- Fourth-Quarter 2016 Worldwide Sales
Were $10.1 Billion, a Decrease of 1 Percent, Including a 1 Percent
Negative Impact from Foreign Exchange; Full-Year 2016 Worldwide
Sales Were $39.8 Billion, an Increase of 1 Percent, Including a 2
Percent Negative Impact from Foreign Exchange
- Fourth-Quarter 2016 GAAP EPS Was $0.42;
Fourth-Quarter Non-GAAP EPS Was $0.89; Full-Year 2016 GAAP EPS Was
$2.04; Full-Year Non-GAAP EPS Was $3.78
- 2017 Financial Outlook
- Expects Full-Year 2017 GAAP EPS to be
Between $2.47 and $2.62; Expects Non-GAAP EPS to be Between $3.72
and $3.87, Including an Approximately 2 Percent Negative Impact
from Foreign Exchange
- Anticipates Full-Year 2017 Worldwide
Sales to be Between $38.6 Billion and $40.1 Billion, Including an
Approximately 2 Percent Negative Impact from Foreign Exchange
- Advanced KEYTRUDA Development Program
- U.S. Food and Drug Administration (FDA)
Approved KEYTRUDA for Previously Untreated Patients with Metastatic
Non-Small Cell Lung Cancer (NSCLC) Whose Tumors Have High PD-L1
Expression (Tumor Proportion Score of 50 Percent or More) Without
EGFR or ALK Genomic Tumor Aberrations
- FDA Granted Priority Review for Three
Supplemental Biologics License Applications for KEYTRUDA
Merck (NYSE:MRK), known as MSD outside the United States and
Canada, today announced financial results for the fourth quarter
and full year of 2016.
This Smart News Release features multimedia.
View the full release here:
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“The performance of Merck’s broad and balanced portfolio allows
us to remain committed to biomedical innovation that saves and
improves lives and delivers long-term value to shareholders,” said
Kenneth C. Frazier, chairman and chief executive officer, Merck.
“The momentum behind our pipeline and key product launches,
including the continued growth and expansion of KEYTRUDA into new
indications and markets around the world, further reinforces our
company’s strategic direction.”
Financial Summary
$ in millions, except EPS amounts
Fourth Quarter
Year Ended Dec. 31, Dec.
31, 2016 2015 2016 2015 Sales
$10,115 $10,215 $39,807 $39,498 GAAP EPS 0.42 0.35 2.04 1.56
Non-GAAP EPS that excludes certain
items1*
0.89 0.93 3.78 3.59
GAAP net income2
1,177 976 5,691 4,442 Non-GAAP net income that excludes certain
items1,2* 2,470 2,608 10,538 10,195
*Refer to table on page 8.
Worldwide sales were $10.1 billion for the fourth quarter of
2016, a decrease of 1 percent compared with the fourth quarter of
2015, including a 1 percent negative impact from foreign exchange.
Sales in the fourth quarter of 2016 reflect the unfavorable impact
of approximately $150 million of sales in Japan, which occurred in
the third quarter of 2016 rather than in the fourth quarter due to
the implementation of a resource planning system. Full-year 2016
worldwide sales were $39.8 billion, an increase of 1 percent
compared with the full year of 2015, including a 2 percent negative
impact from foreign exchange.
GAAP (generally accepted accounting principles) earnings per
share assuming dilution (EPS) were $0.42 for the fourth quarter and
$2.04 for the full year of 2016. Non-GAAP EPS of $0.89 for the
fourth quarter and $3.78 for the full year of 2016 excludes
acquisition- and divestiture-related costs, restructuring costs and
certain other items, which include a charge to settle the worldwide
KEYTRUDA patent litigation.
Pipeline Highlights
Merck significantly advanced the clinical development program
for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy.
- The FDA approved a supplemental
Biologics License Application (sBLA) for KEYTRUDA for the
first-line treatment of patients with metastatic NSCLC whose tumors
have high PD-L1 expression (Tumor Proportion Score [TPS] of 50
Percent or More) as determined by an FDA-approved test, with no
EGFR or ALK genomic tumor aberrations.
