- First-Quarter 2021 Sales Were $12.1 Billion, In-Line with
First-Quarter 2020; Excluding the Impact from Foreign Exchange,
Sales Declined 1%
- First-Quarter 2021 Sales Reflect Strong Underlying Performance
of KEYTRUDA, Lynparza, BRIDION and Animal Health, Which Was Offset
by COVID-19 Pandemic Impacts to Patient Access, Particularly for
Vaccines
- First-Quarter 2021 GAAP EPS Was $1.25; First-Quarter Non-GAAP
EPS Was $1.40
- Entered into HIV Collaboration with Gilead Sciences, Inc. and
Completed Acquisition of Pandion Therapeutics, Inc.
- Merck Will Host an Investor Event Featuring Organon on May 3;
Organon Spinoff is Expected to be Completed on June 2, with First
Day of Trading Scheduled for June 3
- 2021 Financial Outlook
- Continues to Expect Sales Growth of 8% to 12%; Full-Year 2021
Sales Estimated to be Between $51.8 Billion and $53.8 Billion,
Including a Positive Impact from Foreign Exchange of Less Than 2%,
Assuming Organon is Part of Merck for the Full Year
- Expects Full-Year 2021 GAAP EPS to be Between $5.05 and $5.25;
Continues to Expect Non-GAAP EPS to be Between $6.48 and $6.68,
Including a Positive Impact from Foreign Exchange of Less Than 3%,
Assuming Organon is Part of Merck for the Full Year
- Assuming the Completion of the Organon Spinoff, Expects
Full-Year 2021 Sales from Continuing Operations to be Between $45.8
Billion and $47.8 Billion
Merck (NYSE: MRK), known as MSD outside the United States and
Canada, today announced financial results for the first quarter of
2021.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20210429005381/en/
“While our results this quarter were impacted by the pandemic,
the underlying demand for our innovative products remains strong
and we remain confident in our future growth prospects,” said
Kenneth C. Frazier, chairman and CEO, Merck. “We are also taking
the right steps to evolve Merck’s operating model to continue to
create value for patients, shareholders and society.”
“As I transition into the CEO role, one of my immediate
priorities is to ensure that our experienced leadership team
continues to build on our solid foundation,” said Robert M. Davis,
president, Merck. “Our company is well positioned for strong
long-term performance, with scientific innovation remaining the
source of our company’s energy and value creation.”
Financial Summary
$ in millions, except EPS amounts
First Quarter
2021
2020
Change
Change Ex- Exchange
Sales
$12,080
$12,057
0%
-1%
GAAP net income1
3,179
3,219
-1%
-3%
Non-GAAP net income that excludes certain
items1,2*
3,556
3,851
-8%
-9%
GAAP EPS
1.25
1.26
-1%
-3%
Non-GAAP EPS that excludes certain
items2*
1.40
1.51
-7%
-9%
*Refer to table on page 11.
GAAP (generally accepted accounting principles) earnings per
share assuming dilution (EPS) was $1.25 for the first quarter of
2021. Non-GAAP EPS of $1.40 for the first quarter of 2021 excludes
acquisition- and divestiture-related costs, restructuring costs,
income and losses from investments in equity securities and certain
other items.
Oncology Pipeline Highlights
Merck continued to advance the development programs for KEYTRUDA
(pembrolizumab), the company’s anti-PD-1 therapy; Lynparza
(olaparib), a PARP inhibitor being co-developed and
co-commercialized with AstraZeneca; and Lenvima (lenvatinib
mesylate), an orally available tyrosine kinase inhibitor being
co-developed and co-commercialized with Eisai Co., Ltd. (Eisai), in
addition to other notable developments as follows:
- Merck announced the following regulatory actions for KEYTRUDA:
- Approval by the U.S. Food and Drug Administration (FDA) in
combination with platinum- and fluropyrimidine-based chemotherapy
for the first-line treatment of patients with locally advanced or
metastatic esophageal or gastroesophageal junction (GEJ) (tumors
with epicenter 1 to 5 centimeters above the GEJ) carcinoma that is
not amenable to surgical resection or definitive chemoradiation,
based on results from the Phase 3 KEYNOTE-590 trial.
- Approval by the European Commission (EC) for the treatment of
adult and pediatric patients aged 3 years and older with relapsed
or refractory classical Hodgkin lymphoma (cHL) who have failed
autologous stem cell transplant (ASCT) or following at least two
prior therapies when ASCT is not a treatment option, based on
results from the Phase 3 KEYNOTE-204 trial.
- Approval by the EC for the first-line treatment of adult
patients with metastatic microsatellite instability-high (MSI-H) or
mismatch repair deficient colorectal cancer based on results from
the Phase 3 KEYNOTE-177 trial.
