- Fourth-Quarter 2015 GAAP EPS was $0.35;
Fourth-Quarter Non-GAAP EPS was $0.93, an Increase of 7 Percent;
Full-Year 2015 GAAP EPS was $1.56; Full-Year 2015 Non-GAAP EPS was
$3.59, an Increase of 3 Percent
- Fourth-Quarter 2015 Worldwide Sales
Were $10.2 Billion, a Decrease of 3 Percent, Including a 7 Percent
Negative Impact from Foreign Exchange and 3 Percent Net Favorable
Impact from Acquisitions and Divestitures
- Full-Year 2015 Worldwide Sales Were
$39.5 Billion, a Decrease of 6 Percent, Reflecting a 6 Percent
Negative Impact from Foreign Exchange and a 3 Percent Net
Unfavorable Impact from Acquisitions and Divestitures
- 2016 Financial Outlook
- Expects Full-Year 2016 GAAP EPS to be
Between $1.96 and $2.23; Expects Non-GAAP EPS to be Between $3.60
and $3.75, Including an Approximately 4 Percent Negative Impact
from Foreign Exchange
- Anticipates Full-Year 2016 Worldwide
Sales to be Between $38.7 Billion and $40.2 Billion, Including an
Approximately 3 Percent Negative Impact from Foreign Exchange
- Advanced KEYTRUDA Program
- sBLA Approval for Treatment of
Previously Treated Patients with Metastatic Non-Small Cell Lung
Cancer Whose Tumors Express PD-L1
- Expanded Indication for First-Line
Treatment of Patients with Unresectable or Metastatic Melanoma
- Obtained FDA Approval of ZEPATIER in
the Treatment of Chronic Hepatitis C
Merck (NYSE:MRK), known as MSD outside the United States and
Canada, today announced financial results for the fourth quarter
and full year of 2015.
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View the full release here:
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“The past year was one of considerable progress and execution
for Merck,” said Kenneth C. Frazier, chairman and chief executive
officer, Merck. “I’m excited by the near-term opportunities, as we
continue launching important new products like ZEPATIER and
KEYTRUDA while augmenting and advancing our pipeline.”
Financial Summary Fourth
Quarter Year Ended Dec. 31,
Dec. 31, $ in millions, except EPS amounts
2015 2014 2015
2014 Sales $10,215 $10,482 $39,498
$42,237 GAAP EPS 0.35 2.54 1.56
4.07
Non-GAAP EPS that excludes items listed
below1
0.93 0.87 3.59 3.49
GAAP net income2
976 7,316 4,442 11,920 Non-GAAP net
income that excludes items listed below1,2 2,608
2,504 10,195 10,215
Non-GAAP (generally accepted accounting principles) earnings per
share (EPS) of $0.93 for the fourth quarter and $3.59 for the full
year of 2015 exclude acquisition- and divestiture-related costs,
restructuring costs and certain other items, as well as a net
charge to settle Vioxx shareholder class action litigation.
A reconciliation of GAAP to non-GAAP net income and EPS is
provided in the tables that follow.
Fourth Quarter Year
Ended Dec. 31, Dec. 31, $ in
millions, except EPS amounts
2015 2014
2015 2014 EPS
GAAP EPS $0.35
$2.54 $1.56 $4.07
Difference3
0.58 (1.67) 2.03 (0.58) Non-GAAP EPS
that excludes items listed below1 $ 0.93 $0.87
$3.59 $3.49
Net Income
GAAP net income2 $976
$7,316 $4,442 $11,920 Difference 1,632
(4,812) 5,753 (1,705) Non-GAAP net income that
excludes items listed below1,2 $2,608 $2,504
$10,195 $10,215
Decrease (Increase) in Net Income
Due to Excluded Items:
Acquisition- and divestiture-related
costs4
$ 1,264 $1,394 $5,398 $5,946
Restructuring costs 340 619 1,110 1,978
Net charge to settle Vioxx shareholder class action litigation
680 – 680 – Foreign exchange losses
related to Venezuela 161 – 876 – Loss
on extinguishment of debt – 628 – 628
Additional year of health care reform fee – –
– 193 Gain on divestiture of certain ophthalmic products
(147) (84) (147) (480) Gain on
divestiture of certain migraine clinical development programs
– – (250) – Gain on sale of Merck
Consumer Care – (11,209) – (11,209)
Gain on AstraZeneca option exercise – – –
(741) Other 13 (14) (34) (9) Net
decrease (increase) in income before taxes 2,311
(8,666) 7,633 (3,694)
Income tax (benefit) expense5
(679) 3,854 (1,880) 2,045 Acquisition-
and divestiture-related costs attributable to non-controlling
interests – – – (56) Decrease
(increase) in net income $1,632 $(4,812)
$5,753 $(1,705)
1 Merck is providing certain 2015 and 2014 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 Tables 2a and 2b, 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
recognized as a result of acquisitions, intangible asset impairment
charges and expense or income related to changes in the estimated
fair value measurement of liabilities for contingent consideration.
