- Second-Quarter 2021 Worldwide Sales from Continuing Operations
(Excluding Organon) Were $11.4 Billion, 22% Above Second-Quarter
2020; Excluding the Impact from Foreign Exchange, Sales Grew 19%
Reflecting Ongoing Recovery from the COVID-19 Pandemic and Strong
Underlying Demand Across the Company’s Portfolio of Innovative
Products:
- KEYTRUDA Sales Grew 23% to $4.2 Billion; Excluding the Impact
from Foreign Exchange, Sales Grew 20%
- GARDASIL/GARDASIL 9 Sales Grew 88% to $1.2 Billion; Excluding
the Impact from Foreign Exchange, Sales Grew 78%
- Animal Health Sales Grew 34% to $1.5 Billion; Excluding the
Impact from Foreign Exchange, Sales Grew 27%
- Second-Quarter 2021 GAAP EPS from Continuing Operations Was
$0.48; Second-Quarter 2021 Non-GAAP EPS from Continuing Operations
Was $1.31
- Progressed Pipeline and Secured Multiple Regulatory Approvals,
Including FDA Approval of VAXNEUVANCE, Merck’s 15-Valent
Pneumococcal Conjugate Vaccine, for Adults; FDA Approvals for
Neoadjuvant/Adjuvant KEYTRUDA in Combination With Chemotherapy for
High-Risk Early-Stage Triple-Negative Breast Cancer (KEYNOTE-522)
and KEYTRUDA in Combination with Lenvima for the Treatment of
Certain Patients With Advanced Endometrial Carcinoma
(KEYNOTE-775/Study 309)
- Completed the Spinoff of Organon on June 2; Received Cash
Distribution of Approximately $9 Billion
- 2021 Continuing Operations Financial Outlook:
- Expects Full-Year 2021 Sales Growth of 12% to 14%; Narrows and
Raises Estimated Full-Year 2021 Revenue Range to be Between $46.4
Billion and $47.4 Billion, Including a Positive Impact from Foreign
Exchange of Less Than 2%
- Expects Full-Year 2021 GAAP EPS to be Between $4.24 and $4.34;
Expects Full-Year 2021 Non-GAAP EPS to be Between $5.47 and $5.57,
Including a Positive Impact from Foreign Exchange of Approximately
2%
Merck (NYSE: MRK), known as MSD outside the United States and
Canada, today announced financial results for the second quarter of
2021.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20210729005307/en/
“We are encouraged by the strong momentum of our underlying
business led by our key growth drivers as the impact of the
pandemic on our performance lessens,” said Rob Davis, chief
executive officer and president, Merck. “We are confident that we
will deliver sustained long-term growth and value creation enabled
by our strengthening discovery research engine and by working with
increased speed, urgency and agility to accelerate the delivery of
our innovations to the patients who depend on them.”
Financial Summary – Continuing Operations
The businesses that were contributed to Organon & Co.
(Organon) in the spinoff are now accounted for as discontinued
operations. Financial information presented in this release
reflects Merck’s results on a continuing operations basis, which
excludes Organon. Prior periods have been recast to conform to this
presentation. The Company previously filed a Form 8-K on June 21,
2021, which included historical financial information recast to
reflect Organon as discontinued operations.
$ in millions, except EPS amounts
Second Quarter
2021
2020
Change
Change Ex- Exchange
Sales
$11,402
$9,353
22%
19%
GAAP net income1
1,213
2,341
-48%
-47%
Non-GAAP net income that excludes certain
items1,2*
3,321
2,586
28%
27%
GAAP EPS
0.48
0.92
-48%
-48%
Non-GAAP EPS that excludes certain
items2*
1.31
1.02
28%
27%
*Refer to table on page 11.
GAAP (generally accepted accounting principles) earnings per
share assuming dilution (EPS) was $0.48 for the second quarter of
2021. GAAP EPS for the second quarter of 2021 includes a $1.7
billion charge for the acquisition of Pandion Therapeutics, Inc.
(Pandion). Non-GAAP EPS of $1.31 for the second quarter of 2021
excludes acquisition- and divestiture-related costs, restructuring
costs, income and losses from investments in equity securities, the
charge related to Pandion and certain other items. Year-to-date
results can be found in the attached tables.
Oncology Program Highlights
Merck continued to advance development programs across its
oncology portfolio, anticipating greater than 90 potential new
indications by 2028, including notable progress for KEYTRUDA
(pembrolizumab), the company’s anti-PD-1 therapy; Lynparza
(olaparib), an oral poly ADP ribose polymerase (PARP) inhibitor,
being co-developed and co-commercialized with AstraZeneca; and
Lenvima (lenvatinib mesylate), an orally available tyrosine kinase
inhibitor, being co-developed and co-commercialized with Eisai Co.,
Ltd. (Eisai).
- Merck announced the following regulatory milestones:
- U.S. Food and Drug Administration (FDA) approval of KEYTRUDA in
combination with chemotherapy as pre-operative (neoadjuvant)
treatment and then continuing as a single-agent (adjuvant)
treatment after surgery in high-risk early-stage triple-negative
breast cancer (TNBC) based on results from the pivotal Phase 3
KEYNOTE-522 trial. These results were presented during a European
Society for Medical Oncology Virtual Plenary session on July
15.
