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Exhibit 99.1

 

GRAPHIC

 

News Release

 

 

 

 

 

FOR IMMEDIATE RELEASE

 

Media Contacts:

Lainie Keller

Investor Contacts:

Teri Loxam

 

(908) 236-5036

 

(908) 740-1986

 

 

 

 

 

Steven Cragle

 

Justin Holko

 

(908) 740-1801

 

(908) 740-1789

 

Merck Announces Third-Quarter 2015 Financial Results

 

·                  Increased Non-GAAP EPS by 7 Percent to $0.96; GAAP EPS of $0.64

 

·                  Raised 2015 Full-Year Non-GAAP EPS Target to a Range of $3.55 — $3.60 and GAAP EPS Target to a Range of $1.64 — $1.74

 

·                  Worldwide Sales Were $10.1 Billion, a Decrease of 5 Percent; Excluding the Impact of Foreign Exchange, Acquisitions and Divestitures, Worldwide Sales Grew 4 Percent

 

·                  Advanced KEYTRUDA Program

 

·                  FDA Approved sBLA for the Treatment of Previously Treated Patients with Metastatic Non-Small Cell Lung Cancer (NSCLC) Whose Tumors Express PD-L1

 

·                  In KEYNOTE-010 Study KEYTRUDA Showed Superior Overall Survival Compared to Chemotherapy in Patients with Previously Treated Advanced NSCLC Whose Tumors Express PD-L1

 

·                  Third-Quarter Sales Were Approximately $160 million

 

KENILWORTH, N.J., Oct. 27, 2015 — Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the third quarter of 2015.

 

“Our solid results this quarter demonstrate that our focused strategy, which aims to drive future growth, as well as value for patients, society and shareholders, is working. The evolving market, economic and political dynamics of global health care increasingly underscore that the ability to provide high-value innovation is what will distinguish successful companies going forward,” said Kenneth C. Frazier, chairman and chief executive officer, Merck.

 

Financial Summary

 

 

 

Third Quarter

 

$ in millions, except EPS amounts

 

2015

 

2014

 

Sales

 

$10,073

 

$10,557

 

GAAP EPS

 

0.64

 

0.31

 

Non-GAAP EPS that excludes items listed below1

 

0.96

 

0.90

 

GAAP Net Income2

 

1,826

 

895

 

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

 

2,720

 

2,617

 

 


1    Merck is providing certain 2015 and 2014 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP. For a 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) of $0.96 for the third quarter exclude acquisition- and divestiture-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

 

2015

 

2014

 

EPS

 

 

 

 

 

GAAP EPS

 

$0.64

 

$0.31

 

Difference3

 

0.32

 

0.59

 

Non-GAAP EPS that excludes items listed below1

 

$0.96

 

$0.90

 

 

 

 

 

 

 

Net Income

 

 

 

 

 

GAAP net income2

 

$1,826

 

$895

 

Difference

 

894

 

1,722

 

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

 

$2,720

 

$2,617

 

 

 

 

 

 

 

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

 

 

 

 

 

Acquisition- and divestiture-related costs4

 

$1,146

 

$1,659

 

Restructuring costs

 

217

 

612

 

Gain on divestiture of certain migraine clinical development programs

 

(250

)

 

Additional year of health care reform fee

 

 

193

 

Gain on divestiture of certain ophthalmic products

 

 

(396

)

Other

 

(33

)

5

 

Net decrease (increase) in income before taxes

 

1,080

 

2,073

 

Income tax (benefit) expense5

 

(186

)

(295

)

Acquisition- and divestiture-related costs attributable to non-controlling interests

 

 

(56

)

Decrease (increase) in net income

 

$894

 

$1,722

 

 

Additional Executive Commentary

 

“Our late-stage pipeline and ongoing launches create both near- and longer-term opportunities to generate value through innovation aimed at addressing some of the world’s biggest medical needs — cancer, antibiotic resistance, cardiometabolic disease, hepatitis C and Alzheimer’s disease,” said Frazier.

 

“Our broad, global and balanced portfolio of medicines and vaccines allows us to weather periodic volatility within a particular therapeutic area or region while consistently focusing on the best scientific and medical opportunities,” continued Frazier.