- The FDA granted Priority Review for
three additional sBLAs for KEYTRUDA, including:
- Use in combination with chemotherapy as
a first-line treatment for patients with metastatic or advanced
NSCLC regardless of PD-L1 expression and with no EGFR or ALK
genomic tumor aberrations. The PDUFA action date is May 10,
2017.
- The treatment of previously treated
patients with advanced microsatellite instability-high cancer. The
PDUFA action date is March 8, 2017.
- The treatment of patients with
refractory classical Hodgkin lymphoma (cHL) or for patients with
cHL who have relapsed after three or more prior lines of therapy.
The PDUFA action date is March 15, 2017.
- KEYTRUDA received Breakthrough Therapy
Designations from the FDA for the second-line treatment of patients
with urothelial carcinoma with disease progression on or after
platinum-containing chemotherapy and for the treatment of patients
with primary mediastinal B-cell lymphoma that is refractory to or
has relapsed after two prior lines of therapy.
- The European Commission approved
KEYTRUDA for the first-line treatment of metastatic NSCLC in adults
whose tumors have high PD-L1 expression (TPS of 50 percent or more)
with no EGFR or ALK positive tumor mutations.
- KEYTRUDA was approved in Japan as a
first- and second-line treatment of certain patients with
PD-L1-positive unresectable advanced/recurrent NSCLC.
- Merck and Incyte Corporation recently
announced the expansion of the clinical development program
investigating KEYTRUDA in combination with epacadostat, Incyte’s
investigational oral selective IDO1 inhibitor, to include pivotal
studies for NSCLC, renal cell carcinoma, bladder cancer and
squamous cell carcinoma of the head and neck.
The company recently completed enrollment in its Phase 3 APECS
study (NCT01953601) evaluating the safety and efficacy of
verubecestat (MK-8931) in people with prodromal, or mild,
Alzheimer’s disease. Estimated primary completion date for the
trial is February 2019.
Fourth-Quarter and Full-Year Revenue Performance
The following table reflects sales of the company’s top
pharmaceutical products, as well as total sales of Animal Health
products.
$ in millions
Fourth Quarter Year Ended
Change Ex- Dec. 31,
Dec. 31, Change Ex- 2016
2015 Change Exchange 2016 2015
Change Exchange Total Sales $10,115 $10,215 -1% 0%
$39,807 $39,498 1% 3% Pharmaceutical 8,904 9,027 -1% -1% 35,151
34,782 1% 2% JANUVIA/JANUMET 1,509 1,447 4% 4% 6,109 6,014 2% 2%
ZETIA/VYTORIN 873 999 -13% -13% 3,701 3,777 -2% -1%
GARDASIL/GARDASIL 9 542 497 9% 9% 2,173 1,908 14% 14% PROQUAD,
M-M-R II and VARIVAX 405 409 -1% -1% 1,640 1,505 9% 10% KEYTRUDA
483 214 125% 128% 1,402 566 148% 151% ISENTRESS 337 374 -10% -9%
1,387 1,511 -8% -6% REMICADE 269 396 -32% -31% 1,268 1,794 -29%
-28% CUBICIN 119 322 -63% -63% 1,087 1,127 -4% -4% SINGULAIR 210
273 -23% -26% 915 931 -2% -4%
PNEUMOVAX 23
238 188 27% 25% 641 542 18% 17% Animal Health 884 832 6% 7% 3,478
3,331 4% 8% Other Revenues 327 356 -8%
30% 1,178 1,385 -15% 15%
Pharmaceutical Revenue
Fourth-quarter pharmaceutical sales decreased 1 percent to $8.9
billion. The decline was driven primarily by the loss of U.S.
market exclusivity in 2016 for CUBICIN (daptomycin for injection),
an I.V. antibiotic; NASONEX (mometasone furoate monohydrate), an
inhaled nasal corticosteroid for the treatment of nasal allergy
symptoms; and ZETIA (ezetimibe), a medicine for lowering LDL
cholesterol; as well as by the ongoing impact of biosimilar
competition in the company’s marketing territories in Europe for
REMICADE (infliximab), a treatment for inflammatory diseases. In
the aggregate, sales of these products declined $564 million during
the fourth quarter of 2016 compared to the fourth quarter of
2015.