- FDA approval of KEYTRUDA in combination with trastuzumab and
chemotherapy for the first-line treatment of patients with locally
advanced unresectable or metastatic human epidermal growth factor
receptor 2 (HER2)-positive gastric or gastroesophageal junction
(GEJ) adenocarcinoma based on results from the ongoing Phase 3
KEYNOTE-811 trial. This is the first time an anti-PD-1 therapy has
been approved in combination with anti-HER2 therapy and
chemotherapy as a first-line treatment for these patients. This
accelerated approval is contingent upon verification of clinical
benefit in confirmatory trials.
- FDA approval of KEYTRUDA as monotherapy for the treatment of
patients with locally advanced cutaneous squamous cell carcinoma
(cSCC) that is not curable by surgery or radiation. This
approval was based on results from the Phase 2 KEYNOTE-629
trial.
- FDA approval of KEYTRUDA in combination with Lenvima for the
treatment of certain patients with advanced endometrial carcinoma
that is not microsatellite instability-high (MSI-H) or mismatch
repair deficient (dMMR), who have disease progression following
prior systemic therapy in any setting and are not candidates for
curative surgery or radiation. The approval was based on results
from the confirmatory pivotal Phase 3 KEYNOTE-775/Study 309
trial.
- FDA priority review for KEYTRUDA in combination with Lenvima
for the first-line treatment of patients with advanced renal cell
carcinoma (RCC) based on results from the pivotal Phase 3 CLEAR
study (KEYNOTE-581/Study 307). The Prescription Drug User Fee Act
(PDUFA) or target action date is Aug. 26.
- The FDA Oncologic Drugs Advisory Committee voted against
maintaining accelerated approval of KEYTRUDA for the third-line
treatment of certain patients with gastric cancer. Merck
announced a voluntary withdrawal of the accelerated approval
indication for KEYTRUDA for the treatment of patients with
recurrent locally advanced or metastatic gastric or GEJ
adenocarcinoma with disease progression on or after
platinum-containing chemotherapy and at least one other prior line
of therapy. As agreed with the FDA, Merck will initiate the
withdrawal in Jan. 2022.
- European Commission (EC) approval of KEYTRUDA in combination
with platinum- and fluoropyrimidine-based chemotherapy for the
first-line treatment of certain patients with locally advanced
unresectable or metastatic carcinoma of the esophagus or
HER2-negative GEJ adenocarcinoma in adults whose tumors express
PD-L1 (CPS>10), based on the Phase
3 KEYNOTE-590 trial.
- Chinese National Medical Products Administration approval of
Lynparza as monotherapy for the treatment of adult patients with
germline or somatic BRCA-mutated metastatic
castration-resistant prostate cancer who have progressed following
prior treatment that included a new hormonal agent (abiraterone,
enzalutamide), based on data from the Phase 3 PROfound trial.
- Merck provided additional data presentations including:
- Positive top-line overall survival (OS) results for the Phase 3
KEYNOTE-355 study evaluating KEYTRUDA in combination with
chemotherapy in patients with untreated metastatic triple-negative
breast cancer whose tumors expressed PD-L1 (CPS>10). Data will be submitted to global health
authorities and will be presented at an upcoming medical
meeting.
- Results from the pivotal Phase 3 KEYNOTE-564 trial for the
adjuvant treatment of certain patients with RCC at the 2021
American Society of Clinical Oncology (ASCO) Annual Meeting. In the
study, KEYTRUDA given after surgery demonstrated a statistically
significant and clinically meaningful reduction in the risk of
disease recurrence or death compared to placebo. Results are being
submitted to global regulatory authorities and the trial will
continue to evaluate OS, a key secondary endpoint.
- Results from the pivotal Phase 3 KEYNOTE-826 trial
investigating KEYTRUDA in combination with chemotherapy with or
without bevacizumab, confirming the trial met its dual primary
endpoints of OS and progression-free survival (PFS) in the
first-line treatment of patients with persistent, recurrent or
metastatic cervical cancer regardless of PD-L1 status. Results will
be presented at an upcoming medical meeting and will be submitted
to regulatory authorities.
- Initial results presented by Merck and AstraZeneca from the
Phase 3 OlympiA trial at the 2021 ASCO Annual Meeting, in which
Lynparza demonstrated a statistically significant improvement in
its primary endpoint of invasive disease-free survival versus
placebo in the adjuvant treatment of patients with germline BRCA1/2
mutations and HER2-negative early breast cancer. Results will be
submitted to global regulatory authorities and the trial will
continue to assess OS as a secondary endpoint.
Vaccines Highlights
- Merck announced the FDA approval of VAXNEUVANCE (15-valent
Pneumococcal Conjugate Vaccine) for active immunization for the
prevention of invasive disease caused by Streptococcus pneumoniae
serotypes 1, 3, 4, 5, 6A, 6B, 7F, 9V, 14, 18C, 19A, 19F, 22F, 23F
and 33F in adults 18 years of age and older.
