Merck Announces Full-Year and Fourth-Quarter 2012 Financial Results
Merck Announces Full-Year and Fourth-Quarter 2012 Financial Results
* 2012 Full-Year Non-GAAP EPS of $3.82, Excluding Certain Items; GAAP EPS of
$2.16; Fourth-Quarter Non-GAAP EPS of $0.83, Excluding Certain Items; GAAP
EPS of $0.46
* 2012 Full-Year Worldwide Sales Were $47.3 Billion, a Decrease of 2
Percent, Including a 3 Percent Unfavorable Impact from Foreign Exchange;
Fourth-Quarter Worldwide Sales Were $11.7 Billion, a Decline of 5 Percent,
Including a 2 Percent Unfavorable Impact from Foreign Exchange
* Full-Year and Fourth-Quarter Double-Digit Global Sales Growth for JANUVIA,
JANUMET, GARDASIL, VICTRELIS and ZOSTAVAX Offset the Decline in SINGULAIR
Sales Following Patent Expiry in the United States
* Provides Update on Odanacatib Program; Now Anticipates Filing in 2014
* 2013 Full-Year Non-GAAP EPS Target of $3.60 to $3.70, Excluding Certain
Items; GAAP EPS Range of $2.03 to $2.26
Business Wire
WHITEHOUSE STATION, N.J. -- February 1, 2013
Merck (NYSE: MRK), known as MSD outside the United States and Canada, today
announced financial results for the fourth quarter and full year of 2012.
$ in millions, except EPS Fourth Fourth Year Ended Year Ended
amounts Quarter Quarter Dec. 31, Dec. 31,
2012 2011 2012 2011
Sales $11,738 $12,294 $47,267 $48,047
GAAP EPS 0.46 0.49 2.16 2.02
Non-GAAP EPS that excludes items 0.83 0.97 3.82 3.77
listed below^1
GAAP Net Income^2 1,401 1,512 6,661 6,272
Non-GAAP Net Income that 2,540 2,978 11,743 11,697
excludes items listed below ^1,2
Non-GAAP (generally accepted accounting principles) earnings per share (EPS)
for the fourth quarter of $0.83 and $3.82 for the full year of 2012 exclude
acquisition-related costs and restructuring costs.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the
tables that follow.
$ in millions, except EPS amounts Fourth Quarter Year Ended
2012 2011 Dec. 31, Dec. 31,
2012 2011
EPS
GAAP EPS $0.46 $0.49 $2.16 $2.02
Difference^3 0.37 0.48 1.66 1.75
Non-GAAP EPS that excludes items $0.83 $0.97 $3.82 $3.77
listed below^1
Net Income
GAAP net income^2 $1,401 $1,512 $6,661 $6,272
Difference 1,139 1,466 5,082 5,425
Non-GAAP net income that excludes $2,540 $2,978 $11,743 $11,697
items listed below^1,2
Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition-related costs^4 $1,298 $1,479 $5,344 $5,939
Restructuring costs 254 692 999 1,911
Arbitration settlement charge – – – 500
Other^5 – 6 – (258)
Net decrease (increase) in income 1,552 2,177 6,343 8,092
before taxes
Income tax (benefit) expense^6 (413) (711) (1,261) (2,667)
Decrease (increase) in net income $1,139 $1,466 $5,082 $5,425
"Merck overcame significant challenges last year and delivered strong results
in 2012 by successfully growing our businesses, expanding geographically and
reducing our expenses. As we begin 2013, we are well-positioned to further
execute on our business strategy,” said Kenneth C. Frazier, chairman and chief
executive officer of Merck. “We remain committed to investing for future
growth and innovation to deliver value over the long term. Merck is rapidly
advancing many compounds that are potentially first-in-class or best-in-class.
Additionally, we will continue to pursue external opportunities that have the
potential to deliver value to the company and its shareholders.”
Select Revenue Highlights
Full-year 2012 worldwide sales were $47.3 billion, a decrease of 2 percent,
which includes a 3 percent negative impact from foreign exchange, compared to
full-year 2011. Worldwide sales were $11.7 billion for the fourth quarter of
2012, a decrease of 5 percent, which includes a 2 percent negative impact from
foreign exchange compared with the fourth quarter of 2011. Strong sales growth
of key products helped offset the impact of the August 2012 loss of market
exclusivity for SINGULAIR (montelukast sodium) in the United States.
