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EX-99.2 - EX-99.2 - Merck & Co. Inc.a13-4074_1ex99d2.htm

Exhibit 99.1

 

News Release

 

 

 

Media Contacts:

Ron Rogers

Investor Contacts:

 

Carol Ferguson

 

(908) 423-6449

 

 

(908) 423-4465

 

 

 

 

 

 

Steve Cragle

 

 

Justin Holko

 

(908) 423-3461

 

 

(908) 423-5088

 

Merck Announces Full-Year and Fourth-Quarter 2012 Financial Results

 

·                  2012 Full-Year Non-GAAP EPS of $3.82, Excluding Certain Items; GAAP EPS of $2.16; Fourth-Quarter Non-GAAP EPS of $0.83, Excluding Certain Items; GAAP EPS of $0.46

 

·                  2012 Full-Year Worldwide Sales Were $47.3 Billion, a Decrease of 2 Percent, Including a 3 Percent Unfavorable Impact from Foreign Exchange; Fourth-Quarter Worldwide Sales Were $11.7 Billion, a Decline of 5 Percent, Including a 2 Percent Unfavorable Impact from Foreign Exchange

 

·                  Full-Year and Fourth-Quarter Double-Digit Global Sales Growth for JANUVIA, JANUMET, GARDASIL, VICTRELIS and ZOSTAVAX Offset the Decline in SINGULAIR Sales Following Patent Expiry in the United States

 

·                  Provides Update on Odanacatib Program; Now Anticipates Filing in 2014

 

·                  2013 Full-Year Non-GAAP EPS Target of $3.60 to $3.70, Excluding Certain Items; GAAP EPS Range of $2.03 to $2.26

 

WHITEHOUSE STATION, N.J., Feb. 1, 2013 – Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2012.

 

$ in millions, except EPS amounts

 

Fourth
Quarter
2012

 

Fourth
Quarter
2011

 

Year Ended
Dec. 31,
2012

 

Year Ended
Dec. 31,
2011

 

Sales

 

$11,738

 

$12,294

 

$47,267

 

$48,047

 

GAAP EPS

 

0.46

 

0.49

 

2.16

 

2.02

 

Non-GAAP EPS that excludes items listed below1

 

0.83

 

0.97

 

3.82

 

3.77

 

GAAP Net Income2

 

1,401

 

1,512

 

6,661

 

6,272

 

Non-GAAP Net Income that excludes items listed below1,2

 

2,540

 

2,978

 

11,743

 

11,697

 

 

Non-GAAP (generally accepted accounting principles) earnings per share (EPS) for the fourth quarter of $0.83 and $3.82 for the full year of 2012 exclude acquisition-related costs and restructuring costs.

 


1                   Merck is providing certain 2012 and 2011 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 a 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.

 



 

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow.

 

 

 

Fourth Quarter

 

Year Ended

 

$ in millions, except EPS amounts

 

2012

 

2011

 

Dec. 31,
2012

 

Dec. 31,
2011

 

EPS

 

 

 

 

 

 

 

 

 

GAAP EPS

 

$0.46

 

$0.49

 

$2.16

 

$2.02

 

Difference3

 

0.37

 

0.48

 

1.66

 

1.75

 

Non-GAAP EPS that excludes items listed below1

 

$0.83

 

$0.97

 

$3.82

 

$3.77

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

 

 

 

 

 

 

 

GAAP net income2

 

$1,401

 

$1,512

 

$6,661

 

$6,272

 

Difference

 

1,139

 

1,466

 

5,082

 

5,425

 

Non-GAAP net income that excludes items listed below1,2

 

$2,540

 

$2,978

 

$11,743

 

$11,697

 

 

 

 

 

 

 

 

 

 

 

Decrease (Increase) in Net Income Due to Excluded Items:

 

 

 

 

 

 

 

 

 

Acquisition-related costs4

 

$1,298

 

$1,479

 

$5,344

 

$5,939

 

Restructuring costs

 

254

 

692

 

999

 

1,911

 

Arbitration settlement charge

 

 

 

 

500

 

Other5

 

 

6

 

 

(258

)

Net decrease (increase) in income before taxes

 

1,552

 

2,177

 

6,343

 

8,092

 

Income tax (benefit) expense6

 

(413

)

(711

)

(1,261

)

(2,667

)

Decrease (increase) in net income

 

$1,139

 

$1,466

 

$5,082

 

$5,425

 

 

“Merck overcame significant challenges last year and delivered strong results in 2012 by successfully growing our businesses, expanding geographically and reducing our expenses. As we begin 2013, we are well-positioned to further execute on our business strategy,” said Kenneth C. Frazier, chairman and chief executive officer of Merck.  “We remain committed to investing for future growth and innovation to deliver value over the long term.  Merck is rapidly advancing many compounds that are potentially first-in-class or best-in-class.  Additionally, we will continue to pursue external opportunities that have the potential to deliver value to the company and its shareholders.”