 


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 purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges and expense or income related to changes in the fair value measurement of contingent consideration. Also includes integration, transaction and certain other costs related to business acquisitions and divestitures.

5   Includes the estimated tax impact on the reconciling items.

 

Page 2



 

“The Global Human Health business performed well in the third quarter with continued growth in our diabetes, hospital acute care and oncology franchises. We continue to be pleased with the progress of KEYTRUDA, which is a priority launch for the company,” said Adam Schechter, president, Global Human Health, Merck.

 

“In the third quarter, Merck Research Laboratories achieved multiple milestones in our oncology and infectious disease clinical development programs, priority areas where we believe we can have the most beneficial impact on the lives of patients around the world,” said Dr. Roger M. Perlmutter, president, Merck Research Laboratories. “In particular, the results from KEYNOTE-010, which we announced yesterday, provide unambiguous evidence of the favorable impact that our R&D efforts can have in the treatment of grievous illnesses.”

 

“The third quarter was another demonstration of our strong execution. We remain committed to delivering a leveraged P&L. We have met and will exceed our annual target of $2.5 billion in net savings versus 2012 by the end of this year,” said Robert Davis, chief financial officer, Merck.

 

Select Business Highlights

 

Worldwide sales were $10.1 billion for the third quarter of 2015, a decrease of 5 percent compared with the third quarter of 2014, including a 7 percent negative impact from foreign exchange and a 2 percent net unfavorable impact resulting from the divestiture of the Consumer Care business and select products, partially offset by the acquisition of Cubist Pharmaceuticals, Inc. (Cubist).

 

The following table reflects sales of the company’s top pharmaceutical products, as well as total sales of Animal Health and Consumer Care products.

 

 

 

Third Quarter

 

 

 

Change

 

$ in millions

 

2015

 

2014

 

Change

 

Ex-Exchange

 

Total Sales

 

$10,073

 

$10,557

 

-5

%

2

%

Pharmaceutical

 

8,925

 

9,134

 

-2

%

6

%

JANUVIA / JANUMET

 

1,576

 

1,439

 

10

%

17

%

ZETIA / VYTORIN

 

936

 

1,028

 

-9

%

-2

%

GARDASIL / GARDASIL 9

 

625

 

590

 

6

%

7

%

REMICADE

 

442

 

604

 

-27

%

-13

%

PROQUAD, M-M-R II and VARIVAX

 

390

 

421

 

-7

%

-5

%

ISENTRESS

 

377

 

412

 

-9

%

-1

%

CUBICIN

 

325

 

7

*

**

 

**

 

Animal Health

 

825

 

885

 

-7

%

7

%

Consumer Care***

 

 

401

 

**

 

**

 

Other Revenues

 

323

 

137

 

**

 

39

%

 

*Reflects licensing agreement with Cubist in Japan prior to acquisition by Merck on Jan. 21, 2015
**>100%
***divested on Oct. 1, 2014

 

Page 3



 

Commercial and Pipeline Highlights

 

During the third quarter of 2015, the company continued to focus on advancing its pipeline and key therapeutic areas of diabetes, hospital acute care, oncology and vaccines and executing on key launches, including KEYTRUDA (pembrolizumab), an anti-PD-1 therapy, for the treatment of advanced melanoma and metastatic NSCLC in patients whose disease has progressed after other therapies, and BELSOMRA (suvorexant) for the treatment of insomnia.

 

·                  Merck significantly advanced the clinical development program for KEYTRUDA.

 

·                  The U.S. Food and Drug Administration (FDA) approved KEYTRUDA for the treatment of patients with metastatic NSCLC whose tumors express PD-L1 as determined by an FDA-approved test and who have disease progression on or after platinum-containing chemotherapy across both squamous and non-squamous metastatic NSCLC.

 

·                  The National Institute for Health and Care Excellence (NICE) of the U.K. issued a draft recommendation for KEYTRUDA as a first-line treatment option for adults with advanced melanoma. Additionally, NICE issued its final guidance recommending KEYTRUDA for the treatment of advanced melanoma in patients whose disease has progressed after treatment with ipilimumab.

