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Exhibit 99.1

 

News Release

 

 

 

Media Contacts:

Kelley Dougherty

Investor Contacts:

Carol Ferguson

 

(908) 423-4291

 

(908) 423-4465

 

 

 

 

 

Steven Cragle

 

Joe Romanelli

 

(908) 423-3461

 

(908) 423-5185

 

Merck Announces Third-Quarter 2013 Financial Results

 

·                  2013 Third-Quarter Non-GAAP EPS of $0.92, Excluding Certain Items; GAAP EPS of $0.38

 

·                  Worldwide Sales were $11.0 Billion, a Decrease of 4 Percent Reflecting the Unfavorable Impact of Patent Expiries and a 2 Percent Negative Impact from Foreign Exchange

 

·                  Strong Growth in Vaccines and Immunology as well as ISENTRESS

 

·                  ‘Breakthrough Therapy’ Designation Granted for MK-5172/MK-8742, in Development for the Treatment of Chronic Hepatitis C Virus Infection; V503, Merck’s Investigational 9-valent HPV Vaccine has Completed Pivotal Phase III Study, on Track for 2013 Submission

 

·                  Narrows Full-Year Non-GAAP EPS Target to $3.48 to $3.52; GAAP EPS Target to $1.61 to $1.79

 

WHITEHOUSE STATION, N.J., Oct. 28, 2013 — Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the third quarter of 2013.

 

$ in millions, except EPS amounts

 

Third
Quarter
2013

 

Third
Quarter
2012

 

Sales

 

$11,032

 

$11,488

 

GAAP EPS

 

0.38

 

0.56

 

Non-GAAP EPS that excludes items listed below1

 

0.92

 

0.95

 

GAAP Net Income2

 

1,124

 

1,729

 

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

 

2,729

 

2,932

 

 


1  Merck is providing certain 2013 and 2012 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP. For description of the items, see Table 2a, including the related footnotes, attached to this release.

2  Net income attributable to Merck & Co., Inc.

 



 

Non-GAAP (generally accepted accounting principles) earnings per share (EPS) for the third quarter of $0.92 exclude acquisition-related costs, restructuring costs and certain other items.

 

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow. Year-to-date results can be found in the attached tables.

 

 

 

Third Quarter

 

$ in millions, except EPS amounts

 

2013

 

2012

 

EPS

 

 

 

 

 

GAAP EPS

 

$0.38

 

$0.56

 

Difference3

 

0.54

 

0.39

 

Non-GAAP EPS that excludes items listed below1

 

$0.92

 

$0.95

 

 

 

 

 

 

 

Net Income

 

 

 

 

 

GAAP net income2

 

$1,124

 

$1,729

 

Difference

 

1,605

 

1,203

 

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

 

$2,729

 

$2,932

 

 

 

 

 

 

 

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

 

 

 

 

 

Acquisition-related costs4

 

$1,196

 

$1,340

 

Restructuring costs5

 

967

 

163

 

Net decrease (increase) in income before taxes

 

2,163

 

1,503

 

Income tax (benefit) expense6

 

(558

)

(300

)

Decrease (increase) in net income

 

$1,605

 

$1,203

 

 

“This quarter we delivered solid financial results, with strong contributions from our vaccine, immunology and HIV businesses, and effective cost management,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “We are improving productivity and focusing our R&D and commercial resources more precisely to enable our investments in the best opportunities for innovation and growth. We are encouraged that our combination hepatitis C regimen has joined our anti-PD-1 immunotherapy in being designated as a ‘breakthrough therapy’ by the FDA.”

 


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

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

5  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. Amount for 2013 includes approximately $545 million of costs related to actions under a global initiative announced by the company on October 1.

6  Includes the estimated tax impact on the reconciling items. In addition, amount for 2013 includes a net benefit of $165 million related to the settlements of certain federal income tax issues.

 

Page 2



 

Select Revenue Highlights

 

Worldwide sales were $11.0 billion for the third quarter of 2013, a decrease of 4 percent compared with the third quarter of 2012, including a 2 percent negative effect from foreign exchange.

