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EX-99.2 - EX-99.2 - Merck & Co., Inc.a17-18477_1ex99d2.htm
8-K - 8-K - Merck & Co., Inc.a17-18477_18k.htm

Exhibit 99.1

 

GRAPHIC

News Release

 

 

 

FOR IMMEDIATE RELEASE

 

Media Contacts:

Tracy Ogden

Investor Contacts:

Teri Loxam

 

(908) 740-1747

 

(908) 740-1986

 

 

 

 

 

Claire Gillespie

 

Amy Klug

 

(267) 305-0932

 

(908) 740-1898

 

Merck Announces Second-Quarter 2017 Financial Results

 

·                  Second-Quarter 2017 Worldwide Sales Were $9.9 Billion, an Increase of 1 Percent, Including a 1 Percent Negative Impact from Foreign Exchange

 

·                  Second-Quarter 2017 GAAP EPS Was $0.71; Second-Quarter Non-GAAP EPS Was $1.01

 

·                  Company Narrows and Raises 2017 Full-Year Revenue Range to be Between $39.4 Billion and $40.4 Billion, Including an Approximately 1 Percent Negative Impact from Foreign Exchange

 

·                  Company Reduces 2017 Full-Year GAAP EPS Range to be Between $1.60 and $1.72; Continues to Expect 2017 Full-Year Non-GAAP EPS Range to be Between $3.76 and $3.88, Including an Approximately 1 Percent Negative Impact from Foreign Exchange

 

·                  KEYTRUDA Development Program Significantly Advances with Several Key Regulatory Approvals

 

·                  Merck Enters Global Strategic Oncology Collaboration with AstraZeneca

 

KENILWORTH, N.J., July 28, 2017 — Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the second quarter of 2017.

 

“We continued to deliver strong results in the second quarter, driven by robust momentum for KEYTRUDA and good progress with other products in our portfolio,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “The company continues to invest in innovative science that addresses the critical needs of population health, which benefits patients while creating long-term value for shareholders.”

 

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Financial Summary

 

 

 

Second Quarter

 

$ in millions, except EPS amounts

 

2017

 

2016

 

Sales

 

$9,930

 

$9,844

 

GAAP net income1

 

1,946

 

1,205

 

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

 

2,778

 

2,587

 

GAAP EPS

 

0.71

 

0.43

 

Non-GAAP EPS that excludes items listed below2

 

1.01

 

0.93

 

 

Worldwide sales were $9.9 billion for the second quarter of 2017, an increase of 1 percent compared with the second quarter of 2016, including a 1 percent negative impact from foreign exchange.

 

GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) were $0.71 for the second quarter of 2017. Non-GAAP EPS of $1.01 for the second quarter of 2017 excludes acquisition- and divestiture-related costs, restructuring costs and certain other items. Year-to-date results can be found in the attached tables.

 

Pipeline Highlights

 

Merck made significant advances in the development program for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy, receiving key regulatory approvals and a supplemental Biologics License Application (sBLA) acceptance.

 

·                  The U.S. Food and Drug Administration (FDA) approved KEYTRUDA under its Accelerated Approval program:

 

·                  In combination with pemetrexed and carboplatin for the treatment of patients with metastatic nonsquamous non-small cell lung cancer (NSCLC) regardless of PD-L1 expression. This is the first regulatory approval of KEYTRUDA in combination with another treatment. The National Cancer Care Network (NCCN) also recommended the combination for the treatment of patients with metastatic nonsquamous NSCLC.

 

·                  For the treatment of previously treated patients with advanced microsatellite instability-high cancers.

 


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

2  Merck is providing certain 2017 and 2016 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the items, see Table 2a attached to this release.

 

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·                  For the treatment of certain patients with locally advanced or metastatic urothelial carcinoma, a type of bladder cancer, for first-line use in patients who are ineligible for cisplatin-containing therapy.

 

·                  The FDA approved KEYTRUDA for the treatment of certain patients with locally advanced or metastatic urothelial carcinoma in the second-line setting for patients who have disease progression during or following platinum-containing chemotherapy.

 

·                  The European Commission approved KEYTRUDA for the treatment of adult patients with relapsed or refractory classical Hodgkin lymphoma who have failed autologous stem cell transplant and brentuximab vedotin (BV), or who are transplant-ineligible and have failed BV.