 

·                  The FDA accepted for review a supplemental Biologics License Application (sBLA) for KEYTRUDA for the first-line treatment of unresectable or metastatic melanoma. The FDA granted Priority Review with a PDUFA action date of Dec. 19, 2015.

 

·                  Additionally, the FDA extended the PDUFA action date for a separate sBLA for KEYTRUDA for the treatment of patients with ipilimumab-refractory advanced melanoma to Dec. 24, 2015. The company submitted additional data that constitutes a major amendment, which will require additional time for review.

 

·                  Topline results from KEYNOTE-010 indicated the pivotal study met its primary objective. KEYTRUDA showed superior overall survival compared to chemotherapy in patients with previously treated advanced NSCLC whose tumors express PD-L1. The company plans regulatory submissions based on these data to the FDA by the end of 2015 and the European Medicines Agency (EMA) in early 2016.

 

·                  Data were presented at the European Cancer Congress from the KEYNOTE-028 study, which included first-time presentations of findings investigating the use of KEYTRUDA in multiple tumor types.

 

·                  More than 25 registration studies for KEYTRUDA have been announced or initiated in more than 10 tumor types. In total, the KEYTRUDA clinical development program encompasses more than 30 tumor types in more than 160 clinical trials, including more than 80 combinations of KEYTRUDA with other cancer treatments.

 

Page 4



 

·                  The company advanced its clinical development program for the treatment of diabetes.

 

·                  The Japanese Pharmaceuticals and Medical Devices Agency approved omarigliptin, which will be known as MARIZEV in Japan, a once-weekly medicine that helps lower blood sugar levels in adults with type 2 diabetes. Japan is the first country where omarigliptin has been approved; the company plans to submit omarigliptin for regulatory approval in the United States by the end of 2015, and other worldwide regulatory submissions will follow.

 

·                  At the 51st European Association for the Study of Diabetes Annual Meeting, pivotal Phase 3 data were presented demonstrating omarigliptin achieved its primary efficacy endpoint.

 

·                  The company highlighted its commitment to addressing infectious diseases with 40 presentations of data at the joint meeting of the Interscience Conference of Antimicrobial Agents and Chemotherapy, and International Congress of Chemotherapy and Infection.

 

·                  Data were presented from the two pivotal Phase 3 clinical studies for bezlotoxumab, an investigational antitoxin for prevention of Clostridium difficile (C. difficile) infection recurrence, which met their primary efficacy endpoints. The company plans to submit new drug applications for regulatory approval of bezlotoxumab in the United States, EU and Canada by the end of 2015.

·                  Data were presented from a Phase 2 study of relebactam, an investigational beta-lactamase inhibitor with Qualified Infectious Disease Product and Fast Track designations from the FDA for use in combination therapy, which met its primary efficacy endpoint in patients with complicated intra-abdominal infections. The company has initiated pivotal Phase 3 studies in serious bacterial infections.

 

·                  The company’s clinical development program for elbasvir/grazoprevir, an investigational once-daily, single tablet combination therapy for the treatment of adult patients with chronic hepatitis C virus (HCV) infection, advanced in the third quarter of 2015.

 

·                  The FDA accepted the company’s New Drug Application for Priority Review with a PDUFA action date of Jan. 28, 2016.

·                  The EMA accepted the company’s Marketing Authorization Application for review, which it will initiate under accelerated assessment timelines.

 

Pharmaceutical Revenue Performance

 

Third-quarter pharmaceutical sales declined 2 percent to $8.9 billion, including an 8 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by sales in the core therapeutic areas of hospital acute care, diabetes and oncology. Growth in hospital acute care was driven by the addition of the Cubist portfolio and sales growth of certain inline brands. The increase in diabetes reflects the timing of customer purchases in

 

Page 5



 

the United States and global demand growth. Growth in oncology reflects higher sales of KEYTRUDA, which were approximately $160 million for the quarter.