Also includes integration costs, as well as transaction and certain
other costs related to business acquisitions and divestitures.
5 Includes the estimated tax impact on the reconciling items. 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. Additionally,
amount for full-year 2014 includes a net benefit of $517 million
recorded in connection with AstraZeneca’s option exercise, as well
as a benefit of approximately $300 million associated with a
capital loss generated in the first quarter.
Additional Executive Commentary
“In 2016 we will build upon the strong foundation we established
last year. We will continue to invest resources to launch and grow
our strongest brands, support the most promising internal assets,
enhance our pipeline with the best available external science and
maintain a balanced and differentiated portfolio, with the goal of
delivering long-term growth and shareholder value,” said
Frazier.
“Global Human Health delivered a solid performance in 2015,”
said Adam Schechter, president, Global Human Health, Merck. “In
2016 we will continue to prioritize resources focusing on JANUVIA,
on our key launches, including KEYTRUDA and ZEPATIER, and on our
hospital acute care and vaccines businesses.”
“We will pursue numerous filings and approvals in 2016,” said
Dr. Roger M. Perlmutter, president, Merck Research Laboratories.
“For example, we view KEYTRUDA as foundational in the
next-generation treatment of malignant disease, and hence have
embarked upon an exceptionally broad development program for this
agent, with registration-enabling studies underway in more than a
dozen tumor types. We will also pursue more than 100 studies
involving combinations of KEYTRUDA with other drugs.”
“The fourth quarter was a strong finish to a solid year of
execution. We expect this momentum to continue into 2016, as we
further innovate in our labs, invest behind our launches and
continue our focus on disciplined resource allocation and
continuous productivity to deliver a leveraged P&L and
shareholder returns,” said Robert Davis, chief financial officer,
Merck.
Select Business Highlights
Worldwide sales were $10.2 billion for the fourth quarter of
2015, a decrease of 3 percent compared with the fourth quarter of
2014, including a 7 percent negative impact from foreign exchange
and a 3 percent net positive impact primarily from the acquisition
of Cubist Pharmaceuticals, Inc. (Cubist). Full-year 2015 worldwide
sales were $39.5 billion, a decrease of 6 percent compared with the
full year of 2014, including a 6 percent negative impact from
foreign exchange and a 3 percent net negative impact resulting from
the divestiture of the Consumer Care business and select products,
partially offset by the Cubist acquisition.
The following table reflects sales of the company’s top
pharmaceutical products, as well as total sales of Animal Health
and Consumer Care products.
$ in millions
Fourth Quarter
Change
Change
Ex-
Exchange
Year Ended Change Change
Ex-
Exchange
2015 2014 Dec.