 

·                  The Committee for Medicinal Products for Human Use of the European Medicines Agency (EMA) adopted a positive opinion recommending approval of KEYTRUDA for the treatment of certain patients with locally advanced or metastatic urothelial carcinoma, with a final decision expected in the third quarter of 2017.

 

·                  The FDA accepted for review the sBLA for KEYTRUDA for the treatment of patients with recurrent or advanced gastric or gastroesophageal junction adenocarcinoma who have already received two or more lines of chemotherapy. The FDA granted Priority Review with a PDUFA action date of Sept. 22, 2017.

 

·                  The FDA granted Breakthrough Therapy Designation for KEYTRUDA in combination with axitnib as a first-line treatment for patients with advanced or metastatic renal cell carcinoma.

 

The company previously announced that the pivotal Phase 3 KEYNOTE-040 trial investigating KEYTRUDA in previously treated patients with recurrent or metastatic head and neck squamous cell carcinoma did not meet its primary endpoint of overall survival (HR, 0.82 [95% CI, 0.67-1.01]; one-sided p = 0.03). The safety profile observed in KEYNOTE-040 was consistent with that observed in previously reported studies of KEYTRUDA without new safety signals identified. The final data from KEYNOTE-040 will be presented at an upcoming medical meeting.

 

At the 77th Scientific Sessions of the American Diabetes Association, Merck in partnership with Pfizer presented data from two Phase 3 studies of ertugliflozin, an investigational oral SGLT-2 inhibitor in development to help improve glycemic control in adults with type 2 diabetes, which met their primary endpoints. Three New Drug Applications for medicines containing ertugliflozin are currently under review with the FDA and EMA.

 

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Phase 3 results from the REVEAL (Randomized EValuation of the Effects of Anacetrapib through Lipid modification) outcomes study of anacetrapib met its primary endpoint, significantly reducing major coronary events (defined as the composite of coronary death, myocardial infarction, and coronary revascularization) compared to placebo in patients at risk for cardiac events who are already receiving an effective LDL-C lowering regimen. The safety profile of anacetrapib in the early analysis was generally consistent with that demonstrated in previous studies of the drug, including accumulation of anacetrapib in adipose tissue, as has been previously reported. Merck plans to review the results of the trial with external experts, and will consider whether to file new drug applications with the FDA and other regulatory agencies.

 

New data from the company’s HIV portfolio and pipeline were presented at the 9th IAS Conference on HIV Science.

 

·                  Week 96 results from the pivotal Phase 3 ONCEMRK study evaluating the efficacy and safety of ISENTRESS HD, a 1200 mg once-daily dose of the company’s integrase inhibitor, ISENTRESS (raltegravir), met its primary efficacy endpoint of non-inferiority to twice-daily ISENTRESS, with a similar safety and tolerability profile, reaffirming the comparable efficacy and safety of ISENTRESS HD. ISENTRESS HD is now approved in the United States and European Union.

 

·                  48 week data from DRIVE-AHEAD, the second of two pivotal Phase 3 studies evaluating doravirine (MK-1439), an investigational non-nucleoside reverse transcriptase inhibitor, for the treatment of HIV-1 infection showed that a once-daily single tablet, fixed-dose combination of doravirine, lamivudine and tenofovir disoproxil fumarate met its primary endpoint. Based on these findings the company plans to file regulatory applications in the fourth quarter of 2017.

 

·                  Results from a Phase 1 study of MK-8591, Merck’s investigational nucleoside reverse transcriptase translocation inhibitor in adult patients with HIV-1 infection.

 

Merck entered into an exclusive worldwide license agreement with Teijin Pharma for the development, manufacture and commercialization of an investigational preclinical antibody candidate targeting the protein tauChanges in tau are associated with a number of diseases affecting the nervous system, including Alzheimer’s disease.

 

Recent Developments

 

Merck entered a global strategic oncology collaboration with AstraZeneca to co-develop and co-commercialize AstraZeneca’s Lynparza (olaparib), a PARP inhibitor, and investigational medicine selemetinib, a MEK inhibitor, as monotherapy and in combination treatments for

 

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multiple cancer types. Merck and AstraZeneca will independently develop and commercialize Lynparza and selumetinib in combinations with the companies’ respective PD-1 and PD-L1 immuno-oncology medicines KEYTRUDA and Imfinzi (durvalumab). The companies will share development and marketing costs equally, as well as gross profits from Lynparza and selumetinib.