 

Third-quarter pharmaceutical sales reflect lower sales of REMICADE (infliximab), a treatment for inflammatory diseases, due to loss of exclusivity in the company’s marketing territories in Europe, and NASONEX (mometasone furoate monohydrate), an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms, due to supply constraints in the United States, as well as declines in the HCV portfolio of VICTRELIS (boceprevir) and PEGINTRON (peginterferon alfa-2b). In addition, pharmaceutical sales reflect declines in vaccines, primarily PNEUMOVAX 23 (pneumococcal vaccine polyvalent) driven by lower sales in the United States and PROQUAD (Measles, Mumps, Rubella and Varicella Vaccine Live) driven by the timing of sales activity related to the Pediatric Vaccine Stockpile of the U.S. Centers for Disease Control and Prevention. These declines were partially offset by higher U.S. sales in the franchise of GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) and GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16, and 18) Vaccine, Recombinant], vaccines to prevent cancers and other diseases caused by HPV.

 

Animal Health Revenue Performance

 

Animal Health sales totaled $825 million for the third quarter of 2015, a decrease of 7 percent compared with the third quarter of 2014, including a 14 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by an increase in sales of companion animal products, primarily BRAVECTO (fluralaner), a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks, and new aqua and swine products, including PORCILIS PCV M Hyo, a new swine vaccine.

 

Other Revenue Performance

 

Other revenues – primarily comprising alliance revenue, miscellaneous corporate revenues and third-party manufacturing sales – increased to $323 million in the third quarter of 2015.

 

Third-Quarter 2015 Expense and Other Information

 

The costs detailed below totaled $7.8 billion on a GAAP basis during the third quarter of 2015 and include $1.4 billion of acquisition- and divestiture-related costs and restructuring costs.

 

Page 6



 

 

 

Included in expenses for the period

 

$ in millions

 

GAAP

 

Acquisition-
and
Divestiture-
Related
Costs
4

 

Restructuring
Costs

 

Certain
Other Items

 

Non-GAAP1

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter 2014

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

$

4,223

 

$

1,420

 

$

87

 

$

 

$

2,716

 

Marketing and administrative

 

2,975

 

110

 

68

 

193

 

2,604

 

Research and development

 

1,659

 

36

 

81

 

 

1,542

 

Restructuring costs

 

376

 

 

376

 

 

 

 

The gross margin was 62.7 percent for the third quarter of 2015 compared to 60.0 percent for the third quarter of 2014, reflecting 12.4 and 14.3 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs and restructuring costs noted above. The increase in non-GAAP gross margin was driven by lower inventory write-offs and foreign exchange.

 

Marketing and administrative expenses, on a non-GAAP basis, were $2.4 billion in the third quarter of 2015, a decrease from $2.6 billion in the same period of 2014, which was primarily driven by the favorable impact of foreign exchange and the sale of the Consumer Care business.

 

Research and development (R&D) expenses, on a non-GAAP basis, were $1.6 billion in the third quarter of 2015, a 1 percent increase compared to the third quarter of 2014.

 

Other (income) expense, net, was $170 million of income in the third quarter of 2015 compared to $166 million of income in the third quarter of 2014. The third quarter of 2015 includes a gain of $250 million on the divestiture of certain migraine clinical development programs. In the third quarter of 2014, the company recorded a gain of $396 million on the divestiture of certain ophthalmic products in several international markets that was partially offset by a $93 million goodwill impairment charge related to the company’s joint venture with Supera Farma Laboratorios S.A. in Brazil.

 

Page 7



 

Financial Guidance

 

Merck has raised its full-year 2015 non-GAAP EPS range to be between $3.55 and $3.60, including a negative impact from foreign exchange. The range excludes acquisition- and divestiture-related costs, costs related to restructuring programs and certain other items. The company also has raised its full-year 2015 GAAP EPS range to be between $1.64 and $1.74.

 

At current exchange rates, the company now anticipates full-year 2015 revenues to be between $39.2 billion and $39.8 billion, including a negative impact from foreign exchange and approximately $1 billion of net lost sales from acquisitions and divestitures.

 

In addition, the company continues to expect full-year 2015 non-GAAP marketing and administrative expenses to be below 2014 levels and R&D expenses to be modestly above 2014 levels.

 

The company continues to anticipate its full-year 2015 non-GAAP tax rate will be in the range of 23 to 24 percent, not including a 2015 R&D tax credit.