The following table reflects sales of the company's top pharmaceutical
products, as well as total sales of animal health and consumer care products.
Year Year
Fourth Fourth Ended Ended
Quarter Quarter Change Dec. 31, Dec. 31,
$ in millions 2012 2011 2012 2011
Change
Total Sales $11,738 $12,294 -5% $47,267 $48,047 -2%
Pharmaceutical 10,085 10,755 -6% 40,601 41,289 -2%
JANUVIA 1,134 960 18% 4,086 3,324 23%
SINGULAIR 480 1,461 -67% 3,853 5,479 -30%
ZETIA 676 640 6% 2,567 2,428 6%
REMICADE 549 511 8% 2,076 2,667 -22%
VYTORIN 435 475 -8% 1,747 1,882 -7%
JANUMET 452 386 17% 1,659 1,363 22%
GARDASIL 442 274 61% 1,631 1,209 35%
ISENTRESS 381 387 -2% 1,515 1,359 11%
COZAAR/HYZAAR 315 427 -26% 1,284 1,663 -23%
PROQUAD, M-M-R II 306 276 11% 1,273 1,202 6%
and VARIVAX
Animal Health 898 868 3% 3,399 3,253 4%
Consumer Care 395 361 9% 1,952 1,840 6%
Other Revenues 360 310 16% 1,315 1,666 -21%
Pharmaceutical Revenue Performance
Fourth-quarter pharmaceutical sales declined 6 percent to $10.1 billion,
including a 1 percent negative impact due to foreign exchange. Strong sales
growth for JANUVIA (sitagliptin), GARDASIL [Human Papillomavirus Quadrivalent
(Types 6, 11, 16 and 18) Vaccine, Recombinant], ZOSTAVAX (zoster vaccine live)
and JANUMET (sitagliptin/metformin hydrochloride) partially offset the
expected declines in sales of SINGULAIR, COZAAR (losartan potassium) and
HYZAAR (losartan potassium and hydrochlorothiazide).
Full-year pharmaceutical sales declined 2 percent to $40.6 billion, including
a 3 percent negative impact due to foreign exchange.
Sales from emerging markets grew 9 percent and accounted for approximately 20
percent of pharmaceutical sales in the fourth quarter. Sales growth in the
emerging markets is being driven by vaccines, primary care, women’s health and
diversified brands. China continues to be a key driver with 35 percent growth
for the fourth quarter, including a 3 percent benefit from foreign exchange.
Worldwide sales of the combined diabetes franchise of JANUVIA/JANUMET,
medicines that help lower blood sugar levels in adults with type 2 diabetes,
grew 18 percent to $1.6 billion in the fourth quarter of 2012 primarily driven
by growth in the United States and Japan. The combined franchise had sales of
$5.7 billion for the full year of 2012, an increase of 23 percent.
Worldwide sales of SINGULAIR, a once-a-day oral medicine for the chronic
treatment of asthma and the relief of symptoms of allergic rhinitis, declined
67 percent to $480 million in the fourth quarter. SINGULAIR sales declined
$932 million, or 97 percent, in the United States in the fourth quarter.
Full-year 2012 worldwide sales for SINGULAIR were $3.9 billion, a 30 percent
decrease compared to the prior year. The patent for SINGULAIR expired in the
United States on Aug. 3, 2012, and will expire in major European markets later
this month. The company continues to experience a significant and rapid
reduction in sales in the United States and expects a similar decline in
Europe following patent expiry there. SINGULAIR will retain marketing
exclusivity in Japan until 2016.
Sales of ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), medicines for
lowering LDL cholesterol, were $1.1 billion in the fourth quarter, comparable
to the prior year, driven by global growth of ZETIA that was offset by lower
sales of VYTORIN. The combined ZETIA/VYTORIN franchise had sales of $4.3
billion for the full year of 2012, comparable to the prior year.
