- Third-Quarter 2016 Worldwide Sales Were
$10.5 Billion, an Increase of 5 Percent, Including a 1 Percent
Negative Impact from Foreign Exchange
- Third-Quarter 2016 GAAP EPS Was $0.78;
Third-Quarter Non-GAAP EPS Was $1.07
- Company Updates EPS Guidance: Full-Year
2016 GAAP EPS to be Between $2.02 and $2.09; Full-Year 2016
Non-GAAP EPS to be Between $3.71 and $3.78
- Advanced KEYTRUDA Development Program
- 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 [TPS] of 50 Percent or More)
- New Data Were Included in Labeling for
KEYTRUDA Showing Improved Survival Compared to Chemotherapy in
Previously Treated Patients with NSCLC Whose Tumors Express PD-L1
(TPS of 1 Percent or More)
- FDA Approved KEYTRUDA to Treat
Previously Treated Recurrent or Metastatic Head and Neck
Cancer
- KEYNOTE-045 Study Evaluating KEYTRUDA
in Previously Treated Advanced Bladder Cancer (Urothelial Cancer)
Met Primary Endpoint of Overall Survival and Stopped Early
Merck (NYSE:MRK), known as MSD outside the United States and
Canada, today announced financial results for the third quarter of
2016.
This Smart News Release features multimedia.
View the full release here:
http://www.businesswire.com/news/home/20161025005831/en/
“The latest achievements for KEYTRUDA and other recent
regulatory approvals across our portfolio show that our innovation
strategy is working,” said Kenneth C. Frazier, chairman and chief
executive officer, Merck. “We are confident that our focus on the
science, along with continued commercial execution, will drive
long-term results for the company and our shareholders.”
Financial Summary
$ in millions, except EPS amounts
Third Quarter 2016 2015 Sales
$10,536 $10,073 GAAP EPS 0.78 0.64
Non-GAAP EPS that excludes items listed
below1
1.07 0.96
GAAP net income2
2,184 1,826
Non-GAAP net income that excludes items
listed below1,2
2,989 2,720
Worldwide sales were $10.5 billion for the third quarter of
2016, an increase of 5 percent compared with the third quarter of
2015, including a 1 percent negative impact from foreign exchange.
Sales in the third quarter of 2016 include an estimated benefit of
approximately $150 million of additional sales in Japan resulting
from the timing of shipments in anticipation of a resource planning
system Merck is implementing in the fourth quarter of 2016.
GAAP (generally accepted accounting principles) earnings per
share (EPS) assuming dilution were $0.78 for the third quarter.
Non-GAAP EPS of $1.07 for the third quarter excludes acquisition-
and divestiture-related costs and restructuring costs. GAAP and
non-GAAP EPS in the third quarter include an estimated benefit of
approximately $0.04 from the timing of shipments in Japan noted
above.
Pipeline Highlights
Merck significantly advanced the clinical development program
for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy. KEYTRUDA is now
approved in the United States for the treatment of previously
untreated metastatic NSCLC in patients whose tumors express high
levels of PD-L1 (TPS of 50 percent or more) and previously treated
metastatic NSCLC in patients whose tumors express PD-L1 (TPS of 1
percent or more), as well as advanced melanoma and previously
treated recurrent or metastatic head and neck cancer (HNSCC).
Earlier this month at the European Society for Medical Oncology
(ESMO) 2016 Congress, data were presented from 30 studies
evaluating the use of KEYTRUDA as a monotherapy and in combination
in 23 cancers.
Lung Cancer
- Yesterday the U.S. Food and Drug
Administration (FDA) approved two supplemental Biologics License
Applications (sBLA) for KEYTRUDA in lung cancer.
- Based on the KEYNOTE-024 study,
KEYTRUDA was approved for the first-line treatment of patients with
metastatic NSCLC whose tumors have high PD-L1 expression (TPS of 50
percent or more) as determined by an FDA-approved test, with no
EGFR or ALK genomic tumor aberrations. The data from KEYNOTE-024
were published in The New England Journal of Medicine and
highlighted at ESMO.
- The FDA also approved a sBLA to include
data from the pivotal KEYNOTE-010 study in which KEYTRUDA showed
superior overall survival compared to chemotherapy in patients with
previously treated advanced NSCLC whose tumors express PD-L1 (TPS
of 1 percent or more) as determined by an FDA-approved test.