 

A reconciliation of anticipated 2015 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
2015

 

GAAP EPS

 

$1.64 to $1.74

 

Difference3

 

1.91 to 1.86

 

Non-GAAP EPS that excludes items listed below1

 

$3.55 to $3.60

 

 

 

 

 

Acquisition- and divestiture-related costs

 

$5,450 to $5,350

 

Restructuring costs

 

1,000 to 900

 

Foreign currency devaluation related to Venezuela

 

715

 

Gain on sale of certain migraine clinical development programs

 

(250)

 

Net decrease (increase) in income before taxes

 

6,915 to 6,715

 

Estimated income tax (benefit) expense

 

(1,475) to (1,435)

 

Decrease (increase) in net income

 

$5,440 to $5,280

 

 

Total Employees

 

As of Sept. 30, 2015, Merck had approximately 68,000 employees worldwide.

 

Earnings Conference Call

 

Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. 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 42222255. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 42222255. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

 

Page 8



 

About Merck

 

Today’s Merck is a global health care leader working to help the world be well. Merck is known as MSD outside the United States and Canada. Through our prescription medicines, vaccines, biologic therapies and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to health care through far-reaching policies, programs and partnerships. For more information, visit www.merck.com and connect with us on Twitter, Facebook and YouTube. 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 2014 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

 

###

 

Page 9


 


 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1

 

 

 

GAAP

 

 

 

GAAP

 

 

 

 

 

3Q15

 

3Q14

 

% Change

 

Sep YTD
2015

 

Sep YTD
2014

 

% Change

 

Sales

 

$

10,073

 

$

10,557

 

-5

%

$

29,283

 

$

31,755

 

-8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production (1)

 

3,761

 

4,223

 

-11

%

11,084

 

13,019

 

-15

%

Marketing and administrative (1)

 

2,472

 

2,975

 

-17

%

7,698

 

8,681

 

-11

%

Research and development (1)

 

1,500

 

1,659

 

-10

%

4,906

 

4,897

 

 

Restructuring costs (2)

 

113

 

376

 

-70

%

386

 

664

 

-42

%

Other (income) expense, net (1) (3)

 

(170

)

(166

)

2

%

624

 

(978

)

*

 

Income Before Taxes

 

2,397

 

1,490

 

61

%

4,585

 

5,472

 

-16

%

Income Tax Provision

 

566

 

648

 

 

 

1,108

 

865

 

 

 

Net Income

 

1,831

 

842

 

*

 

3,477

 

4,607

 

-25

%

Less: Net Income (Loss) Attributable to Noncontrolling Interests

 

5

 

(53

)

 

 

12

 

3

 

 

 

Net Income Attributable to Merck & Co., Inc.

 

$

1,826

 

$

895

 

*

 

$

3,465

 

$

4,604

 

-25

%

Earnings per Common Share Assuming Dilution

 

$

0.64

 

$

0.31

 

*

 

$

1.22

 

$

1.57

 

-22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

2,836

 

2,911

 

 

 

2,850

 

2,942

 

 

 

Tax Rate (4)

 

23.6

%

43.5

%

 

 

24.2

%

15.8

%

 

 

 

* 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 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 for the first nine months of 2015 includes foreign exchange losses of $715 million recorded in the second quarter to revalue the company’s net monetary assets in Venezuela.

 

Other (income) expense, net in the third quarter and first nine months of 2014 includes a $396 million gain on the divestiture of certain ophthalmic products in several international markets, as well as a $93 million goodwill impairment charge related to the company’s joint venture with Supera Farma Laboratorios S.A. Other (income) expense, net for the first nine months of 2014 also includes a gain of $741 million related to AstraZeneca’s option exercise and a gain of $204 million related to the divestiture of the company’s Sirna Therapeutics, Inc. subsidiary.

 

Other (income) expense, net includes equity income from affiliates. Prior period amounts have been reclassified to conform to the current presentation.

 

(4) The effective income tax 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 foreign exchange losses recorded in connection with the revaluation of the company’s net monetary assets in Venezuela for which no tax benefit was recorded. The effective income tax rate for the first nine months of 2014 reflects a net benefit of $517 million recorded in connection with AstraZeneca’s option exercise, as well as a benefit of approximately $300 million associated with a capital loss generated in the first quarter of 2014.