 

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

 

Third 
Quarter
2013

 

Third 
Quarter
2012

 

Change

 

Change
Ex-exchange

 

Total Sales

 

$11,032

 

$11,488

 

-4

%

-2

%

Pharmaceutical

 

9,475

 

9,875

 

-4

%

-2

%

JANUVIA

 

927

 

975

 

-5

%

-1

%

GARDASIL

 

665

 

581

 

15

%

15

%

ZETIA

 

662

 

645

 

3

%

5

%

REMICADE

 

574

 

490

 

17

%

12

%

JANUMET

 

442

 

405

 

9

%

9

%

ISENTRESS

 

427

 

399

 

7

%

7

%

PROQUAD, M-M-R II and VARIVAX

 

421

 

396

 

6

%

7

%

VYTORIN

 

396

 

423

 

-6

%

-6

%

NASONEX

 

297

 

292

 

2

%

4

%

SINGULAIR

 

280

 

602

 

-53

%

-48

%

Animal Health

 

800

 

815

 

-2

%

0

%

Consumer Care

 

443

 

451

 

-2

%

0

%

Other Revenues

 

315

 

347

 

-9

%

-11

%

 

Pharmaceutical Revenue Performance

 

Third-quarter pharmaceutical sales declined 4 percent to $9.5 billion, including a 2 percent negative impact due to foreign exchange. Declines of SINGULAIR (montelukast sodium), MAXALT (rizatriptan benzoate), TEMODAR (temozolomide) and COZAAR (losartan potassium)/HYZAAR (losartan potassium and hydrochlorothiazide) following loss of market exclusivity were partially offset by growth of REMICADE (infliximab), GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant], SIMPONI (golimumab) and ISENTRESS (raltegravir).

 

Sales from emerging markets decreased 4 percent, including a 6 percent negative impact from foreign exchange. Emerging market sales accounted for approximately 20 percent of pharmaceutical sales in the third quarter of 2013 with strong growth in Brazil, Korea, Russia and Turkey, offset by declines in China and Mexico.

 

Worldwide sales of the combined diabetes franchise of JANUVIA (sitagliptin)/JANUMET (sitagliptin and metformin HCI) decreased 1 percent to $1.4 billion in the third quarter, including a 3 percent negative impact from foreign exchange. Sales decreases in the United States due to

 

Page 3



 

reduced customer inventory levels, and in Japan due to foreign exchange, were partially offset by growth in Europe and the emerging markets.

 

Sales of ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), medicines for lowering LDL cholesterol, decreased 1 percent to $1.1 billion in the third quarter, including a 2 percent negative impact from foreign exchange. The decrease reflects lower sales of VYTORIN, partially offset by growth of ZETIA, mainly in the United States.

 

Combined sales of REMICADE and SIMPONI, treatments for inflammatory diseases, increased 22 percent, including a 6 percent positive impact from foreign exchange, to $700 million in the third quarter of 2013.

 

ISENTRESS, an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, grew 7 percent to $427 million in the third quarter driven by growth in all regions.

 

Merck’s sales of GARDASIL, a vaccine to help prevent certain diseases caused by four types of human papillomavirus (HPV), were $665 million, an increase of 15 percent for the quarter. The increase was driven by higher sales in the United States, which reflects continued strong uptake of use in males, as well as higher public sector sales of approximately $60 million. The increase was partially offset by lower sales in Japan due to the government’s decision to suspend proactive recommendation of HPV vaccines in the country.

 

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 53 percent to $280 million in the third quarter. The patents for SINGULAIR expired in the United States in August 2012 and expired in major European markets in February 2013. The company has experienced a significant and rapid reduction in sales in these markets.

 

Animal Health Revenue Performance

 

Animal Health sales totaled $800 million for the third quarter of 2013, a 2 percent decline compared with the third quarter of 2012, including a 2 percent negative impact due to foreign exchange. The quarter was negatively affected by the previously announced voluntary suspension of sales of ZILMAX (zilpaterol hydrochloride), the company’s feed supplement for cattle, in the United States and Canada. The negative impact was partially offset by higher sales of companion animal and swine products.

 

Consumer Care Revenue Performance

 

Third-quarter global sales of Consumer Care were $443 million, a decrease of 2 percent compared to the third quarter of 2012, including a 2 percent negative impact due to foreign exchange. Sales were positively affected by the launch of OXYTROL FOR WOMEN, the only

 

Page 4



 

over-the-counter medicine to treat overactive bladder, but were offset by lower sales in the DR. SCHOLL’S footcare line.