- Data were presented at ESMO from
KEYNOTE-021, Cohort G, showing superior efficacy of KEYTRUDA plus
chemotherapy compared to chemotherapy alone as a first-line
treatment for patients with metastatic non-squamous NSCLC
regardless of PD-L1 expression. These data were simultaneously
published in The Lancet Oncology.
- The European Commission approved
KEYTRUDA for the treatment of locally advanced or metastatic NSCLC
in patients whose tumors express PD-L1 and who have received at
least one prior chemotherapy regimen.
Head and Neck Cancer
- The FDA approved a sBLA for KEYTRUDA
for the treatment of patients with recurrent or metastatic HNSCC
with disease progression on or after platinum-containing
chemotherapy.
Bladder Cancer
- On Friday the company announced that
the KEYNOTE-045 trial investigating the use of KEYTRUDA in patients
with previously treated advanced bladder cancer (urothelial cancer)
met its primary endpoint. In the study, KEYTRUDA met the primary
endpoint of overall survival and was superior compared to
investigator choice chemotherapy.
- Interim Phase 2 data were presented at
ESMO for the first time investigating the use of KEYTRUDA in
previously untreated patients with advanced bladder cancer.
Last week the U.S. Centers for Disease Control and Prevention’s
(CDC) Advisory Committee on Immunization Practices voted to
recommend a 2-dose vaccination regimen for GARDASIL 9 (Human
Papillomavirus 9-valent Vaccine, Recombinant), a vaccine to prevent
certain cancers and other diseases caused by HPV, in certain girls
and boys 9 through 14 years of age, which followed the FDA’s
approval of a 2-dose regimen in this adolescent population earlier
this month.
The FDA accepted for review the New Drug Application (NDA) for
MK-1293, an investigational follow-on biologic insulin glargine
candidate for the treatment of people with type 1 and type 2
diabetes that is being developed in collaboration with and
partially funded by Samsung Bioepis.
The FDA accepted for review a supplemental NDA for a once-daily
formulation of ISENTRESS (raltegravir) in combination with other
antiretroviral therapies for the treatment of HIV-1 infection in
previously untreated patients or patients whose virus remains
suppressed after treatment with an initial regimen of 400 mg of
ISENTRESS twice-daily. The FDA granted a PDUFA action date of May
27, 2017.
Merck announced last week that the pivotal Phase 3 study of
letermovir, an investigational antiviral medicine for prevention of
cytomegalovirus infection in high-risk bone marrow transplant
patients, met its primary endpoint; Merck will submit results from
the study for presentation at a future scientific conference.
Third-Quarter 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
Third Quarter Change
Change
Ex-Exchange
2016 2015 Total Sales $10,536 $10,073
5% 6% Pharmaceutical 9,443 8,925 6% 6% JANUVIA / JANUMET 1,554
1,576 -1% -2% ZETIA / VYTORIN 944 936 1% – GARDASIL / GARDASIL 9
860 625 38% 38% PROQUAD / M-M-R II / VARIVAX 496 390 27% 28%
ISENTRESS 372 377 -1% 1% KEYTRUDA 356 159 124% 128% CUBICIN 320 325
-2% -2% REMICADE 311 442 -30% -28% Animal Health 865 827 5% 7%
Other Revenues 228 321 -29% 10%
Pharmaceutical Revenue
Third-quarter pharmaceutical sales increased 6 percent to $9.4
billion, reflecting higher sales in vaccines, oncology, the
cardiovascular franchise and hospital acute care.
Growth in vaccines resulted from higher sales of GARDASIL 9 and
GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16, and
18) Vaccine, Recombinant], vaccines to prevent certain cancers and
other diseases caused by HPV, primarily due to the timing of public
sector purchases and increased pricing and demand in the United
States; and higher sales of PROQUAD (Measles, Mumps, Rubella and
Varicella Vaccine Live), driven by the timing of sales activity in
the third quarter of 2015 related to the Pediatric Vaccine
Stockpile of the U.S. CDC.
Growth in oncology was driven by KEYTRUDA as the company
continues to launch the product with new indications globally.