 

Second-Quarter Revenue Performance

 

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

 

 

 

Second Quarter

 

$ in millions

 

2017

 

2016

 

Change

 

Change
Ex-Exchange

 

Total Sales

 

$9,930

 

$9,844

 

1

%

2

%

Pharmaceutical

 

8,759

 

8,700

 

1

%

2

%

JANUVIA / JANUMET

 

1,511

 

1,634

 

-8

%

-7

%

KEYTRUDA

 

881

 

314

 

180

%

183

%

ZETIA / VYTORIN

 

549

 

994

 

-45

%

-44

%

ZEPATIER

 

517

 

112

 

*

 

*

 

GARDASIL / GARDASIL 9

 

469

 

393

 

19

%

20

%

PROQUAD, M-M-R II and VARIVAX

 

399

 

383

 

4

%

5

%

ISENTRESS / ISENTRESS HD

 

282

 

338

 

-17

%

-15

%

REMICADE

 

208

 

339

 

-39

%

-36

%

SINGULAIR

 

203

 

229

 

-11

%

-10

%

Animal Health

 

955

 

900

 

6

%

7

%

Other Revenues

 

216

 

244

 

-11

%

-5

%

 

*Growth comparison not meaningful due to ongoing product launch.

 

Pharmaceutical Revenue

 

Second-quarter pharmaceutical sales increased 1 percent to $8.8 billion, including a 1 percent negative impact from foreign exchange. The growth was primarily driven by product launches and vaccines, largely offset by the loss of market exclusivity for several products, as well as lower sales in the diabetes franchise.

 

Growth in oncology was due to higher sales of KEYTRUDA as the company continues to launch the product with new indications globally. Strong momentum from NSCLC, as KEYTRUDA is the only anti-PD-1 approved in the first-line setting, contributed significantly to KEYTRUDA’s overall growth.

 

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Growth in hepatitis C was driven by ZEPATIER (elbasvir and grazoprevir), a medicine for the treatment of chronic hepatitis C virus genotypes 1 or 4 infection, due to ongoing launches globally.

 

Additionally, the ongoing launch of 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, generated sales of $163 million and also contributed to growth during the second quarter of 2017.

 

Growth in vaccines was primarily 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), vaccines to prevent certain cancers and other diseases caused by HPV, reflecting strong demand in Asia Pacific and the timing of sales in Brazil. Growth in vaccines also reflects higher sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, largely driven by volume growth and pricing in the United States. Additionally, vaccines sales growth reflects incremental sales of approximately $70 million, of which approximately $40 million relates to GARDASIL and GARDASIL 9, due to the recording of vaccine sales from 19 European countries that were part of the Sanofi Pasteur MSD (SPMSD) vaccines joint venture, which was terminated on Dec. 31, 2016.

 

Pharmaceutical sales reflect a decrease in the diabetes franchise of JANUVIA and JANUMET (sitagliptin and metformin HCl), medicines that help lower blood sugar in adults with type 2 diabetes, primarily due to lower sales in the United States, reflecting continued pricing pressure and lower customer inventory levels that were partially offset by continued volume growth. Pharmaceutical sales growth also was offset by the loss of U.S. market exclusivity for ZETIA (ezetimibe) in late 2016 and VYTORIN (ezetimibe/simvastatin) in April 2017, medicines for lowering LDL cholesterol, and the ongoing impacts of generic competition for CUBICIN (daptomycin for injection), an I.V. antibiotic, and biosimilar competition for REMICADE (infliximab), a treatment for inflammatory diseases, in the company’s marketing territories in Europe. In the aggregate, sales of these products declined $830 million during the second quarter of 2017 compared to the second quarter of 2016.

 

Animal Health Revenue

 

Animal Health sales totaled $955 million for the second quarter of 2017, an increase of 6 percent compared with the second quarter of 2016, including a 1 percent negative impact from foreign exchange. Growth was primarily due to sales increases in companion animal products,

 

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driven by the BRAVECTO (fluralaner) line of products that kill fleas and ticks in dogs and cats for up to 12 weeks, and the NOBIVAC Canine Flu Bivalent vaccine, as well as sales increases in ruminants products, reflecting the positive impact of the Vallée S.A. acquisition.

 

Second-Quarter Expense, EPS and Related Information

 

The table below presents selected expense information.

