Merck & Co., Inc. - FORM 8-K - EX-99.2

Attached files

file	filename
8-K - 8-K - Merck & Co., Inc.	a15-21668_18k.htm
EX-99.1 - EX-99.1 - Merck & Co., Inc.	a15-21668_1ex99d1.htm

Exhibit 99.2

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1a

	2015												2014																		% Change
	1Q			2Q			3Q			Sep YTD			1Q			2Q			3Q			Sep YTD			4Q			Dec YTD			3Q		Sep YTD

Sales	$	9,425		$	9,785		$	10,073		$	29,283		$	10,264		$	10,934		$	10,557		$	31,755		$	10,482		$	42,237		-5	%	-8	%
Costs, Expenses and Other
Materials and production	3,569			3,754			3,761			11,084			3,903			4,893			4,223			13,019			3,749			16,768			-11	%	-15	%
Marketing and administrative	2,601			2,624			2,472			7,698			2,734			2,973			2,975			8,681			2,924			11,606			-17	%	-11	%
Research and development	1,737			1,670			1,500			4,906			1,574			1,664			1,659			4,897			2,283			7,180			-10	%	—
Restructuring costs	82			191			113			386			125			163			376			664			349			1,013			-70	%	-42	%
Other (income) expense, net (1)	55			739			(170		)	624			(163		)	(650		)	(166		)	(978		)	(10,634		)	(11,613		)	2	%	*
Income Before Taxes	1,381			807			2,397			4,585			2,091			1,891			1,490			5,472			11,811			17,283			61	%	-16	%
Income Tax Provision (Benefit)	423			119			566			1,108			360			(142		)	648			865			4,484			5,349
Net Income	958			688			1,831			3,477			1,731			2,033			842			4,607			7,327			11,934			*		-25	%
Less: Net Income (Loss) Attributable to Noncontrolling Interests	5			1			5			12			26			29			(53		)	3			11			14
Net Income Attributable to Merck & Co., Inc.	$	953		$	687		$	1,826		$	3,465		$	1,705		$	2,004		$	895		$	4,604		$	7,316		$	11,920		*		-25	%
Earnings per Common Share Assuming Dilution	$	0.33		$	0.24		$	0.64		$	1.22		$	0.57		$	0.68		$	0.31		$	1.57		$	2.54		$	4.07		*		-22	%

Average Shares Outstanding Assuming Dilution	2,865			2,850			2,836			2,850			2,971			2,949			2,911			2,942			2,880			2,928
Tax Rate	30.6		%	14.7		%	23.6		%	24.2		%	17.2		%	-7.5		%	43.5		%	15.8		%	38.0		%	30.9		%

* 100% or greater

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

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

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME

GAAP TO NON-GAAP RECONCILIATION

THIRD QUARTER 2014

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2c

	GAAP			Acquisition and Divestiture- Related Costs (1)		Restructuring Costs (2)		Certain Other Items (3)		Adjustment Subtotal		Non-GAAP
Sales	$	10,557										$	10,557

Costs, Expenses and Other
Materials and production	4,223			1,420		87				1,507		2,716
Marketing and administrative	2,975			110		68		193		371		2,604
Research and development	1,659			36		81				117		1,542
Restructuring costs	376					376				376		—
Other (income) expense, net	(166		)	93				(391	)	(298	)	132
Income Before Taxes	1,490			(1,659	)	(612	)	198		(2,073	)	3,563
Taxes on Income	648									(295	)(4)	943
Net Income	842									(1,778	)	2,620
Less: Net (Loss) Income Attributable to Noncontrolling Interests	(53		)	(56	)					(56	)	3
Net Income Attributable to Merck & Co., Inc.	$	895								(1,722	)	$	2,617
Earnings per Common Share Assuming Dilution	$	0.31										$	0.90

Average Shares Outstanding Assuming Dilution	2,911											2,911
Tax Rate	43.5		%									26.5		%

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 $1.0 billion for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as $412 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect merger integration costs, as well as transaction and certain other costs related to business acquisitions and divestitures. Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges primarily related to the company’s joint venture with Supera Farma Laboratorios S.A. (“Supera”). Amount included in other (income) expense, net is a goodwill impairment charge related to the joint venture with Supera. Amount included in net (loss) income attributable to noncontrolling interests represents the portion of intangible asset and goodwill impairment charges related to the joint venture with Supera that are attributable to noncontrolling interests.

(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) Amount included in marketing and administrative expenses represents an additional year of expense related to the healthcare reform fee in accordance with final regulations issued in the third quarter by the Internal Revenue Service. Included in other (income) expense, net is a $396 million gain on the divestiture of certain ophthalmic products in several international markets.

