- First-Quarter 2016 GAAP EPS was $0.40;
First-Quarter Non-GAAP EPS Increased by 5 Percent to $0.89
- Company Continues to Expect 2016
Full-Year GAAP EPS to be Between $1.96 and $2.23; Narrows and
Raises 2016 Full-Year Non-GAAP EPS to be Between $3.65 and
$3.77
- First-Quarter 2016 Worldwide Sales Were
$9.3 Billion, a Decrease of 1 Percent, Including a 4 Percent
Negative Impact from Foreign Exchange
- Obtained FDA Approval of ZEPATIER in
the Treatment of Chronic Hepatitis C Genotypes 1 or 4
Infection
- Advanced KEYTRUDA Development Program
- sBLA Accepted for Recurrent or
Metastatic Head and Neck Cancer
- Breakthrough Therapy Designation
Granted for Classical Hodgkin Lymphoma
Merck (NYSE:MRK), known as MSD outside the United States and
Canada, today announced financial results for the first quarter of
2016.
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View the full release here:
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“Our first quarter’s performance sets us on a good course for
the year,” said Kenneth C. Frazier, chairman and chief executive
officer, Merck. “We remain focused on advancing our pipeline and
driving the commercial success of our key launches and inline
medicines and vaccines.”
Financial Summary
First Quarter $ in millions, except EPS amounts
2016 2015 Sales $9,312
$9,425
GAAP EPS
0.40 0.33
Non-GAAP EPS that excludes items listed
below1
0.89 0.85
GAAP net income2
1,125 953
Non-GAAP net income that excludes items
listed below1,2
2,492 2,426
Non-GAAP (generally accepted accounting principles) earnings per
share (EPS) of $0.89 for the first quarter exclude acquisition- and
divestiture-related costs and restructuring costs.
A reconciliation of GAAP to non-GAAP net income and EPS is
provided in the tables that follow.
$ in millions, except EPS amounts
First Quarter
2016 2015 EPS
GAAP EPS $0.40 $0.33
Difference3
0.49 0.52
Non-GAAP EPS that excludes items listed
below1
$0.89 $0.85
Net Income
GAAP net income2 $1,125 $953 Difference
1,367 1,473 Non-GAAP net income that excludes items
listed below1,2 $2,492 $2,426
Decrease
(Increase) in Net Income Due to Excluded Items:
Acquisition- and divestiture-related
costs4
$1,423 $1,526 Restructuring costs 196
225 Net decrease (increase) in income before taxes 1,619
1,751 Estimated income tax (benefit) expense (252)
(278) Decrease (increase) in net income $1,367
$1,473
Additional Executive Commentary
“Business development is a top priority, and we are actively
pursuing the best external science through licensing or bolt-on
acquisitions to bolster our pipeline and grow our company,” said
Frazier.
“The Global Human Health business performed well in the first
quarter. The JANUVIA franchise demonstrated strong growth, and we
remain pleased with the ongoing launch of KEYTRUDA in markets
around the world,” said Adam Schechter, president, Global Human
Health. “Additionally, we are already seeing positive signs in the
launch of ZEPATIER in the United States.”
“Merck Research Laboratories advanced several clinical
development programs in the first quarter of 2016. We continued to
accelerate the development of KEYTRUDA with an additional
supplemental filing in head and neck cancer, and by securing a
fourth Breakthrough Therapy Designation in classical Hodgkin
lymphoma,” said Dr. Roger M. Perlmutter, president, Merck Research
Laboratories.
“We demonstrated strong performance with a leveraged P&L,
growing sales and EPS, excluding the impact of foreign exchange. We
benefited from the contribution of new product launches, while
continuing to sustain growth in our key franchises and driving
operational improvements across the company,” said Robert Davis,
chief financial officer.
Select Business Highlights
Worldwide sales were $9.3 billion for the first quarter of 2016,
a decrease of 1 percent compared with the first quarter of 2015,
including a 4 percent negative impact from foreign exchange.
The following table reflects sales of the company’s top
pharmaceutical products, as well as total sales of Animal Health
products.