 

 

 

GAAP

 

Acquisition- and
Divestiture-
Related Costs
3

 

Restructuring 
Costs

 

Non-GAAP2

 

Second-Quarter 2017

 

 

 

 

 

 

 

 

 

Materials and production

 

$3,080

 

$827

 

$33

 

$2,220

 

Marketing and administrative

 

2,438

 

9

 

2

 

2,427

 

Research and development

 

1,749

 

7

 

9

 

1,733

 

Restructuring costs

 

166

 

 

166

 

 

Other (income) expense, net

 

58

 

39

 

 

19

 

 

 

 

 

 

 

 

 

 

 

Second-Quarter 2016

 

 

 

 

 

 

 

 

 

Materials and production

 

$3,578

 

$1,120

 

$66

 

$2,392

 

Marketing and administrative

 

2,458

 

18

 

87

 

2,353

 

Research and development

 

2,151

 

207

 

64

 

1,880

 

Restructuring costs

 

134

 

 

134

 

 

Other (income) expense, net

 

19

 

 

 

19

 

 

GAAP Expense, EPS and Related Information

 

On a GAAP basis, the gross margin was 69.0 percent for the second quarter of 2017 compared to 63.7 percent for the second quarter of 2016. The increase in gross margin for the second quarter of 2017 was primarily driven by lower acquisition- and divestiture-related costs and restructuring costs, which reduced gross margin by 8.6 percentage points in the second quarter of 2017 compared with 12.0 percentage points in the second quarter of 2016. The increase also reflects the favorable effects of product mix and lower inventory write-offs.

 

Marketing and administrative expenses were $2.4 billion in the second quarter of 2017, a 1 percent decrease compared to the second quarter of 2016. The decrease primarily reflects lower restructuring costs partially offset by higher administrative costs including costs associated with the company now operating its European vaccines business in the countries that were part of the SPMSD vaccines joint venture, which was terminated on Dec. 31, 2016, and higher promotion expenses related to product launches.

 


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 contingent consideration. Also includes integration, transaction and certain other costs related to business acquisitions and divestitures.

 

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Research and development (R&D) expenses were $1.7 billion in the second quarter of 2017, a 19 percent decrease compared to the second quarter of 2016. The decrease primarily reflects lower intangible asset impairment charges and licensing costs.

 

GAAP EPS was $0.71 for the second quarter of 2017 compared with $0.43 for the second quarter of 2016.

 

Non-GAAP Expense, EPS and Related Information

 

The non-GAAP gross margin was 77.6 percent for the second quarter of 2017 compared to 75.7 percent for the second quarter of 2016. The increase in non-GAAP gross margin was largely driven by the favorable effects of product mix and lower inventory write-offs.

 

Non-GAAP marketing and administrative expenses were $2.4 billion in the second quarter of 2017, an increase of 3 percent compared to the second quarter of 2016. The increase was driven primarily by higher administrative costs, including costs associated with the company now operating its European vaccines business in the countries that were previously part of the SPMSD vaccines joint venture, and higher promotion expenses related to product launches.

 

Non-GAAP R&D expenses were $1.7 billion in the second quarter of 2017, an 8 percent decrease compared to the second quarter of 2016. The decrease primarily reflects lower licensing costs.

 

Non-GAAP EPS was $1.01 for the second quarter of 2017 compared with $0.93 for the second quarter of 2016.

 

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.

 

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Second Quarter

 

$ in millions, except EPS amounts

 

2017

 

2016

 

EPS

 

 

 

 

 

GAAP EPS

 

$0.71

 

$0.43

 

Difference4

 

0.30

 

0.50

 

Non-GAAP EPS that excludes items listed below2

 

$1.01

 

$0.93

 

 

 

 

 

 

 

Net Income

 

 

 

 

 

GAAP net income1

 

$1,946

 

$1,205

 

Difference

 

832

 

1,382

 

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

 

$2,778

 

$2,587

 

 

 

 

 

 

 

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

 

 

 

 

 

Acquisition- and divestiture-related costs3

 

$882

 

$1,345

 

Restructuring costs

 

210

 

351

 

Net decrease (increase) in income before taxes

 

1,092

 

1,696

 

Income tax (benefit) expense5

 

(260

)

(314

)

Decrease (increase) in net income

 

$832

 

$1,382

 

 

Financial Outlook

 

On June 27, 2017, the company experienced a network cyber-attack that led to a disruption of its worldwide operations, including manufacturing, research and sales operations. While the company does not yet know the magnitude of the impact of the disruption, which remains ongoing in certain operations, it continues to work to minimize the effects.