 

Select Revenue Highlights

 

Full-year 2012 worldwide sales were $47.3 billion, a decrease of 2 percent, which includes a 3 percent negative impact from foreign exchange, compared to full-year 2011. Worldwide sales were $11.7 billion for the fourth quarter of 2012, a decrease of 5 percent, which includes a 2 percent negative impact from foreign exchange compared with the fourth quarter of

 


3                   Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the period.

4                   Includes expenses for the amortization of intangible assets and amortization of purchase accounting adjustments to inventories recognized as a result of mergers and acquisitions, as well as intangible asset impairment charges.  Also includes integration and other costs associated with mergers and acquisitions.

5                   Amount for full-year 2011 includes a gain on the divestiture of the company’s interest in the Johnson & Johnson°Merck Consumer Pharmaceuticals Company joint venture and a gain on the sale of certain manufacturing facilities and related assets.

6                   Includes an estimated income tax (benefit) expense on the reconciling items.  In addition, the full year amount for 2011 includes the net favorable impact of approximately $700 million relating to the settlement of a federal income tax audit, as well as $270 million of net tax benefits from changes in tax rates that resulted in a reduction of deferred tax liabilities on intangibles established in purchase accounting.

 

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2011.  Strong sales growth of key products helped offset the impact of the August 2012 loss of market exclusivity for SINGULAIR (montelukast sodium) in the United States.

 

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
2012

 

Fourth
Quarter
2011

 

Change

 

Year
Ended
Dec. 31,
 2012

 

Year
Ended
Dec. 31,
 2011

 

Change

 

Total Sales

 

$11,738

 

$12,294

 

-5

%

 

$47,267

 

$48,047

 

-2

%

 

Pharmaceutical

 

10,085

 

10,755

 

-6

%

 

40,601

 

41,289

 

-2

%

 

JANUVIA

 

1,134

 

960

 

18

%

 

4,086

 

3,324

 

23

%

 

SINGULAIR

 

480

 

1,461

 

-67

%

 

3,853

 

5,479

 

-30

%

 

ZETIA

 

676

 

640

 

6

%

 

2,567

 

2,428

 

6

%

 

REMICADE

 

549

 

511

 

8

%

 

2,076

 

2,667

 

-22

%

 

VYTORIN

 

435

 

475

 

-8

%

 

1,747

 

1,882

 

-7

%

 

JANUMET

 

452

 

386

 

17

%

 

1,659

 

1,363

 

22

%

 

GARDASIL

 

442

 

274

 

61

%

 

1,631

 

1,209

 

35

%

 

ISENTRESS

 

381

 

387

 

-2

%

 

1,515

 

1,359

 

11

%

 

COZAAR/HYZAAR

 

315

 

427

 

-26

%

 

1,284

 

1,663

 

-23

%

 

PROQUAD, M-M-R II and VARIVAX

 

306

 

276

 

11

%

 

1,273

 

1,202

 

6

%

 

Animal Health

 

898

 

868

 

3

%

 

3,399

 

3,253

 

4

%

 

Consumer Care

 

395

 

361

 

9

%

 

1,952

 

1,840

 

6

%

 

Other Revenues

 

360

 

310

 

16

%

 

1,315

 

1,666

 

-21

%

 

 

Pharmaceutical Revenue Performance

 

Fourth-quarter pharmaceutical sales declined 6 percent to $10.1 billion, including a 1 percent negative impact due to foreign exchange.  Strong sales growth for JANUVIA (sitagliptin), GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant], ZOSTAVAX (zoster vaccine live) and JANUMET (sitagliptin/metformin hydrochloride) partially offset the expected declines in sales of SINGULAIR, COZAAR (losartan potassium) and HYZAAR (losartan potassium and hydrochlorothiazide).

 

Full-year pharmaceutical sales declined 2 percent to $40.6 billion, including a 3 percent negative impact due to foreign exchange.

 

Sales from emerging markets grew 9 percent and accounted for approximately 20 percent of pharmaceutical sales in the fourth quarter.  Sales growth in the emerging markets is being driven by vaccines, primary care, women’s health and diversified brands.  China continues to be a key driver with 35 percent growth for the fourth quarter, including a 3 percent benefit from foreign exchange.

 

Worldwide sales of the combined diabetes franchise of JANUVIA/JANUMET, medicines that help lower blood sugar levels in adults with type 2 diabetes, grew 18 percent to $1.6 billion in the fourth quarter of 2012 primarily driven by growth in the United States and Japan.  The combined franchise had sales of $5.7 billion for the full year of 2012, an increase of 23 percent.

 

Worldwide sales of SINGULAIR, a once-a-day oral medicine for the chronic treatment of asthma and the relief of symptoms of allergic rhinitis, declined 67 percent to $480 million in the fourth quarter.  SINGULAIR sales declined $932 million, or 97 percent, in the United States in

 

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the fourth quarter.  Full-year 2012 worldwide sales for SINGULAIR were $3.9 billion, a 30 percent decrease compared to the prior year.  The patent for SINGULAIR expired in the United States on Aug. 3, 2012, and will expire in major European markets later this month.  The company continues to experience a significant and rapid reduction in sales in the United States and expects a similar decline in Europe following patent expiry there.  SINGULAIR will retain marketing exclusivity in Japan until 2016.