- Merck presented new data from the pivotal Phase 3 PNEU-AGE
study of VAXNEUVANCE compared with a 13-valent pneumococcal
conjugate vaccine in adults 50 years of age and older at the
European Congress of Clinical Microbiology & Infectious
Diseases (ECCMID) 2021.
- Merck announced VAXNEUVANCE met its primary immunogenicity and
safety endpoints in two trials from its Phase 3 pediatric clinical
program. Plans are on track for submission of a supplemental
regulatory licensure application to the FDA for use in children
before the end of the year.
HIV Highlight
- Merck announced results from an ongoing Phase 2a clinical trial
evaluating the safety, tolerability and pharmacokinetics of six
monthly oral doses, over 24 weeks, of islatravir, the company’s
investigational nucleoside reverse transcriptase translocation
inhibitor, versus placebo for pre-exposure prophylaxis (PrEP) of
HIV-1 infection in adults at low risk of contracting HIV-1. These
data, which support the safety profile of an oral islatravir PrEP
regimen through 24 weeks versus placebo, were shared as a
late-breaking oral presentation during the virtual 11th
International AIDS Society Conference on HIV Science.
Other Highlights
- The EC granted marketing authorization in the European Union
for Verquvo (vericiguat) for the treatment of symptomatic chronic
heart failure in adult patients with reduced ejection fraction who
are stabilized after a recent decompensation event requiring
intravenous therapy. Verquvo is being jointly developed by Merck
and Bayer AG.
- BRIDION (sugammadex) Injection 100 mg/mL was approved by the
FDA for the reversal of neuromuscular blockade induced by
rocuronium bromide and vecuronium bromide in pediatric patients
aged 2 years and older undergoing surgery.
- The FDA has informed Merck of its decision to extend the goal
date for the company’s New Drug Application for gefapixant, an
investigational, orally administered, selective P2X3 receptor
antagonist, for the treatment of refractory chronic cough or
unexplained chronic cough in adults, to provide time for a full
review of the submission. The extended PDUFA action date is March
21, 2022.
COVID-19 Highlights
- In April, Merck and Ridgeback Biotherapeutics LP announced
top-line data from the Phase 2 portion of the Phase 2/3 trials
studying molnupiravir (MK-4482), which showed that it inhibits the
replication of multiple RNA viruses including SARS-CoV-2, the
causative agent of COVID-19. Data were presented at ECCMID in July.
Molnupiravir is now being evaluated in a Phase 3 clinical trial,
the MOVe-OUT study, for the treatment of non-hospitalized patients
with laboratory-confirmed COVID-19 and at least one risk factor
associated with poor disease outcomes.
- In April, Merck announced that the company entered into
non-exclusive voluntary licensing agreements for molnupiravir with
established Indian generic manufacturers. Merck entered into these
agreements to accelerate availability of molnupiravir in India and
in other low- and middle-income countries following approvals or
emergency authorization by local regulatory agencies.
- In June, Merck announced it entered into a procurement
agreement with the United States government for molnupiravir.
Second-Quarter Revenue Performance
The following table reflects sales of the company’s top
pharmaceutical products, as well as sales of Animal Health
products.
$ in millions
Second Quarter
2021
2020
Change
Change Ex- Exchange
Total Sales
$11,402
$9,353
22%
19%
Pharmaceutical
9,980
8,178
22%
18%
KEYTRUDA
4,176
3,388
23%
20%
JANUVIA / JANUMET
1,261
1,344
-6%
-10%
GARDASIL / GARDASIL 9
1,234
656
88%
78%
PROQUAD, M-M-R II and VARIVAX
516
378
36%
35%
BRIDION
387
224
72%
67%
Lynparza*
ROTATEQ
248
208
178
168
39%
23%
34%
19%
SIMPONI
202
191
5%
-3%
ISENTRESS / ISENTRESS HD Lenvima*
192
181
196
151
-2%
19%
-5%
15%
Animal Health
1,472
1,101
34%
27%
Livestock
820
647
27%
20%
Companion Animals
651
453
44%
38%
Other Revenues**
(50)
74
-167%
-1%
*Alliance revenue for this
product represents Merck’s share of profits, which are product
sales net of cost of sales and commercialization costs.
**Other revenues are comprised
primarily of third-party manufacturing sales and miscellaneous
corporate revenues, including revenue-hedging activities. The
revenue-hedging activities resulted in negative revenue in the
second quarter of 2021.
Pharmaceutical Revenue
Second-quarter pharmaceutical sales increased 22% to $10.0
billion. Excluding the favorable effect of foreign exchange, sales
grew by 18%, reflecting ongoing recovery from the COVID-19 pandemic
and strong underlying demand. The COVID-19 pandemic unfavorably
affected sales in the second quarter of 2021 but to a lesser extent
than in the second quarter of 2020. The estimated net favorable
benefit of the ongoing COVID-19 pandemic recovery to year-over-year
sales growth was approximately $900 million.