 

The company is in the process of restoring its manufacturing operations. To date, Merck has largely restored its packaging operations and has partially restored its formulation operations. The company is in the process of restoring its Active Pharmaceutical Ingredient operations but is not yet producing bulk product. The company’s external manufacturing was not impacted. Throughout this time, Merck has continued to fulfill orders and ship product.

 

The company is confident in the continuous supply of key products such as KEYTRUDA, JANUVIA and ZEPATIER. In addition, Merck does not currently expect a significant impact to sales of its other top products; however, the company anticipates that it will have temporary delays in fulfilling orders for certain other products in certain markets.

 

The financial outlook below reflects the current state of the company’s manufacturing operations as well as its plans to restore those operations and potential costs associated with the remediation efforts.

 

Merck has reduced its full-year 2017 GAAP EPS range to be between $1.60 and $1.72. The change in the GAAP EPS range reflects the inclusion of licensing expenses related to the collaboration with AstraZeneca. Merck has maintained its full-year 2017 non-GAAP EPS range

 


4 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.

5 Includes the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments, as well as a benefit of $88 million related to the settlement of a state income tax issue.

 

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to be between $3.76 and $3.88, including an approximately 1 percent negative impact from foreign exchange at mid-July 2017 exchange rates. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs and certain other items, including licensing expenses related to the collaboration with AstraZeneca as shown in the table below.

 

Merck has narrowed and raised its full-year 2017 revenue range to be between $39.4 billion and $40.4 billion, including an approximately 1 percent negative impact from foreign exchange at mid-July 2017 exchange rates.

 

The following table summarizes the company’s 2017 financial guidance.

 

 

 

GAAP

 

Non-GAAP2

 

 

 

 

 

 

 

Revenue

 

$39.4 to $40.4 billion

 

$39.4 to $40.4 billion**

 

Operating expenses

 

Lower than 2016

 

Higher than 2016 by a mid-single digit rate

 

Effective tax rate

 

32.0% to 33.0%

 

21.0% to 22.0%

 

EPS

 

$1.60 to $1.72

 

$3.76 to $3.88

 

 

**The company does not have any non-GAAP adjustments to revenue.

 

A reconciliation of anticipated 2017 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 2017

 

 

 

 

 

GAAP EPS

 

$1.60 to $1.72

 

Difference4

 

2.16

 

Non-GAAP EPS that excludes items listed below2

 

$3.76 to $3.88

 

 

 

 

 

Acquisition- and divestiture-related costs

 

$3,600

 

Restructuring costs

 

600

 

Licensing expense relating to AstraZeneca collaboration

 

2,350

 

Net decrease (increase) in income before taxes

 

6,550

 

Estimated income tax (benefit) expense

 

(610

)

Decrease (increase) in net income

 

$5,940

 

 

The expected full-year 2017 GAAP effective tax rate of 32.0 to 33.0 percent reflects an unfavorable impact of approximately 11 percentage points from the above items.

 

Total Employees

 

As of June 30, 2017, Merck had approximately 69,000 employees worldwide.

 

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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://investors.merck.com/events-and-presentations/default.aspx. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 36593115. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 36593115. 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 a century, Merck, a leading global biopharmaceutical company 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. Through our prescription medicines, vaccines, biologic therapies and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to health care through far-reaching policies, programs and partnerships. Today, Merck continues to be at the forefront of research to advance the prevention and treatment of diseases that threaten people and communities around the world - including cancer, cardio-metabolic diseases, emerging animal diseases, Alzheimer’s disease and infectious diseases including HIV and Ebola. For more information, visit www.merck.com and connect with us on Twitter, Facebook, YouTube and LinkedIn. You can also follow our Twitter conversation at $MRK.

 

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

 

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fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

 

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s 2016 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).