 

Other Revenue Performance

 

Other revenues — primarily comprising alliance revenue, miscellaneous corporate revenues and third-party manufacturing sales — decreased 9 percent to $315 million compared to the third quarter of 2012. The decrease was primarily driven by lower revenue from AstraZeneca LP (AZLP) recorded by Merck, which decreased 14 percent to $220 million as compared with the third quarter 2012.

 

Third-Quarter Expense and Other Information

 

The costs detailed below totaled $9.4 billion on a GAAP basis during the third quarter of 2013 and include $2.2 billion of acquisition-related costs and restructuring costs.

 

 

 

Included in expenses for the period

 

$ in millions

 

GAAP

 

Acquisition-
Related
Costs
4

 

Restructuring 
Costs
5

 

Non-GAAP1

 

Third Quarter 2013

 

 

 

 

 

 

 

 

 

Materials and production

 

$4,104

 

$1,176

 

$57

 

$2,871

 

Marketing and administrative

 

2,803

 

20

 

31

 

2,752

 

Research and development

 

1,660

 

 

9

 

1,651

 

Restructuring costs

 

870

 

 

870

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter 2012

 

 

 

 

 

 

 

 

 

Materials and production

 

$4,137

 

$1,232

 

$60

 

$2,845

 

Marketing and administrative

 

3,063

 

68

 

25

 

2,970

 

Research and development

 

1,918

 

40

 

(32

)

1,910

 

Restructuring costs

 

110

 

 

110

 

 

 

The gross margin was 62.8 percent for the third quarter of 2013 and 64.0 percent for the third quarter of 2012, reflecting 11.2 percentage points of unfavorable impact in both periods from the acquisition-related costs and restructuring costs noted above. The gross margin decline, on a non-GAAP basis, primarily reflects the impact of recent patent expiries.

 

Marketing and administrative expenses, on a non-GAAP basis, were $2.8 billion in the third quarter of 2013, a decrease from $3.0 billion in the third quarter of 2012 due to ongoing productivity improvements.

 

Page 5



 

Research and development (R&D) expenses, on a non-GAAP basis, were $1.7 billion in the third quarter of 2013, a decrease from $1.9 billion in the third quarter of 2012 reflecting ongoing productivity improvements and timing of certain programs that will begin in the fourth quarter.

 

Equity income from affiliates was $102 million for the third quarter, primarily reflecting the performance of partnerships with AZLP and Sanofi Pasteur MSD.

 

Other (income) expense, net was $172 million of expense in the third quarter of 2013, compared to $200 million of expense in the third quarter of 2012.

 

The company noted the following developments:

 

·                  Announced a global, multi-year initiative to sharpen the company’s commercial and R&D focus, targeting a net reduction in annual operating expenses of approximately $2.5 billion by the end of 2015. These savings are off of the company’s full-year 2012 expense levels.

 

·                  Granted MK-5172/MK-8742 ‘Breakthrough Therapy’ designation by the U.S. Food and Drug Administration (FDA) for treatment of chronic hepatitis C virus infection. Interim data from an ongoing Phase IIB clinical trial evaluating this investigational oral combination regimen in genotype 1 infected patients (C-WORTHY Study) is scheduled to be presented at the 64th American Association for the Study of Liver Diseases annual meeting in Washington, D.C., Nov. 1-5, 2013.

 

·                  Announced that V503, Merck’s investigational 9-valent HPV vaccine, has completed its pivotal Phase III clinical trial and has met all primary study endpoints. Merck will present results from the Phase III clinical program for V503 at the EUROGIN (EUropean Research Organisation on Genital Infection and Neoplasia) congress in early November. The company expects to submit a Biologics License Application (BLA) for V503 to the FDA in 2013.

 

·                  Presenting interim data from the Phase IB expansion study evaluating the efficacy and safety of the company’s anti-PD-1 immunotherapy (MK-3475) in patients with refractory non-small cell lung cancer tomorrow, Oct. 29, at 1:15 a.m. EDT, at the 15th World Conference on Lung Cancer in Sydney, Australia.

 

·                  Informed by the FDA that the Allergenic Products Advisory Committee meeting to discuss the BLA for the investigational grass pollen allergy immunotherapy tablet (AIT) has been rescheduled to Dec. 12, 2013. The Advisory Committee meeting originally scheduled for Nov. 6 was temporarily postponed due to the recent U.S. government shutdown.