Combined sales of REMICADE (infliximab) and SIMPONI (golimumab), treatments
for inflammatory diseases, increased 13 percent to $645 million for the fourth
quarter of 2012. The combined sales grew 18 percent excluding foreign
exchange. Global combined sales for the full year decreased 18 percent over
the prior year. In Europe, Russia and Turkey, where Merck retained exclusive
marketing rights, the combined sales of REMICADE and SIMPONI increased 2
percent for the full year of 2012 or 10 percent excluding foreign exchange. In
July 2011, the company transferred exclusive marketing rights for REMICADE and
SIMPONI to Johnson & Johnson in Canada, Central and South America, the Middle
East, Africa and Asia Pacific.
Sales recorded by Merck for GARDASIL, a vaccine to help prevent certain
diseases caused by four types of human papillomavirus (HPV), increased 61
percent to $442 million for the fourth quarter driven by higher sales in the
United States, reflecting continued strong uptake in males and higher public
sector purchases, as well as favorable performance in Japan and the emerging
markets. Worldwide sales of GARDASIL recorded by Merck for the year were $1.6
billion, a 35 percent increase compared to the prior year.
ISENTRESS (raltegravir), an HIV integrase inhibitor for use in combination
with other antiretroviral agents for the treatment of HIV-1 infection,
decreased 2 percent to $381 million in the fourth quarter. ISENTRESS sales in
the United States grew 11 percent in the fourth quarter. Global sales of
ISENTRESS for the full year of 2012 were $1.5 billion, an 11 percent increase
compared to 2011.
Global sales of Merck's antihypertensive medicines COZAAR and HYZAAR declined
26 percent to $315 million in the fourth quarter and 23 percent to $1.3
billion for the full year of 2012 due to the loss of market exclusivity in
major markets in prior years.
Sales of ZOSTAVAX, a vaccine for the prevention of herpes zoster, grew to $225
million in the fourth quarter compared to $78 million in the prior year,
driven by a positive response to supply availability and increased promotional
efforts in the United States. Global sales for the full year of 2012 were $651
million.
Sales of VICTRELIS (boceprevir), the company's oral hepatitis C virus protease
inhibitor, grew to $115 million in the quarter versus $87 million last year as
the product continues to launch. Global sales for the full year of 2012 were
$502 million. VICTRELIS is approved in 69 countries and has launched in 34 of
those markets.
Animal Health Revenue Performance
Merck Animal Health sales totaled $898 million for the fourth quarter of 2012,
a 3 percent increase compared with the same period last year, including a 3
percent negative impact due to foreign exchange. Growth was seen across major
species, particularly cattle and poultry.
Animal Health global sales for the full year of 2012 were $3.4 billion, a 4
percent increase compared with the prior year, including a 5 percent negative
impact due to foreign exchange.
Consumer Care Revenue Performance
Fourth-quarter global sales of Consumer Care were $395 million, an increase of
9 percent compared to the fourth quarter of 2011. This increase was primarily
driven by CLARITIN, COPPERTONE and the DR. SCHOLL'S footcare line. Full-year
2012 global sales were $2.0 billion, a 6 percent increase compared to
full-year 2011, including a 1 percent negative impact due to foreign exchange.
Last week, the U.S. Food and Drug Administration (FDA) approved OXYTROL FOR
WOMEN (oxybutynin transdermal system), the first and only over-the-counter
treatment for overactive bladder in women. Merck anticipates that OXYTROL FOR
WOMEN will be available to customers in fall 2013.
Other Revenue Performance
Other revenues – primarily comprised of alliance revenue, miscellaneous
corporate revenues and third-party manufacturing sales – increased 16 percent
to $360 million in the fourth quarter and decreased 21 percent to $1.3 billion
for the full year of 2012. The full-year decline was driven largely by lower
revenue from AstraZeneca LP (AZLP) recorded by Merck, which declined 23
percent to $915 million, as well as by lower third-party manufacturing sales.
Fourth-Quarter and Full-Year Expense and Other Information
The costs detailed below totaled $10.0 billion on a GAAP basis during the
fourth quarter of 2012 and include $1.6 billion of acquisition-related costs
and restructuring costs.