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME

GAAP TO NON-GAAP RECONCILIATION

THIRD QUARTER 2015

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2a

 

 

 

GAAP

 

Acquisition and
Divestiture-
Related Costs 
(1)

 

Restructuring
Costs 
(2)

 

Certain Other
Items 
(3)

 

Adjustment
Subtotal

 

Non-GAAP

 

Sales

 

$

10,073

 

 

 

 

 

 

 

 

 

$

10,073

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

3,761

 

1,184

 

70

 

 

 

1,254

 

2,507

 

Marketing and administrative

 

2,472

 

26

 

17

 

 

 

43

 

2,429

 

Research and development

 

1,500

 

(71

)

17

 

 

 

(54

)

1,554

 

Restructuring costs

 

113

 

 

 

113

 

 

 

113

 

 

Other (income) expense, net (4)

 

(170

)

7

 

 

 

(283

)

(276

)

106

 

Income Before Taxes

 

2,397

 

(1,146

)

(217

)

283

 

(1,080

)

3,477

 

Taxes on Income

 

566

 

 

 

 

 

 

 

(186

)(5)

752

 

Net Income

 

1,831

 

 

 

 

 

 

 

(894

)

2,725

 

Less: Net Income Attributable to Noncontrolling Interests

 

5

 

 

 

 

 

 

 

 

 

5

 

Net Income Attributable to Merck & Co., Inc.

 

$

1,826

 

 

 

 

 

 

 

(894

)

$

2,720

 

Earnings per Common Share Assuming Dilution

 

$

0.64

 

 

 

 

 

 

 

 

 

$

0.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

2,836

 

 

 

 

 

 

 

 

 

2,836

 

Tax Rate

 

23.6

%

 

 

 

 

 

 

 

 

21.6

%

 

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 $1.2 billion of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as $11 million of amortization of purchase accounting adjustments to inventories as a result of the Cubist acquisition. 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. Amount included in research and development expenses represents income of $71 million resulting from a reduction in the fair value of liabilities for contingent consideration.

 

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

 

(3) Primarily reflects a $250 million gain on the divestiture of certain migraine clinical development programs.

 

(4) Other (income) expense, net includes equity income from affiliates.

 

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

 



 

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME

GAAP TO NON-GAAP RECONCILIATION

NINE MONTHS ENDED SEPTEMBER 30, 2015

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2b

 

 

 

GAAP

 

Acquisition and
Divestiture-
Related Costs
(1)

 

Restructuring
Costs
(2)

 

Certain Other
Items
(3)

 

Adjustment
Subtotal

 

Non-GAAP

 

Sales

 

$

29,283

 

 

 

 

 

 

 

 

 

$

29,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs, Expenses and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and production

 

11,084

 

3,675

 

280

 

 

 

3,955

 

7,129

 

Marketing and administrative

 

7,698

 

389

 

70

 

 

 

459

 

7,239

 

Research and development

 

4,906

 

63

 

34

 

 

 

97

 

4,809

 

Restructuring costs

 

386

 

 

 

386

 

 

 

386

 

 

Other (income) expense, net (4)

 

624

 

7

 

 

 

418

 

425

 

199

 

Income Before Taxes

 

4,585

 

(4,134

)

(770

)

(418

)

(5,322

)

9,907

 

Taxes on Income

 

1,108

 

 

 

 

 

 

 

(1,201

)(5)

2,309

 

Net Income

 

3,477

 

 

 

 

 

 

 

(4,121

)

7,598

 

Less: Net Income Attributable to Noncontrolling Interests

 

12

 

 

 

 

 

 

 

 

 

12

 

Net Income Attributable to Merck & Co., Inc.

 

$

3,465

 

 

 

 

 

 

 

(4,121

)

$

7,586

 

Earnings per Common Share Assuming Dilution

 

$

1.22

 

 

 

 

 

 

 

 

 

$

2.66

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Shares Outstanding Assuming Dilution

 

2,850

 

 

 

 

 

 

 

 

 

2,850

 

Tax Rate

 

24.2

%

 

 

 

 

 

 

 

 

23.3

%

 

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 $3.6 billion of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as $76 million of amortization of purchase accounting adjustments to inventories as a result of the Cubist acquisition. 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 $62 million of 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 activities under the company’s formal restructuring programs.