(4) 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, 2014

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2d

	GAAP			Acquisition and Divestiture- Related Costs (1)		Restructuring Costs (2)		Certain Other Items (3)		Adjustment Subtotal		Non-GAAP
Sales	$	31,755										$	31,755

Costs, Expenses and Other
Materials and production	13,019			4,270		377				4,647		8,372
Marketing and administrative	8,681			153		143		193		489		8,192
Research and development	4,897			36		175				211		4,686
Restructuring costs	664					664				664		—
Other (income) expense, net	(978		)	93				(1,132	)	(1,039	)	61
Income Before Taxes	5,472			(4,552	)	(1,359	)	939		(4,972	)	10,444
Taxes on Income	865									(1,809	)(4)	2,674
Net Income	4,607									(3,163	)	7,770
Less: Net Income Attributable to Noncontrolling Interests	3			(56	)					(56	)	59
Net Income Attributable to Merck & Co., Inc.	$	4,604								(3,107	)	$	7,711
Earnings per Common Share Assuming Dilution	$	1.57										$	2.62

Average Shares Outstanding Assuming Dilution	2,942											2,942
Tax Rate	15.8		%									25.6		%

(1) Amounts included in materials and production costs reflect expenses of $3.2 billion for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as $1.1 billion of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect merger integration costs, as well as transaction and certain other costs related to business acquisitions and divestitures. Amounts included in research and development expenses represent in-process research and development (“IPR&D”) impairment charges primarily related to the company’s joint venture with Supera Farma Laboratorios S.A. (“Supera”). Amount included in other (income) expense, net is a goodwill impairment charge related to the joint venture with Supera. Amount included in net income attributable to noncontrolling interests represents the portion of intangible asset and goodwill impairment charges related to the joint venture with Supera that are attributable to noncontrolling interests.

(3) Amount included in marketing and administrative expenses represents an additional year of expense related to the healthcare reform fee in accordance with final regulations issued in the third quarter by the Internal Revenue Service. Included in other (income) expense, net is a $741 million gain related to AstraZeneca’s option exercise and a $396 million gain on the divestiture of certain ophthalmic products in several international markets.

(4) Represents the estimated tax impact on the reconciling items, including 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.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

THIRD QUARTER 2015

(AMOUNTS IN MILLIONS)

Table 3a

	Global					U.S.					International
	3Q 2015		3Q 2014		% Change	3Q 2015		3Q 2014		% Change	3Q 2015		3Q 2014		% Change
TOTAL SALES (1)	$	10,073	$	10,557	-5	$	4,749	$	4,409	8	$	5,324	$	6,148	-13
PHARMACEUTICAL	8,925		9,134		-2	4,382		3,837		14	4,543		5,297		-14

Primary Care and Women’s Health
Cardiovascular
Zetia	633		660		-4	406		361		12	228		298		-24
Vytorin	302		369		-18	122		133		-8	180		236		-24

Diabetes
Januvia	1,014		933		9	628		513		23	386		421		-8
Janumet	562		505		11	274		228		20	288		278		4

General Medicine & Women’s Health
NuvaRing	190		186		2	135		119		13	56		67		-17
Implanon / Nexplanon	176		158		11	107		93		15	69		65		6
Dulera	133		124		7	128		117		9	5		6		-25
Follistim AQ	95		97		-2	37		39		-5	57		58		-1

Hospital and Specialty
Hepatitis
PegIntron	40		84		-52			4		*	40		81		-51

HIV
Isentress	377		412		-9	204		207		-1	173		205		-16

Hospital Acute Care
Cubicin(2)	325		7		*	291					35		7		*
Cancidas	139		183		-24	6		4		57	133		179		-26
Invanz	153		141		8	89		72		23	64		69		-8
Noxafil	132		107		23	61		40		52	71		67		6
Bridion	89		90		-1						89		90		-1
Primaxin	75		91		-18	1		1		*	74		91		-19

Immunology
Remicade	442		604		-27						442		604		-27
Simponi	178		170		5						178		170		5

Oncology
Emend	141		136		4	88		80		10	53		56		-5
Keytruda	159		4		*	109		4		*	50				*
Temodar	83		88		-5	6		1		*	77		87		-11

Diversified Brands
Respiratory
Nasonex	121		261		-54	41		154		-73	80		107		-25
Singulair	201		218		-8	10		5		*	191		214		-10
Clarinex	39		49		-21	5		7		-22	34		42		-21

Other
Cozaar / Hyzaar	150		195		-23	7		6		8	143		188		-24
Arcoxia	123		132		-7						123		132		-7
Fosamax	86		114		-24	4		3		18	83		111		-25
Zocor	56		61		-9	5		5		4	51		56		-10
Propecia	41		66		-38	4		5		-15	37		61		-39