 

Sales of ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), medicines for lowering LDL cholesterol, were $1.1 billion in the fourth quarter, comparable to the prior year, driven by global growth of ZETIA that was offset by lower sales of VYTORIN.  The combined ZETIA/VYTORIN franchise had sales of $4.3 billion for the full year of 2012, comparable to the prior year.

 

Combined sales of REMICADE (infliximab) and SIMPONI (golimumab), treatments for inflammatory diseases, increased 13 percent to $645 million for the fourth quarter of 2012.  The combined sales grew 18 percent excluding foreign exchange.  Global combined sales for the full year decreased 18 percent over the prior year.  In Europe, Russia and Turkey, where Merck retained exclusive marketing rights, the combined sales of REMICADE and SIMPONI increased 2 percent for the full year of 2012 or 10 percent excluding foreign exchange.  In July 2011, the company transferred exclusive marketing rights for REMICADE and SIMPONI to Johnson & Johnson in Canada, Central and South America, the Middle East, Africa and Asia Pacific.

 

Sales recorded by Merck for GARDASIL, a vaccine to help prevent certain diseases caused by four types of human papillomavirus (HPV), increased 61 percent to $442 million for the fourth quarter driven by higher sales in the United States, reflecting continued strong uptake in males and higher public sector purchases, as well as favorable performance in Japan and the emerging markets.  Worldwide sales of GARDASIL recorded by Merck for the year were $1.6 billion, a 35 percent increase compared to the prior year.

 

ISENTRESS (raltegravir), an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, decreased 2 percent to $381 million in the fourth quarter.  ISENTRESS sales in the United States grew 11 percent in the fourth quarter. Global sales of ISENTRESS for the full year of 2012 were $1.5 billion, an 11 percent increase compared to 2011.

 

Global sales of Merck’s antihypertensive medicines COZAAR and HYZAAR declined 26 percent to $315 million in the fourth quarter and 23 percent to $1.3 billion for the full year of 2012 due to the loss of market exclusivity in major markets in prior years.

 

Sales of ZOSTAVAX, a vaccine for the prevention of herpes zoster, grew to $225 million in the fourth quarter compared to $78 million in the prior year, driven by a positive response to supply availability and increased promotional efforts in the United States.  Global sales for the full year of 2012 were $651 million.

 

Page 4



 

Sales of VICTRELIS (boceprevir), the company’s oral hepatitis C virus protease inhibitor, grew to $115 million in the quarter versus $87 million last year as the product continues to launch.  Global sales for the full year of 2012 were $502 million.  VICTRELIS is approved in 69 countries and has launched in 34 of those markets.

 

Animal Health Revenue Performance

 

Merck Animal Health sales totaled $898 million for the fourth quarter of 2012, a 3 percent increase compared with the same period last year, including a 3 percent negative impact due to foreign exchange.  Growth was seen across major species, particularly cattle and poultry.

 

Animal Health global sales for the full year of 2012 were $3.4 billion, a 4 percent increase compared with the prior year, including a 5 percent negative impact due to foreign exchange.

 

Consumer Care Revenue Performance

 

Fourth-quarter global sales of Consumer Care were $395 million, an increase of 9 percent compared to the fourth quarter of 2011.  This increase was primarily driven by CLARITIN, COPPERTONE and the DR. SCHOLL’S footcare line.  Full-year 2012 global sales were $2.0 billion, a 6 percent increase compared to full-year 2011, including a 1 percent negative impact due to foreign exchange.

 

Last week, the U.S. Food and Drug Administration (FDA) approved OXYTROL FOR WOMEN (oxybutynin transdermal system), the first and only over-the-counter treatment for overactive bladder in women.  Merck anticipates that OXYTROL FOR WOMEN will be available to customers in fall 2013.

 

Other Revenue Performance

 

Other revenues — primarily comprised of alliance revenue, miscellaneous corporate revenues and third-party manufacturing sales — increased 16 percent to $360 million in the fourth quarter and decreased 21 percent to $1.3 billion for the full year of 2012.  The full-year decline was driven largely by lower revenue from AstraZeneca LP (AZLP) recorded by Merck, which declined 23 percent to $915 million, as well as by lower third-party manufacturing sales.

 

Fourth-Quarter and Full-Year Expense and Other Information

 

The costs detailed below totaled $10.0 billion on a GAAP basis during the fourth quarter of 2012 and include $1.6 billion of acquisition-related costs and restructuring costs.