$ in millions Included in expenses for the period
Fourth Quarter Acquisition- Restructuring Certain
2012 Related Costs Other
GAAP Costs^4 Items Non-GAAP^1
Materials and $4,160 $1,185 $40 – $2,935
production
Marketing and 3,390 89 20 – 3,281
administrative
Research and 2,224 24 3 – 2,197
development
Restructuring 191 – 191 – –
costs
Fourth Quarter
2011
Materials and $4,176 $1,212 $68 $7 $2,889
production
Marketing and 3,704 86 42 – 3,576
administrative
Research and 2,419 244 49 – 2,126
development
Restructuring 533 – 533 – –
costs
The costs detailed below totaled $38.1 billion on a GAAP basis for full-year
2012 and include $6.3 billion of acquisition-related costs and restructuring
costs.
$ in millions Included in expenses for the period
Year Ended Acquisition- Restructuring Certain
Dec. 31, 2012 Related Costs Other
GAAP Costs^4 Items Non-GAAP^1
Materials and $16,446 $4,872 $188 – $11,386
production
Marketing and 12,776 272 90 – 12,414
administrative
Research and 8,168 200 57 – 7,911
development
Restructuring 664 – 664 – –
costs
Year Ended
Dec. 31, 2011
Materials and $16,871 $5,137 $348 $7 $11,379
production
Marketing and 13,733 278 119 – 13,336
administrative
Research and 8,467 587 138 – 7,742
development
Restructuring 1,306 – 1,306 – –
costs
The gross margin was 64.6 percent for the fourth quarter of 2012 and 66.0
percent for the fourth quarter of 2011, reflecting 10.4 and 10.5 percentage
point unfavorable impacts, respectively, from the acquisition-related costs
and restructuring costs noted above. The non-GAAP gross margin decline
primarily reflects the impact of the SINGULAIR patent expiry in the United
States.
Marketing and administrative expenses, on a non-GAAP basis, were $3.3 billion
in the fourth quarter of 2012, a decrease from $3.6 billion in the fourth
quarter of 2011. The decrease was primarily due to productivity measures and
the beneficial impact of foreign exchange.
Research and development (R&D) expenses, on a non-GAAP basis, were $2.2
billion in the fourth quarter of 2012, an increase from $2.1 billion in the
fourth quarter of 2011. The increase reflects an upfront payment related to a
worldwide licensing agreement for AiCuris' novel portfolio of investigational
medicines targeting human cytomegalovirus.
Equity income from affiliates was $231 million for the fourth quarter and $642
million for the full year, which primarily includes partnerships with AZLP and
Sanofi Pasteur MSD.
The GAAP effective tax rate of 21.1 percent for the fourth quarter of 2012
reflects the impact of acquisition-related costs and restructuring costs. The
non-GAAP effective tax rate, which excludes these items, was 23.6 percent for
the quarter. Both the GAAP and non-GAAP effective tax rates reflect a
favorable ruling on a state tax matter in the fourth quarter.
Additionally, the company has achieved the previously announced $3.5 billion
in synergy targets related to the merger with Schering-Plough Corporation.
Recent Key Developments
* Merck recently received and is reviewing safety and efficacy data from the
pivotal Phase III trial of odanacatib, the company’s investigational
medicine for osteoporosis. As previously indicated, the company has been
conducting a blinded extension of the trial in approximately 8,200 women,
which will provide additional safety and efficacy data. Merck now
anticipates that it will file applications for approval of odanacatib in
2014 with additional data from the extension trial, rather than filing in
the first half of 2013. The company continues to believe that odanacatib
will have the potential to address unmet medical needs in patients with
osteoporosis;
* The New Drug Application (NDA) for suvorexant, the company's
investigational insomnia medicine, was accepted for review by the FDA,
during which the medicine also will be evaluated by the FDA’s Controlled
Substance Staff. If approved by the FDA, suvorexant will become available
after a schedule assessment and determination has been completed by the
U.S. Drug Enforcement Administration. Also, the company submitted an NDA
for suvorexant to the health authorities in Japan;
* The marketing authorization application for vintafolide, an
investigational treatment for folate-receptor positive platinum-resistant
ovarian cancer in combination with pegylated liposomal doxorubicin, was
accepted for review by the European Medicines Agency;
* The NDA resubmissions for sugammadex, a neuromuscular blockade reversal
agent, and ezetimibe/atorvastatin tablets, an investigational combination
medicine for hyperlipidemia, separately were accepted for review by the
FDA. Merck expects the FDA’s review of both candidates to be completed in
the first half of 2013; and
* In January, the company submitted a Biologics License Application to the
FDA for MK-7243, an investigational allergy immunotherapy tablet for grass
pollen.