31,
2015
Dec. 31,
2014
Total Sales $10,215 $10,482 -3%
4% $39,498 $42,237 -6% 0%
Pharmaceutical 9,027 9,370 -4% 4%
34,782 36,042 -3% 4%
JANUVIA /JANUMET
1,447 1,652 -12% -6% 6,014
6,002 0% 7%
ZETIA /VYTORIN
999 1,032 -3% 4% 3,777
4,166 -9% -2%
GARDASIL /GARDASIL 9
497 356 40% 42% 1,908
1,738 10% 11% PROQUAD, M-M-R II and VARIVAX
409 366 12% 14% 1,505 1,394
8% 10% REMICADE 396 557 -29%
-18% 1,794 2,372 -24% -10%
ISENTRESS 374 418 -11% -4% 1,511
1,673 -10% -2% CUBICIN 322 7*
** ** 1,127 25* ** **
SINGULAIR 273 319 -14% -7% 931
1,092 -15% -5% ZOSTAVAX 246 285
-14% -11% 749 765 -2% 0%
NASONEX 231 268 -14% -8% 858
1,099 -22% -16% KEYTRUDA 214 50
** ** 566 55 ** ** Animal
Health 830 885 -6% 8% 3,324
3,454 -4% 9% Consumer Care*** –
16 ** ** 3 1,547 ** **
Other Revenues 358 211 69% 19%
1,389 1,194 16% -33% *Reflects licensing
agreement with Cubist in Japan prior to acquisition by Merck on
Jan. 21, 2015 **≥100% ***divested on Oct. 1, 2014
Commercial and Pipeline Highlights
The company continued to make steady progress in advancing its
late-stage pipeline, achieving key regulatory approvals and
expanded indications for multiple products across its
portfolio.
- The U.S. Food and Drug Administration
(FDA) approved ZEPATIER (elbasvir and grazoprevir), a once-daily,
fixed-dose combination tablet for the treatment of adult patients
with chronic hepatitis C virus (HCV) genotype (GT) 1 or GT4
infection, with or without ribavirin. ZEPATIER was approved for use
in a broad range of chronic HCV patients, including those with
compensated cirrhosis, renal impairment of any degree and HIV-1/HCV
co-infection.
- Merck significantly 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 FDA approved KEYTRUDA for the
treatment of patients with metastatic NSCLC whose tumors express
PD-L1 as determined by an FDA-approved test and who have disease
progression on or after platinum-containing chemotherapy across
both squamous and non-squamous metastatic NSCLC.
- The FDA approved an expanded indication
for KEYTRUDA for the first-line treatment of patients with
unresectable or metastatic melanoma regardless of BRAF status and
an update to the product labeling for KEYTRUDA for the treatment of
patients with ipilimumab-refractory advanced melanoma.
- KEYTRUDA received a third Breakthrough
Therapy Designation from the FDA for the treatment of patients with
microsatellite instability high metastatic colorectal cancer.
- Results from the pivotal KEYNOTE-010
study were published in The Lancet and presented at the European
Society for Medical Oncology Asia 2015 Congress, showing superior
overall survival compared to chemotherapy in patients with
previously treated advanced NSCLC whose tumors express PD-L1. Based
on these data, the company has submitted a supplemental Biologics
License Application to the FDA and a Marketing Authorization
Application (MAA) to the European Medicines Agency (EMA).
- During the fourth quarter of 2015, the
company entered into collaborations with GSK and Amgen.
Additionally, the company extended an existing collaboration with
Eli Lilly and Company (Lilly) and entered into a new collaboration
with Lilly to study KEYTRUDA in combination settings.
- The KEYTRUDA clinical trials program
currently includes more than 30 tumor types in more than 200
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, Hodgkin lymphoma, multiple myeloma and
breast cancer, and further trials are being planned for other
malignancies.
- The company strengthened its oncology
pipeline by acquiring IOmet Pharma Ltd (IOmet) in early 2016. IOmet
is a drug discovery company focused on the development of
innovative medicines for the treatment of cancer, with a particular
emphasis on the fields of cancer immunotherapy and cancer
metabolism.
- BRIDION (sugammadex) Injection 100
mg/mL was approved by the FDA for the reversal of neuromuscular
blockade induced by rocuronium bromide and vecuronium bromide in
adults undergoing surgery.
- The Biologics License Application for
bezlotoxumab, an investigational antitoxin for the prevention of
Clostridium difficile (C. difficile) infection recurrence, was
accepted by the FDA for priority review with a PDUFA action date of
July 23, 2016. The company also has filed a MAA for bezlotoxumab
with the EMA that is currently under review.