 

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Included in expenses for the period

 

$ in millions

 

GAAP

 

Acquisition-
Related
Costs
4

 

Restructuring
Costs

 

Certain Other
Items

 

Non-GAAP1

 

Fourth Quarter 2012

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

$4,160

 

$1,185

 

$40

 

 

$2,935

 

Marketing and administrative

 

3,390

 

89

 

20

 

 

3,281

 

Research and development

 

2,224

 

24

 

3

 

 

2,197

 

Restructuring costs

 

191

 

 

191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarter 2011

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

$4,176

 

$1,212

 

$68

 

$7

 

$2,889

 

Marketing and administrative

 

3,704

 

86

 

42

 

 

3,576

 

Research and development

 

2,419

 

244

 

49

 

 

2,126

 

Restructuring costs

 

533

 

 

533

 

 

 

 

The costs detailed below totaled $38.1 billion on a GAAP basis for full-year 2012 and include $6.3 billion of acquisition-related costs and restructuring costs.

 

 

 

Included in expenses for the period

 

$ in millions

 

GAAP

 

Acquisition-
Related
Costs
4

 

Restructuring
Costs

 

Certain Other
 Items

 

Non-GAAP1

 

Year Ended Dec. 31, 2012

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

$16,446

 

$4,872

 

$188

 

 

$11,386

 

Marketing and administrative

 

12,776

 

272

 

90

 

 

12,414

 

Research and development

 

8,168

 

200

 

57

 

 

7,911

 

Restructuring costs

 

664

 

 

664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended Dec. 31, 2011

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

$16,871

 

$5,137

 

$348

 

$7

 

$11,379

 

Marketing and administrative

 

13,733

 

278

 

119

 

 

13,336

 

Research and development

 

8,467

 

587

 

138

 

 

7,742

 

Restructuring costs

 

1,306

 

 

1,306

 

 

 

 

The gross margin was 64.6 percent for the fourth quarter of 2012 and 66.0 percent for the fourth quarter of 2011, reflecting 10.4 and 10.5 percentage point unfavorable impacts, respectively, from the acquisition-related costs and restructuring costs noted above.  The non-GAAP gross margin decline primarily reflects the impact of the SINGULAIR patent expiry in the United States.

 

Marketing and administrative expenses, on a non-GAAP basis, were $3.3 billion in the fourth quarter of 2012, a decrease from $3.6 billion in the fourth quarter of 2011.  The decrease was primarily due to productivity measures and the beneficial impact of foreign exchange.

 

Research and development (R&D) expenses, on a non-GAAP basis, were $2.2 billion in the fourth quarter of 2012, an increase from $2.1 billion in the fourth quarter of 2011.  The

 

Page 6



 

increase reflects an upfront payment related to a worldwide licensing agreement for AiCuris’ novel portfolio of investigational medicines targeting human cytomegalovirus.

 

Equity income from affiliates was $231 million for the fourth quarter and $642 million for the full year, which primarily includes partnerships with AZLP and Sanofi Pasteur MSD.

 

The GAAP effective tax rate of 21.1 percent for the fourth quarter of 2012 reflects the impact of acquisition-related costs and restructuring costs.  The non-GAAP effective tax rate, which excludes these items, was 23.6 percent for the quarter.  Both the GAAP and non-GAAP effective tax rates reflect a favorable ruling on a state tax matter in the fourth quarter.

 

Additionally, the company has achieved the previously announced $3.5 billion in synergy targets related to the merger with Schering-Plough Corporation.

 

Recent Key Developments

 

·                  Merck recently received and is reviewing safety and efficacy data from the pivotal Phase III trial of odanacatib, the company’s investigational medicine for osteoporosis.  As previously indicated, the company has been conducting a blinded extension of the trial in approximately 8,200 women, which will provide additional safety and efficacy data.  Merck now anticipates that it will file applications for approval of odanacatib in 2014 with additional data from the extension trial, rather than filing in the first half of 2013.  The company continues to believe that odanacatib will have the potential to address unmet medical needs in patients with osteoporosis;

·                  The New Drug Application (NDA) for suvorexant, the company’s investigational insomnia medicine, was accepted for review by the FDA, during which the medicine also will be evaluated by the FDA’s Controlled Substance Staff.  If approved by the FDA, suvorexant will become available after a schedule assessment and determination has been completed by the U.S. Drug Enforcement Administration.  Also, the company submitted an NDA for suvorexant to the health authorities in Japan;

·                  The marketing authorization application for vintafolide, an investigational treatment for folate-receptor positive platinum-resistant ovarian cancer in combination with pegylated liposomal doxorubicin, was accepted for review by the European Medicines Agency;

·                  The NDA resubmissions for sugammadex, a neuromuscular blockade reversal agent, and ezetimibe/atorvastatin tablets, an investigational combination medicine for hyperlipidemia, separately were accepted for review by the FDA.  Merck expects the FDA’s review of both candidates to be completed in the first half of 2013; and

·                  In January, the company submitted a Biologics License Application to the FDA for MK-7243, an investigational allergy immunotherapy tablet for grass pollen.