 

###

 

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MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1

 

 

 

GAAP

 

 

 

GAAP

 

 

 

 

 

2Q17

 

2Q16

 

% Change

 

June YTD
2017

 

June YTD
2016

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

9,930

 

$

9,844

 

1

%

$

19,365

 

$

19,156

 

1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production (1)

 

3,080

 

3,578

 

-14

%

6,095

 

7,150

 

-15

%

Marketing and administrative (1) 

 

2,438

 

2,458

 

-1

%

4,849

 

4,776

 

2

%

Research and development (1) 

 

1,749

 

2,151

 

-19

%

3,545

 

3,810

 

-7

%

Restructuring costs (2) 

 

166

 

134

 

24

%

317

 

225

 

41

%

Other (income) expense, net (1)

 

58

 

19

 

*

 

117

 

67

 

75

%

Income Before Taxes

 

2,439

 

1,504

 

62

%

4,442

 

3,128

 

42

%

Taxes on Income

 

488

 

295

 

 

 

935

 

789

 

 

 

Net Income

 

1,951

 

1,209

 

61

%

3,507

 

2,339

 

50

%

Less: Net Income Attributable to Noncontrolling Interests

 

5

 

4

 

 

 

11

 

9

 

 

 

Net Income Attributable to Merck & Co., Inc.

 

$

1,946

 

$

1,205

 

61

%

$

3,496

 

$

2,330

 

50

%

Earnings per Common Share Assuming Dilution

 

$

0.71

 

$

0.43

 

65

%

$

1.27

 

$

0.83

 

53

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

2,752

 

2,789

 

 

 

2,759

 

2,792

 

 

 

Tax Rate

 

20.0

%

19.6

%

 

 

21.0

%

25.2

%

 

 

 

*                 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.

 



 

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

SECOND QUARTER 2017

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2a

 

 

 

 

GAAP

 

Acquisition and
Divestiture-Related
Costs 
(1)

 

Restructuring
Costs 
(2)

 

Certain Other
Items

 

Adjustment
Subtotal

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

$

3,080

 

827

 

33

 

 

 

860

 

$

2,220

 

Marketing and administrative

 

2,438

 

9

 

2

 

 

 

11

 

2,427

 

Research and development

 

1,749

 

7

 

9

 

 

 

16

 

1,733

 

Restructuring costs

 

166

 

 

 

166

 

 

 

166

 

 

Other (income) expense, net

 

58

 

39

 

 

 

 

 

39

 

19

 

Income Before Taxes

 

2,439

 

(882

)

(210

)

 

 

(1,092

)

3,531

 

Income Tax Provision (Benefit)

 

488

 

(127

)(3)

(45

)(3)

(88

)(4)

(260

)

748

 

Net Income

 

1,951

 

(755

)

(165

)

88

 

(832

)

2,783

 

Net Income Attributable to Merck & Co., Inc.

 

1,946

 

(755

)

(165

)

88

 

(832

)

2,778

 

Earnings per Common Share Assuming Dilution

 

$

0.71

 

(0.27

)

(0.06

)

0.03

 

(0.30

)

$

1.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax Rate

 

20.0

%

 

 

 

 

 

 

 

 

21.2

%

 

Only the line items that are affected by non-GAAP adjustments are shown.

 

Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

 

(1) Amounts included in materials and production costs primarily reflect $779 million of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as intangible asset impairment charges of $47 million.  Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures.  Amounts included in research and development expenses reflect changes in the estimated fair value measurement of liabilities for contingent consideration.  Amounts included in other (income) expense, net primarily reflect changes in the estimated fair value measurement of liabilities for contingent consideration related to the termination of the Sanofi-Pasteur MSD joint venture.

 

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

 

(3) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

 

(4) Represents a benefit related to the settlement of a state income tax issue.

 



 

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

SIX MONTHS ENDED JUNE 30, 2017

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2b

 

 

 

GAAP

 

Acquisition and
Divestiture-Related
Costs 
(1)

 

Restructuring
Costs 
(2)

 

Certain Other
Items

 

Adjustment
Subtotal

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

$

6,095

 

1,682

 

96

 

 

 

1,778

 

$

4,317

 

Marketing and administrative

 

4,849

 

29

 

3

 

 

 

32

 

4,817

 

Research and development

 

3,545

 

18

 

9

 

 

 

27

 

3,518

 

Restructuring costs

 

317

 

 

 

317

 

 

 

317

 

 

Other (income) expense, net

 

117

 

36

 

 

 

(9

)

27

 

90

 

Income Before Taxes

 

4,442

 

(1,765

)

(425

)

9

 

(2,181

)

6,623

 

Income Tax Provision (Benefit)

 

935

 

(285

)(3)

(93

)(3)

(85

)(3)

(463

)

1,398

 

Net Income

 

3,507

 

(1,480

)

(332

)

94

 

(1,718

)

5,225

 

Net Income Attributable to Merck & Co., Inc.