Pharmaceutical Revenue Performance
Fourth-quarter pharmaceutical sales declined 4 percent to $9.0
billion, including an 8 percent negative impact from foreign
exchange. Excluding the impact of exchange, growth was driven by
sales in hospital acute care, oncology and vaccines. Growth in
hospital acute care was driven by the addition of the Cubist
portfolio and sales growth of certain inline brands. Growth in
oncology reflects higher sales of KEYTRUDA. Growth in vaccines
reflects higher sales of GARDASIL 9 (Human Papillomavirus 9-valent
Vaccine, Recombinant), a vaccine to prevent cancers and other
diseases caused by HPV, reflecting an increase in sales in the
United States primarily due to public sector purchases, and higher
sales of PROQUAD (Measles, Mumps, Rubella and Varicella Vaccine
Live) driven by the timing of sales activity related to the
Pediatric Vaccine Stockpile of the U.S. Centers for Disease Control
and Prevention.
Fourth-quarter pharmaceutical sales reflect a decrease in
PNEUMOVAX 23 (pneumococcal vaccine polyvalent), due to near-term
market dynamics in the United States and the timing of vaccinations
linked to the National Immunization Program in Japan, as well as
lower sales in the diabetes franchise of JANUVIA
(sitagliptin)/JANUMET (sitagliptin and metformin HCl), medicines
that help lower blood sugar in adults with type 2 diabetes, driven
in large part by an expected decline due to the timing of customer
purchases in the third quarter of 2015. Pharmaceutical sales also
reflect declines in REMICADE (infliximab), a treatment for
inflammatory diseases, due to loss of exclusivity and the
accelerating impact of biosimilar competition in the company’s
marketing territories in Europe, and PEGINTRON (peginterferon
alfa-2b), a medicine to treat chronic HCV.
Full-year 2015 pharmaceutical sales declined 3 percent to $34.8
billion, including a 7 percent negative impact from foreign
exchange. Excluding the impact of exchange, growth was driven by
sales in hospital acute care, oncology, diabetes and vaccines.
Animal Health Revenue Performance
Animal Health sales totaled $830 million for the fourth quarter
of 2015, a decrease of 6 percent compared with the fourth quarter
of 2014, including a 14 percent negative impact from foreign
exchange. Worldwide sales for the full year of 2015 were $3.3
billion, a decrease of 4 percent, including a 13 percent negative
impact from foreign exchange. Excluding the impact of exchange,
growth in both periods was primarily driven by an increase in sales
of companion animal products, including continued strong growth
from BRAVECTO (fluralaner), a chewable tablet that kills fleas and
ticks in dogs for up to 12 weeks, and aqua and swine products.
Fourth-Quarter and Full-Year 2015 Expense and Other
Information
The tables below present selected expense information for the
fourth quarter and full year of 2015.
$ in millions
Included in expenses for the
period Acquisition- and Fourth
Quarter Divestiture- Restructuring 2015
GAAP
Related Costs4
Costs Non-GAAP(1) 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
–
Fourth Quarter
2014
Materials
and production $3,749 $984 $105 $2,660
Marketing and administrative 2,924 81 57
2,786 Research and development 2,283 329
108 1,846 Restructuring costs 349 –
349 – $ in
millions
Included in expenses for the period
Acquisition- and Divestiture-
Year Ended Related Restructuring
Certain Dec. 31, 2015 GAAP
Costs4
Costs Other Items
Non-GAAP(1) 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 – –
Year Ended
Dec. 31, 2014
Materials and production $16,768 $5,254
$482 $– $ 11,032 Marketing and administrative
11,606 234 200 193 10,979 Research and
development 7,180 365 283 –
6,532 Restructuring costs 1,013 – 1,013
– –
The gross margin was 62.3 percent for the fourth quarter of 2015
compared to 64.2 percent for the fourth quarter of 2014, reflecting
12.5 and 10.4 unfavorable percentage point impacts, respectively,
from the acquisition- and divestiture-related costs and
restructuring costs noted above. The gross margin was 62.2 percent
for the full year of 2015 compared to 60.3 percent for the full
year of 2014, reflecting 13.2 and 13.6 unfavorable percentage point
impacts, respectively, from the acquisition- and
divestiture-related costs and restructuring costs noted above. The
rate increases in non-GAAP gross margin for the fourth quarter and
full year of 2015 reflect the favorable impact of foreign exchange
and lower inventory write-offs.
Marketing and administrative expenses, on a non-GAAP basis, were
$2.6 billion in the fourth quarter of 2015, a decrease from $2.8
billion in the same period of 2014, which was primarily driven by
the favorable impact of foreign exchange and operational
efficiencies, partially offset by investments in key brands.