 

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Merck is on track to file five products for regulatory approval in 2013.  The company also recently started several key clinical trials including:  Phase III trials of MK-3102, an investigational once-weekly DPP-4 inhibitor in development for treatment of type 2 diabetes; a Phase III study of MK-3222, an investigational biologic therapy for treatment of psoriasis; a Phase II/III trial of MK-8931, an investigational b-amyloid precursor protein site-cleaving enzyme (BACE) inhibitor, to evaluate safety and efficacy in patients with mild-to-moderate Alzheimer’s disease; and a Phase II study of MK-3475, an investigational therapy for the treatment of patients with advanced melanoma.

 

Financial Targets

 

Merck expects full-year 2013 non-GAAP EPS to be between $3.60 and $3.70, and the 2013 GAAP EPS range to be $2.03 to $2.26.  The 2013 non-GAAP range excludes acquisition-related costs and costs related to restructuring programs.

 

Merck expects full-year 2013 revenues to be near 2012 levels on a constant currency basis.  At current exchange rates, sales would be affected unfavorably by approximately 1 to 2 percent for the full year.

 

In addition, the company expects full-year 2013 non-GAAP R&D expense to be about the same level as in 2012.  The company expects its full-year 2013 non-GAAP tax rate to be in the range of 21 to 23 percent, including the impact of the recently re-enacted tax law related to the R&D tax credits.

 

A reconciliation of anticipated 2013 EPS as reported in accordance with GAAP to non-GAAP EPS that excludes certain items is provided in the table below.

 

$ in millions, except EPS amounts

 

Full Year 2013

GAAP EPS

 

$2.03 to $2.26

Difference3

 

1.57 to 1.44

Non-GAAP EPS that excludes items listed below

 

$3.60 to $3.70

 

 

 

Acquisition-related costs4

 

$5,125 to $4,800

Restructuring costs

 

700 to 500

Net decrease (increase) in income before taxes

 

5,825 to 5,300

Estimated income tax (benefit) expense

 

(1,020) to (910)

Decrease (increase) in net income

 

$4,805 to $4,390

 

Total Employees

 

As of Dec. 31, 2012, Merck had approximately 83,000 employees worldwide.

 

Earnings Conference Call

 

Investors are invited to a live audio webcast of Merck’s fourth-quarter earnings conference call today at 8:00 a.m. EST by visiting Merck’s website,

 

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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.  Journalists are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917.  A replay of the call will be available for approximately one week starting at 11:00 a.m. EST today.  To listen to the replay, dial (404) 537-3406 or (855) 859-2056 and enter ID No. 81283478.

 

About Merck

 

Today’s Merck is a global healthcare 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 consumer care 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 healthcare through far-reaching policies, programs and partnerships. For more information, visit www.merck.com and connect with us on Twitter, Facebook and YouTube.

 

Forward-Looking Statement

 

This news release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of Merck’s management and are subject to significant risks and uncertainties. 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; Merck’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 Merck’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

 

Merck 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 Merck’s 2011 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).

 

###

 

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MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1

 

 

 

GAAP

 

 

 

GAAP

 

 

 

 

 

4Q12

 

4Q11

 

% Change

 

Full Year
2012

 

Full Year
2011

 

% Change

 

Sales

 

$

11,738

 

$

12,294

 

-5

%

 

$

47,267

 

$

48,047

 

-2

%

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production (1)

 

4,160

 

4,176

 

 

 

16,446

 

16,871

 

-3

%

 

Marketing and administrative (1) 

 

3,390

 

3,704

 

-8

%

 

12,776

 

13,733

 

-7

%

 

Research and development (1) 

 

2,224

 

2,419

 

-8

%

 

8,168

 

8,467

 

-4

%

 

Restructuring costs (2) 

 

191

 

533

 

-64

%

 

664

 

1,306

 

-49

%

 

Equity income from affiliates (3)

 

(231

)

(257

)

-10

%

 

(642

)

(610

)

5

%

 

Other (income) expense, net (1)(4)

 

176

 

139

 

27

%

 

623

 

946

 

-34

%

 

Income Before Taxes

 

1,828

 

1,580

 

16

%

 

9,232

 

7,334

 

26

%

 

Income Tax Provision

 

385

 

37

 

 

 

 

2,440

 

942

 

 

 

 

Net Income

 

1,443

 

1,543

 

-6

%

 

6,792

 

6,392

 

6

%

 

Less: Net Income Attributable to Noncontrolling Interests

 

42

 

31

 

 

 

 

131

 

120

 

 

 

 

Net Income Attributable to Merck & Co., Inc.