 

·                  Initiating Phase III clinical trials for ertugliflozin with its collaboration partner, Pfizer Inc. Ertugliflozin is an investigational oral sodium glucose cotransporter (SGLT2) inhibitor being evaluated for the treatment of type 2 diabetes.

 

Page 6



 

·                  Announced the receipt of a Complete Response Letter from the FDA for the resubmission of the New Drug Application for sugammadex sodium injection, Merck’s investigational medicine for the reversal of neuromuscular blockade induced by rocuronium or vecuronium. To address the Complete Response Letter, the company intends to conduct a confirmatory hypersensitivity study as soon as practicable, following discussion about the study with FDA.

 

·                  Received approval from the FDA to manufacture bulk varicella at the company’s site in Durham, N.C., for use in Merck’s vaccines to protect against chickenpox and shingles. The approval will enable the site to produce bulk varicella supply for the United States and help boost Merck’s overall global supply capabilities.

 

Financial Targets

 

Merck has narrowed the range of full-year 2013 non-GAAP EPS to be between $3.48 and $3.52, and the 2013 GAAP EPS to be between $1.61 and $1.79. The 2013 non-GAAP range excludes acquisition-related costs, costs related to restructuring programs and certain other items.

 

At current exchange rates, Merck continues to anticipate full-year 2013 sales to be approximately 5 to 6 percent below prior year levels with foreign exchange accounting for approximately 2.5 percentage points of the decline.

 

In addition, the company continues to expect full-year 2013 non-GAAP R&D expense to be below 2012 levels. The company continues to anticipate its full-year 2013 non-GAAP tax rate to be in the range of 22 to 23 percent.

 

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

 

$1.61 to $1.79

 

Difference3

 

1.87 to 1.73

 

Non-GAAP EPS that excludes items listed below

 

$3.48 to $3.52

 

 

 

 

 

Acquisition-related costs

 

$5,400 to $5,200

 

Restructuring costs

 

1,900 to 1,600

 

Net decrease (increase) in income before taxes

 

7,300 to 6,800

 

Income tax (benefit) expense7

 

(1,700) to (1,600)

 

Decrease (increase) in net income

 

$5,600 to $5,200

 

 


7  Includes the estimated tax impact on the reconciling items, as well as net benefits of approximately $325 million related to the settlements of certain federal income tax issues.

 

Page 7



 

Total Employees

 

As of Sept. 30, 2013, Merck had approximately 80,000 employees worldwide. In addition, the company’s joint ventures in China and Brazil, which are included in the consolidated results of Merck, had about 1,300 employees.

 

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://www.merck.com/investors/events-and-presentations/home.html. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 77194196. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 77194196. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

 

About Merck

 

Today’s Merck is a global 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. 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; Merck’s ability to

 

Page 8



 

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 2012 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).

 

###

 

Page 9



 

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1

 

 

 

GAAP

 

 

 

GAAP

 

 

 

 

 

3Q13

 

3Q12

 

% Change

 

YTD 2013

 

YTD 2012

 

% Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

11,032

 

$

11,488

 

-4

%

$

32,713

 

$

35,530

 

-8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production (1)

 

4,104

 

4,137

 

-1

%

12,347

 

12,286

 

 

Marketing and administrative (1)

 

2,803

 

3,063

 

-8

%

8,929

 

9,386

 

-5

%

Research and development (1)

 

1,660

 

1,918

 

-13

%

5,668

 

5,944

 

-5

%

Restructuring costs (2)

 

870

 

110

 

*

 

1,144

 

473

 

*

 

Equity income from affiliates (3)

 

(102

)

(158

)

-35

%

(351

)

(410

)

-14

%

Other (income) expense, net (1) (4)

 

172

 

200

 

-14

%

656

 

446

 

47

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Before Taxes

 

1,525

 

2,218

 

-31

%

4,320

 

7,405

 

-42

%

Income Tax Provision

 

375

 

455

 

 

 

618

 

2,055

 

 

 

Net Income

 

1,150

 

1,763

 

-35

%

3,702

 

5,350

 

-31

%

Less: Net Income Attributable to Noncontrolling Interests

 

26

 

34

 

 

 

79

 

89

 

 

 

Net Income Attributable to Merck & Co., Inc.