Vaccines
Gardasil / Gardasil 9	625		590		6	556		511		9	69		79		-12
ProQuad, M-M-R II and Varivax	390		421		-7	327		377		-13	64		44		45
Zostavax	179		181		-1	145		149		-3	34		32		5
RotaTeq	160		174		-8	115		126		-9	45		48		-7
Pneumovax 23	138		197		-30	103		150		-31	35		48		-26

Other Pharmaceutical (3)	1,178		1,326		-11	368		323		14	810		1,003		-19

ANIMAL HEALTH	825		885		-7	226		216		5	599		669		-10

CONSUMER CARE (4)	0		401		*	0		262		*	0		139		*

Other Revenues (5)	323		137		*	141		94		50	182		43		*

* 100% or greater

(1) Only select products are shown.

(2) 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 $99 million and $116 million on a global basis for third quarter 2015 and 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.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

SEPTEMBER YEAR-TO-DATE 2015

(AMOUNTS IN MILLIONS)

Table 3b

	Global					U.S.					International
	Sep YTD 15		Sep YTD 14		% Change	Sep YTD 15		Sep YTD 14		% Change	Sep YTD 15		Sep YTD 14		% Change
TOTAL SALES (1)	$	29,283	$	31,755	-8	$	12,907	$	12,983	-1	$	16,376	$	18,772	-13
PHARMACEUTICAL	25,755		26,672		-3	11,953		10,429		15	13,802		16,243		-15

Primary Care and Women’s Health
Cardiovascular
Zetia	1,836		1,988		-8	1,160		1,093		6	676		895		-24
Vytorin	942		1,146		-18	356		410		-13	586		736		-20

Diabetes
Januvia	2,942		2,849		3	1,777		1,553		14	1,165		1,297		-10
Janumet	1,625		1,500		8	749		676		11	877		825		6

General Medicine & Women’s Health
NuvaRing	538		531		1	373		334		12	165		198		-16
Implanon / Nexplanon	437		379		15	265		220		21	172		159		8
Dulera	383		328		17	369		312		18	15		16		-10
Follistim AQ	288		309		-7	123		103		19	164		206		-20

Hospital and Specialty
Hepatitis
PegIntron	148		300		-51			16		*	148		284		-48

HIV
Isentress	1,137		1,255		-9	603		626		-4	534		629		-15

Hospital Acute Care
Cubicin(2)	805		18		*	722					83		18		*
Cancidas	436		505		-14	19		15		26	417		491		-15
Invanz	424		390		9	235		195		20	189		195		-3
Noxafil	360		280		29	156		95		65	204		185		10
Bridion	262		245		7						262		245		7
Primaxin	228		243		-6	5		4		44	222		239		-7

Immunology
Remicade	1,398		1,815		-23						1,398		1,815		-23
Simponi	505		500		1						505		500		1

Oncology
Emend	396		402		-1	245		228		7	151		174		-13
Keytruda	352		4		*	261		4		*	90				*
Temodar	238		264		-10	6		5		23	232		259		-10

Diversified Brands
Respiratory
Singulair	658		773		-15	26		18		45	632		755		-16
Nasonex	625		830		-25	308		428		-28	317		402		-21
Clarinex	145		180		-20	17		18		-7	128		162		-21

Other
Cozaar / Hyzaar	524		614		-15	23		20		15	501		594		-16
Arcoxia	361		400		-10						361		400		-10
Fosamax	277		358		-23	10		13		-23	267		346		-23
Zocor	168		194		-14	15		15		1	153		179		-15
Propecia	133		197		-32	12		14		-19	122		183		-33

Vaccines
Gardasil / Gardasil 9	1,410		1,382		2	1,159		1,075		8	252		307		-18
ProQuad, M-M-R II and Varivax	1,096		1,027		7	936		894		5	160		133		20
Zostavax	503		479		5	402		393		2	101		86		17
RotaTeq	441		490		-10	320		357		-10	121		133		-9
Pneumovax 23	354		400		-12	250		318		-21	104		82		26

Other Pharmaceutical (3)	3,380		4,097		-18	1,051		977		8	2,328		3,120		-25

ANIMAL HEALTH	2,494		2,569		-3	643		578		11	1,850		1,992		-7

CONSUMER CARE (4)	3		1,531		*	0		1,058		*	3		473		*

Other Revenues (5)	1,031		983		5	311		919		-66	721		64		*

* 100% or greater

(1) Only select products are shown.