 

$

1,401

 

$

1,512

 

-7

%

 

$

6,661

 

$

6,272

 

6

%

 

Earnings per Common Share Assuming Dilution (5)

 

$

0.46

 

$

0.49

 

-6

%

 

$

2.16

 

$

2.02

 

7

%

 

Average Shares Outstanding Assuming Dilution

 

3,074

 

3,069

 

 

 

 

3,076

 

3,094

 

 

 

 

Tax Rate (6)

 

21.1

%

2.3

%

 

 

 

26.4

%

12.8

%

 

 

 

 

(1) Amounts include the impact of acquisition-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) Primarily reflects equity income from the AstraZeneca LP and Sanofi Pasteur MSD partnerships.

 

(4) Other (income) expense, net in the full year of 2011 includes a charge of $500 million related to the resolution of the arbitration proceeding with Johnson & Johnson, a $136 million gain on the divestiture of the company’s interest in the Johnson & JohnsonºMerck Consumer Pharmaceuticals Company joint venture and a $127 million gain on the sale of certain manufacturing facilities and related assets.

 

(5) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders.  Net income attributable to Merck & Co., Inc. common shareholders used to calculate earnings per common share assuming dilution was $1,401 million and $1,510 million for the fourth quarter of 2012 and 2011, respectively, and was $6,658 million and $6,257 million for the full year of 2012 and 2011, respectively.

 

(6) The GAAP effective tax rates for the fourth quarter and full year of 2012 were 21.1% and 26.4%, respectively.  Excluding the impact of the non-GAAP reconciling items detailed in the accompanying tables, the effective tax rates were 23.6% and 23.8% for the fourth quarter and full year of 2012, respectively.  Both the GAAP and non-GAAP effective tax rates for the fourth quarter and full year of 2012 reflect a favorable ruling on a state tax matter.  In addition,  both the GAAP and non-GAAP effective tax rates for the full year of 2012 reflect the favorable impacts of a settlement with a foreign tax authority and the realization of foreign tax credits.  The GAAP effective tax rates for the fourth quarter and full year of 2011 were 2.3% and 12.8%, respectively.  Excluding the impact of the non-GAAP reconciling items detailed in the accompanying tables, the effective tax rates were 19.9% and 23.4% for the fourth quarter and full year of 2011, respectively.

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS

GAAP TO NON-GAAP RECONCILIATION

FOURTH QUARTER 2012

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2a

 

 

 

GAAP

 

Acquisition-
Related Costs 
(1)

 

Restructuring
Costs 
(2)

 

Adjustment
Subtotal

 

Non-GAAP

 

Sales

 

$

11,738

 

 

 

 

 

$

 

$

11,738

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

4,160

 

1,185

 

40

 

1,225

 

2,935

 

Marketing and administrative

 

3,390

 

89

 

20

 

109

 

3,281

 

Research and development

 

2,224

 

24

 

3

 

27

 

2,197

 

Restructuring costs

 

191

 

 

 

191

 

191

 

 

Equity income from affiliates

 

(231

)

 

 

 

 

 

(231

)

Other (income) expense, net

 

176

 

 

 

 

 

 

176

 

Income Before Taxes

 

1,828

 

(1,298

)

(254

)

(1,552

)

3,380

 

Taxes on Income

 

385

 

 

 

 

 

(413

)(3)

798

 

Net Income

 

1,443

 

 

 

 

 

(1,139

)

2,582

 

Less: Net Income Attributable to Noncontrolling Interests

 

42

 

 

 

 

 

 

42

 

Net Income Attributable to Merck & Co., Inc.

 

$

1,401

 

 

 

 

 

$

(1,139

)

$

2,540

 

Earnings per Common Share Assuming Dilution

 

$

0.46

 

 

 

 

 

 

 

$

0.83

(4)

Average Shares Outstanding Assuming Dilution

 

3,074

 

 

 

 

 

 

 

3,074

 

Tax Rate

 

21.1

%

 

 

 

 

 

 

23.6

%

 

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 expenses for the amortization of intangible assets recognized as a result of mergers and acquisitions.  Amounts included in marketing and administrative expenses reflect merger integration costs.  Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.

 

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company’s formal restructuring programs.

 

(3) Represents the estimated tax impact on the reconciling items.

 

(4) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders.  Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $2,540 million for the fourth quarter of 2012.

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF OPERATIONS

GAAP TO NON-GAAP RECONCILIATION

FULL YEAR 2012

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2b

 

 

 

GAAP

 

Acquisition-
Related Costs 
(1)

 

Restructuring
Costs 
(2)

 

Adjustment
Subtotal

 

Non-GAAP

 

Sales

 

$

47,267

 

 

 

 

 

$

 

$

47,267

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

16,446

 

4,872

 

188

 

5,060

 

11,386

 

Marketing and administrative

 

12,776

 

272

 

90

 

362

 

12,414

 

Research and development

 

8,168

 

200

 

57

 

257

 

7,911

 

Restructuring costs

 

664

 

 

 

664

 

664

 

 

Equity income from affiliates

 

(642

)

 

 

 

 

 

(642

)

Other (income) expense, net

 

623

 

 

 

 

 

 

623

 

Income Before Taxes

 

9,232

 

(5,344

)

(999

)

(6,343

)

15,575

 

Taxes on Income

 

2,440

 

 

 

 

 

(1,261

)(3)

3,701

 

Net Income

 

6,792

 

 

 

 

 

(5,082

)

11,874

 

Less: Net Income Attributable to Noncontrolling Interests

 

131

 

 

 

 

 

 

131

 

Net Income Attributable to Merck & Co., Inc.