Full-year 2015 marketing and administrative expenses, on a non-GAAP
basis, were $9.8 billion, a decrease from $11.0 billion in 2014,
which was primarily driven by the favorable impact of foreign
exchange and the sale of the Consumer Care business, partially
offset by investments in key brands.
Research and development (R&D) expenses, on a non-GAAP
basis, were $1.8 billion in the fourth quarter of 2015, a 2 percent
decrease compared to the fourth quarter of 2014. Full-year R&D
expenses in 2015, on a non-GAAP basis, were $6.6 billion, an
increase from $6.5 billion in 2014.
Other (income) expense, net, was $905 million of expense in the
fourth quarter of 2015 compared to $10.6 billion of income in the
fourth quarter of 2014 and $1.5 billion of expense for the full
year of 2015 compared to $11.6 billion of income for the full year
of 2014. 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 revaluation
of the company’s net monetary assets in Venezuela and a $680
million net charge to settle Vioxx shareholder class action
litigation. Other (income) expense, net in both the fourth quarter
and full year of 2014 includes an $11.2 billion gain on the
divestiture of the Consumer Care business and a $628 million loss
on the extinguishment of debt.
The GAAP effective tax rates of (20.4) percent for the fourth
quarter of 2015 and 17.4 percent for the full year of 2015 reflect
the impacts of acquisition- and divestiture-related costs,
restructuring costs and certain other items, including the impact
of the net charge to settle Vioxx shareholder class action
litigation being fully deductible at combined U.S. federal and
state tax rates, as well as the unfavorable impact of
non-deductible foreign exchange losses related to Venezuela. In
addition, the GAAP effective tax rates for the fourth quarter and
full year of 2015 include net benefits of $40 million and $410
million, respectively, related to the settlement of certain federal
tax issues. The non-GAAP effective tax rates, which exclude these
items, were 16.4 percent for the fourth quarter and 21.7 percent
for the full year of 2015. Both the GAAP and non-GAAP effective tax
rates for the fourth quarter and full year of 2015 include the
favorable impact of tax legislation, including the renewal of the
R&D tax credit, enacted in the fourth quarter of 2015.
Financial Outlook
Merck expects its full-year 2016 GAAP EPS to be between $1.96
and $2.23. Merck expects its full-year 2016 non-GAAP EPS to be
between $3.60 and $3.75, including an approximately 4 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 2016 exchange rates, Merck anticipates full-year
2016 revenues to be between $38.7 billion and $40.2 billion,
including an approximately 3 percent negative impact from foreign
exchange.
In addition, the company expects 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 anticipates 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
1.64 to 1.52 Non-GAAP EPS that excludes items listed below
$3.60 to $3.75 Acquisition- and divestiture-related
costs $4,600 to $4,400 Restructuring costs 900 to 700
Net decrease (increase) in income before taxes 5,500 to
5,100 Estimated income tax (benefit) expense (935) to (860)
Decrease (increase) in net income $4,565 to $4,240
Total Employees
As of Dec. 31, 2015, 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://www.merck.com/investors/events-and-presentations/home.html.
Institutional investors and analysts can participate in the call by
dialing (706) 758-9927 or (877) 381-5782 and using ID code number
4404803. Members of the media are invited to monitor the call by
dialing (706) 758-9928 or (800) 399-7917 and using ID code number
4404803. Journalists who wish to ask questions are requested to
contact a member of Merck’s Media Relations team at the conclusion
of the call.
About Merck
Today's Merck is a global 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.
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 2014
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).