 

3,496

 

(1,480

)

(332

)

94

 

(1,718

)

5,214

 

Earnings per Common Share Assuming Dilution

 

$

1.27

 

(0.53

)

(0.12

)

0.03

 

(0.62

)

$

1.89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax Rate

 

21.0

%

 

 

 

 

 

 

 

 

21.1

%

 

Only the line items that are affected by non-GAAP adjustments are shown.

 

Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

 

(1) Amounts included in materials and production costs primarily reflect $1.6 billion of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as intangible asset impairment charges of $123 million.  Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures.  Amounts included in research and development expenses primarily reflect changes in the estimated fair value measurement of liabilities for contingent consideration.  Amounts included in other (income) expense, net primarily reflect changes in the estimated fair value measurement of liabilities for contingent consideration 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, as well as a benefit of $88 million related to the settlement of a state income tax issue.

 



 

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

Table 3

 

 

 

2017

 

2016

 

2Q

 

June YTD

 

 

 

1Q

 

2Q

 

June YTD

 

1Q

 

2Q

 

June YTD

 

3Q

 

4Q

 

Full Year

 

Nom %

 

 Ex-Exch %

 

Nom %

 

Ex-Exch %

 

TOTAL SALES (1)

 

$

9,434

 

$

9,930

 

$

19,365

 

$

9,312

 

$

9,844

 

$

19,156

 

$

10,536

 

$

10,115

 

$

39,807

 

1

 

2

 

1

 

2

 

PHARMACEUTICAL

 

8,185

 

8,759

 

16,944

 

8,104

 

8,700

 

16,804

 

9,443

 

8,904

 

35,151

 

1

 

2

 

1

 

2

 

Primary Care and Women’s Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cardiovascular

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Zetia

 

334

 

367

 

701

 

612

 

702

 

1,314

 

671

 

575

 

2,560

 

-48

 

-47

 

-47

 

-46

 

Vytorin

 

241

 

182

 

423

 

277

 

293

 

570

 

273

 

299

 

1,141

 

-38

 

-37

 

-26

 

-25

 

Liptruzet

 

49

 

63

 

112

 

23

 

33

 

56

 

39

 

50

 

146

 

88

 

90

 

99

 

102

 

Adempas

 

84

 

67

 

151

 

33

 

40

 

72

 

48

 

49

 

169

 

68

 

69

 

109

 

110

 

Diabetes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Januvia

 

839

 

948

 

1,787

 

906

 

1,064

 

1,970

 

1,006

 

932

 

3,908

 

-11

 

-10

 

-9

 

-9

 

Janumet

 

496

 

563

 

1,059

 

506

 

569

 

1,075

 

548

 

577

 

2,201

 

-1

 

0

 

-2

 

-1

 

General Medicine & Women’s Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NuvaRing

 

160

 

199

 

359

 

175

 

200

 

376

 

195

 

207

 

777

 

0

 

0

 

-4

 

-4

 

Implanon / Nexplanon

 

170

 

178

 

349

 

134

 

164

 

298

 

148

 

160

 

606

 

9

 

9

 

17

 

18

 

Follistim AQ

 

81

 

79

 

160

 

94

 

73

 

167

 

101

 

87

 

355

 

9

 

10

 

-4

 

-3

 

Hospital and Specialty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hepatitis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Zepatier

 

378

 

517

 

895

 

50

 

112

 

161

 

164

 

229

 

555

 

*

 

*

 

*

 

*

 

HIV

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Isentress / Isentress HD

 

305

 

282

 

587

 

340

 

338

 

678

 

372

 

337

 

1,387

 

-17

 

-15

 

-13

 

-13

 

Hospital Acute Care

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bridion

 

148

 

163

 

310

 

90

 

113

 

204

 

139

 

139

 

482

 

44

 

44

 

52

 

53

 

Noxafil

 

141

 

155

 

296

 

145

 

143

 

288

 

147

 

161

 

595

 

8

 

11

 

3

 

5

 

Invanz

 

136

 

150

 

286

 

114

 

143

 