 

(3) Primarily reflects foreign exchange losses of $715 million to revalue the company’s net monetary assets in Venezuela and a $250 million gain on the divestiture of certain migraine clinical development programs.

 

(4) Other (income) expense, net includes equity income from affiliates.

 

(5) Represents the estimated tax impact on the reconciling items, as well as a net benefit of $370 million on the settlement of certain federal income tax issues.

 



 

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

Table 3

 

 

 

2015

 

2014

 

% Change

 

 

 

 

 

 

 

 

 

Sep

 

 

 

 

 

 

 

Sep

 

 

 

Full

 

 

 

Sep

 

 

 

1Q

 

2Q

 

3Q

 

YTD

 

1Q

 

2Q

 

3Q

 

YTD

 

4Q

 

Year

 

3Q

 

YTD

 

TOTAL SALES (1)

 

$

9,425

 

$

9,785

 

$

10,073

 

$

29,283

 

$

10,264

 

$

10,934

 

$

10,557

 

$

31,755

 

$

10,482

 

$

42,237

 

-5

 

-8

 

PHARMACEUTICAL

 

8,266

 

8,564

 

8,925

 

25,755

 

8,451

 

9,087

 

9,134

 

26,672

 

9,370

 

36,042

 

-2

 

-3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Primary Care and Women’s Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cardiovascular

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Zetia

 

568

 

635

 

633

 

1,836

 

611

 

717

 

660

 

1,988

 

662

 

2,650

 

-4

 

-8

 

Vytorin

 

320

 

320

 

302

 

942

 

361

 

417

 

369

 

1,146

 

370

 

1,516

 

-18

 

-18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diabetes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Januvia

 

884

 

1,044

 

1,014

 

2,942

 

858

 

1,058

 

933

 

2,849

 

1,082

 

3,931

 

9

 

3

 

Janumet

 

509

 

554

 

562

 

1,625

 

476

 

519

 

505

 

1,500

 

570

 

2,071

 

11

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General Medicine & Women’s Health

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NuvaRing

 

166

 

182

 

190

 

538

 

168

 

178

 

186

 

531

 

191

 

723

 

2

 

1

 

Implanon / Nexplanon

 

137

 

124

 

176

 

437

 

102

 

119

 

158

 

379

 

123

 

502

 

11

 

15

 

Dulera

 

130

 

120

 

133

 

383

 

102

 

103

 

124

 

328

 

132

 

460

 

7

 

17

 

Follistim AQ

 

82

 

111

 

95

 

288

 

110

 

102

 

97

 

309

 

102

 

412

 

-2

 

-7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hospital and Specialty

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hepatitis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PegIntron

 

56

 

52

 

40

 

148

 

112

 

103

 

84

 

300

 

81

 

381

 

-52

 

-51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HIV

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Isentress

 

385

 

375

 

377

 

1,137

 

390

 

453

 

412

 

1,255

 

418

 

1,673

 

-9

 

-9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hospital Acute Care

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cubicin(2)

 

187

 

293

 

325

 

805

 

5

 

6

 

7

 

18

 

7

 

25

 

*

 

*

 

Cancidas

 

163

 

134

 

139

 

436

 

166

 

156

 

183

 

505

 

175

 

681

 

-24

 

-14

 

Invanz

 

132

 

139

 

153

 

424

 

114

 

134

 

141

 

390

 

139

 

529

 

8

 

9

 

Noxafil

 

111

 

117

 

132

 

360

 

74

 

98

 

107

 

280

 

122

 

402

 

23

 

29

 

Bridion

 

85

 

87

 

89

 

262

 

73

 

82

 

90

 

245

 

95

 

340

 

-1

 

7

 

Primaxin

 

65

 

88

 

75

 

228

 

71

 

81

 

91

 

243

 

86

 

329

 

-18

 

-6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Immunology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remicade

 

501

 

455

 

442

 

1,398

 

604

 

607

 

604

 

1,815

 

557

 

2,372

 

-27

 

-23

 

Simponi

 

158

 