These declines were largely offset by growth in oncology,
hepatitis C, diabetes and vaccines, which include the ongoing
launches of KEYTRUDA and ZEPATIER (elbasvir and grazoprevir), a
medicine for the treatment of chronic hepatitis C virus genotypes 1
or 4 infection. 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 $139
million during the fourth quarter of 2016.
Growth of KEYTRUDA reflects the company’s continued efforts to
launch the product with new indications, particularly as a
first-line treatment for NSCLC and for previously treated recurrent
or metastatic head and neck cancer in the United States, and as a
second-line treatment for NSCLC globally.
ZEPATIER sales growth was primarily driven by the ongoing launch
in the United States, as well as ongoing launches in emerging
markets and the launches in Europe and Japan. In the fourth quarter
of 2016, sales of ZEPATIER were $229 million.
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 sales growth in the United States,
partially offset by lower sales in Japan due to the timing of
shipments.
Growth in vaccines resulted from higher sales of PNEUMOVAX 23
(pneumococcal vaccine polyvalent) in the United States due to the
adoption of recently issued vaccination guidelines from the Centers
for Disease Control and Prevention; and GARDASIL 9 (Human
Papillomavirus 9-valent Vaccine, Recombinant) and GARDASIL [Human
Papillomavirus Quadrivalent (Types 6, 11, 16, and 18) Vaccine,
Recombinant], vaccines to prevent certain cancers and other
diseases caused by HPV, due to increased pricing and demand in the
United States. On Dec. 31, 2016, Merck and Sanofi Pasteur ended the
Sanofi Pasteur MSD vaccines joint venture. As a result, beginning
in 2017, Merck will operate its vaccines business in Europe and
will record vaccine sales in the 19 European countries previously
part of the joint venture.
In April 2017 the company will lose market exclusivity in the
United States for VYTORIN (ezetimibe/simvastatin), a medicine for
lowering LDL cholesterol, and anticipates a significant decline in
U.S. VYTORIN sales thereafter. Full-year 2016 U.S. sales of VYTORIN
were $473 million.
Full-year 2016 pharmaceutical sales increased 1 percent to $35.2
billion, including a 1 percent negative impact from foreign
exchange. Growth was driven by sales in oncology, vaccines and
hepatitis C products, partially offset by sales declines of $887
million due to the loss of U.S. market exclusivity for NASONEX and
CUBICIN, and the impact of biosimilar competition for REMICADE in
the company’s marketing territories in Europe.
Animal Health Revenue
Animal Health sales totaled $884 million for the fourth quarter
of 2016, an increase of 6 percent compared with the fourth quarter
of 2015, including a 1 percent negative impact from foreign
exchange. Worldwide sales for the full year of 2016 were $3.5
billion, an increase of 4 percent, including a 4 percent negative
impact from foreign exchange. Sales growth in both periods was
primarily driven by an increase in sales of companion animal
products, particularly the BRAVECTO (fluralaner) line of products
that kill fleas and ticks in dogs and cats for up to 12 weeks.
Fourth-Quarter and Full-Year Expense, EPS and Related
Information
The tables below present selected expense information.
$ in millions
Acquisition- and
Divestiture- Restructuring Certain Other
Fourth-Quarter 2016 GAAP
Related Costs3
Costs Items
Non-GAAP1
Materials and production $3,332 $756 $32 $– $2,544 Marketing and
administrative 2,593 22 4 – 2,567 Research and development 1,720
(33) 9 – 1,744 Restructuring costs 265 – 265 – – Other (income)
expense, net 721 35 – 654 32
Fourth-Quarter 2015
Materials and production $3,850 $1,194 $81 $– $2,575 Marketing and
administrative 2,615 47 8 – 2,560 Research and development 1,797
(24) 18 – 1,803 Restructuring costs 233 – 233 – – Other (income)
expense, net 905 47 – 707 151
$ in millions
Acquisition- and
Divestiture- Restructuring Certain Other
Year Ended Dec. 31, 2016 GAAP
Related Costs3
Costs Items
Non-GAAP1
Materials and production $13,891 $4,035 $181 $– $9,675 Marketing
and administrative 9,762 78 95 – 9,589 Research and development
7,194 222 142 – 6,830 Restructuring costs 651 – 651 – – Other
(income) expense, net 810 47 – 648 115
Year Ended Dec.