257

 

152

 

152

 

561

 

5

 

5

 

11

 

11

 

Cancidas

 

121

 

112

 

233

 

133

 

131

 

263

 

142

 

152

 

558

 

-14

 

-13

 

-12

 

-9

 

Cubicin

 

96

 

103

 

198

 

292

 

357

 

649

 

320

 

119

 

1,087

 

-71

 

-71

 

-69

 

-69

 

Primaxin

 

62

 

71

 

133

 

73

 

81

 

154

 

77

 

66

 

297

 

-13

 

-9

 

-14

 

-10

 

Immunology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remicade

 

229

 

208

 

437

 

349

 

339

 

688

 

311

 

269

 

1,268

 

-39

 

-36

 

-37

 

-34

 

Simponi

 

184

 

199

 

383

 

188

 

199

 

387

 

193

 

186

 

766

 

0

 

3

 

-1

 

3

 

Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keytruda

 

584

 

881

 

1,465

 

249

 

314

 

563

 

356

 

483

 

1,402

 

180

 

183

 

160

 

162

 

Emend

 

133

 

143

 

276

 

126

 

143

 

268

 

137

 

144

 

549

 

0

 

1

 

3

 

3

 

Temodar

 

66

 

65

 

130

 

66

 

73

 

139

 

78

 

67

 

283

 

-12

 

-11

 

-6

 

-6

 

Diversified Brands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Respiratory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Singulair

 

186

 

203

 

389

 

237

 

229

 

465

 

239

 

210

 

915

 

-11

 

-10

 

-16

 

-16

 

Nasonex

 

139

 

85

 

224

 

229

 

101

 

331

 

94

 

112

 

537

 

-16

 

-16

 

-32

 

-33

 

Dulera

 

82

 

69

 

151

 

113

 

121

 

234

 

97

 

105

 

436

 

-43

 

-43

 

-35

 

-36

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cozaar / Hyzaar

 

112

 

119

 

231

 

126

 

132

 

258

 

131

 

121

 

511

 

-10

 

-7

 

-10

 

-8

 

Arcoxia

 

103

 

89

 

192

 

111

 

117

 

228

 

114

 

108

 

450

 

-24

 

-24

 

-16

 

-15

 

Fosamax

 

61

 

66

 

127

 

75

 

73

 

148

 

68

 

68

 

284

 

-10

 

-9

 

-14

 

-13

 

Vaccines (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gardasil / Gardasil 9

 

532

 

469

 

1,001

 

378

 

393

 

770

 

860

 

542

 

2,173

 

19

 

20

 

30

 

30

 

ProQuad / M-M-R II / Varivax

 

355

 

399

 

754

 

357

 

383

 

739

 

496

 

405

 

1,640

 

4

 

5

 

2

 

3

 

RotaTeq

 

224

 

123

 

347

 

188

 

130

 

318

 

171

 

162

 

652

 

-5

 

-5

 

9

 

9

 

Pneumovax 23

 

163

 

166

 

329

 

107

 

120

 

228

 

175

 

238

 

641

 

38

 

38

 

44

 

45

 

Zostavax

 

154

 

160

 

313

 

125

 

149

 

274

 

190

 

221

 

685

 

7

 

7

 

14

 

14

 

Other Pharmaceutical (3)

 

1,037

 

1,116

 

2,156

 

1,083

 

1,128

 

2,214

 

1,191

 

1,172

 

4,574

 

-1

 

0

 

-3

 

-2

 

ANIMAL HEALTH

 

939

 

955

 

1,894

 

829

 

900

 

1,729

 

865

 

884

 

3,478

 

6

 

7

 

10

 

10

 

Other Revenues (4)

 

310

 

216

 

527

 

379

 

244

 

623

 

228

 

327

 

1,178

 

-11

 

-5

 

-15

 

-5

 

 

* 200% or greater

 

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

 

(1) Only select products are shown.

 

(2) Vaccine sales in 2017 include sales in the European markets that were previously part of the Sanofi Pasteur MSD (SPMSD) joint venture that was terminated on December 31, 2016. Amounts for 2016 reflect supply sales to SPMSD.

 

(3) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $88 million in the first quarter and $87 million in the second quarter of 2017 and $103 million, $91 million, $135 million and $126 million for the first, second, third and fourth quarters of 2016, respectively.

 

(4) Other Revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.