- A Complete Response Letter was received from the FDA regarding
Merck’s supplemental Biologics License Application for the
treatment of patients with high-risk early-stage triple-negative
breast cancer (TNBC), in combination with chemotherapy as
neoadjuvant (pre-operative) treatment, then continuing as a single
agent as adjuvant (post-operative) treatment after surgery.
- A voluntary withdrawal in the United States for the treatment
of patients with metastatic small cell lung cancer with disease
progression on or after platinum-based chemotherapy and at least
one other prior line of therapy. This withdrawal does not affect
other indications for KEYTRUDA.
- Merck announced that an interim analysis from the pivotal Phase
3 KEYNOTE-564 trial evaluating KEYTRUDA met its primary endpoint of
disease-free survival for the potential adjuvant treatment of
patients with renal cell carcinoma (RCC) following nephrectomy or
following nephrectomy and resection of metastatic lesions. Data
will be presented at the 2021 American Society for Clinical
Oncology (ASCO) Annual Meeting.
- Merck announced that the FDA has accepted and granted priority
review for a New Drug Application (NDA) for the hypoxia-inducible
factor-2 alpha (HIF-2α) inhibitor, belzutifan, a novel
investigational candidate in Merck’s oncology pipeline, for the
potential treatment of certain patients with von Hippel-Lindau
(VHL) disease-associated RCC, not requiring immediate surgery. The
FDA has set a PDUFA date of Sept. 15, 2021.
- Merck and Eisai announced the first presentation of new
investigational data from the pivotal Phase 3 CLEAR study
(KEYNOTE-581/Study 307) at the 2021 Genitourinary Cancers Symposium
(ASCO GU) and simultaneously published in the New England Journal
of Medicine. The combination of KEYTRUDA plus Lenvima significantly
improved the primary endpoint of progression-free survival (PFS)
and key secondary endpoint of overall survival (OS) versus
sunitinib in first-line treatment of patients with advanced
RCC.
- Merck and Eisai announced the first presentation of
investigational data from the pivotal Phase 3 KEYNOTE-775/Study 309
trial at the Society of Gynecologic Oncology (SGO) 2021 Annual
Meeting. The combination of KEYTRUDA plus Lenvima significantly
improved the dual primary endpoints of PFS and OS versus
chemotherapy for the treatment of patients with advanced
endometrial cancer following one prior platinum-based regimen in
any setting.
- Merck and AstraZeneca announced that the Phase 3 OlympiA trial
for Lynparza will move to early primary analysis and reporting
following a recommendation from the Independent Data Monitoring
Committee (IDMC). Based on the planned interim analysis, the IDMC
concluded that the trial crossed the superiority boundary for its
primary endpoint of invasive disease-free survival versus placebo
in the adjuvant treatment of germline BRCA-mutated (gBRCAm),
high-risk human epidermal growth factor receptor 2 (HER2)-negative
early-stage breast cancer following definitive local treatment and
neoadjuvant or adjuvant chemotherapy. The trial will continue to
evaluate the key secondary endpoints of OS and distant disease-free
survival. Data will be presented at the 2021 ASCO Annual
Meeting.
- Merck began enrollment for the Phase 3 study evaluating
vibostolimab, its investigational anti-TIGIT antibody, in
combination with KEYTRUDA in non-small cell lung cancer patients
whose tumors express PD-L1.
Business Development and Other Pipeline Highlights
- Merck and Gilead Sciences, Inc. (Gilead) announced that they
have entered into an agreement to co-develop and co-commercialize
long-acting treatments in HIV that combine Gilead’s investigational
capsid inhibitor, lenacapavir, and Merck’s investigational
nucleoside reverse transcriptase translocation inhibitor (NRTTI),
islatravir, into a two-drug regimen in oral and injectable
formulations with the potential to provide new, meaningful
treatment options for people living with HIV.
- Merck acquired Pandion Therapeutics, Inc. (Pandion), a
clinical-stage biotechnology company developing novel therapeutics
designed to address the unmet needs of patients living with
autoimmune diseases, on April 1, 2021.
- Merck announced that a Phase 2/3 trial of molnupiravir
(EIDD-2801/MK-4482), an investigational oral antiviral agent being
developed in collaboration with Ridgeback Biotherapeutics, for the
treatment of outpatients diagnosed with COVID-19, will proceed to
Phase 3. Interim results from Phase 2/3 studies evaluating
molnupiravir in both outpatients and inpatients will be shared with
the scientific community at an upcoming medical meeting.