Growth in oncology was largely driven by higher sales of
KEYTRUDA, which rose 23% to $4.2 billion in the quarter. Global
sales growth of KEYTRUDA reflects continued strong momentum from
the non-small-cell lung cancer indications as well as continued
uptake in other indications, including adjuvant melanoma, RCC,
bladder, head and neck squamous cell carcinoma and MSI-H cancers.
Also contributing to higher sales in oncology was a 39% rise in
Lynparza alliance revenue, reflecting continued uptake in approved
indications in the United States, Europe and China, as well as a
19% increase in Lenvima alliance revenue, driven primarily by
higher demand in China.
Growth in vaccines for the second quarter was primarily driven
by higher combined sales of GARDASIL [Human Papillomavirus
Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and
GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant).
Second-quarter 2021 GARDASIL/GARDASIL 9 sales rebounded to $1.2
billion, growing 88%, primarily due to the ongoing COVID-19
pandemic recovery and strong underlying demand in the United
States, as well as continued market uptake in certain ex-U.S.
markets, including China, which also benefitted from increased
supply.
Combined sales of pediatric vaccines VARIVAX (Varicella Virus
Vaccine Live), a vaccine to help prevent chickenpox; PROQUAD
(Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a
combination vaccine to help protect against measles, mumps, rubella
and varicella; and M-M-R II (Measles, Mumps and Rubella Virus
Vaccine Live), a vaccine to help prevent measles, mumps and
rubella, for second-quarter 2021 rose 36% to $516 million driven
primarily by the ongoing market recovery from the COVID-19 pandemic
in the United States.
Growth in hospital acute care reflects higher demand globally
for BRIDION (sugammadex) Injection 100 mg/mL, a medicine for the
reversal of neuromuscular blockade induced by rocuronium bromide or
vecuronium bromide in adults and pediatric patients aged 2 years
and older undergoing surgery, which rose 72% to $387 million
attributable in part to the ongoing COVID-19 pandemic recovery; and
the continued uptake of PREVYMIS (letermovir), a medicine for
prophylaxis (prevention) of cytomegalovirus (CMV) infection and
disease in adult CMV-seropositive recipients of an allogeneic
hematopoietic stem cell transplant. Growth in hospital acute care
was partially offset by the suspension of sales of ZERBAXA
(ceftolozane and tazobactam) for injection, a combination
cephalosporin antibacterial and beta-lactamase inhibitor for the
treatment of adults with certain bacterial infections, following a
product recall in the fourth quarter of 2020.
Sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and
metformin HCI) decreased 6% in the quarter to $1.3 billion
reflecting continued pricing pressure in the United States,
partially offset by higher demand in certain international
markets.
Animal Health Revenue
Animal Health sales totaled $1.5 billion for the second quarter
of 2021, an increase of 34% compared with the second quarter of
2020. Excluding the favorable effect from foreign exchange, Animal
Health sales grew 27%. Sales growth reflects higher demand globally
for companion animal products, driven by companion animal vaccines,
as well as growth in parasiticide lines of products, including
BRAVECTO (fluralaner). Sales growth in livestock products reflects
higher demand for ruminant, swine and poultry products, as well as
higher demand globally for Animal Health Intelligence products. The
COVID-19 pandemic unfavorably affected Animal Health sales by
approximately $100 million in the second quarter of 2020 but had no
impact in the second quarter of 2021.
Second-Quarter Expense, EPS and Related Information
The tables below present selected expense information.
$ in millions
Second-Quarter 2021
GAAP
Acquisition- and Divestiture-
Related Costs3
Restructuring Costs
(Income) Loss from Investments
in Equity Securities
Certain Other Items
Non- GAAP2
Cost of sales
$3,104
$345
$38
$-
$37
$2,684
Selling, general and administrative
2,281
25
2
-
-
2,254
Research and development
4,321
16
6
-
1,765
2,534
Restructuring costs
82
-
82
-
-
-
Other (income) expense, net
(103)
117
-
(258)
-
38
Second-Quarter 2020
Cost of sales
$2,747
$580
$25
$-
$-
$2,142
Selling, general and administrative
2,085
44
11
-
-
2,030
Research and development
2,085
(63)
31
-
-
2,117
Restructuring costs
82
-
82
-
-
-
Other (income) expense, net
(387)
63
-
(511)
(16)
77
GAAP Expense, EPS and Related Information
Gross margin was 72.8% for the second quarter of 2021 compared
to 70.6% for the second quarter of 2020. The increase reflects
lower acquisition- and divestiture-related costs and favorable
product mix, partially offset by the unfavorable effects of foreign
exchange, pricing pressure and higher manufacturing costs.
Selling, general and administrative expenses were $2.3 billion
in the second quarter of 2021, an increase of 9% compared to the
second quarter of 2020. The increase primarily reflects higher
promotion and administrative costs, as well as the unfavorable
effects of foreign exchange.
Research and development expenses were $4.3 billion in the
second quarter of 2021 compared with $2.1 billion in the second
quarter of 2020. The increase was primarily driven by a $1.7
billion charge for the acquisition of Pandion, as well as higher
expenses related to clinical development, and increased investment
in discovery research and early drug development.