Merck is on track to file five products for regulatory approval in 2013. The
company also recently started several key clinical trials including: Phase III
trials of MK-3102, an investigational once-weekly DPP-4 inhibitor in
development for treatment of type 2 diabetes; a Phase III study of MK-3222, an
investigational biologic therapy for treatment of psoriasis; a Phase II/III
trial of MK-8931, an investigational β-amyloid precursor protein site-cleaving
enzyme (BACE) inhibitor, to evaluate safety and efficacy in patients with
mild-to-moderate Alzheimer's disease; and a Phase II study of MK-3475, an
investigational therapy for the treatment of patients with advanced melanoma.
Financial Targets
Merck expects full-year 2013 non-GAAP EPS to be between $3.60 and $3.70, and
the 2013 GAAP EPS range to be $2.03 to $2.26. The 2013 non-GAAP range excludes
acquisition-related costs and costs related to restructuring programs.
Merck expects full-year 2013 revenues to be near 2012 levels on a constant
currency basis. At current exchange rates, sales would be affected unfavorably
by approximately 1 to 2 percent for the full year.
In addition, the company expects full-year 2013 non-GAAP R&D expense to be
about the same level as in 2012. The company expects its full-year 2013
non-GAAP tax rate to be in the range of 21 to 23 percent, including the impact
of the recently re-enacted tax law related to the R&D tax credits.
A reconciliation of anticipated 2013 EPS as reported in accordance with GAAP
to non-GAAP EPS that excludes certain items is provided in the table below.
$ in millions, except EPS amounts Full Year 2013
GAAP EPS $2.03 to $2.26
Difference^3 1.57 to 1.44
Non-GAAP EPS that excludes items listed below $3.60 to $3.70
Acquisition-related costs^4 $5,125 to $4,800
Restructuring costs 700 to 500
Net decrease (increase) in income before taxes 5,825 to 5,300
Estimated income tax (benefit) expense (1,020) to (910)
Decrease (increase) in net income $4,805 to $4,390
Total Employees
As of Dec. 31, 2012, Merck had approximately 83,000 employees worldwide.
Earnings Conference Call
Investors are invited to a live audio webcast of Merck's fourth-quarter
earnings conference call today at 8:00 a.m. EST by visiting Merck's website,
www.merck.com/investors/events-and-presentations/home.html. Institutional
investors and analysts can participate in the call by dialing (706) 758-9927
or (877) 381-5782. Journalists are invited to monitor the call by dialing
(706) 758-9928 or (800) 399-7917. A replay of the call will be available for
approximately one week starting at 11:00 a.m. EST today. To listen to the
replay, dial (404) 537-3406 or (855) 859-2056 and enter ID No. 81283478.
About Merck
Today's Merck is a global healthcare leader working to help the world be well.
Merck is known as MSD outside the United States and Canada. Through our
prescription medicines, vaccines, biologic therapies, and consumer care and
animal health products, we work with customers and operate in more than 140
countries to deliver innovative health solutions. We also demonstrate our
commitment to increasing access to healthcare through far-reaching policies,
programs and partnerships. For more information, visit www.merck.com and
connect with us on Twitter, Facebook and YouTube.
Forward-Looking Statement
This news release includes “forward-looking statements” within the meaning of
the safe harbor provisions of the United States Private Securities Litigation
Reform Act of 1995. These statements are based upon the current beliefs and
expectations of Merck’s management and are subject to significant risks and
uncertainties. If underlying assumptions prove inaccurate or risks or
uncertainties materialize, actual results may differ materially from those set
forth in the forward-looking statements.
Risks and uncertainties include but are not limited to, general industry
conditions and competition; general economic factors, including interest rate
and currency exchange rate fluctuations; the impact of pharmaceutical industry
regulation and health care legislation in the United States and
internationally; global trends toward health care cost containment;
technological advances, new products and patents attained by competitors;
challenges inherent in new product development, including obtaining regulatory
approval; Merck’s ability to accurately predict future market conditions;
manufacturing difficulties or delays; financial instability of international
economies and sovereign risk; dependence on the effectiveness of Merck’s
patents and other protections for innovative products; and the exposure to
litigation, including patent litigation, and/or regulatory actions.