- Merck announced results from a Phase 1 study evaluating the
safety, tolerability and pharmacokinetics (PK) of the company’s
investigational subdermal drug-eluting implant with potential for
extended administration of islatravir, an investigational NRTTI,
for pre-exposure prophylaxis (PrEP) of HIV-1 infection. Study
results demonstrated that the implant achieved active drug
concentrations above the pre-specified PK threshold at 12 weeks
across the three doses of islatravir studied (48 mg, 52 mg and 56
mg), and is projected to provide drug concentrations likely above
threshold for one year at the 56 mg dose. Based on these findings,
Merck plans to initiate a Phase 2 trial to further explore the
potential of a subdermal implant containing islatravir as a
long-acting option for PrEP for up to 12 months.
- Merck announced that the FDA has accepted for review the
company’s NDA for gefapixant, an investigational, orally
administered, selective P2X3 receptor antagonist, for the treatment
of refractory chronic cough or unexplained chronic cough in adults
based on results from the COUGH-1 and COUGH-2 studies. This
application for gefapixant will be discussed at an upcoming
advisory committee meeting. The FDA has set a PDUFA date of Dec.
21, 2021.
- Merck announced that supply for VAXELIS (Diphtheria and Tetanus
Toxoids and Acellular Pertussis, Inactivated Poliovirus,
Haemophilus b Conjugate and Hepatitis B Vaccine) in the United
States will be available in June 2021. Developed as part of a
joint-partnership between Sanofi and Merck, VAXELIS is the first
and only hexavalent combination vaccine approved in the United
States to help protect infants and children 6 weeks through 4 years
of age against diseases caused by six infectious agents:
diphtheria, tetanus, pertussis (whooping cough), poliomyelitis,
hepatitis B and invasive disease due to Haemophilus influenzae type
b.
Organon Highlights
- Merck filed a Form 10 registration statement with the United
States Securities and Exchange Commission (SEC) in connection with
the intended spinoff of its women’s health, biosimilars and
established brands businesses into a standalone, publicly-traded
company, Organon & Co. (Organon).
- In April 2021, Organon Finance 1 LLC issued senior secured
notes of €1.25 billion aggregate principal amount of 2.875% senior
secured notes due 2028, $2.1 billion aggregate principal amount of
4.125% senior secured notes due 2028 and $2.0 billon aggregate
principal amount of 5.125% senior unsecured notes due 2031, in
connection with the intended spinoff of Organon from Merck.
- Merck announced a definitive agreement pursuant to which, after
the intended spinoff of Organon, Organon will acquire Alydia
Health. Alydia Health is a commercial-stage medical device company
focused on preventing maternal morbidity and mortality caused by
postpartum hemorrhage or abnormal postpartum uterine bleeding.
- Merck will host an investor event featuring Organon on May 3.
The Organon spinoff is expected to be completed on June 2, with
first day of trading scheduled for June 3.
Corporate Developments
- Merck announced goals to achieve carbon neutrality in its
operations (Scopes 1 & 2 emissions) by 2025 through ongoing
innovation to increase efficiency and reduce carbon emissions,
applying sustainable building standards and continuing to
transition away from fossil fuel use. Remaining Scope 1 emissions
will be offset each year with a portfolio of high-quality carbon
credits, including carbon removals. Merck has also set a goal of
achieving a 30% reduction in its value chain emissions by 2030
(Scope 3 emissions).
First-Quarter Revenue Performance
The following table reflects sales of the company’s top
pharmaceutical products, as well as sales of animal health
products.
$ in millions
First Quarter
2021
2020
Change
Change Ex-Exchange
Total Sales
$12,080
$12,057
0%
-1%
Pharmaceutical
10,675
10,655
0%
-3%
KEYTRUDA
3,899
3,284
19%
16%
JANUVIA / JANUMET
1,295
1,277
1%
-2%
GARDASIL / GARDASIL 9
917
1,097
-16%
-20%
PROQUAD, M-M-R II and
VARIVAX
449
435
3%
2%
BRIDION
340
299
14%
11%
Lynparza*
SIMPONI
228
214
145
215
57%
0%
51%
-8%
ISENTRESS / ISENTRESS HD
209
245
-15%
-15%
PNEUMOVAX 23
ROTATEQ
171
158
256
222
-33%
-29%
-36%
-29%
Animal Health
1,418
1,214
17%
15%
Livestock
819
739
11%
9%
Companion Animals
599
475
26%
24%
Other Revenues**
(13)
188
-107%
-21%
*Alliance revenue for this
product represents Merck’s share of profits, which are product
sales net of cost of sales and commercialization costs.
**Other revenues are comprised
primarily of third-party manufacturing sales and miscellaneous
corporate revenues, including revenue hedging activities. The
revenue hedging activities resulted in negative revenue in the
first quarter of 2021.
Pharmaceutical Revenue
First-quarter pharmaceutical sales of $10.7 billion were in-line
with the first quarter of 2020. Excluding the favorable effect of
foreign exchange, sales declined by 3%. Sales performance reflects
underlying strength in the business, offset by negative impacts of
the COVID-19 pandemic, and the ongoing impacts of the loss of
market exclusivity for several products. With respect to the
COVID-19 pandemic, the estimated negative impact to Merck’s first
quarter pharmaceutical revenue was approximately $600 million.