31, 2015 Materials and production $14,934 $4,869 $361 $– $9,704
Marketing and administrative 10,313 436 78 – 9,799 Research and
development 6,704 39 52 – 6,613 Restructuring costs 619 – 619 – –
Other (income) expense, net 1,527 54 –
1,125 348
GAAP Expense, EPS and Related Information
On a GAAP basis, the gross margin was 67.1 percent for the
fourth quarter of 2016 compared to 62.3 percent for the fourth
quarter of 2015. The increase in gross margin for the fourth
quarter of 2016 was primarily driven by lower acquisition- and
divestiture-related costs and restructuring costs noted above,
which negatively affected gross margin by 7.7 percentage points in
the fourth quarter of 2016 compared with 12.5 percentage points for
the fourth quarter of 2015. The gross margin was 65.1 percent for
the full year of 2016 compared to 62.2 percent for the full year of
2015. The increase in gross margin for the full year of 2016 was
primarily driven by lower acquisition- and divestiture-related
costs and restructuring costs, which negatively affected gross
margin by 10.6 percentage points in the full year of 2016 compared
with 13.2 percentage points for the full year of 2015.
Marketing and administrative expenses were $2.6 billion in the
fourth quarter of 2016, a 1 percent decrease compared to the fourth
quarter of 2015. The decline primarily reflects lower acquisition-
and divestiture-related costs. Full-year 2016 marketing and
administrative expenses were $9.8 billion, a 5 percent decrease
compared to the full year of 2015. The decline reflects lower
acquisition- and divestiture-related costs, the favorable impact of
foreign exchange and lower direct selling costs.
Research and development (R&D) expenses were $1.7 billion in
the fourth quarter of 2016, a 4 percent decrease compared to the
fourth quarter of 2015. The decline reflects a reduction in
expenses resulting from a decrease in the estimated fair value of
liabilities for contingent consideration, partially offset by
higher in-process research and development (IPR&D) impairment
charges. R&D expenses were $7.2 billion for the full year of
2016, a 7 percent increase compared to the full year of 2015. The
increase primarily reflects higher IPR&D impairment charges,
clinical development spending and restructuring costs, partially
offset by a reduction in expenses resulting from a decrease in the
estimated fair value of liabilities for contingent
consideration.
Other (income) expense, net, was $721 million of expense in the
fourth quarter of 2016 compared to $905 million of expense in the
fourth quarter of 2015 and was $810 million of expense for the full
year of 2016 compared to $1.5 billion of expense for the full year
of 2015. Other (income) expense, net for the fourth quarter and
full year of 2016 includes a $625 million charge to settle the
worldwide KEYTRUDA patent litigation. Other (income) expense, net
for the fourth quarter and full year of 2015 includes $161 million
and $876 million, respectively, of foreign exchange losses related
to the devaluation of the company’s net monetary assets in
Venezuela and a $680 million net charge to settle the Vioxx
shareholder class action litigation.
GAAP EPS was $0.42 for the fourth quarter of 2016 compared with
$0.35 for the fourth quarter of 2015. GAAP EPS was $2.04 for the
full year of 2016 compared with $1.56 for the full year of
2015.
Non-GAAP Expense, EPS and Related Information
The non-GAAP gross margin was 74.8 percent for the fourth
quarter of 2016, the same as the fourth quarter of 2015. The
non-GAAP gross margin was 75.7 percent for the full year of 2016
compared to 75.4 percent for the full year of 2015. The increase in
GAAP gross margin for the full year of 2016 reflects lower
inventory write-offs.
Non-GAAP marketing and administrative expenses were $2.6 billion
in the fourth quarter of 2016, comparable to the fourth quarter of
2015. Non-GAAP marketing and administrative expenses were $9.6
billion for the full year of 2016, a 2 percent decrease compared to
the full year of 2015. The decline reflects the favorable impact of
foreign exchange and lower direct selling costs.
Non-GAAP R&D expenses were $1.7 billion in the fourth
quarter of 2016, a 3 percent decline compared to the fourth quarter
of 2015. The decline reflects lower licensing costs. Non-GAAP
R&D expenses were $6.8 billion for the full year of 2016, a 3
percent increase compared to the full year of 2015 reflecting
increased clinical development spending.