$ in millions
First Quarter
Change Change
Ex-Exchange
2016 2015 Total
Sales $9,312 $9,425 -1% 3%
Pharmaceutical 8,104 8,266 -2% 2%
JANUVIA / JANUMET 1,412 1,393 1% 4%
ZETIA / VYTORIN 889 887 0% 4% GARDASIL
/ GARDASIL 9 378 359 5% 7%
PROQUAD, M-M-R II and VARIVAX
357 348 3% 4% REMICADE 349
501 -30% -26% ISENTRESS 340 385
-12% -8% CUBICIN 292 187* 56%*
57%* KEYTRUDA 249 83 ** **
SINGULAIR 237 245 -3% -1% NASONEX
229 289 -21% -19% Animal Health
829 829 0% 9% Other Revenues 379
330 15% 23%
*First quarter of 2015 reflects approximately two months of
sales following the acquisition of Cubist Pharmaceuticals, Inc.
(Cubist) by Merck on Jan. 21, 2015. Percentages reflect comparison
to full quarter of sales in 2016.**≥ 100%
Commercial and Pipeline Highlights
During the first quarter of 2016, the company continued to focus
on advancing its pipeline, and achieved regulatory and clinical
milestones for multiple products in its portfolio.
- Merck advanced its development program
for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy for the
treatment of metastatic non-small cell lung cancer (NSCLC) in
previously treated patients whose tumors express PD-L1, as well as
advanced melanoma.
- The U.S. Food and Drug Administration
(FDA) accepted for review a supplemental Biologics License
Application (sBLA) for KEYTRUDA for the treatment of patients with
recurrent or metastatic head and neck squamous cell carcinoma with
disease progression on or after platinum-containing chemotherapy.
The FDA granted Priority Review with a PDUFA action date of Aug. 9,
2016; the sBLA will be reviewed under the FDA’s Accelerated
Approval program.
- KEYTRUDA received Breakthrough Therapy
Designation from the FDA for the treatment of patients with
relapsed or refractory classical Hodgkin lymphoma. It is the fourth
Breakthrough Therapy Designation granted for KEYTRUDA.
- The FDA also accepted for review a sBLA
for KEYTRUDA to include data from the pivotal KEYNOTE-010 study in
which KEYTRUDA showed superior overall survival compared to
chemotherapy in patients with previously treated advanced NSCLC
whose tumors express PD-L1. In accordance with the accelerated
approval process, the data from KEYNOTE-010 was intended to serve
as the confirmatory trial for receiving full approval, establishing
the clinical benefit by demonstrating improved survival over
standard chemotherapy.
- The KEYTRUDA clinical development
program includes patients with more than 30 tumor types in more
than 250 clinical trials, including more than 100 trials that
combine KEYTRUDA with other cancer treatments.
Registration-enabling trials of KEYTRUDA are currently enrolling
patients with melanoma, NSCLC, head and neck cancer, bladder
cancer, gastric cancer, colorectal cancer, esophageal cancer,
breast cancer, ovarian cancer, Hodgkin lymphoma, non-Hodgkin
lymphoma, multiple myeloma, nasopharyngeal cancer, and other
tumors, with further trials in planning for other cancers.
- The FDA approved ZEPATIER (elbasvir and
grazoprevir), a once-daily, fixed-dose combination tablet for the
treatment of adult patients with chronic hepatitis C virus genotype
(GT) 1 or GT4 infection, with or without ribavirin.
- The FDA accepted for review the
Biologics License Application (BLA) for MK-8237, the company’s
investigational house dust mite sublingual allergy immunotherapy
tablet.
- The Antimicrobial Drugs Advisory
Committee of the FDA has scheduled a meeting on June 9, 2016 to
discuss the BLA for ZINPLAVA (bezlotoxumab), an investigational
antitoxin for the prevention of Clostridium difficile (C.
difficile) infection recurrence, which was accepted by the FDA for
Priority Review with a PDUFA action date of July 23, 2016.