Continued reduced access to health care providers, combined with
the prioritization of COVID-19 vaccines has negatively impacted the
sales of certain products, notably vaccines in the United
States.
Pharmaceutical revenue reflects growth in oncology, largely
driven by higher sales of KEYTRUDA, which rose 19% to $3.9 billion
in the quarter, although the COVID-19 pandemic had a dampening
effect on growing demand due to a decline in the number of new
patients starting treatment. Global sales growth of KEYTRUDA
reflects continued strong momentum from the non-small-cell lung
cancer indications as well as continued uptake in other
indications, including adjuvant melanoma, RCC, bladder, head and
neck squamous cell carcinoma (HNSCC) and MSI-H cancers, as well as
uptake following the recent launch of the 400mg every 6 weeks adult
dosing regimen in the United States, partially offset by pricing
pressure in Europe and Japan. Also contributing to growth in
oncology was 57% growth in Lynparza alliance revenue, reflecting
continued uptake in approved indications in the United States,
Europe and China.
The decline in vaccine sales was primarily driven by GARDASIL
(Human Papillomavirus Quadrivalent [Types 6,11,16 and 18] Vaccine,
Recombinant)/GARDASIL 9 (Human Papillomavirus 9-valent Vaccine,
Recombinant), vaccines to prevent certain cancers and other
diseases caused by HPV, primarily attributable to buying patterns
in the United States and the timing of shipments in China, which in
total negatively affected the year over year GARDASIL/GARDASIL 9
sales comparison by approximately $230 million. The COVID-19
pandemic also negatively affected sales for GARDASIL/GARDASIL 9,
particularly in the United States and Europe.
Also contributing to the decline in vaccine sales were lower
sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine
to help prevent pneumococcal disease, primarily reflecting the
impact of the COVID-19 pandemic on demand in the United States,
partially offset by higher volumes in international markets.
Vaccines sales were also negatively affected by lower sales of
ROTATEQ (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to
help protect against rotavirus gastroenteritis in infants and
children, largely due to the timing of shipments in China and lower
demand in the United States.
Pharmaceutical sales in the quarter were negatively affected by
the ongoing impacts from the loss of market exclusivity, including
for ZETIA (ezetimibe) and NOXAFIL (posaconazole), as well as
certain products in diversified brands.
Performance in hospital acute care primarily reflects the
decline in sales of ZERBAXA (ceftolozane and tazobactam) for
injection, a combination cephalosporin antibacterial and
beta-lactamase inhibitor for the treatment of adults with certain
bacterial infections due to the temporary suspension of sales and
product recall in the fourth quarter of 2020. Hospital acute care
performance also reflects higher demand globally for 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; and the continued uptake of
PREVYMIS (letermovir), a medicine for prophylaxis (prevention) of
cytomegalovirus (CMV) infection and disease in adult
CMV-seropositive recipients of an allogeneic hematopoietic stem
cell transplant.
Animal Health Revenue
Animal Health sales totaled $1.4 billion for the first quarter
of 2021, an increase of 17% compared with the first quarter of
2020; excluding the favorable effect from foreign exchange, Animal
Health sales grew 15%. Sales growth reflects higher demand globally
for companion animal products, including parasiticide lines of
products, primarily BRAVECTO (fluralaner), as well as higher sales
of companion animal vaccines. Sales growth in livestock products
reflects higher demand in international markets for ruminant,
poultry and swine products, as well as higher demand globally for
Animal Intelligence products.
First-Quarter Expense, EPS and Related Information
The tables below present selected expense information.
$ in millions
First-Quarter 2021
GAAP
Acquisition- and Divestiture-
Related Costs3
Restructuring Costs
(Income) Loss from Investments
in Equity Securities
Certain Other Items
Non- GAAP2
Cost of sales
$3,670
$517
$27
$−
$188
$2,938
Selling, general and administrative
2,633
218
3
−
−
2,412
Research and development
2,465
18
7
−
−
2,440
Restructuring costs
298
−
298
−
−
−
Other (income) expense, net
(448)
(28)
−
(561)
−
141
First-Quarter 2020
Cost of sales
$3,312
$407
$68
$−
$−
$2,837
Selling, general and administrative
2,555
278
11
−
−
2,266
Research and development
2,209
40
17
−
−
2,152
Restructuring costs
72
−
72
−
−
−
Other (income) expense, net
71
(11)
–
(87)
−
169
GAAP Expense, EPS and Related Information
Gross margin was 69.6% for the first quarter of 2021 compared to
72.5% for the first quarter of 2020. The decrease reflects higher
costs associated with COVID-19 development programs, including a
charge related to the discontinuation of certain COVID-19
development programs, as well as higher acquisition- and
divestiture-related costs, and pricing pressure, partially offset
by favorable product mix.