Other (income) expense, net, was $103 million of income in the
second quarter of 2021 compared to $387 million of income in the
second quarter of 2020, primarily reflecting lower income from
investments in equity securities in 2021 compared with 2020.
The effective income tax rate of 29.3% for the second quarter of
2021 reflects no tax benefit recognized on the Pandion acquisition
charge.
GAAP EPS was $0.48 for the second quarter of 2021 compared with
$0.92 for the second quarter of 2020.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 76.5% for the second quarter of 2021
compared to 77.1% for the second quarter of 2020. The decrease in
non-GAAP gross margin reflects the unfavorable effects of foreign
exchange, pricing pressure and higher manufacturing costs,
partially offset by favorable product mix.
Non-GAAP selling, general and administrative expenses were $2.3
billion in the second quarter of 2021, an increase of 11% compared
to the second quarter of 2020. The increase primarily reflects
higher promotion and administrative costs, as well as the
unfavorable effects of foreign exchange.
Non-GAAP R&D expenses were $2.5 billion in the second
quarter of 2021, a 20% increase compared to the second quarter of
2020. The increase primarily reflects higher expenses related to
clinical development, as well as increased investment in discovery
research and early drug development.
Non-GAAP other (income) expense, net, was $38 million of expense
in the second quarter of 2021 compared to $77 million of expense in
the second quarter of 2020.
The non-GAAP effective income tax rate was 14.6% for the second
quarter of 2021.
Non-GAAP EPS was $1.31 for the second quarter of 2021 compared
with $1.02 for the second quarter of 2020.
A reconciliation of GAAP to non-GAAP net income and EPS is
provided in the table that follows.
$ in millions, except EPS amounts
Second Quarter
2021
2020
EPS
GAAP EPS
$0.48
$0.92
Difference
0.83
0.10
Non-GAAP EPS that excludes items listed
below2
$1.31
$1.02
Net Income
GAAP net income1
$1,213
$2,341
Difference
2,108
245
Non-GAAP net income that excludes items
listed below1,2
$3,321
$2,586
Decrease (Increase) in Net Income Due
to Excluded Items:
Acquisition- and divestiture-related
costs3
$503
$624
Restructuring costs
128
149
(Income) loss from investments in equity
securities
(258)
(511)
Charge for the acquisition of Pandion
1,704
-
Charge for the discontinuation of COVID-19
development programs
37
-
Other
61
(16)
Net decrease (increase) in income before
taxes
2,175
246
Income tax (benefit) expense4
(67)
(1)
Decrease (increase) in net income
$2,108
$245
Financial Outlook
Merck continues to experience strong global underlying demand
across its business. Consequently, at mid-July 2021 exchange rates,
Merck now expects sales growth of 12% to 14% in 2021 with full-year
2021 revenue estimated to be between $46.4 billion and $47.4
billion, including a positive impact from foreign exchange of less
than 2%.
Merck continues to believe that global health systems and
patients have largely adapted to the impacts of COVID-19 disease,
and that while certain negative effects will persist, the trend
will continue to improve. Merck now estimates that the pandemic
will have a net unfavorable impact to 2021 revenues of less than
3%, all of which relates to the pharmaceutical segment.
Merck expects full-year 2021 GAAP EPS to be between $4.24 and
$4.34.
Merck expects full-year 2021 non-GAAP EPS to be between $5.47
and $5.57, including a positive impact from foreign exchange of
approximately 2%. The non-GAAP range excludes acquisition- and
divestiture-related costs, costs related to restructuring programs,
income and losses from investments in equity securities and certain
other items.
For full-year 2021, Merck continues to expect the pandemic will
have a negligible impact on operating expenses, as spending on the
development of its COVID-19 antiviral program is expected to offset
the favorable impact of lower spending in other areas due to the
COVID-19 pandemic.
Neither the sales nor the EPS guidance ranges provided above
include the impact of the potential launch of Merck’s COVID-19
antiviral drug candidate, molnupiravir.
The following table summarizes the company’s full-year 2021
financial guidance.
GAAP
Non-GAAP2
Revenue
$46.4 to $47.4 billion
$46.4 to $47.4 billion*
Operating expenses
Lower than 2020 by a mid-single
digit rate
Higher than 2020 by a high-single
digit rate
Effective tax rate
14.5% to 15.5%
14.5% to 15.5%
EPS**
$4.24 to $4.34
$5.47 to $5.57
*The company does not have any
non-GAAP adjustments to revenue.
**EPS guidance for 2021 assumes a
share count (assuming dilution) of approximately 2.53 billion
shares.
A reconciliation of anticipated 2021 GAAP EPS to non-GAAP EPS
and the items excluded from non-GAAP EPS are provided in the table
below.
$ in millions, except EPS amounts
Full-Year 2021
GAAP EPS
$4.24 to $4.34
Difference
$1.23
Non-GAAP EPS that excludes items listed
below2
$5.47 to $5.57
Acquisition- and divestiture-related
costs
Restructuring costs
(Income) loss from investments in equity
securities
$2,100
700
(1,200)
Charge for the discontinuation of COVID-19
development programs
225
Charge for the acquisition of Pandion
1,704
Other
61
Net decrease (increase) in income before
taxes
3,590
Income tax (benefit) expense4
(475)
Decrease (increase) in net income
$3,115
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
https://investors.merck.com/events-and-presentations/default.aspx.