Pharmaceutical Revenue Performance
First-quarter pharmaceutical sales declined 2 percent to $8.1
billion, including a 4 percent negative impact from foreign
exchange. Excluding the impact of exchange, growth reflects higher
sales in oncology, hospital acute care and diabetes. Growth in
oncology was driven by higher sales of KEYTRUDA as the company
continues to launch the product with new indications and in new
markets. Growth in hospital acute care was driven by sales of the
Cubist portfolio and sales growth of certain inline brands.
Pharmaceutical sales also reflect an increase in the diabetes
franchise of JANUVIA (sitagliptin) and JANUMET (sitagliptin and
metformin HCl), medicines that help lower blood sugar in adults
with type 2 diabetes, driven by strong growth in the United States
and Europe, partially offset by lower sales in emerging
markets.
First-quarter pharmaceutical sales reflect a decrease in
REMICADE (infliximab), a treatment for inflammatory diseases, due
to the accelerating impact of biosimilar competition in the
company’s marketing territories in Europe. Pharmaceutical sales
also reflect declines in NASONEX (mometasone furoate monohydrate),
an inhaled nasal corticosteroid for the treatment of nasal allergy
symptoms, and ZOSTAVAX (zoster vaccine live), a vaccine for the
prevention of herpes zoster. Pharmaceutical sales were unfavorably
affected in the first quarter of 2016 by the company’s reduced
operations in Venezuela.
A generic version of NASONEX became available in the United
States in March 2016; as a result, the company anticipates
significant losses of future NASONEX sales. Additionally, in June
2016 the company will lose U.S. patent protection for CUBICIN
(daptomycin for injection), an I.V. antibiotic, and significant
losses of CUBICIN sales are expected to occur thereafter.
Animal Health Revenue Performance
Animal Health sales, which totaled $829 million for the first
quarter of 2016, were in line with sales from the first quarter of
2015. Excluding the impact of foreign exchange, Animal Health sales
grew 9 percent, primarily driven by BRAVECTO (fluralaner), a
chewable tablet that kills fleas and ticks in dogs for up to 12
weeks.
First-Quarter 2016 Expense and Other Information
The tables that follow present selected expense information.
$ in millions
Included in expenses for the
period Acquisition- and
First Quarter Divestiture- Restructuring
2016 GAAP
Related Costs4
Costs
Non-GAAP1
Materials and production $3,572 $1,386 $47
$2,139 Marketing and administrative 2,318 2
3 2,313 Research and development 1,659
35 55 1,569 Restructuring costs 91 –
91 –
First Quarter
2015
Materials
and production $3,569 $1,250 $105
$2,214 Marketing and administrative 2,601 227
36 2,338 Research and development 1,737 63
2 1,672 Restructuring costs 82 –
82 –
The gross margin was 61.6 percent for the first quarter of 2016
compared to 62.1 percent for the first quarter of 2015, reflecting
15.4 and 14.4 unfavorable percentage point impacts, respectively,
from the acquisition- and divestiture-related costs and
restructuring costs noted above.
Research and development (R&D) expenses, on a non-GAAP
basis, were $1.6 billion in the first quarter of 2016, a 6 percent
decrease compared to the first quarter of 2015, primarily driven by
lower licensing expenses.
Financial Outlook
Merck continues to expect its full-year 2016 GAAP EPS to be
between $1.96 and $2.23. The company has narrowed and raised its
full-year 2016 non-GAAP EPS to be between $3.65 and $3.77,
including an approximately 2 percent negative impact from foreign
exchange at mid-April exchange rates. The non-GAAP range excludes
acquisition- and divestiture-related costs and costs related to
restructuring programs. The change in the non-GAAP EPS range
reflects recent favorability in foreign exchange rates, partially
offset by the earlier than expected entry of a generic version of
NASONEX in the United States.
At mid-April exchange rates, Merck now anticipates full-year
2016 revenues to be between $39.0 billion and $40.2 billion,
including an approximately 2 percent negative impact from foreign
exchange.
In addition, the company continues to expect full-year 2016
non-GAAP marketing and administrative expenses to be below 2015
levels and R&D expenses to be modestly above 2015 levels.