Selling, general and administrative expenses were $2.6 billion
in the first quarter of 2021, an increase of 3% compared to the
first quarter of 2020. The increase primarily reflects higher
promotion and administrative costs, the unfavorable effects of
foreign exchange and higher costs related to the company’s planned
spinoff of Organon, partially offset by lower selling costs due in
part to the COVID-19 pandemic.
Research and development expenses were $2.5 billion in the first
quarter of 2021, an increase of 12% compared with the first quarter
of 2020. The increase was primarily driven by higher expenses
related to clinical development, including investment in COVID-19
development programs, as well as increased investment in discovery
research and early drug development, partially offset by lower
licensing costs.
Other (income) expense, net, was $448 million of income in the
first quarter of 2021 compared to $71 million of expense in the
first quarter of 2020, primarily reflecting higher income from
investments in equity securities in 2021 compared with 2020.
The effective income tax rate of 8.0% for the first quarter of
2021 reflects a net tax benefit of $237 million related to the
settlement of certain federal income tax matters.
GAAP EPS was $1.25 for the first quarter of 2021 compared with
$1.26 for the first quarter of 2020.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 75.7% for the first quarter of 2021
compared to 76.5% for the first quarter of 2020. The decrease in
non-GAAP gross margin reflects higher costs associated with
COVID-19 development programs, as well as pricing pressure,
partially offset by favorable product mix.
Non-GAAP selling, general and administrative expenses were $2.4
billion in the first quarter of 2021, an increase of 6% compared to
the first quarter of 2020. The increase primarily reflects higher
promotion and administrative costs and the unfavorable effects of
foreign exchange, partially offset by lower selling costs due in
part to the COVID-19 pandemic.
Non-GAAP R&D expenses were $2.4 billion in the first quarter
of 2021, a 13% increase compared to the first quarter of 2020. The
increase primarily reflects higher expenses related to clinical
development, including investment in COVID-19 development programs,
as well as increased investment in discovery research and early
drug development, partially offset by lower licensing costs.
Non-GAAP other (income) expense, net, was $141 million of
expense in the first quarter of 2021 compared to $169 million of
expense in the first quarter of 2020.
The non-GAAP effective income tax rate was 14.1% for the first
quarter of 2021.
Non-GAAP EPS was $1.40 for the first quarter of 2021 compared
with $1.51 for the first quarter of 2020.
A reconciliation of GAAP to non-GAAP net income and EPS is
provided in the table that follows.
$ in millions, except EPS amounts
First Quarter
2021
2020
EPS
GAAP EPS
$1.25
$1.26
Difference
0.15
0.25
Non-GAAP EPS that excludes items listed
below2
$1.40
$1.51
Net Income
GAAP net income1
$3,179
$3,219
Difference
377
632
Non-GAAP net income that excludes items
listed below1,2
$3,556
$3,851
Decrease (Increase) in Net Income Due
to Excluded Items:
Acquisition- and divestiture-related
costs3
$725
$714
Restructuring costs
335
168
(Income) loss from investments in equity
securities
(561)
(87)
Charge for the discontinuation of COVID-19
development programs
188
-
Net decrease (increase) in income before
taxes
687
795
Income tax (benefit) expense4
(310)
(163)
Decrease (increase) in net income
$377
$632
Financial Outlook
The guidance provided below is based on the assumption that the
Organon business will be part of Merck for all of 2021; however,
the Company expects that the Organon spinoff will occur on June 2,
2021. If the spinoff occurs, these financial estimates will be
updated. Initial information related to revenue from continuing
operations is provided below.
Merck continues to experience strong global underlying demand
across its business. Consequently, at mid-April 2021 exchange
rates, Merck continues to expect sales growth of 8% to 12% in 2021
with full-year 2021 revenue estimated to be between $51.8 billion
and $53.8 billion, including a positive impact from foreign
exchange of less than 2%. Merck now estimates that the pandemic
will have a net unfavorable impact to 2021 revenues of
approximately 3%, all of which relates to the pharmaceutical
segment.
Merck continues to believe that global health systems and
patients have largely adapted to the impacts of COVID-19 disease,
but that negative impacts will persist, particularly during the
first half of 2021 and most notably with respect to vaccine sales
in the United States, which is expected to be partially offset by
the re-allocation of GARDASIL 9 doses to markets outside of the
United States to address continued strong demand.
Merck now expects full-year 2021 GAAP EPS to be between $5.05
and $5.25.
Merck continues to expect full-year 2021 non-GAAP EPS to be
between $6.48 and $6.68, including a positive impact from foreign
exchange of less than 3%. The non-GAAP range excludes acquisition-
and divestiture-related costs, costs related to restructuring
programs, income and losses from investments in equity securities
and certain other items.