Non-GAAP EPS was $0.89 for the fourth quarter of 2016 compared
with $0.93 for the fourth quarter of 2015. Non-GAAP EPS was $3.78
for the full year of 2016 compared with $3.59 for the full year of
2015.
Non-GAAP other (income) expense, net, was $32 million of expense
in the fourth quarter of 2016 compared to $151 million of expense
in the fourth quarter of 2015, primarily reflecting the receipt of
a milestone payment. Non-GAAP other (income) expense, net, for the
full year of 2016 was $115 million of expense compared to $348
million of expense for the full year of 2015, reflecting lower
foreign exchange losses.
A reconciliation of GAAP to non-GAAP net income and EPS is
provided in the table that follows.
$ in millions, except EPS amounts
Fourth Quarter Year Ended
Dec. 31, Dec. 31, 2016 2015
2016 2015 EPS GAAP EPS $0.42 $0.35 $2.04 $1.56
Difference4
0.47 0.58 1.74 2.03 Non-GAAP EPS that excludes items listed below1
$0.89 $0.93 $3.78 $3.59
Net Income GAAP net income2
$1,177 $976 $5,691 $4,442 Difference 1,293 1,632 4,847 5,753
Non-GAAP net income that excludes items listed below1,2 $2,470
$2,608 $10,538 $10,195
Decrease (Increase) in Net Income
Due to Excluded Items: Acquisition- and divestiture-related
costs3 $780 $1,264 $4,382 $5,398 Restructuring costs 310 340 1,069
1,110 Charge to settle worldwide KEYTRUDA patent litigation 625 –
625 – Net charge to settle Vioxx shareholder class action
litigation – 680 – 680 Foreign exchange losses related to Venezuela
– 161 – 876 Gain on divestiture of certain ophthalmic products –
(147) – (147) Gain on divestiture of certain migraine clinical
development programs – – – (250) Other 29 13 23 (34) Net decrease
(increase) in income before taxes 1,744 2,311 6,099 7,633
Income tax (benefit) expense5
(451) (679) (1,252) (1,880) Decrease (increase) in net income
$1,293 $1,632 $4,847 $5,753
Financial Outlook
Merck expects its full-year 2017 GAAP EPS to be between $2.47
and $2.62. Merck expects its full-year 2017 non-GAAP EPS to be
between $3.72 and $3.87, including an approximately 2 percent
negative impact from foreign exchange. The non-GAAP range excludes
acquisition- and divestiture-related costs and costs related to
restructuring programs.
At mid-January 2017 exchange rates, Merck anticipates full-year
2017 revenues to be between $38.6 billion and $40.1 billion,
including an approximately 2 percent negative impact from foreign
exchange.
The following table summarizes the company’s 2017 financial
guidance.
GAAP
Non-GAAP1 Revenue $38.6 to $40.1 billion $38.6 to
$40.1 billion** Operating expenses Higher than 2016 by a low-single
digit rate Higher than 2016 by a low-single digit rate Effective
tax rate 22.0% to 23.0% 21.0 % to 22.0% EPS
$2.47 to $2.62 $3.72 to $3.87
**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 $2.47 to
$2.62 Difference4 1.25 Non-GAAP EPS that excludes items listed
below1 $3.72 to $3.87 Acquisition- and divestiture-related
costs $3,600 Restructuring costs 600 Net decrease (increase) in
income before taxes 4,200 Estimated income tax (benefit) expense
(750) Decrease (increase) in net income $3,450
The expected full-year 2017 GAAP effective tax rate of 22.0 to
23.0 percent reflects an unfavorable impact of approximately 1
percentage point from the above items.
Total Employees
As of Dec. 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. EST 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
32136167. Members of the media are invited to monitor the call by
dialing (706) 758-9928 or (800) 399-7917 and using ID code number
32136167. 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 over a century, 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
results and permits investors to understand how management assesses
performance. Management uses these measures internally for planning
and forecasting purposes and to measure the performance of the
company along with other metrics. 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 Tables 2a
and 2b attached to this release.