169

 

178

 

505

 

157

 

174

 

170

 

500

 

188

 

689

 

5

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Emend

 

122

 

134

 

141

 

396

 

122

 

144

 

136

 

402

 

151

 

553

 

4

 

-1

 

Keytruda

 

83

 

110

 

159

 

352

 

0

 

0

 

4

 

4

 

50

 

55

 

*

 

*

 

Temodar

 

74

 

80

 

83

 

238

 

83

 

93

 

88

 

264

 

86

 

350

 

-5

 

-10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diversified Brands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Respiratory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Singulair

 

245

 

212

 

201

 

658

 

271

 

284

 

218

 

773

 

319

 

1,092

 

-8

 

-15

 

Nasonex

 

289

 

215

 

121

 

625

 

312

 

258

 

261

 

830

 

268

 

1,099

 

-54

 

-25

 

Clarinex

 

51

 

55

 

39

 

145

 

62

 

69

 

49

 

180

 

52

 

232

 

-21

 

-20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cozaar / Hyzaar

 

185

 

189

 

150

 

524

 

205

 

214

 

195

 

614

 

192

 

806

 

-23

 

-15

 

Arcoxia

 

123

 

115

 

123

 

361

 

128

 

141

 

132

 

400

 

118

 

519

 

-7

 

-10

 

Fosamax

 

94

 

96

 

86

 

277

 

123

 

121

 

114

 

358

 

112

 

470

 

-24

 

-23

 

Zocor

 

49

 

63

 

56

 

168

 

64

 

69

 

61

 

194

 

64

 

258

 

-9

 

-14

 

Propecia

 

53

 

39

 

41

 

133

 

74

 

58

 

66

 

197

 

67

 

264

 

-38

 

-32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vaccines

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gardasil / Gardasil 9

 

359

 

427

 

625

 

1,410

 

383

 

409

 

590

 

1,382

 

356

 

1,738

 

6

 

2

 

ProQuad, M-M-R II and Varivax

 

348

 

358

 

390

 

1,096

 

280

 

326

 

421

 

1,027

 

366

 

1,394

 

-7

 

7

 

Zostavax

 

175

 

149

 

179

 

503

 

142

 

156

 

181

 

479

 

285

 

765

 

-1

 

5

 

RotaTeq

 

192

 

89

 

160

 

441

 

169

 

147

 

174

 

490

 

169

 

659

 

-8

 

-10

 

Pneumovax 23

 

110

 

106

 

138

 

354

 

101

 

102

 

197

 

400

 

346

 

746

 

-30

 

-12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Pharmaceutical (3)

 

1,075

 

1,128

 

1,178

 

3,380

 

1,378

 

1,389

 

1,326

 

4,097

 

1,269

 

5,356

 

-11

 

-18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Animal Health

 

829

 

840

 

825

 

2,494

 

813

 

872

 

885

 

2,569

 

885

 

3,454

 

-7

 

-3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONSUMER CARE (4)

 

2

 

0

 

0

 

3

 

546

 

583

 

401

 

1,531

 

16

 

1,547

 

*

 

*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenues (5)

 

328

 

381

 

323

 

1,031

 

454

 

392

 

137

 

983

 

211

 

1,194

 

*

 

5

 

 

* 100% or greater

 

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

 

(1) Only select products are shown.

 

(2) Cubicin results for the first quarter 2015 represent sales for the two months following Merck’s acquisition of Cubist. Cubicin sales for 2014 represent the previous licensing agreement in Japan prior to the acquisition.

 

(3) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $78 million, $76 million, and $99 million for the first, second, and third quarters of 2015, respectively. Other Vaccines sales included in Other Pharmaceutical were $98 million, $76 million, $116 million and $88 million for the first, second, third and fourth quarters of 2014, respectively.

 

(4) On October 1, 2014, the company divested the Consumer Care business.

 

(5) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. On June 30, 2014, AstraZeneca exercised its option to buy Merck’s interest in a subsidiary and through it, Merck’s interest in Nexium and Prilosec. As a result, the company no longer records supply sales for these products. Other revenues in the first quarter 2014 include $232 million of revenue recognized in connection with the sale of U.S. Saphris rights.