The company continues to anticipate its full-year 2016 non-GAAP
tax rate will be in the range of 21.5 to 22.5 percent, including a
2016 R&D tax credit.
A reconciliation of anticipated 2016 EPS, as reported in
accordance with GAAP to non-GAAP EPS that excludes certain items,
is provided in the table below.
Full Year $ in millions, except EPS amounts
2016 GAAP EPS $1.96 to $2.23 Difference3
1.69 to 1.54 Non-GAAP EPS that excludes items listed below
$3.65 to $3.77 Acquisition- and
divestiture-related costs $4,700 to $4,400 Restructuring
costs 900 to 700 Net decrease (increase) in income before
taxes 5,600 to 5,100 Estimated income tax (benefit) expense
(900) to (805) Decrease (increase) in net income
$4,700 to $4,295
Total Employees
As of March 31, 2016, Merck had approximately 68,000 employees
worldwide.
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/investors/webcasts-and-presentations.
Institutional investors and analysts can participate in the call by
dialing (706) 758-9927 or (877) 381-5782 and using ID code number
75256428. Members of the media are invited to monitor the call by
dialing (706) 758-9928 or (800) 399-7917 and using ID code number
75256428. 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 125 years, Merck has been a global health care 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 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. 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 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 2015
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 Merck is providing certain 2016 and 2015 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.
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 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.
MERCK & CO., INC. CONSOLIDATED
STATEMENT OF INCOME - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER
SHARE FIGURES) (UNAUDITED) Table 1
GAAP
1Q16 1Q15
% Change
Sales $
9,312 $ 9,425 -1% Costs, Expenses and Other Materials and
production (1) 3,572 3,569 -- Marketing and administrative (1)
2,318 2,601 -11% Research and development (1) 1,659 1,737 -4%
Restructuring costs (2) 91 82 11% Other (income) expense, net (1)
48 55 -13% Income Before Taxes 1,624 1,381 18% Income Tax Provision
494 423 Net Income 1,130 958 18% Less: Net Income Attributable to
Noncontrolling Interests 5 5 Net Income Attributable to Merck &
Co., Inc. $ 1,125 $ 953 18% Earnings per Common Share Assuming
Dilution $ 0.40 $ 0.33 21%
Average Shares Outstanding Assuming Dilution 2,795 2,865 Tax
Rate 30.4 % 30.6 %
(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.
CONSOLIDATED STATEMENT OF INCOME GAAP TO NON-GAAP
RECONCILIATION FIRST QUARTER 2016 (AMOUNTS IN
MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table
2a Acquisition and
GAAP Divestiture- Restructuring
Adjustment Non-GAAP
Related Costs(1)
Costs (2)
Subtotal Sales
$ 9,312 $
9,312 Costs, Expenses and Other Materials and production
3,572 1,386 47 1,433 2,139 Marketing and administrative
2,318 2 3 5 2,313 Research and development
1,659 35
55 90 1,569 Restructuring costs
91 91 91 - Other (income)
expense, net
48 48 Income Before Taxes
1,624 (1,423 )
(196 ) (1,619 ) 3,243 Income Tax Provision
494 (252 )
(3)
746 Net Income
1,130 (1,367 ) 2,497 Less: Net Income
Attributable to Noncontrolling Interests
5 5 Net Income
Attributable to Merck & Co., Inc.
$ 1,125 (1,367
) $ 2,492 Earnings per Common Share Assuming Dilution
$
0.40 $ 0.89 Average Shares
Outstanding Assuming Dilution
2,795 2,795 Tax Rate
30.4 % 23.0 %
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
$1.1 billion of expenses for the amortization of intangible assets
recognized as a result of acquisitions, as well as $24 million of
amortization of purchase accounting adjustments to inventories as a
result of the prior year acquisition of Cubist Pharmaceuticals,
Inc., and $252 million of impairment charges on product
intangibles. Amounts included in marketing and administrative
expenses reflect integration, transaction and certain other costs
related to business acquisitions, including severance costs which
are not part of the company's formal restructuring programs, as
well as transaction and certain other costs related to
divestitures. Amounts included in research and development expenses
primarily reflect in-process research and development ("IPR&D")
impairment charges.