 

$

1,124

 

$

1,729

 

-35

%

$

3,623

 

$

5,261

 

-31

%

Earnings per Common Share Assuming Dilution

 

$

0.38

 

$

0.56

 

-32

%

$

1.20

 

$

1.71

 

-30

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

2,960

 

3,079

 

 

 

3,007

 

3,077

 

 

 

Tax Rate (5)

 

24.6

%

20.5

%

 

 

14.3

%

27.8

%

 

 

 

* 100% or greater

 

(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. Amounts for the third quarter and first nine months of 2013 include approximately $545 million of costs related to actions under a global initiative announced by the company on October 1.

 

(3)   Primarily reflects equity income from the AstraZeneca LP and Sanofi Pasteur MSD partnerships.

 

(4)   Other (income) expense, net in the first nine months of 2013 reflects approximately $140 million of losses due to exchange as a result of a Venezuelan currency devaluation.

 

(5)   The effective tax rate for the first nine months of 2013 reflects net benefits from the settlements of certain federal income tax issues, reductions in tax reserves upon expiration of applicable statute of limitations and the favorable impact of tax legislation enacted in the first quarter of 2013.

 



 

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
THIRD QUARTER 2013
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a

 

 

 

GAAP

 

Acquisition-
Related Costs 
(1)

 

Restructuring
Costs 
(2)

 

Adjustment
Subtotal

 

Non-GAAP

 

Sales

 

$

11,032

 

 

 

 

 

 

 

$

11,032

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

4,104

 

1,176

 

57

 

1,233

 

2,871

 

Marketing and administrative

 

2,803

 

20

 

31

 

51

 

2,752

 

Research and development

 

1,660

 

 

 

9

 

9

 

1,651

 

Restructuring costs

 

870

 

 

 

870

 

870

 

 

Equity income from affiliates

 

(102

)

 

 

 

 

 

(102

)

Other (income) expense, net

 

172

 

 

 

 

 

 

172

 

Income Before Taxes

 

1,525

 

(1,196

)

(967

)

(2,163

)

3,688

 

Taxes on Income

 

375

 

 

 

 

 

(558

)(3)

933

 

Net Income

 

1,150

 

 

 

 

 

(1,605

)

2,755

 

Less: Net Income Attributable to Noncontrolling Interests

 

26

 

 

 

 

 

 

26

 

Net Income Attributable to Merck & Co., Inc.

 

$

1,124

 

 

 

 

 

$

(1,605

)

$

2,729

 

Earnings per Common Share Assuming Dilution

 

$

0.38

 

 

 

 

 

 

 

$

0.92

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

2,960

 

 

 

 

 

 

 

2,960

 

Tax Rate

 

24.6

%

 

 

 

 

 

 

25.3

%

 

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.

 

(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, as well as a net benefit of approximately $165 million related to the settlements of certain federal income tax issues.

 



 

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
NINE MONTHS ENDED SEPTEMBER 30, 2013
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2b

 

 

 

GAAP

 

Acquisition-
Related Costs 
(1)

 

Restructuring
Costs 
(2)

 

Certain Other
Items

 

Adjustment
Subtotal

 

Non-GAAP

 

Sales

 

$

32,713

 

 

 

 

 

 

 

 

 

$

32,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

12,347

 

3,875

 

193

 

 

 

4,068

 

8,279

 

Marketing and administrative

 

8,929

 

62

 

64

 

 

 

126

 

8,803

 

Research and development

 

5,668

 

264

 

38

 

 

 

302

 

5,366

 

Restructuring costs

 

1,144

 

 

 

1,144

 

 

 

1,144

 

 

Equity income from affiliates

 

(351

)

 

 

 

 

 

 

 

(351

)

Other (income) expense, net

 

656

 

 

 

 

 

(13

)

(13

)

669

 

Income Before Taxes

 

4,320

 

(4,201

)

(1,439

)

13

 

(5,627

)

9,947

 

Taxes on Income

 

618

 

 

 

 

 

 

 

(1,406

)(3)

2,024

 

Net Income

 

3,702

 

 

 

 

 

 

 

(4,221

)

7,923

 

Less: Net Income Attributable to Noncontrolling Interests

 

79

 

 

 

 

 

 

 

 

79

 

Net Income Attributable to Merck & Co., Inc.