Higher sales in the cardiovascular portfolio were driven by an
increase in sales of ADEMPAS (riociguat), a medicine for treating
pulmonary arterial hypertension and chronic thromboembolic
pulmonary hypertension, which the company is now promoting and
distributing in Europe; and ZETIA (ezetimibe), a medicine for
lowering LDL cholesterol, primarily driven by higher sales in Japan
due to the timing of shipments. U.S. sales of ZETIA were $411
million for the third quarter of 2016; in December 2016 the company
will lose market exclusivity in the United States for ZETIA and
anticipates a significant decline in U.S. ZETIA sales
thereafter.
Growth in hospital acute care primarily resulted from higher
sales 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, which
had worldwide sales of $139 million for the quarter that were
driven by the ongoing launch in the United States, higher sales in
Europe and the timing of shipments in Japan.
Pharmaceutical sales growth also reflects the continued launch
of ZEPATIER (elbasvir and grazoprevir), a medicine for the
treatment of chronic hepatitis C virus genotypes 1 or 4 infection,
which had sales of $164 million in the third quarter.
Third-quarter pharmaceutical sales reflect a decline in REMICADE
(infliximab), a treatment for inflammatory diseases, due to the
impact of biosimilar competition in the company’s marketing
territories in Europe.
U.S. sales of CUBICIN (daptomycin for injection), an I.V.
antibiotic, were $264 million in the third quarter. The company has
lost U.S. patent protection for CUBICIN and anticipates a
significant decline in U.S. CUBICIN sales going forward.
Animal Health Revenue
Animal Health sales totaled $865 million for the third quarter
of 2016, an increase of 5 percent compared with the third quarter
of 2015, including a 2 percent negative impact from foreign
exchange. Sales growth was primarily driven by an increase in sales
of companion animal and poultry products, particularly the BRAVECTO
(fluralaner) line of products that kill fleas and ticks in dogs and
cats for up to 12 weeks.
Earlier this month, the company announced that the U.S.
Department of Agriculture approved a license for Nobivac Canine Flu
Bivalent vaccine, the first vaccine to aid in the control of
disease associated with both canine influenza virus H3N2 and canine
influenza virus H3N8.
Third-Quarter Expense, EPS and Related Information
The table below presents selected expense information.
$ in millions
Acquisition-
and Divestiture- Certain
Related Restructuring Other
Non-
GAAP
Costs(3)
Costs Items
GAAP(1)
Third-Quarter 2016 Materials and production $3,409 $773 $36
$– $2,600 Marketing and administrative 2,393 36 1 – 2,356 Research
and development 1,664 13 14 – 1,637 Restructuring costs 161 – 161 –
– Other (income) expense, net 22 12 – (6) 16
Third-Quarter 2015 Materials and production $3,761 $1,184
$70 $– $2,507 Marketing and administrative 2,472 26 17 – 2,429
Research and development 1,500 (71) 17 – 1,554 Restructuring costs
113 – 113 – – Other (income) expense, net (170) 7
– (283) 106
GAAP Expense, EPS and Related Information
On a GAAP basis, the gross margin was 67.6 percent for the third
quarter of 2016 compared to 62.7 percent for the third quarter of
2015. The increase in gross margin for the third quarter of 2016
was primarily driven by lower acquisition- and divestiture-related
costs, which negatively affected gross margin by 7.7 percentage
points in the third quarter of 2016 compared with 12.4 percentage
points for the third quarter of 2015. The increase in gross margin
also reflects the favorable effects of product mix.
Marketing and administrative expenses were $2.4 billion in the
third quarter of 2016, a 3 percent decrease compared to the third
quarter of 2015. The decline primarily reflects lower selling and
promotional expenses as a result of prioritizing investments in key
brands, the favorable impact of foreign exchange and lower
restructuring costs, partially offset by higher acquisition- and
divestiture-related costs.
Research and development (R&D) expenses were $1.7 billion in
the third quarter of 2016, an 11 percent increase compared to the
third quarter of 2015. The increase primarily reflects higher
clinical development spending, as well as a reduction in the third
quarter of 2015 of the estimated fair value of liabilities for
contingent consideration.