MERCK & CO., INC. CONSOLIDATED STATEMENT OF
INCOME - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE
FIGURES) (UNAUDITED) Table 1
GAAP
GAAP
4Q15 4Q14
% Change
Full Year2015
Full Year2014
% Change
Sales $
10,215 $ 10,482 -3% $ 39,498 $ 42,237 -6% Costs, Expenses
and Other Materials and production (1) 3,850 3,749 3% 14,934 16,768
-11% Marketing and administrative (1) 2,615 2,924 -11% 10,313
11,606 -11% Research and development (1) 1,797 2,283 -21% 6,704
7,180 -7% Restructuring costs (2) 233 349 -33% 619 1,013 -39% Other
(income) expense, net (1) (3) 905 (10,634) * 1,527 (11,613) *
Income Before Taxes 815 11,811 -93% 5,401 17,283 -69% Income Tax
(Benefit) Provision (166) 4,484 942 5,349 Net Income 981 7,327 -87%
4,459 11,934 -63% Less: Net Income Attributable to Noncontrolling
Interests 5 11 17 14 Net Income Attributable to Merck & Co.,
Inc. $ 976 $ 7,316 -87% $ 4,442 $ 11,920 -63% Earnings per Common
Share Assuming Dilution $ 0.35 $ 2.54 -86% $ 1.56 $ 4.07
-62% Average Shares
Outstanding Assuming Dilution 2,813 2,880 2,841 2,928 Tax Rate (4)
-20.4% 38.0% 17.4% 30.9%
* 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 2015 includes a $680 million net charge to settle 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. 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 revalue 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.
Other (income) expense, net in the fourth quarter and full year
of 2014 includes an $11.2 billion gain on the divestiture of
Merck's Consumer Care business and a $628 million loss on the
extinguishment of debt. Other (income) expense, net for the full
year of 2014 also includes a gain of $741 million related to
AstraZeneca's option exercise, a gain of $480 million on the
divestiture of certain ophthalmic products in several international
markets, and a gain of $204 million related to the divestiture of
the company's Sirna Therapeutics, Inc. subsidiary, as well as a $93
million goodwill impairment charge related to the company's joint
venture with Supera Farma Laboratorios S.A.
Other (income) expense, net includes equity income from
affiliates. Prior period amounts have been reclassified to conform
to the current presentation.
(4) The effective income tax rates for the fourth quarter and
full year of 2015 reflect the impact of the net charge to settle
VIOXX shareholder class action litigation being fully deductible at
combined U.S. federal and state tax rates, as well as the favorable
impact of tax legislation enacted in the fourth quarter of 2015,
partially offset by the unfavorable impact of non-deductible
foreign exchange losses recorded in connection with the revaluation
of the company's net monetary assets in 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.
The effective income tax rates for the fourth quarter and full
year of 2014 include the impact of the gain on the divestiture of
Merck's Consumer Care business being taxed primarily at combined
U.S. federal and state tax rates. The effective income tax rates
for the fourth quarter and full year of 2014 also reflect the
favorable impact of tax legislation enacted in the fourth quarter
of 2014. In addition, the effective income tax rate for the full
year of 2014 reflects a net benefit of $517 million recorded in
connection with AstraZeneca's option exercise, as well as a benefit
of approximately $300 million associated with a capital loss
generated in the first quarter of 2014.
MERCK & CO., INC. CONSOLIDATED STATEMENT OF
INCOME GAAP TO NON-GAAP RECONCILIATION FOURTH QUARTER
2015 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED) Table 2a
GAAP
Acquisition
andDivestiture-Related Costs (1)
RestructuringCosts
(2)
Certain OtherItems
(3)
AdjustmentSubtotal
Non-GAAP
Sales
$ 10,215 $ 10,215 Costs, Expenses
and Other Materials and production
3,850 1,194 81 1,275
2,575 Marketing and administrative
2,615 47 8 55 2,560
Research and development
1,797 (24 ) 18 (6 ) 1,803
Restructuring costs
233 233 233 - Other (income) expense,
net (4)
905 47 707 754 151 Income Before Taxes
815
(1,264 ) (340 ) (707 ) (2,311 ) 3,126 Income Tax (Benefit)
Provision
(166 ) (679 )
(5)
513 Net Income
981 (1,632 ) 2,613 Less: Net Income
Attributable to Noncontrolling Interests
5 5 Net Income
Attributable to Merck & Co., Inc.
$ 976 (1,632 )
$ 2,608 Earnings per Common Share Assuming Dilution
$
0.35 $ 0.93 Average Shares
Outstanding Assuming Dilution
2,813 2,813 Tax Rate
-20.4 % 16.4 %
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 $29 million of
amortization of purchase accounting adjustments to inventories as a
result of the Cubist acquisition, and $33 million of impairment
charges on intangible assets. 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 income of $25 million
resulting from a reduction in the estimated fair value of
liabilities for contingent consideration. Amounts included in other
(income) expense, net represent goodwill impairment charges related
to certain of Merck's Healthcare Services businesses.