 

$

6,661

 

 

 

 

 

$

(5,082

)

$

11,743

 

Earnings per Common Share Assuming Dilution

 

$

2.16

 

 

 

 

 

 

 

$

3.82

(4)

Average Shares Outstanding Assuming Dilution

 

3,076

 

 

 

 

 

 

 

3,076

 

Tax Rate

 

26.4

%

 

 

 

 

 

 

23.8

%

 

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 expenses for the amortization of intangible assets recognized as a result of mergers and acquisitions.  Amounts included in marketing and administrative expenses reflect merger integration costs.  Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges.

 

(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company’s formal restructuring programs.

 

(3) Represents the estimated tax impact on the reconciling items.

 

(4) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders.  Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $11,738 million for the full year of 2012.

 



 

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3

 

 

 

2012

 

2011

 

% Change

 

% Change

 

 

 

1Q

 

2Q

 

3Q

 

4Q

 

Full Year

 

1Q

 

2Q

 

3Q

 

4Q

 

Full Year

 

4Q

 

Full Year

 

TOTAL SALES (1)

 

$

11,731

 

$

12,311

 

$

11,488

 

$

11,738

 

$

47,267

 

$

11,580

 

$

12,151

 

$

12,022

 

$

12,294

 

$

48,047

 

-5

 

-2

 

PHARMACEUTICAL

 

10,082

 

10,560

 

9,875

 

10,085

 

40,601

 

9,820

 

10,360

 

10,354

 

10,755

 

41,289

 

-6

 

-2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Care and Women’s Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cardiovascular

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Zetia

 

614

 

632

 

645

 

676

 

2,567

 

582

 

592

 

614

 

640

 

2,428

 

6

 

6

 

Vytorin

 

444

 

445

 

423

 

435

 

1,747

 

480

 

459

 

469

 

475

 

1,882

 

-8

 

-7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diabetes & Obesity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Januvia

 

919

 

1,058

 

975

 

1,134

 

4,086

 

739

 

779

 

846

 

960

 

3,324

 

18

 

23

 

Janumet

 

392

 

411

 

405

 

452

 

1,659

 

305

 

321

 

350

 

386

 

1,363

 

17

 

22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Respiratory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Singulair

 

1,340

 

1,431

 

602

 

480

 

3,853

 

1,328

 

1,354

 

1,336

 

1,461

 

5,479

 

-67

 

-30

 

Nasonex

 

375

 

293

 

292

 

308

 

1,268

 

373

 

323

 

266

 

325

 

1,286

 

-5

 

-1

 

Clarinex

 

134

 

140

 

64

 

56

 

393

 

155

 

209

 

128

 

129

 

621

 

-57

 

-37

 

Dulera

 

39

 

50

 

52

 

67

 

207

 

13

 

25

 

22

 

37

 

96

 

83

 

*

 

Asmanex

 

48

 

51

 

42

 

44

 

185

 

60

 

47

 

42

 

57

 

206

 

-23

 

-10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Women’s Health & Endocrine

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fosamax

 

184

 

186

 

152

 

154

 

676

 

208

 

221

 

215

 

211

 

855

 

-27

 

-21

 

NuvaRing

 

146

 

157

 

156

 

164

 

623

 

142

 

154

 

159

 

168

 

623

 

-2

 

 

Follistim AQ

 

116

 

125

 

111

 

116

 

468

 

133

 

143

 

129

 

126

 

530

 

-8

 

-12

 

Implanon

 

76

 

85

 

93

 

94

 

348

 

60

 

81

 

80

 

74

 

294

 

27

 

18

 

Cerazette

 

67

 

72

 

64

 

68

 

271

 

59

 

66

 

74

 

69

 

268

 

-1

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maxalt

 

156

 

154

 

166

 

162

 

638

 

173

 

131

 

156

 

178

 

639

 

-9

 

 

Arcoxia

 

112

 

117

 

109

 

115

 

453

 

114

 

100

 

108

 

110

 

431

 

5

 

5

 

Avelox

 

73

 

44

 

30

 

55

 

201

 

106

 

61

 

59

 

95

 

322

 

-42

 

-37

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hospital and Specialty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Immunology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remicade

 

519

 

518

 

490

 

549

 

2,076

 

753

 

842

 

561

 

511

 

2,667

 

8

 

-22

 

Simponi

 

74

 

76

 

86

 

95

 

331

 

54

 

75

 

74

 

61

 

264

 

56

 

25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infectious Disease

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Isentress

 

337

 

398

 

399

 

381

 

1,515

 

292

 

337

 

343

 