Other (income) expense, net, was $22 million of expense in the
third quarter of 2016 compared to $170 million of income in the
third quarter of 2015, reflecting a gain of $250 million in the
third quarter of 2015 on the divestiture of certain migraine
clinical development programs, as well as lower foreign exchange
losses in the third quarter of 2016.
GAAP EPS was $0.78 for the third quarter of 2016 compared with
$0.64 for the third quarter of 2015.
Non-GAAP Expense, EPS and Related Information
The non-GAAP gross margin was 75.3 percent for the third quarter
of 2016 compared to 75.1 percent for the third quarter of 2015. The
increase in non-GAAP gross margin for the third quarter of 2016
reflects the favorable impact of product mix.
Non-GAAP marketing and administrative expenses were $2.4 billion
in the third quarter of 2016, a 3 percent decline compared to the
third quarter of 2015. The decline reflects lower selling costs and
promotional spending as a result of prioritizing investments in key
brands and the favorable impact of foreign exchange.
Non-GAAP R&D expenses were $1.6 billion in the third quarter
of 2016, a 5 percent increase compared to the third quarter of
2015. The increase primarily reflects higher clinical development
spending.
Non-GAAP EPS was $1.07 for the third quarter of 2016 compared
with $0.96 for the third quarter of 2015.
Non-GAAP other (income) expense, net, was $16 million of expense
in the third quarter of 2016 compared to $106 million of expense in
the third quarter 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. Year-to-date results can be
found in the attached tables.
$ in millions, except EPS amounts
Third Quarter 2016 2015 EPS GAAP
EPS $0.78 $0.64
Difference4
0.29 0.32
Non-GAAP EPS that excludes items listed
below1
$1.07 $0.96
Net Income GAAP net income2 $2,184 $1,826
Difference 805 894 Non-GAAP net income that excludes items listed
below1,2 $2,989 $2,720
Decrease (Increase) in Net Income
Due to Excluded Items: Acquisition- and divestiture-related
costs3 $834 $1,146 Restructuring costs 212 217 Gain on divestiture
of certain migraine clinical development programs – (250) Other (6)
(33) Net decrease (increase) in income before taxes 1,040 1,080
Income tax (benefit) expense5
(235) (186) Decrease (increase) in net income $805
$894
Financial Outlook
Merck has narrowed and raised its full-year 2016 GAAP EPS to be
between $2.02 and $2.09. The company has narrowed and raised its
full-year 2016 non-GAAP EPS to be between $3.71 to $3.78, including
an approximately 1 percent negative impact from foreign exchange at
mid-October exchange rates. The non-GAAP range excludes
acquisition- and divestiture-related costs and costs related to
restructuring programs.
Merck has narrowed and raised its full-year 2016 revenue range
to be between $39.7 billion and $40.2 billion, including an
approximately 2 percent negative impact from foreign exchange at
mid-October exchange rates.
The following table summarizes the company’s 2016 financial
guidance.
GAAP
Non-GAAP1 Revenue $39.7 to $40.2 billion $39.7 to
$40.2 billion* Marketing and administrative expenses Lower than
2015 Lower than 2015 R&D expenses Higher than 2015 Higher than
2015 Effective tax rate 26.0% to 27.0% 21.5% to 22.5% EPS
$2.02 to $2.09 $3.71 to $3.78
*The company does not have any non-GAAP
adjustments to revenue.
A reconciliation of anticipated 2016 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 2016 GAAP EPS $2.02 to $2.09
Difference4 1.69 Non-GAAP EPS that excludes items listed below1
$3.71 to $3.78 Acquisition- and divestiture-related costs
$4,750 Restructuring costs 900 Net decrease (increase) in income
before taxes 5,650 Estimated income tax (benefit) expense (955)
Decrease (increase) in net income $4,695
The expected full-year 2016 GAAP effective tax rate of 26.0 to
27.0 percent reflects an unfavorable impact of approximately 4.5
percentage points from the above items.
Total Employees
As of Sept. 30, 2016, Merck had approximately 68,000 employees
worldwide.
Earnings Conference Call
Investors, journalists and the general public may access a live
audio webcast of the call today at 8:00 a.m. EDT on Merck’s website
at
http://investors.merck.com/investors/webcasts-and-presentations/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
87561377. Members of the media are invited to monitor the call by
dialing (706) 758-9928 or (800) 399-7917 and using ID code number
87561377. Journalists who wish to ask questions are requested to
contact a member of Merck’s Media Relations team at the conclusion
of the call.