Institutional investors and analysts can participate in the call by
dialing (833) 353-0277 or (469) 886-1947 and using ID code number
5951886. Members of the media are invited to monitor the call by
dialing (833) 353-0277 or (469) 886-1947 and using ID code number
5951886. Journalists who wish to ask questions are requested to
contact a member of Merck’s Media Relations team at the conclusion
of the call.
About Merck
For 130 years, Merck, known as MSD outside of the United States
and Canada, has been inventing for life, bringing forward medicines
and vaccines for many of the world’s most challenging diseases in
pursuit of our mission to save and improve lives. We demonstrate
our commitment to patients and population health by increasing
access to health care through far-reaching policies, programs and
partnerships. Today, Merck continues to be at the forefront of
research to prevent and treat diseases that threaten people and
animals – including cancer, infectious diseases such as HIV and
Ebola and emerging animal diseases – as we aspire to be the premier
research-intensive biopharmaceutical company in the world. For more
information, visit www.merck.com and connect with us on Twitter,
Facebook, Instagram, YouTube and LinkedIn.
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 the global outbreak of novel coronavirus disease
(COVID-19); 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 2020
Annual Report on Form 10-K and the company’s other filings with the
Securities and Exchange Commission (SEC) available at the SEC’s
Internet site (www.sec.gov).
1
Net income attributable to Merck & Co., Inc.
2
Merck is providing certain 2021 and 2020 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
results and permits investors to understand how management assesses
performance. Management uses these measures internally for planning
and forecasting purposes and to measure the performance of the
company along with other metrics. In addition, senior management’s
annual compensation is derived in part using non-GAAP pretax
income. This information should be considered in addition to, but
not as a substitute for or superior to, information prepared in
accordance with GAAP. For a description of the non-GAAP
adjustments, see Table 2a attached to this release.
3
Includes expenses for the amortization of intangible assets
and purchase accounting adjustments to inventories recognized as a
result of acquisitions, intangible asset impairment charges and
expense or income related to changes in the estimated fair value
measurement of liabilities for contingent consideration. Also
includes integration, transaction and certain other costs related
to acquisitions and divestitures.
4
Includes the estimated tax impact on the reconciling items.
In addition, the amount for full-year 2021 includes a $207 million
net tax benefit related to the settlement of certain federal income
tax matters.
MERCK & CO., INC. CONSOLIDATED STATEMENT
OF INCOME - GAAP (AMOUNTS IN MILLIONS, EXCEPT PER SHARE
FIGURES) (UNAUDITED) Table 1 On June 2,
2021, Merck completed the spinoff of products from its women’s
health, biosimilars and established brands businesses into a new,
independent, publicly traded company named Organon & Co.
(Organon) through a distribution of Organon’s publicly traded stock
to company shareholders. The historical results of the women’s
health, biosimilars and established brands businesses that were
contributed to Organon in the spin-off are excluded from sales and
expenses below and reflected as discontinued operations in the
company’s Consolidated Statements of Income provided below.
GAAP % Change GAAP
% Change
2Q21
2Q20
June YTD 2021 June YTD 2020
Sales
$
11,402
$
9,353
22%
$
22,029
$
19,641
12%
Costs, Expenses and Other
Cost of sales
3,104
2,747
13%
6,303
5,576
13%
Selling, general and administrative
2,281
2,085
9%
4,468
4,276
4%
Research and development
4,321
2,085
*
6,732
4,260
58%
Restructuring costs (1)
82
82
0%
380
152
*
Other (income) expense, net
(103
)
(387
)
-73%
(558
)
(325
)
72%
Income from Continuing Operations Before Taxes
1,717
2,741
-37%
4,704
5,702
-18%
Income Tax Provision
503
396
741
891
Net Income from Continuing Operations
1,214
2,345
-48%
3,963
4,811
-18%
Less: Net Income (Loss) Attributable to Noncontrolling Interests
1
4
5
(1
)
Net Income from Continuing Operations Attributable to Merck &
Co., Inc.
$
1,213
$
2,341
-48%
$
3,958
$
4,812
-18%
Income from Discontinued Operations, Net of Taxes and
AmountsAttributable to Noncontrolling Interests
$
332
$
661
-50%
$
766
$
1,409
-46%
Net Income Attributable to Merck & Co., Inc.