For full-year 2021, Merck expects the pandemic to have a
negligible impact on operating expenses, as spending on the
development of its COVID-19 antiviral programs is expected to
largely offset the favorable impact of lower spending in other
areas due to the COVID-19 pandemic.
Neither the sales nor the EPS guidance ranges provided above
include the impact of the potential launch of Merck’s COVID-19
antiviral drug candidate.
The following table summarizes the company’s full-year 2021
financial guidance.
GAAP
Non-GAAP2
Revenue
$51.8 to $53.8 billion
$51.8 to $53.8 billion*
Operating expenses
Lower than 2020 by a mid-single
digit rate
Higher than 2020 by a mid- to
high-single digit rate
Effective tax rate
15% to 16%
15% to 16%
EPS**
$5.05 to $5.25
$6.48 to $6.68
*The company does not have any
non-GAAP adjustments to revenue.
**EPS guidance for 2021 assumes a
share count (assuming dilution) of approximately 2.53 billion
shares.
A reconciliation of anticipated 2021 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 2021
GAAP EPS
$5.05 to $5.25
Difference
$1.43
Non-GAAP EPS that excludes items listed
below2
$6.48 to $6.68
Acquisition- and divestiture-related
costs
$2,500
Restructuring costs
700
(Income) loss from investments in equity
securities
(1,000)
Charge for the discontinuation of COVID-19
development programs
188
Charge for the acquisition of Pandion
1,800
Net decrease (increase) in income before
taxes
4,188
Income tax (benefit) expense4
(565)
Decrease (increase) in net income
$3,623
Impact of Planned Spinoff of Organon
Merck expects the spinoff of Organon to be completed on June 2,
2021. Merck continues to expect the transaction to create two
companies with enhanced strategic and operational focus, improved
agility, simplified operating models, optimized capital structures
and improved financial profiles. Merck believes the transaction
will deliver significant benefits for both Merck and Organon and
create value for Merck shareholders.
On a pro forma basis, assuming it operated as an independent
company for the full year, Organon is expected to generate $6.1
billion to $6.4 billion in revenue in 2021. Organon is expected to
have $9.5 billion in initial debt and is expected to pay a special
tax-free dividend to Merck of approximately $9.0 billion.
For Merck, the spinoff of Organon will allow it to increase its
focus on key growth pillars, achieve higher revenue and EPS growth
rates and enable incremental operating efficiencies of
approximately $1.5 billion, which are expected to be achieved
ratably over three years, with approximately $500 million realized
during 2021. Merck will continue to incur overhead costs previously
allocated to the Organon products, which are estimated to be
approximately $400 million on a full-year basis. These costs are
expected to be reduced over time and are netted into the overall
efficiency target. Merck expects to use the special tax-free
dividend from Organon for business development and/or share
repurchases.
As a result of the stronger growth Organon is expected to
achieve as a standalone company and the benefit of operating
efficiencies at Merck enabled by the spinoff, Merck expects
combined non-GAAP EPS of the two companies to be higher within
12-24 months post-spinoff versus what would have been achieved
assuming no transaction. Due to the higher relative profitability
of Organon’s products, Merck’s operating margin from continuing
operations is expected to initially be slightly lower in 2021
versus what it was prior to the spinoff. With the incremental
operating efficiencies enabled by the spinoff, Merck’s operating
margins are expected to be higher within 12-24 months versus where
they would have been in the absence of the spinoff and to be
greater than 42% in 2024.
Finally, assuming the completion of the Organon spinoff, Merck
anticipates full-year 2021 revenue from continuing operations to be
between $45.8 billion and $47.8 billion. Continuing operations for
Merck exclude Organon results for the full year. Further details,
including post-spinoff GAAP and non-GAAP EPS guidance, will be
announced in conjunction with Merck’s second-quarter 2021 earnings
release.
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
https://investors.merck.com/events-and-presentations/default.aspx.
Institutional investors and analysts can participate in the call by
dialing (833) 353-0277 or (469) 886-1947 and using ID code number
7279283. Members of the media are invited to monitor the call by
dialing (833) 353-0277 or (469) 886-1947 and using ID code number
7279283. 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 130 years, Merck, known as MSD outside of the United States
and Canada, has been inventing for life, bringing forward medicines
and vaccines for many of the world’s most challenging diseases in
pursuit of our mission to save and improve lives. We demonstrate
our commitment to patients and population health by increasing
access to health care through far-reaching policies, programs and
partnerships. Today, Merck continues to be at the forefront of
research to prevent and treat diseases that threaten people and
animals – including cancer, infectious diseases such as HIV and
Ebola, and emerging animal diseases – as we aspire to be the
premier research-intensive biopharmaceutical company in the world.