 

$

3,623

 

 

 

 

 

 

 

$

(4,221

)

$

7,844

 

Earnings per Common Share Assuming Dilution

 

$

1.20

 

 

 

 

 

 

 

 

 

$

2.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

3,007

 

 

 

 

 

 

 

 

 

3,007

 

Tax Rate

 

14.3

%

 

 

 

 

 

 

 

 

20.3

%

 

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 of $3.5 billion for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as $330 million of impairment charges on product intangibles. 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, as well as net benefits of approximately $325 million related to the settlements of certain federal income tax issues.

 



 

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

Table 3

 

 

 

2013

 

2012

 

% Change

 

% Change

 

 

 

1Q

 

2Q

 

3Q

 

Sep YTD

 

1Q

 

2Q

 

3Q

 

Sep YTD

 

4Q

 

Full Year

 

3Q

 

Sep YTD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL SALES (1)

 

$

10,671

 

$

11,010

 

$

11,032

 

$

32,713

 

$

11,731

 

$

12,311

 

$

11,488

 

$

35,530

 

$

11,738

 

$

47,267

 

-4

 

-8

 

PHARMACEUTICAL

 

8,891

 

9,310

 

9,475

 

27,677

 

10,082

 

10,560

 

9,875

 

30,517

 

10,085

 

40,601

 

-4

 

-9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Care and Women’s Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cardiovascular

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Zetia

 

629

 

650

 

662

 

1,941

 

614

 

632

 

645

 

1,891

 

676

 

2,567

 

3

 

3

 

Vytorin

 

394

 

417

 

396

 

1,207

 

444

 

445

 

423

 

1,312

 

435

 

1,747

 

-6

 

-8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diabetes & Obesity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Januvia

 

884

 

1,072

 

927

 

2,883

 

919

 

1,058

 

975

 

2,952

 

1,134

 

4,086

 

-5

 

-2

 

Janumet

 

409

 

474

 

442

 

1,325

 

392

 

411

 

405

 

1,207

 

452

 

1,659

 

9

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Respiratory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nasonex

 

385

 

325

 

297

 

1,008

 

375

 

293

 

292

 

960

 

308

 

1,268

 

2

 

5

 

Singulair

 

337

 

281

 

280

 

898

 

1,340

 

1,431

 

602

 

3,373

 

480

 

3,853

 

-53

 

-73

 

Dulera

 

68

 

79

 

82

 

229

 

39

 

50

 

52

 

140

 

67

 

207

 

58

 

63

 

Asmanex

 

40

 

49

 

43

 

133

 

48

 

51

 

42

 

141

 

44

 

185

 

2

 

-6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Women’s Health & Endocrine

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NuvaRing

 

151

 

171

 

170

 

492

 

146

 

157

 

156

 

459

 

164

 

623

 

9

 

7

 

Fosamax

 

137

 

144

 

140

 

421

 

184

 

186

 

152

 

522

 

154

 

676

 

-8

 

-19

 

Follistim AQ

 

122

 

134

 

124

 

380

 

116

 

125

 

111

 

352

 

116

 

468

 

12

 

8

 

Implanon

 

84

 

102

 

96

 

282

 

76

 

85

 

93

 

254

 

94

 

348

 

3

 

11

 

Cerazette

 

61

 

48

 

51

 

159

 

67

 

72

 

64

 

202

 

68

 

271

 

-21

 

-22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arcoxia

 

121

 

121

 

112

 

354

 

112

 

117

 

109

 

338

 

115

 

453

 

2

 

5

 

Avelox

 

36

 

29

 

38

 

102

 

73

 

44

 

30

 

146

 

55

 

201

 

27

 

-30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hospital and Specialty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Immunology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remicade

 

549

 

527

 

574

 

1,651

 

519

 

518

 

490

 

1,527

 

549

 

2,076

 

17

 

8

 

Simponi

 

108

 

120

 

126

 

354

 

74

 

76

 

86

 

236

 

95

 

331

 

46

 

50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Infectious Disease

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Isentress

 

362

 

412

 

427

 

1,201

 

337

 

398

 

399

 

1,133

 

381

 

1,515

 

7

 

6

 

Cancidas

 

162

 

163

 

151

 

477

 

145

 

166

 

163

 

474

 

145

 

619

 

-7

 

1

 

PegIntron

 

126

 

142

 

104

 

372

 

162

 

183

 

165

 

510

 

143

 

653

 

-37

 

-27

 

Invanz

 

110

 

120

 

130

 

360

 

101

 

110

 

118

 

329

 

116

 

445

 

10

 

9

 