$
1,545
$
3,002
-49%
$
4,724
$
6,221
-24%
Basic Earnings per Common Share Attributable to Merck & Co.,
Inc.Common Shareholders:
Income from Continuing Operations
$
0.48
$
0.93
-48%
$
1.56
$
1.90
-18%
Income from Discontinued Operations
$
0.13
$
0.26
-50%
$
0.30
$
0.56
-46%
Net Income
$
0.61
$
1.19
-49%
$
1.87
$
2.46
-24%
Earnings per Common Share Assuming Dilution Attributable toMerck
& Co., Inc. Common Shareholders:
Income from Continuing Operations
$
0.48
$
0.92
-48%
$
1.56
$
1.89
-17%
Income from Discontinued Operations
$
0.13
$
0.26
-50%
$
0.30
$
0.55
-45%
Net Income
$
0.61
$
1.18
-48%
$
1.86
$
2.45
-24%
Average Shares Outstanding
2,533
2,527
2,532
2,531
Average Shares Outstanding Assuming Dilution
2,540
2,536
2,540
2,542
Tax Rate from Continuing Operations (2)
29.3
%
14.4
%
15.8
%
15.6
%
* 100% or greater (1) Represents separation and other related costs
associated with restructuring activities under the company's formal
restructuring programs. (2) The effective income tax
rates for the second quarter and first six months of 2021 reflect
the unfavorable impact of a charge for the acquisition of Pandion
Therapeutics, Inc. for which no tax benefit was recognized.
Additionally, the effective income tax rate for the first six
months of 2021 reflects a net tax benefit of $207 million related
to the settlement of certain federal income tax
matters.
MERCK & CO., INC.
SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2021 GAAP TO
NON-GAAP RECONCILIATION - CONTINUING OPERATIONS
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED) Table 2a
The table below reflects a reconciliation of GAAP to
non-GAAP financial information on a continuing operations
basis. As Organon results are reflected within discontinued
operations, they are excluded from the financial information
provided below.
GAAP
Acquisition and Divestiture-Related Costs (1)
Restructuring Costs (2) (Income) Loss fromInvestments in
EquitySecurities Certain Other Items Adjustment
Subtotal Non-GAAP Second Quarter
Cost of sales
$
3,104
345
38
37
(3)
420
$
2,684
Selling, general and administrative
2,281
25
2
27
2,254
Research and development
4,321
16
6
1,765
(4)
1,787
2,534
Restructuring costs
82
82
82
-
Other (income) expense, net
(103)
117
(258)
(141)
38
Income From Continuing Operations Before Taxes
1,717
(503)
(128)
258
(1,802)
(2,175)
3,892
Income Tax Provision (Benefit)
503
(98)
(5)
(15)
(5)
57
(5)
(11)
(5)
(67)
570
Net Income from Continuing Operations
1,214
(405)
(113)
201
(1,791)
(2,108)
3,322
Net Income from Continuing Operations Attributable toMerck
& Co., Inc.
1,213
(405)
(113)
201
(1,791)
(2,108)
3,321
Earnings per Common Share Assuming Dilution fromContinuing
Operations
$
0.48
(0.16)
(0.04)
0.08
(0.71)
(0.83)
$
1.31
Tax Rate
29.3%
14.6%
June YTD
Cost of sales
$
6,303
842
65
225
(3)
1,132
$
5,171
Selling, general and administrative
4,468
35
4
39
4,429
Research and development
6,732
34
13
1,765
(4)
1,812
4,920
Restructuring costs
380
380
380
-
Other (income) expense, net
(558)
89
(819)
(730)
172
Income From Continuing Operations Before Taxes
4,704
(1,000)
(462)
819
(1,990)
(2,633)
7,337
Income Tax Provision (Benefit)
741
(187)
(5)
(56)
(5)
180
(5)
(260)
(5)
(323)
1,064
Net Income from Continuing Operations
3,963
(813)
(406)
639
(1,730)
(2,310)
6,273
Net Income from Continuing Operations Attributable toMerck
& Co., Inc.
3,958
(813)
(406)
639
(1,730)
(2,310)
6,268
Earnings per Common Share Assuming Dilution fromContinuing
Operations
$
1.56
(0.32)
(0.16)
0.25
(0.68)
(0.91)
$
2.47
Tax Rate
15.8%
14.5%
Only the line items that are affected by non-GAAP
adjustments are shown. Merck is providing certain 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
results as it permits investors to understand how management
assesses performance. Management uses these measures internally for
planning and forecasting purposes and to measure the performance of
the company along with other metrics. In addition, senior
management’s annual compensation is derived in part using non-GAAP
pretax income. This information should be considered in addition
to, but not as a substitute for or superior to, information
prepared in accordance with GAAP. (1) Amounts included
in cost of sales primarily reflect expenses for the amortization of
intangible assets. Amounts included in selling, general and
administrative expenses reflect acquisition and divestiture-related
costs. Amounts included in research and development expenses
primarily reflect expenses for the amortization of intangible
assets. Amounts included in other (income) expense, net, for
the second quarter and six months period primarily reflect an
increase in the estimated fair value measurement of liabilities for
contingent consideration related to the termination of the
Sanofi-Pasteur MSD joint venture and a loss on a forward exchange
contract entered into in conjunction with the Organon
spinoff. Amount included in other (income) expense, net, for
the six month period is partially offset by royalty income related
to the termination of the Sanofi-Pasteur MSD joint venture.