For more information, visit www.merck.com and connect with us on
Twitter, Facebook, Instagram, 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; uncertainties as to the timing
of the proposed spinoff; general economic factors, including
interest rate and currency exchange rate fluctuations; the impact
of the global outbreak of novel coronavirus disease (COVID-19); 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 2020
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
Net income attributable to Merck &
Co., Inc.
2
Merck is providing certain 2021 and 2020
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. In addition,
senior management’s annual compensation is derived in part using
non-GAAP pretax income. This information should be considered in
addition to, but not as a substitute for or superior to,
information prepared in accordance with GAAP. As previously
disclosed, beginning in 2021, Merck changed the treatment of
certain items for purposes of its non-GAAP reporting. Prior periods
have been recast to conform to the current presentation. For a
description of the non-GAAP adjustments, see Table 2a attached to
this release.
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 liabilities for
contingent consideration. Also includes integration, transaction
and certain other costs related to acquisitions and
divestitures.
4
Includes the estimated tax impact on the
reconciling items. In addition, the amount for 2021 includes a $237
million net tax benefit related to the settlement of certain
federal income tax matters.
MERCK & CO., INC. CONSOLIDATED STATEMENT OF INCOME -
GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED) Table 1 GAAP
% Change 1Q21 1Q20
Sales
$
12,080
$
12,057
0%
Costs, Expenses and Other
Cost of sales
3,670
3,312
11%
Selling, general and administrative
2,633
2,555
3%
Research and development
2,465
2,209
12%
Restructuring costs (1)
298
72
*
Other (income) expense, net
(448)
71
*
Income Before Taxes
3,462
3,838
-10%
Taxes on Income
276
619
Net Income
3,186
3,219
-1%
Less: Net Income Attributable to Noncontrolling Interests
7
-
Net Income Attributable to Merck & Co., Inc.
$
3,179
$
3,219
-1%
Earnings per Common Share Assuming Dilution
$
1.25
$
1.26
-1%
Average Shares Outstanding Assuming Dilution
2,541
2,547
Tax Rate (2)
8.0%
16.1%
* 100% or greater (1) Represents separation and other
related costs associated with restructuring activities under the
company's formal restructuring programs. (2) The effective
income tax rate for the first quarter of 2021 reflects a net tax
benefit of $237 million related to the settlement of certain
federal income tax matters.
MERCK & CO., INC.
GAAP TO NON-GAAP RECONCILIATION FIRST QUARTER 2021
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED) Table 2a GAAP
Acquisition and Divestiture Related Costs (1)
Restructuring Costs (2) (Income) Loss from Investments in
Equity Securities Certain Other Items Adjustment
Subtotal Non-GAAP Cost of sales
$
3,670
517
27
188
(3)
732
$
2,938
Selling, general and administrative
2,633
218
3
221
2,412
Research and development
2,465
18
7
25
2,440
Restructuring costs
298
298
298
-
Other (income) expense, net
(448
)
(28
)
(561
)
(589
)
141
Income Before Taxes
3,462
(725
)
(335
)
561
(188
)
(687
)
4,149
Income Tax Provision (Benefit)
276
(114
)
(4)
(41
)
(4)
123
(4)
(278
)
(4)
(310
)
586
Net Income
3,186
(611
)
(294
)
438
90
(377
)
3,563
Net Income Attributable to Merck & Co., Inc.
3,179
(611
)
(294
)
438
90
(377
)
3,556
Earnings per Common Share Assuming Dilution
$
1.25
(0.24
)
(0.12
)
0.17
0.04
(0.15
)
$
1.40
Tax Rate
8.0
%
14.1
%
Only the line items that are affected by non-GAAP
adjustments are shown. Merck is providing certain non-GAAP
information that excludes certain items because of the nature of
these items and the impact they have on the analysis of underlying
business performance and trends. Management believes that providing
this information enhances investors’ understanding of the company’s
results as it permits investors to understand how management
assesses performance. Management uses these measures internally for
planning and forecasting purposes and to measure the performance of
the company along with other metrics. In addition, senior
management’s annual compensation is derived in part using non-GAAP
pretax income. This information should be considered in addition
to, but not as a substitute for or superior to, information
prepared in accordance with GAAP. (1) Amount included in
cost of sales primarily reflects expenses for the amortization of
intangible assets. Amount included in selling, general and
administrative expenses reflects approximately $208 million of
expenses related to the company's planned spin-off of Organon &
Co. and other acquisition and divestiture-related costs. Amount
included in other (income) expense, net, primarily reflects royalty
income, partially offset by an increase in the estimated fair value
measurement of liabilities for contingent consideration related to
the termination of the Sanofi-Pasteur MSD joint venture. (2)
Amounts primarily include employee separation costs and accelerated
depreciation associated with facilities to be closed or divested
related to activities under the company's formal restructuring
programs. (3) Represents a charge for the discontinuation of
COVID-19 development programs. (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.