(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 $680 million net charge to settle VIOXX
shareholder class action litigation, foreign exchange losses of
$161 million to revalue the company's net monetary assets in
Venezuela and a $147 million gain on the divestiture of the
company's remaining ophthalmics business in international
markets.
(4) Other (income) expense, net includes equity income from
affiliates.
(5) Represents the estimated tax impact on the reconciling
items, as well as a net benefit of $40 million on the settlement of
certain federal income tax issues.
MERCK & CO.,
INC. CONSOLIDATED STATEMENT OF INCOME GAAP TO
NON-GAAP RECONCILIATION YEAR ENDED DECEMBER 31, 2015
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED) Table 2b
GAAP
Acquisition
andDivestiture-Related Costs (1)
RestructuringCosts
(2)
Certain OtherItems
(3)
AdjustmentSubtotal
Non-GAAP Sales
$ 39,498 $ 39,498
Costs, Expenses and Other Materials and production
14,934 4,869 361 5,230 9,704 Marketing and administrative
10,313 436 78 514 9,799 Research and development
6,704 39 52 91 6,613 Restructuring costs
619 619 619
- Other (income) expense, net (4)
1,527 54 1,125 1,179 348
Income Before Taxes
5,401 (5,398 ) (1,110 ) (1,125 ) (7,633
) 13,034 Taxes on Income
942 (1,880 )
(5)
2,822 Net Income
4,459 (5,753 ) 10,212 Less: Net Income
Attributable to Noncontrolling Interests
17 17 Net Income
Attributable to Merck & Co., Inc.
$ 4,442 (5,753
) $ 10,195 Earnings per Common Share Assuming Dilution
$
1.56 $ 3.59 Average Shares
Outstanding Assuming Dilution
2,841 2,841 Tax Rate
17.4 % 21.7 %
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
$4.7 billion of expenses for the amortization of intangible assets
recognized as a result of acquisitions, as well as $105 million of
amortization of purchase accounting adjustments to inventories as a
result of the Cubist acquisition, and $45 million of impairment
charges on intangible assets. 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 reflect $63 million of in-process research and
development (IPR&D) impairment charges and income of $24
million resulting from a reduction in the estimated fair value of
liabilities for contingent consideration. Amounts included in other
(income) expense, net represent goodwill impairment charges related
to certain of Merck's Healthcare Services businesses.
(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 foreign exchange losses of $876 million
to revalue the company's net monetary assets in Venezuela, a $680
million net charge to settle VIOXX shareholder class action
litigation, a $250 million gain on the divestiture of certain
migraine clinical development programs and a $147 million gain on
the divestiture of the company's remaining ophthalmics business in
international markets.
(4) Other (income) expense, net includes equity income from
affiliates.
(5) Represents the estimated tax impact on the reconciling
items, as well as a net benefit of $410 million on the settlement
of certain federal income tax issues.