(2) Amounts primarily include employee separation costs and
accelerated depreciation associated with facilities to be closed or
divested related to activities under the company's formal
restructuring programs. (3) Represents charges for the
discontinuation of COVID-19 development programs. (4)
Includes a $1.7 billion charge for the acquisition of Pandion
Therapeutics, Inc. (5) Represent the estimated tax
impacts on the reconciling items based on applying the statutory
rate of the originating territory of the non-GAAP
adjustments. Certain other items for the six month period
also includes a $207 million net tax benefit related to the
settlement of certain federal income tax matters.
MERCK &
CO., INC. FRANCHISE / KEY PRODUCT SALES - CONTINUING
OPERATIONS (AMOUNTS IN MILLIONS)
(UNAUDITED) Table 3
2021
2020
2Q June YTD
1Q 2Q June
YTD 1Q 2Q
June YTD 3Q
4Q Full Year Nom %
Ex-Exch % Nom
% Ex-Exch %
TOTAL SALES (1)
$10,627
$11,402
$22,029
$10,288
$9,353
$19,641
$10,929
$10,948
$41,518
22
19
12
10
PHARMACEUTICAL
9,238
9,980
19,218
8,905
8,178
17,083
9,714
9,813
36,610
22
18
12
9
Oncology
Keytruda
3,899
4,176
8,076
3,284
3,388
6,672
3,715
3,993
14,380
23
20
21
18
Alliance Revenue – Lynparza (2)
228
248
475
145
178
323
196
206
725
39
34
47
42
Alliance Revenue – Lenvima (2)
130
181
310
128
151
279
142
158
580
19
15
11
8
Vaccines (3)
Gardasil / Gardasil 9
917
1,234
2,151
1,097
656
1,753
1,187
998
3,938
88
78
23
17
ProQuad / M-M-R II / Varivax
449
516
965
435
378
813
576
488
1,878
36
35
19
17
Pneumovax 23
171
152
323
256
117
373
375
339
1,087
30
27
-13
-16
RotaTeq
158
208
366
222
168
391
210
196
797
23
19
-6
-8
Vaqta
34
56
90
60
28
88
51
31
170
101
96
2
-
Hospital Acute Care
Bridion
340
387
727
299
224
524
320
355
1,198
72
67
39
35
Prevymis
82
93
174
60
63
123
77
80
281
47
41
42
36
Noxafil
67
66
133
94
73
168
79
82
329
-10
-14
-21
-24
Primaxin
65
60
125
51
64
115
74
62
251
-6
-14
8
-
Cancidas
57
54
111
55
43
98
50
65
213
24
17
13
8
Invanz
57
48
104
64
43
108
51
53
211
10
3
-3
-5
Zerbaxa
(8)
(1)
(9)
37
32
69
43
19
130
-104
-104
-113
-113
Immunology
Simponi
214
202
416
215
191
406
209
223
838
5
-3
2
-6
Remicade
85
75
160
88
73
160
82
88
330
3
-3
-
-6
Neuroscience
Belsomra
79
78
157
79
84
163
81
83
327
-7
-6
-4
-5
Virology
Isentress / Isentress HD
209
192
401
245
196
441
205
211
857
-2
-5
-9
-11
Cardiovascular
Alliance Revenue - Adempas/Verquvo (4)
74
74
149
53
79
133
83
65
281
-7
13
12
23
Adempas (5)
55
74
129
56
57
113
55
53
220
29
23
15
7
Diabetes (6)
Januvia
809
784
1,593
774
854
1,628
821
857
3,306
-8
-11
-2
-5
Janumet
486
477
962
503
490
993
506
472
1,971
-3
-8
-3
-7
Other Pharmaceutical (7)
581
546
1,130
605
548
1,149
526
636
2,312
-
-5
-2
-6
ANIMAL
HEALTH
1,418
1,472
2,890
1,214
1,101
2,314
1,220
1,168
4,703
34
27
25
21
Livestock
819
821
1,640
739
648
1,386
758
794
2,939
27
20
18
15
Companion Animals
599
651
1,250
475
453
928
462
374
1,764
44
38
35
31
Other Revenues
(8)
(29)
(50)
(79)
169
74
244
(5)
(33)
205
-167
-1
-132
-15
Sum of quarterly amounts may not equal year-to-date amounts
due to rounding. (1) Only select products are
shown. (2)
Alliance Revenue represents Merck’s share of profits, which are
product sales net of cost of sales and commercialization
costs. (3)
Total Vaccines sales were $1,809 million and $2,293 million in the
first and second quarter of 2021, respectively, and $2,155 million,
$1,418 million, $2,521 million and $2,163 million in the first,
second, third and fourth quarters of 2020, respectively. (4)
Alliance Revenue represents Merck's share of profits from sales in
Bayer's marketing territories, which are product sales net of cost
of sales and commercialization costs. (5) Net product sales in
Merck's marketing
territories. (6)
Total Diabetes sales were $1,363 million and $1,330 million in the
first and second quarter of 2021, respectively, and $1,353 million,
$1,418 million, $1,405 million and $1,412 million in the first,
second, third and fourth quarters of 2020, respectively. (7)
Includes Pharmaceutical products not individually shown
above. (8) Other Revenues are comprised primarily of
third-party manufacturing sales and miscellaneous corporate
revenues, including revenue hedging activities.
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