Certain other items also include a $237 million net tax benefit
related to the settlement of certain federal income tax matters.
MERCK & CO., INC. FRANCHISE / KEY PRODUCT SALES
(AMOUNTS IN MILLIONS) (UNAUDITED) Table 3
2021
2020
1Q
1Q
1Q
2Q
3Q
4Q
Full Year
Nom %
Ex-Exch %
TOTAL SALES (1)
$
12,080
$
12,057
$
10,872
$
12,551
$
12,514
$
47,994
-
-1
PHARMACEUTICAL
10,675
10,655
9,679
11,320
11,367
43,021
-
-3
Oncology
Keytruda
3,899
3,284
3,388
3,715
3,993
14,380
19
16
Alliance Revenue – Lynparza (2)
228
145
178
196
206
725
57
51
Alliance Revenue – Lenvima (2)
130
128
151
142
158
580
1
-1
Vaccines (3)
Gardasil / Gardasil 9
917
1,097
656
1,187
998
3,938
-16
-20
ProQuad / M-M-R II / Varivax
449
435
378
576
488
1,878
3
2
Pneumovax 23
171
256
117
375
339
1,087
-33
-36
RotaTeq
158
222
168
210
196
797
-29
-29
Vaqta
34
60
28
51
31
170
-43
-44
Hospital Acute Care
Bridion
340
299
224
320
355
1,198
14
11
Prevymis
82
60
63
77
80
281
37
31
Noxafil
67
94
73
79
82
329
-29
-32
Primaxin
65
51
64
74
62
251
26
17
Cancidas
57
55
43
50
65
213
4
1
Invanz
57
64
43
51
53
211
-12
-11
Zerbaxa
(8
)
37
32
43
19
130
-121
-120
Immunology
Simponi
214
215
191
209
223
838
-
-8
Remicade
85
88
73
82
88
330
-3
-9
Neuroscience
Belsomra
79
79
84
81
83
327
-
-4
Virology
Isentress / Isentress HD
209
245
196
205
211
857
-15
-15
Cardiovascular
Zetia
92
145
137
103
98
482
-37
-41
Vytorin
41
53
39
47
43
182
-23
-27
Atozet
112
122
115
111
105
453
-9
-16
Alliance Revenue - Adempas (4)
74
53
79
83
65
281
38
38
Adempas (5)
55
56
57
55
53
220
-2
-10
Diabetes (6)
Januvia
809
774
854
821
857
3,306
5
2
Janumet
486
503
490
506
472
1,971
-3
-6
Women's Health
Implanon / Nexplanon
183
195
132
189
165
680
-6
-7
NuvaRing
45
63
63
58
53
236
-28
-30
Diversified Brands
Singulair
107
155
100
82
124
462
-31
-35
Cozaar / Hyzaar
90
102
98
91
94
386
-12
-16
Arcoxia
56
70
65
68
54
258
-20
-22
Follistim AQ
52
41
44
50
57
193
25
21
Nasonex
43
71
49
41
57
218
-39
-40
Other Pharmaceutical (7)
1,197
1,338
1,207
1,292
1,340
5,173
-11
-13
ANIMAL HEALTH
1,418
1,214
1,101
1,220
1,168
4,703
17
15
Livestock
819
739
648
758
794
2,939
11
9
Companion Animals
599
475
453
462
374
1,764
26
24
Other Revenues (8)
(13
)
188
92
11
(21
)
270
-107
-21
Sum of quarterly amounts may not equal
year-to-date amounts due to rounding. (1) Only select
products are shown. (2) Alliance Revenue represents Merck’s
share of profits, which are product sales net of cost of sales and
commercialization costs. (3) Total Vaccines sales were
$1,809 million in the first quarter of 2021 and $2,155 million,
$1,418 million, $2,521 million and $2,163 million in the first,
second, third and fourth quarters of 2020, respectively. (4)
Alliance Revenue represents Merck's share of profits from sales in
Bayer's marketing territories, which are product sales net of cost
of sales and commercialization costs. (5) Net product sales
in Merck's marketing territories. (6) Total Diabetes sales
were $1,363 million in the first quarter of 2021 and $1,353
million, $1,418 million, $1,405 million and $1,412 million in the
first, second, third and fourth quarters of 2020, respectively.
(7) Includes Pharmaceutical products not individually shown
above. (8) Other Revenues are comprised primarily of
third-party manufacturing sales and miscellaneous corporate
revenues, including revenue hedging activities.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210429005381/en/
Media Contact:
Patrick Ryan (973) 275-7075
Investor Contacts:
Peter Dannenbaum (908) 740-1037
Raychel Kruper (908) 740-2107
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