2 Net income attributable to Merck & Co., Inc.
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.
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. In
addition, amounts for fourth-quarter and full-year 2015 include net
benefits of $40 million and $410 million, respectively, related to
the settlement of certain federal income tax issues.
MERCK & CO.,
INC. CONSOLIDATED STATEMENT OF INCOME - GAAP (AMOUNTS
IN MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED)
Table 1 GAAP
GAAP
4Q16 4Q15
% Change
Full Year Full Year
% Change
2016 2015
Sales $
10,115 $ 10,215 -1 % $ 39,807 $ 39,498 1 % Costs, Expenses
and Other Materials and production (1) 3,332 3,850 -13 % 13,891
14,934 -7 % Marketing and administrative (1) 2,593 2,615 -1 % 9,762
10,313 -5 % Research and development (1) 1,720 1,797 -4 % 7,194
6,704 7 % Restructuring costs (2) 265 233 14 % 651 619 5 % Other
(income) expense, net (1) (3) 721 905 -20 % 810 1,527 -47 % Income
Before Taxes 1,484 815 82 % 7,499 5,401 39 % Income Tax Provision
(Benefit) 300 (166 ) 1,787 942 Net Income 1,184 981 21 % 5,712
4,459 28 % Less: Net Income Attributable to Noncontrolling
Interests 7 5 21 17 Net Income Attributable to Merck & Co.,
Inc. $ 1,177 $ 976 21 % $ 5,691 $ 4,442 28 % Earnings per Common
Share Assuming Dilution $ 0.42 $ 0.35 20 % $
2.04 $ 1.56 31 %
Average Shares Outstanding Assuming Dilution 2,776 2,813 2,787
2,841 Tax Rate (4) 20.2 % -20.4 % 23.8
% 17.4 % * 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) Other (income) expense, net in the fourth quarter and full
year of 2016 includes a $625 million charge to settle worldwide
patent litigation related to KEYTRUDA. Other (income) expense, net
in the fourth quarter and full year of 2015 includes a $680 million
net charge related to the settlement of VIOXX shareholder class
action litigation, as well as a $147 million gain on the
divestiture of the company's remaining ophthalmics business in
international markets. In addition, other (income) expense, net in
the fourth quarter and full year of 2015 includes foreign exchange
losses of $161 million and $876 million, respectively, to devalue
the company's net monetary assets in Venezuela. Other (income)
expense, net for the full year of 2015 also includes a $250 million
gain on the sale of certain migraine clinical development
programs.
(4) The effective income tax rates for the fourth quarter and
full year of 2015 reflect the impact of the net charge related to
the settlement of VIOXX shareholder class action litigation being
fully deductible at combined U.S. federal and state tax rates, the
favorable impact of tax legislation enacted in the fourth quarter
of 2015, as well as the unfavorable effect of non-tax deductible
foreign exchange losses related to Venezuela. The effective income
tax rates for the fourth quarter and full year of 2015 also reflect
net benefits of $40 million and $410 million, respectively, related
to the settlement of certain federal income tax issues.
MERCK & CO., INC. GAAP TO NON-GAAP
RECONCILIATION FOURTH QUARTER 2016 (AMOUNTS IN
MILLIONS, EXCEPT PER SHARE FIGURES) (UNAUDITED) Table
2a
Acquisition and
Restructuring Certain Other Adjustment
GAAP Divestiture-
Costs (2)
Items (3)
Subtotal Non-GAAP
Related Costs (1)
Materials and production
$ 3,332 756 32 788 $ 2,544 Marketing and administrative
2,593 22 4 26 2,567 Research and development
1,720
(33) 9 (24) 1,744 Restructuring costs
265 265 265 - Other
(income) expense, net
721 35 654 689 32 Income Before Taxes
1,484 (780) (310) (654) (1,744) 3,228 Income Tax Provision
(Benefit)
300 (253) (4) (60) (4) (138) (4) (451) 751 Net
Income
1,184 (527) (250) (516) (1,293) 2,477 Net Income
Attributable to Merck & Co., Inc.