About Merck
For 125 years, Merck has been a global health care leader
working to help the world be well. Merck is known as MSD outside
the United States and Canada. Through our prescription medicines,
vaccines, biologic therapies and animal health products, we work
with customers and operate in more than 140 countries to deliver
innovative health solutions. We also demonstrate our commitment to
increasing access to health care through far-reaching policies,
programs and partnerships. For more information, visit
www.merck.com and connect with us on Twitter, Facebook, YouTube and
LinkedIn. You can also follow our Twitter conversation at $MRK.
Forward-Looking Statement of Merck & Co., Inc.,
Kenilworth, N.J., USA
This news release of Merck & Co., Inc., Kenilworth, N.J.,
USA (the “company”) includes “forward-looking statements” within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. These statements are
based upon the current beliefs and expectations of the company’s
management and are subject to significant risks and uncertainties.
There can be no guarantees with respect to pipeline products that
the products will receive the necessary regulatory approvals or
that they will prove to be commercially successful. If underlying
assumptions prove inaccurate or risks or uncertainties materialize,
actual results may differ materially from those set forth in the
forward-looking statements.
Risks and uncertainties include but are not limited to, general
industry conditions and competition; general economic factors,
including interest rate and currency exchange rate fluctuations;
the impact of pharmaceutical industry regulation and health care
legislation in the United States and internationally; global trends
toward health care cost containment; technological advances, new
products and patents attained by competitors; challenges inherent
in new product development, including obtaining regulatory
approval; the company’s ability to accurately predict future market
conditions; manufacturing difficulties or delays; financial
instability of international economies and sovereign risk;
dependence on the effectiveness of the company’s patents and other
protections for innovative products; and the exposure to
litigation, including patent litigation, and/or regulatory
actions.
The company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events or otherwise. Additional factors that could cause
results to differ materially from those described in the
forward-looking statements can be found in the company’s 2015
Annual Report on Form 10-K and the company’s other filings with the
Securities and Exchange Commission (SEC) available at the SEC’s
Internet site (www.sec.gov).
###
1 Merck is providing certain 2016 and 2015 non-GAAP information
that excludes certain items because of the nature of these items
and the impact they have on the analysis of underlying business
performance and trends. Management believes that providing this
information enhances investors’ understanding of the company’s
performance. Management uses these measures internally for planning
and forecasting purposes and to measure the performance of the
company along with other metrics. Senior management’s annual
compensation is derived in part using non-GAAP income and non-GAAP
EPS. This information should be considered in addition to, but not
as a substitute for or superior to, information prepared in
accordance with GAAP. For a description of the items, see Table 2a
attached to this release.
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.
MERCK & CO., INC. CONSOLIDATED STATEMENT OF
INCOME - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE
FIGURES) (UNAUDITED) Table 1
GAAP
GAAP
% Change
% Change
3Q16 3Q15
Sep YTD
Sep YTD
2016
2015
Sales $ 10,536 $
10,073 5% $ 29,692 $ 29,283 1% Costs, Expenses and Other
Materials and production (1) 3,409 3,761 -9% 10,559 11,084 -5%
Marketing and administrative (1) 2,393 2,472 -3% 7,169 7,698 -7%
Research and development (1) 1,664 1,500 11% 5,475 4,906 12%
Restructuring costs (2) 161 113 42% 386 386
-
Other (income) expense, net (1) (3)
22 (170 ) * 88 624 -86% Income Before Taxes 2,887 2,397 20% 6,015
4,585 31% Taxes on Income 699 566 1,487 1,108 Net Income 2,188
1,831 19% 4,528 3,477 30% Less: Net Income Attributable to
Noncontrolling Interests 4 5 13 12 Net Income Attributable to Merck
& Co., Inc. $ 2,184 $ 1,826 20% $ 4,515 $ 3,465 30% Earnings
per Common Share Assuming Dilution $ 0.78 $ 0.64
22% $ 1.62 $ 1.22 33%
Average Shares Outstanding Assuming
Dilution 2,786 2,836 2,791 2,850 Tax Rate (4) 24.2 %
23.6 % 24.7 % 24.2 %
* 100% or greater
(1) Amounts include the impact of acquisition and
divestiture-related costs, restructuring costs and certain other
items. See accompanying tables for details.