MERCK & CO., INC. FRANCHISE /
KEY PRODUCT SALES (AMOUNTS IN MILLIONS) Table 3
2015 2014 % Change Full
Full Full 1Q 2Q 3Q
4Q Year 1Q 2Q
3Q 4Q Year 4Q
Year TOTAL SALES (1) $
9,425 $ 9,785 $
10,073 $ 10,215 $
39,498 $ 10,264 $ 10,934
$ 10,557 $ 10,482
$ 42,237 -3 -6
PHARMACEUTICAL 8,266 8,564 8,925
9,027 34,782 8,451 9,087 9,134
9,370 36,042 -4 -3 Primary Care
& Women's Health Cardiovascular Zetia 568 635 633 691 2,526
611 717 660 662 2,650 4 -5 Vytorin 320 320 302 308 1,251 361 417
369 370 1,516 -17 -17 Diabetes Januvia 884 1,044 1,014 921 3,863
858 1,058 933 1,082 3,931 -15 -2 Janumet 509 554 562 526 2,151 476
519 505 570 2,071 -8 4 General Medicine & Women's Health
NuvaRing 166 182 190 193 732 168 178 186 191 723 1 1 Implanon /
Nexplanon 137 124 176 151 588 102 119 158 123 502 23 17 Dulera 130
120 133 153 536 102 103 124 132 460 16 16 Follistim AQ 82 111 95 95
383 110 102 97 102 412 -7 -7
Hospital and Specialty
Hepatitis PegIntron 56 52 40 34 182 112 103 84 81 381 -58 -52 HIV
Isentress 385 375 377 374 1,511 390 453 412 418 1,673 -11 -10
Hospital Acute Care Cubicin(2) 187 293 325 322 1,127 5 6 7 7 25 * *
Cancidas 163 134 139 137 573 166 156 183 175 681 -22 -16 Invanz 132
139 153 144 569 114 134 141 139 529 4 8 Noxafil 111 117 132 128 487
74 98 107 122 402 4 21 Bridion 85 87 89 92 353 73 82 90 95 340 -3 4
Primaxin 65 88 75 86 313 71 81 91 86 329 0 -5 Immunology Remicade
501 455 442 396 1,794 604 607 604 557 2,372 -29 -24 Simponi 158 169
178 185 690 157 174 170 188 689 -2 0
Oncology Keytruda 83
110 159 214 566 0 0 4 50 55 * * Emend 122 134 141 139 535 122 144
136 151 553 -8 -3 Temodar 74 80 83 75 312 83 93 88 86 350 -14 -11
Diversified Brands Respiratory Singulair 245 212 201 273 931
271 284 218 319 1,092 -14 -15 Nasonex 289 215 121 231 858 312 258
261 268 1,099 -14 -22 Clarinex 51 55 39 42 187 62 69 49 52 232 -20
-20 Other Cozaar / Hyzaar 185 189 150 143 667 205 214 195 192 806
-25 -17 Arcoxia 123 115 123 110 471 128 141 132 118 519 -7 -9
Fosamax 94 96 86 82 359 123 121 114 112 470 -27 -24 Zocor 49 63 56
49 217 64 69 61 64 258 -22 -16 Propecia 53 39 41 50 183 74 58 66 67
264 -26 -31
Vaccines Gardasil / Gardasil 9 359 427 625 497
1,908 383 409 590 356 1,738 40 10 ProQuad, M-M-R II and Varivax 348
358 390 409 1,505 280 326 421 366 1,394 12 8 Zostavax 175 149 179
246 749 142 156 181 285 765 -14 -2 RotaTeq 192 89 160 169 610 169
147 174 169 659 0 -7 Pneumovax 23 110 106 138 188 542 101 102 197
346 746 -46 -27
Other Pharmaceutical (3) 1,075 1,128
1,178 1,174 4,553 1,378 1,389 1,326 1,269 5,356 -7 -15
ANIMAL HEALTH 829 840 825 830
3,324 813 872 885 885
3,454 -6 -4 CONSUMER CARE
(4) 2 0 0 0 3 546
583 401 16 1,547 * *
Other Revenues (5) 328
381 323 358
1,389 454
392 137 211
1,194 69 16
* 100% or greater
Sum of quarterly amounts may not equal year-to-date amounts due
to rounding.
(1) Only select products are shown.
(2) Cubicin results for the first quarter 2015 represent sales
for the two months following Merck's acquisition of Cubist. Cubicin
sales for 2014 represent the previous licensing agreement in Japan
prior to the acquisition.
(3) Includes Pharmaceutical products not individually shown
above. 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.
Other Vaccines sales included in Other Pharmaceutical were $98
million, $76 million, $116 million and $88 million for the first,
second, third and fourth quarters of 2014, respectively.
(4) On October 1, 2014, the company divested the Consumer Care
business.
(5) Other revenues are comprised primarily of alliance revenue,
third-party manufacturing sales and miscellaneous corporate
revenues, including revenue hedging activities. On June 30, 2014,
AstraZeneca exercised its option to buy Merck's interest in a
subsidiary and through it, Merck's interest in Nexium and Prilosec.
As a result, the company no longer records supply sales for these
products. Other revenues in the first quarter 2014 include $232
million of revenue recognized in connection with the sale of U.S.
Saphris rights.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160203005708/en/
MerckMedia:Lainie Keller, 908-236-5036Steven Cragle,
908-740-1801orInvestors:Teri Loxam, 908-740-1986Justin Holko,
908-740-1879
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