1,177 (527) (250)
(516) (1,293) 2,470 Earnings per Common Share Assuming Dilution
$ 0.42 (0.19) (0.09) (0.19) (0.47) $ 0.89 Tax
Rate
20.2% 23.3%
Only the line items that are affected by non-GAAP adjustments
are shown.
Merck is providing certain non-GAAP information that excludes
certain items because of the nature of these items and the impact
they have on the analysis of underlying business performance and
trends. Management believes that providing this information
enhances investors’ understanding of the company’s results and
permits investors to understand how management assesses
performance. Management uses these measures internally for planning
and forecasting purposes and to measure the performance of the
company along with other metrics. 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 reflect
expenses for the amortization of intangible assets recognized as a
result of acquisitions. 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 business divestitures. Amounts included in
research and development expenses reflect a reduction of expenses
of $432 million related to decreases in the estimated fair value
measurement of liabilities for contingent consideration, largely
offset by $399 million of in-process research and development
(IPR&D) impairment charges. Amount included in other (income)
expense, net represents a goodwill impairment charge related to a
business within the Healthcare Services segment.
(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) Primarily reflects a $625 million charge to settle worldwide
patent litigation related to KEYTRUDA.
(4) Represents the estimated tax impact on the reconciling items
based on applying the statutory rate of the originating territory
of the non-GAAP adjustments.
MERCK & CO., INC. GAAP TO NON-GAAP
RECONCILIATION FULL YEAR 2016 (AMOUNTS IN MILLIONS,
EXCEPT PER SHARE FIGURES) (UNAUDITED) Table 2b
Acquisition and Restructuring
Certain Other Adjustment GAAP
Divestiture-
Costs (2)
Items (3)
Subtotal Non-GAAP
Related Costs (1)
Materials and production
$ 13,891 4,035 181 4,216 $ 9,675 Marketing and
administrative
9,762 78 95 173 9,589 Research and
development
7,194 222 142 364 6,830 Restructuring costs
651 651 651 - Other (income) expense, net
810 47 648
695 115 Income Before Taxes
7,499 (4,382) (1,069) (648)
(6,099) 13,598 Income Tax Provision (Benefit)
1,787 (886)
(4) (229) (4) (137) (4) (1,252) 3,039 Net Income
5,712
(3,496) (840) (511) (4,847) 10,559 Net Income Attributable to Merck
& Co., Inc.
5,691 (3,496) (840) (511) (4,847) 10,538
Earnings per Common Share Assuming Dilution
$ 2.04 (1.26)
(0.30) (0.18) (1.74) $ 3.78 Tax Rate
23.8%
22.3%
Only the line items that are affected by non-GAAP adjustments
are shown.
Merck is providing certain non-GAAP information that excludes
certain items because of the nature of these items and the impact
they have on the analysis of underlying business performance and
trends. Management believes that providing this information
enhances investors’ understanding of the company’s results and
permits investors to understand how management assesses
performance. Management uses these measures internally for planning
and forecasting purposes and to measure the performance of the
company along with other metrics. 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 $3.7 billion of expenses for the amortization of intangible
assets recognized as a result of acquisitions, as well as $347
million of intangible asset impairment charges. 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 business divestitures. Amounts
included in research and development expenses reflect $624 million
of in-process research and development (IPR&D) impairment
charges, partially offset by a reduction of expenses of $402
million related to a decrease in the estimated fair value
measurement of liabilities for contingent consideration. Amounts
included in other (income) expense, net represent goodwill
impairment charges related to businesses within the Healthcare
Services segment.
(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) Primarily reflects a $625 million charge to settle worldwide
patent litigation related to KEYTRUDA.
(4) Represents the estimated tax impact on the reconciling items
based on applying the statutory rate of the originating territory
of the non-GAAP adjustments.