(2) Represents separation and other related costs associated
with restructuring activities under the company's formal
restructuring programs.
(3) Other (income) expense, net in the first nine months of 2016
includes a $117 million gain related to the settlement of certain
patent litigation. Other (income) expense, net in the
third quarter and first nine months of 2015 includes a $250 million
gain on the sale of certain migraine clinical development
programs. Other (income) expense, net in the first nine
months of 2015 also includes foreign exchange losses of $715
million recorded in the second quarter to devalue the company's net
monetary assets in Venezuela.
(4) The effective income tax rate for the first nine
months of 2015 reflects a net benefit of $370 million related to
the settlement of certain federal income tax issues, partially
offset by the unfavorable impact of non-tax deductible foreign
exchange losses recorded in connection with the devaluation of the
company's net monetary assets in Venezuela.
MERCK & CO., INC. GAAP TO NON-GAAP RECONCILIATION
THIRD QUARTER 2016 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE
FIGURES) (UNAUDITED) Table 2a
Acquisition and GAAP
Divestiture- Restructuring Certain Other
Adjustment Non-GAAP
Related Costs (1)
Costs (2)
Items Subtotal Materials and
production
$ 3,409 773 36 809 $ 2,600 Marketing and
administrative
2,393 36 1 37 2,356 Research and development
1,664 13 14 27 1,637 Restructuring costs
161 161 161
- Other (income) expense, net
22 12 (6 ) 6 16 Income Before
Taxes
2,887 (834 ) (212 ) 6 (1,040 ) 3,927 Tax Provision
(Benefit)
699 (189
)(3)
(47
)(3)
1
(3)
(235 ) 934 Net Income
2,188 (645 ) (165 ) 5 (805 ) 2,993 Net
Income Attributable to Merck & Co., Inc.
2,184 (645 )
(165 ) 5 (805 ) 2,989 Earnings per Common Share Assuming Dilution
$ 0.78 (0.23 ) (0.06 )
-
(0.29 ) $ 1.07 Tax Rate
24.2
% 23.8 %
Only the line items that are affected by non-GAAP adjustments
are shown.
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. Management uses this information 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 divestitures. Amounts included in research and
development expenses primarily reflect expenses related to an
increase in the estimated fair value measurement of liabilities for
contingent consideration and 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) 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 NINE MONTHS ENDED
SEPTEMBER 30, 2016 (AMOUNTS IN MILLIONS, EXCEPT PER SHARE
FIGURES) (UNAUDITED) Table 2b
Acquisition and GAAP
Divestiture- Restructuring Certain Other
Adjustment Non-GAAP
Related Costs (1)
Costs (2)
Items Subtotal Materials and
production
$ 10,559 3,279 149 3,428 $ 7,131 Marketing
and administrative
7,169 56 91 147 7,022 Research and
development
5,475 255 133 388 5,087 Restructuring costs
386 386 386 - Other (income) expense, net
88 12 (6 )
6 82 Income Before Taxes
6,015 (3,602 ) (759 ) 6 (4,355 )
10,370 Tax Provision (Benefit)
1,487 (633
)(3)
(169
)(3)
1
(3)
(801 ) 2,288 Net Income
4,528 (2,969 ) (590 ) 5 (3,554 )
8,082 Net Income Attributable to Merck & Co., Inc.
4,515
(2,969 ) (590 ) 5 (3,554 ) 8,069 Earnings per Common Share Assuming
Dilution
$ 1.62 (1.06 ) (0.21 )
-
(1.27 ) $ 2.89 Tax Rate
24.7
% 22.1 %
Only the line items that are affected by non-GAAP adjustments
are shown.
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. Management
uses this information 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 $2.9 billion of expenses for the amortization of intangible
assets recognized as a result of acquisitions, as well as $347
million of impairment charges on product intangibles. Amounts
included in marketing and administrative expenses reflect
integration, transaction and certain other costs related to
business acquisitions, including severance costs which are not part
of the company's formal restructuring programs, as well as
transaction and certain other costs related to divestitures.
