

84

 

85

 

168

 

88

 

79

 

335

 

-5

 

-10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Immunology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remicade

 

604

 

607

 

1,211

 

549

 

527

 

1,076

 

574

 

620

 

2,271

 

15

 

13

 

Simponi

 

157

 

174

 

330

 

108

 

120

 

228

 

126

 

146

 

500

 

44

 

45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cosopt / Trusopt

 

99

 

100

 

198

 

105

 

103

 

209

 

104

 

103

 

416

 

-3

 

-5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emend

 

122

 

144

 

266

 

116

 

135

 

250

 

123

 

134

 

507

 

7

 

6

 

Temodar

 

83

 

93

 

176

 

216

 

219

 

434

 

162

 

111

 

708

 

-57

 

-59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diversified Brands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Respiratory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nasonex

 

312

 

258

 

570

 

385

 

325

 

711

 

297

 

327

 

1,335

 

-21

 

-20

 

Singulair

 

271

 

284

 

554

 

337

 

281

 

618

 

280

 

298

 

1,196

 

1

 

-10

 

Clarinex

 

62

 

69

 

131

 

61

 

64

 

125

 

54

 

55

 

235

 

7

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cozaar / Hyzaar

 

205

 

214

 

419

 

267

 

255

 

522

 

238

 

246

 

1,006

 

-16

 

-20

 

Arcoxia

 

128

 

141

 

268

 

121

 

121

 

242

 

112

 

131

 

484

 

16

 

11

 

Fosamax

 

123

 

121

 

245

 

137

 

144

 

281

 

140

 

139

 

560

 

-16

 

-13

 

Zocor

 

64

 

69

 

133

 

82

 

74

 

156

 

65

 

79

 

301

 

-8

 

-15

 

Propecia

 

74

 

58

 

131

 

68

 

67

 

135

 

71

 

77

 

283

 

-14

 

-3

 

Remeron

 

50

 

40

 

90

 

52

 

53

 

106

 

44

 

56

 

206

 

-26

 

-15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vaccines

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gardasil

 

383

 

409

 

792

 

390

 

383

 

773

 

665

 

394

 

1,831

 

7

 

3

 

ProQuad, M-M-R II and Varivax

 

280

 

326

 

606

 

272

 

339

 

611

 

421

 

273

 

1,306

 

-4

 

-1

 

RotaTeq

 

169

 

147

 

316

 

162

 

144

 

306

 

201

 

129

 

636

 

3

 

3

 

Zostavax

 

142

 

156

 

298

 

168

 

141

 

309

 

185

 

264

 

758

 

11

 

-3

 

Pneumovax 23

 

101

 

102

 

203

 

111

 

108

 

219

 

193

 

241

 

653

 

-6

 

-7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Pharmaceutical (2)

 

1,175

 

1,209

 

2,387

 

1,361

 

1,430

 

2,789

 

1,350

 

1,435

 

5,570

 

-15

 

-14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANIMAL HEALTH

 

813

 

872

 

1,685

 

840

 

851

 

1,691

 

800

 

871

 

3,362

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSUMER CARE (3)

 

546

 

583

 

1,130

 

571

 

490

 

1,061

 

443

 

390

 

1,894

 

19

 

6

 

Claritin OTC

 

170

 

153

 

323

 

177

 

78

 

256

 

123

 

92

 

471

 

95

 

26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenues (4)

 

454

 

392

 

845

 

369

 

359

 

727

 

314

 

298

 

1,340

 

9

 

16

 

Astra

 

147

 

316

 

463

 

262

 

245

 

507

 

220

 

193

 

920

 

29

 

-9

 

 

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.

(1) Only select products are shown.

(2) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $98 million and $76 million for the first and second quarters of 2014. Other Vaccines sales included in Other Pharmaceutical were $53 million, $86 million, $127 million, and $101 million for the first, second, third, and fourth quarters of 2013, respectively.

(3) The decrease in Consumer Care sales in the second quarter and full year of 2013 resulted from the termination in China of distribution arrangements and a reversal of sales previously made to those distributors, together with associated termination costs.

(4) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. On October 1, 2013, the Company divested a substantial portion of its third-party manufacturing sales. In addition, Other revenues in the fourth quarter and full year of 2013 reflect $50 million of revenue for the out-license of a pipeline compound.