MERCK & CO., INC. FRANCHISE / KEY PRODUCT
SALES (AMOUNTS IN MILLIONS) Table 3
2016
2015 % Change 1Q 2Q
3Q 4Q Full Year 1Q
2Q 3Q 4Q Full Year
4Q Full Year TOTAL SALES (1)
$ 9,312 $ 9,844 $ 10,536
$ 10,115 $ 39,807 $ 9,425
$ 9,785 $ 10,073 $ 10,215
$ 39,498 -1 1 PHARMACEUTICAL
8,104 8,700 9,443 8,904 35,151
8,266 8,564 8,925 9,027 34,782
-1 1 Primary Care and Women's Health
Cardiovascular Zetia 612 702 671 575 2,560 568 635 633 691 2,526
-17 1 Vytorin 277 293 273 299 1,141 320 320 302 308 1,251 -3 -9
Diabetes Januvia 906 1,064 1,006 932 3,908 884 1,044 1,014 921
3,863 1 1 Janumet 506 569 548 577 2,201 509 554 562 526 2,151 10 2
General Medicine & Women's Health NuvaRing 175 200 195 207 777
166 182 190 193 732 7 6 Implanon / Nexplanon 134 164 148 160 606
137 124 176 151 588 6 3 Dulera 113 121 97 105 436 130 120 133 153
536 -31 -19 Follistim AQ 94 73 101 87 355 82 111 95 95 383 -9 -7
Hospital and Specialty Hepatitis Zepatier 50 112 164 229 555
HIV Isentress 340 338 372 337 1,387 385 375 377 374 1,511 -10 -8
Hospital Acute Care Cubicin (2) 292 357 320 119 1,087 187 293 325
322 1,127 -63 -4 Noxafil 145 143 147 161 595 111 117 132 128 487 26
22 Invanz 114 143 152 152 561 132 139 153 144 569 6 -1 Cancidas 133
131 142 152 558 163 134 139 137 573 11 -3 Bridion 90 113 139 139
482 85 87 89 92 353 52 37 Primaxin 73 81 77 66 297 65 88 75 86 313
-23 -5 Immunology Remicade 349 339 311 269 1,268 501 455 442 396
1,794 -32 -29 Simponi 188 199 193 186 766 158 169 178 185 690 0 11
Oncology Keytruda 249 314 356 483 1,402 83 110 159 214 566
125 148 Emend 126 143 137 144 549 122 134 141 139 535 4 3 Temodar
66 73 78 67 283 74 80 83 75 312 -11 -9
Diversified Brands
Respiratory Singulair 237 229 239 210 915 245 212 201 273 931 -23
-2 Nasonex 229 101 94 112 537 289 215 121 231 858 -52 -37 Other
Cozaar / Hyzaar 126 132 131 121 511 185 189 150 143 667 -15 -23
Arcoxia 111 117 114 108 450 123 115 123 110 471 -2 -4 Fosamax 75 73
68 68 284 94 96 86 82 359 -18 -21 Zocor 46 50 54 37 186 49 63 56 49
217 -26 -14
Vaccines Gardasil / Gardasil 9 378 393 860 542
2,173 359 427 625 497 1,908 9 14 ProQuad / M-M-R II / Varivax 357
383 496 405 1,640 348 358 390 409 1,505 -1 9 Zostavax 125 149 190
221 685 175 149 179 246 749 -10 -9 RotaTeq 188 130 171 162 652 192
89 160 169 610 -4 7 Pneumovax 23 107 120 175 238 641 110 106 138
188 542 27 18
Other Pharmaceutical (3) 1,093 1,151
1,224 1,234 4,703 1,235 1,274 1,298 1,300 5,105 -5 -8
ANIMAL HEALTH (4) 829 900 865
884 3,478 831 842 827 832
3,331 6 4 Other Revenues
(4)(5) 379 244
228 327
1,178 328 379
321 356
1,385 -8 -15
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 January 21, 2015.
(3) Includes Pharmaceutical products not individually shown
above. Other Vaccines sales included in Other Pharmaceutical were
$103 million, $91 million, $135 million and $126 million for the
first, second, third and fourth quarters of 2016, respectively.
Other Vaccines sales included in Other Pharmaceutical were $78
million, $76 million, $99 million and $148 million for the first,
second, third and fourth quarters of 2015, respectively.
(4) Amounts reflect a reclassification of certain revenues
between Animal Health and Other Revenues.
(5) Other revenues are comprised primarily of alliance revenue,
third-party manufacturing sales and miscellaneous corporate
revenues, including revenue hedging activities.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170202005556/en/
MerckMedia:Lainie Keller, 908-236-5036orInvestors:Teri Loxam,
908-740-1986Amy Klug, 908-740-1898
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