Amounts included in research and development expenses reflect $225
million of in-process research and development ("IPR&D")
impairment charges and $30 million of expenses to increase the
estimated fair value of liabilities for contingent consideration.
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) 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 Sep YTD
1Q 2Q 3Q Sep YTD
4Q FY 3Q Sep YTD
TOTAL SALES (1) $ 9,312 $
9,844 $ 10,536 $ 29,692 $
9,425 $ 9,785 $ 10,073 $
29,283 $ 10,215 $ 39,498
5 1 PHARMACEUTICAL 8,104 8,700
9,443 26,247 8,266 8,564 8,925
25,755 9,027 34,782 6 2
Primary Care and Women's Health Cardiovascular Zetia 612 702
671 1,985 568 635 633 1,836 691 2,526 6 8 Vytorin 277 293 273 843
320 320 302 942 308 1,251 -10 -11 Diabetes Januvia 906 1,064 1,006
2,976 884 1,044 1,014 2,942 921 3,863 -1 1 Janumet 506 569 548
1,624 509 554 562 1,625 526 2,151 -2 0 General Medicine &
Women's Health NuvaRing 175 200 195 571 166 182 190 538 193 732 3 6
Implanon / Nexplanon 134 164 148 446 137 124 176 437 151 588 -16 2
Dulera 113 121 97 331 130 120 133 383 153 536 -27 -14 Follistim AQ
94 73 101 268 82 111 95 288 95 383 6 -7
Hospital and
Specialty Hepatitis Zepatier 50 112 164 326 HIV Isentress 340
338 372 1,050 385 375 377 1,137 374 1,511 -1 -8 Hospital Acute Care
Cubicin(2) 292 357 320 969 187 293 325 805 322 1,127 -2 20 Noxafil
145 143 147 434 111 117 132 360 128 487 11 21 Invanz 114 143 152
409 132 139 153 424 144 569 -1 -4 Cancidas 133 131 142 406 163 134
139 436 137 573 2 -7 Bridion 90 113 139 343 85 87 89 262 92 353 56
31 Primaxin 73 81 77 231 65 88 75 228 86 313 3 2 Immunology
Remicade 349 339 311 999 501 455 442 1,398 396 1,794 -30 -29
Simponi 188 199 193 581 158 169 178 505 185 690 8 15
Oncology Keytruda 249 314 356 919 83 110 159 352 214 566 124
161 Emend 126 143 137 405 122 134 141 396 139 535 -3 2 Temodar 66
73 78 216 74 80 83 238 75 312 -6 -9
Diversified Brands
Respiratory Singulair 237 229 239 705 245 212 201 658 273 931 19 7
Nasonex 229 101 94 425 289 215 121 625 231 858 -22 -32 Other Cozaar
/ Hyzaar 126 132 131 389 185 189 150 524 143 667 -12 -26 Arcoxia
111 117 114 342 123 115 123 361 110 471 -7 -5 Fosamax 75 73 68 217
94 96 86 277 82 359 -21 -22 Zocor 46 50 54 150 49 63 56 168 49 217
-3 -11
Vaccines Gardasil / Gardasil 9 378 393 860 1,631 359
427 625 1,410 497 1,908 38 16 ProQuad / M-M-R II / Varivax 357 383
496 1,236 348 358 390 1,096 409 1,505 27 13 RotaTeq 188 130 171 489
192 89 160 441 169 610 7 11 Zostavax 125 149 190 464 175 149 179
503 246 749 6 -8 Pneumovax 23 107 120 175 403 110 106 138 354 188
542 27 14
Other Pharmaceutical (3) 1,093 1,151 1,224
3,464 1,235 1,274 1,298 3,806 1,300 5,105 -8 -11
ANIMAL
HEALTH (4) 829 900 865 2,594
831 842 827 2,499 832
3,331 5 4 Other Revenues
(4)(5) 379 244
228 851 328
379 321
1,029 356 1,385
-29 -17
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 and $135 million for the first, second
and third 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/20161025005831/en/
MerckMedia:Lainie Keller, 908-236-5036orInvestors:Teri Loxam,
908-740-1986Amy Klug, 908-740-1898
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