Victrelis

 

110

 

116

 

121

 

347

 

111

 

126

 

149

 

387

 

115

 

502

 

-19

 

-10

 

Noxafil

 

65

 

71

 

75

 

212

 

59

 

66

 

66

 

191

 

68

 

258

 

15

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Temodar

 

216

 

219

 

162

 

596

 

237

 

225

 

227

 

688

 

229

 

917

 

-28

 

-13

 

Emend

 

116

 

135

 

123

 

373

 

102

 

145

 

111

 

358

 

131

 

489

 

11

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cosopt / Trusopt

 

105

 

103

 

104

 

313

 

124

 

105

 

102

 

331

 

113

 

444

 

3

 

-5

 

Bridion

 

63

 

69

 

75

 

206

 

58

 

60

 

68

 

186

 

75

 

261

 

10

 

11

 

Integrilin

 

47

 

48

 

45

 

140

 

53

 

60

 

48

 

160

 

51

 

211

 

-6

 

-13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diversified Brands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cozaar / Hyzaar

 

267

 

255

 

238

 

760

 

336

 

337

 

295

 

969

 

315

 

1,284

 

-19

 

-22

 

Primaxin

 

84

 

85

 

88

 

256

 

88

 

104

 

109

 

301

 

83

 

384

 

-19

 

-15

 

Zocor

 

82

 

74

 

65

 

221

 

103

 

96

 

86

 

285

 

98

 

383

 

-24

 

-22

 

Propecia

 

68

 

67

 

71

 

206

 

108

 

100

 

104

 

312

 

112

 

424

 

-32

 

-34

 

Clarinex

 

61

 

64

 

54

 

180

 

134

 

140

 

64

 

337

 

56

 

393

 

-15

 

-47

 

Claritin Rx

 

76

 

40

 

36

 

151

 

87

 

48

 

47

 

181

 

63

 

244

 

-23

 

-16

 

Remeron

 

52

 

53

 

44

 

150

 

57

 

66

 

52

 

175

 

57

 

232

 

-15

 

-14

 

Proscar

 

39

 

58

 

38

 

136

 

51

 

55

 

55

 

160

 

56

 

217

 

-30

 

-15

 

Maxalt

 

40

 

43

 

40

 

124

 

156

 

154

 

166

 

476

 

162

 

638

 

-76

 

-74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vaccines

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gardasil

 

390

 

383

 

665

 

1,438

 

284

 

324

 

581

 

1,189

 

442

 

1,631

 

15

 

21

 

ProQuad, M-M-R II and Varivax

 

272

 

339

 

421

 

1,032

 

255

 

316

 

396

 

967

 

306

 

1,273

 

6

 

7

 

RotaTeq

 

162

 

144

 

201

 

507

 

142

 

142

 

150

 

433

 

168

 

601

 

34

 

17

 

Zostavax

 

168

 

141

 

185

 

494

 

76

 

148

 

202

 

426

 

225

 

651

 

-8

 

16

 

Pneumovax

 

111

 

108

 

193

 

412

 

112

 

101

 

160

 

372

 

208

 

580

 

21

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Pharmaceutical (2)

 

1,022

 

1,115

 

1,059

 

3,194

 

1,066

 

1,034

 

1,065

 

3,175

 

1,161

 

4,333

 

-1

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANIMAL HEALTH

 

840

 

851

 

800

 

2,491

 

821

 

865

 

815

 

2,501

 

898

 

3,399

 

-2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSUMER CARE (3)

 

571

 

490

 

443

 

1,504

 

554

 

552

 

451

 

1,557

 

395

 

1,952

 

-2

 

-3

 

Claritin OTC

 

177

 

78

 

123

 

379

 

169

 

145

 

118

 

432

 

100

 

532

 

5

 

-12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenues (4)

 

369

 

359

 

314

 

1,041

 

274

 

333

 

347

 

955

 

360

 

1,315

 

-9

 

9

 

Astra

 

262

 

245

 

220

 

727

 

186

 

223

 

255

 

664

 

251

 

915

 

-14

 

10

 

 

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 $53 million, $86 million, and $127 million for the first, second, and third quarters of 2013. 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.

 

(3) The decrease in Consumer Care sales in the second quarter and September year-to-date period resulted from the ongoing termination in China of distribution arrangements and a reversal of sales previously made to those distributors, together with associated termination costs.

 

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