387

 

1,359

 

-2

 

11

 

PegIntron

 

162

 

183

 

165

 

143

 

653

 

166

 

154

 

163

 

175

 

657

 

-18

 

-1

 

Cancidas

 

145

 

166

 

163

 

145

 

619

 

158

 

168

 

150

 

164

 

640

 

-11

 

-3

 

Victrelis

 

111

 

126

 

149

 

115

 

502

 

1

 

21

 

31

 

87

 

140

 

32

 

*

 

Invanz

 

101

 

110

 

118

 

116

 

445

 

87

 

103

 

107

 

110

 

406

 

6

 

10

 

Primaxin

 

88

 

104

 

109

 

83

 

384

 

136

 

136

 

124

 

119

 

515

 

-30

 

-25

 

Noxafil

 

59

 

66

 

66

 

68

 

258

 

55

 

56

 

61

 

59

 

230

 

15

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Temodar

 

237

 

225

 

227

 

229

 

917

 

248

 

234

 

223

 

230

 

935

 

-1

 

-2

 

Emend

 

102

 

145

 

111

 

131

 

489

 

87

 

120

 

98

 

114

 

419

 

16

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cosopt / Trusopt

 

124

 

105

 

102

 

113

 

444

 

114

 

122

 

124

 

117

 

477

 

-3

 

-7

 

Bridion

 

58

 

60

 

68

 

75

 

261

 

41

 

47

 

52

 

60

 

201

 

26

 

30

 

Integrilin

 

53

 

60

 

48

 

51

 

211

 

64

 

56

 

53

 

57

 

230

 

-11

 

-8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diversified Brands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cozaar / Hyzaar

 

336

 

337

 

295

 

315

 

1,284

 

426

 

406

 

404

 

427

 

1,663

 

-26

 

-23

 

Propecia

 

108

 

100

 

104

 

112

 

424

 

106

 

112

 

112

 

117

 

447

 

-4

 

-5

 

Zocor

 

103

 

96

 

86

 

98

 

383

 

127

 

107

 

110

 

111

 

456

 

-12

 

-16

 

Claritin Rx

 

87

 

48

 

47

 

63

 

244

 

120

 

65

 

55

 

74

 

314

 

-15

 

-22

 

Remeron

 

57

 

66

 

52

 

57

 

232

 

60

 

57

 

65

 

59

 

241

 

-4

 

-4

 

Proscar

 

51

 

55

 

55

 

56

 

217

 

60

 

53

 

58

 

52

 

223

 

7

 

-3

 

Vasotec / Vaseretic

 

53

 

49

 

42

 

48

 

192

 

57

 

59

 

57

 

58

 

231

 

-17

 

-17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vaccines

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gardasil

 

284

 

324

 

581

 

442

 

1,631

 

214

 

277

 

445

 

274

 

1,209

 

61

 

35

 

ProQuad, M-M-R II and Varivax

 

255

 

316

 

396

 

306

 

1,273

 

244

 

291

 

391

 

276

 

1,202

 

11

 

6

 

Zostavax

 

76

 

148

 

202

 

225

 

651

 

24

 

122

 

108

 

78

 

332

 

*

 

96

 

RotaTeq

 

142

 

142

 

150

 

168

 

601

 

125

 

148

 

184

 

195

 

651

 

-14

 

-8

 

Pneumovax

 

112

 

101

 

160

 

208

 

580

 

79

 

64

 

133

 

222

 

498

 

-7

 

17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Pharmaceutical (2)

 

1,013

 

985

 

1,023

 

1,113

 

4,141

 

892

 

1,064

 

1,015

 

1,064

 

4,035

 

5

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANIMAL HEALTH

 

821

 

865

 

815

 

898

 

3,399

 

758

 

802

 

826

 

868

 

3,253

 

3

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSUMER CARE

 

554

 

552

 

451

 

395

 

1,952

 

517

 

541

 

421

 

361

 

1,840

 

9

 

6

 

Claritin OTC

 

169

 

145

 

118

 

100

 

532

 

167

 

134

 

118

 

92

 

511

 

9

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenues (3)

 

274

 

333

 

347

 

360

 

1,315

 

486

 

448

 

421

 

310

 

1,666

 

16

 

-21

 

Astra

 

186

 

223

 

255

 

251

 

915

 

322

 

306

 

299

 

256

 

1,184

 

-2

 

-23

 

 

* 100% or greater

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.

(1) Only select products are shown.

(2) Includes Pharmaceutical products not individually shown above.  Other Vaccines sales included in Other Pharmaceutical were $60 million, $75 million, $116 million, and $69 million for the first, second, third, and fourth quarters of 2012, respectively.  Other Vaccines sales included in Other Pharmaceutical were $54 million, $67 million, $100 million and $62 million for the first, second, third and fourth quarters of 2011, respectively.

(3) Other revenues are primarily comprised of alliance revenue, miscellaneous corporate revenues and third party manufacturing sales.