(2) Amounts primarily include employee separation costs and
accelerated depreciation associated with facilities to be closed or
divested related to activities under the company's formal
restructuring programs.
(3) Represents the estimated tax impact on the reconciling
items.
MERCK & CO., INC. FRANCHISE / KEY PRODUCT
SALES (AMOUNTS IN MILLIONS) Table 3
2016
2015 % Change 1Q 1Q 2Q
3Q 4Q FY 1Q
TOTAL SALES(1) $ 9,312 $
9,425 $ 9,785 $
10,073 $ 10,215 $
39,498 -1 PHARMACEUTICAL 8,104
8,266 8,564 8,925 9,027 34,782
-2 Primary Care and Women's Health Cardiovascular
Zetia 612 568 635 633 691 2,526 8 Vytorin 277 320 320 302 308 1,251
-13 Diabetes Januvia 906 884 1,044 1,014 921 3,863 2 Janumet 506
509 554 562 526 2,151 -1 General Medicine & Women's Health
NuvaRing 175 166 182 190 193 732 6 Implanon / Nexplanon 134 137 124
176 151 588 -2 Dulera 113 130 120 133 153 536 -13 Follistim AQ 94
82 111 95 95 383 16
Hospital and Specialty Hepatitis
Zepatier 50 0 0 0 0 0 * HIV Isentress 340 385 375 377 374 1,511 -12
Hospital Acute Care Cubicin(2) 292 187 293 325 322 1,127 56 Noxafil
145 111 117 132 128 487 31 Cancidas 133 163 134 139 137 573 -19
Invanz 114 132 139 153 144 569 -14 Bridion 90 85 87 89 92 353 6
Primaxin 73 65 88 75 86 313 13 Immunology Remicade 349 501 455 442
396 1,794 -30 Simponi 188 158 169 178 185 690 19
Oncology
Keytruda 249 83 110 159 214 566 * Emend 126 122 134 141 139 535 3
Temodar 66 74 80 83 75 312 -12
Diversified Brands
Respiratory Singulair 237 245 212 201 273 931 -3 Nasonex 229 289
215 121 231 858 -21 Other Cozaar / Hyzaar 126 185 189 150 143 667
-32 Arcoxia 111 123 115 123 110 471 -10 Fosamax 75 94 96 86 82 359
-20 Zocor 46 49 63 56 49 217 -7
Vaccines Gardasil / Gardasil
9 378 359 427 625 497 1,908 5 ProQuad, M-M-R II and Varivax 357 348
358 390 409 1,505 3 RotaTeq 188 192 89 160 169 610 -2 Zostavax 125
175 149 179 246 749 -28 Pneumovax 23 107 110 106 138 188 542 -3
Other Pharmaceutical(3) 1,093 1,235 1,274 1,298 1,300
5,105 -12
ANIMAL HEALTH 829 829
840 825 830 3,324 0
Other Revenues(4) 379 330
381 323
358 1,392 15
* 100% or greater
Sum of quarterly amounts may not equal year-to-date amounts due
to rounding.
(1) Only select products are shown.
(2) First quarter of 2015 reflects approximately two months of
sales following the acquisition of Cubist Pharmaceuticals, Inc. by
Merck on Jan. 21, 2015. Percentage reflects comparison to full
quarter of sales in 2016.
(3) Includes Pharmaceutical products not individually shown
above. Other Vaccines sales included in Other Pharmaceutical were
$103 million in the first quarter of 2016 and $78 million, $76
million, $99 million and $148 million for the first, second, third
and fourth quarters of 2015, respectively.
(4) Other revenues are comprised primarily of alliance revenue,
third-party manufacturing sales and miscellaneous corporate
revenues, including revenue hedging activities.
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MerckMedia:Lainie Keller, 908-236-5036orInvestors:Teri Loxam,
908-740-1986Justin Holko, 908-740-1879
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