(2) Cubicin results for the September YTD 2015 period represent sales for the eight 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 $253 million and $291 million on a global basis for September YTD 2015 and 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. Other revenues in 2014 include $232 million of revenue recognized in connection with the sale of U.S. Saphris rights. 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.

MERCK & CO., INC.

PHARMACEUTICAL GEOGRAPHIC SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3c

	2015												2014																		% Change	% Change
	1Q			2Q			3Q			Sep YTD			1Q			2Q			3Q			Sep YTD			4Q			Full Year			3Q	Sep YTD
TOTAL PHARMACEUTICAL	$	8,266		$	8,564		$	8,925		$	25,755		$	8,451		$	9,087		$	9,134		$	26,672		$	9,370		$	36,042		-2	-3

United States	3,637			3,934			4,382			11,953			3,130			3,462			3,837			10,429			3,786			14,214			14	15
% Pharmaceutical Sales	44.0		%	45.9		%	49.1		%	46.4		%	37.0		%	38.1		%	42.0		%	39.1		%	40.4		%	39.4		%

Europe (1)	2,024			1,896			1,920			5,841			2,478			2,537			2,297			7,312			2,269			9,581			-16	-20
% Pharmaceutical Sales	24.5		%	22.1		%	21.5		%	22.7		%	29.3		%	27.9		%	25.2		%	27.4		%	24.2		%	26.6		%

Japan	627			629			564			1,820			835			859			730			2,423			965			3,389			-23	-25
% Pharmaceutical Sales	7.6		%	7.3		%	6.3		%	7.1		%	9.9		%	9.5		%	8.0		%	9.1		%	10.3		%	9.4		%

Asia Pacific	809			822			854			2,485			809			840			878			2,528			910			3,438			-3	-2
% Pharmaceutical Sales	9.8		%	9.6		%	9.6		%	9.6		%	9.6		%	9.2		%	9.6		%	9.5		%	9.7		%	9.5		%

China	318			335			353			1,005			282			309			318			909			332			1,242			11	11

Latin America	630			676			585			1,891			538			668			673			1,879			678			2,557			-13	1
% Pharmaceutical Sales	7.6		%	7.9		%	6.5		%	7.3		%	6.4		%	7.3		%	7.4		%	7.0		%	7.2		%	7.1		%

Eastern Europe/Middle East Africa	321			372			380			1,074			415			459			443			1,317			500			1,817			-14	-19
% Pharmaceutical Sales	3.9		%	4.3		%	4.3		%	4.2		%	4.9		%	5.1		%	4.9		%	4.9		%	5.3		%	5.0		%

Canada	170			167			159			496			200			218			218			636			218			854			-27	-22
% Pharmaceutical Sales	2.1		%	2.0		%	1.8		%	1.9		%	2.4		%	2.4		%	2.4		%	2.4		%	2.3		%	2.4		%

Other	48			68			81			195			46			44			58			148			44			192			40	32
% Pharmaceutical Sales	0.6		%	0.8		%	0.9		%	0.8		%	0.5		%	0.5		%	0.6		%	0.6		%	0.5		%	0.5		%

(1) Europe primarily represents all European Union countries and the European Union accession markets.

MERCK & CO., INC.

THIRD QUARTER 2015

OTHER (INCOME) EXPENSE, NET - GAAP

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 4

OTHER (INCOME) EXPENSE, NET

							SEP YTD			SEP YTD
	3Q15			3Q14			2015			2014
INTEREST INCOME	$	(68	)	$	(69	)	$	(214	)	$	(190	)
INTEREST EXPENSE	165			191			503			567
EXCHANGE LOSSES (1)	228			61			1,038			114
EQUITY INCOME FROM AFFILIATES (2)	(63		)	(24		)	(210		)	(241		)
Other, net (3)	(432		)	(325		)	(493		)	(1,228		)
TOTAL	$	(170	)	$	(166	)	$	624		$	(978	)

(1) Included in foreign exchange losses for the first nine months of 2015 is a $715 million charge recorded in the second quarter in connection with the revaluation of the company’s net monetary assets in Venezuela.

(2) Includes the performance of the company’s joint ventures and other equity method affiliates, including the Sanofi Pasteur MSD partnership, certain investment funds, as well as AstraZeneca LP until the termination of that relationship on June 30, 2014. Equity income from AstraZeneca LP was $192 million in the first nine months of 2014.

(3) Other, net in the third quarter and first nine months of 2015 includes a $250 million gain on the divestiture of certain migraine clinical development programs. Other, 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. Other, net in the first nine months of 2014 also includes a $741 million gain on AstraZeneca’s option exercise.

Attached files

Merck & Co., Inc. Reports

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