Merck undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or otherwise.
Additional factors that could cause results to differ materially from those
described in the forward-looking statements can be found in Merck’s 2011
Annual Report on Form 10-K and the company’s other filings with the Securities
and Exchange Commission (SEC) available at the SEC’s Internet site
(www.sec.gov).
^1 Merck is providing certain 2012 and 2011 non-GAAP information that excludes
certain items because of the nature of these items and the impact they have on
the analysis of underlying business performance and trends. Management
believes that providing this information enhances investors' understanding of
the company's performance. This information should be considered in addition
to, but not in lieu of, information prepared in accordance with GAAP. For a
description of the items, see Tables 2a and 2b, including the related
footnotes, attached to this release.
^2 Net income attributable to Merck & Co., Inc.
^3 Represents the difference between calculated GAAP EPS and calculated
non-GAAP EPS, which may be different than the amount calculated by dividing
the impact of the excluded items by the weighted-average shares for the
period.
^4 Includes expenses for the amortization of intangible assets and
amortization of purchase accounting adjustments to inventories recognized as a
result of mergers and acquisitions, as well as intangible asset impairment
charges. Also includes integration and other costs associated with mergers and
acquisitions.
^5 Amount for full-year 2011 includes a gain on the divestiture of the
company's interest in the Johnson & Johnson°Merck Consumer Pharmaceuticals
Company joint venture and a gain on the sale of certain manufacturing
facilities and related assets.
^6 Includes an estimated income tax (benefit) expense on the reconciling
items. In addition, the full year amount for 2011 includes the net favorable
impact of approximately $700 million relating to the settlement of a federal
income tax audit, as well as $270 million of net tax benefits from changes in
tax rates that resulted in a reduction of deferred tax liabilities on
intangibles established in purchase accounting.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1
GAAP % GAAP %
4Q12 4Q11 Change Full Year Full Year Change
2012 2011
Sales $ 11,738 $ 12,294 -5% $ 47,267 $ 48,047 -2%
Costs,
Expenses and
Other
Materials and
production 4,160 4,176 - 16,446 16,871 -3%
^(1)
Marketing and
administrative 3,390 3,704 -8% 12,776 13,733 -7%
^(1)
Research and
development 2,224 2,419 -8% 8,168 8,467 -4%
^(1)
Restructuring 191 533 -64% 664 1,306 -49%
costs ^(2)
Equity income
from (231 ) (257 ) -10% (642 ) (610 ) 5%
affiliates
^(3)
Other (income)
expense, net 176 139 27% 623 946 -34%
^(1)(4)
Income Before 1,828 1,580 16% 9,232 7,334 26%
Taxes
Income Tax 385 37 2,440 942
Provision
Net Income 1,443 1,543 -6% 6,792 6,392 6%
Less: Net
Income
Attributable 42 31 131 120
to
Noncontrolling
Interests
Net Income
Attributable $ 1,401 $ 1,512 -7% $ 6,661 $ 6,272 6%
to Merck &
Co., Inc.
Earnings per
Common Share $ 0.46 $ 0.49 -6% $ 2.16 $ 2.02 7%
Assuming
Dilution ^(5)
Average Shares
Outstanding 3,074 3,069 3,076 3,094
Assuming
Dilution
Tax Rate ^(6) 21.1 % 2.3 % 26.4 % 12.8 %
(1) Amounts include the impact of acquisition-related costs, restructuring
costs and certain other items. See accompanying tables for details.
(2) Represents separation and other related costs associated with
restructuring activities under the company's formal restructuring programs.
(3) Primarily reflects equity income from the AstraZeneca LP and Sanofi
Pasteur MSD partnerships.
(4) Other (income) expense, net in the full year of 2011 includes a charge of
$500 million related to the resolution of the arbitration proceeding with
Johnson & Johnson, a $136 million gain on the divestiture of the company's
interest in the Johnson & JohnsonºMerck Consumer Pharmaceuticals Company joint
venture and a $127 million gain on the sale of certain manufacturing
facilities and related assets.
(5) The company calculates earnings per share pursuant to the two-class method
which requires the allocation of net income between common shareholders and
participating security holders. Net income attributable to Merck & Co., Inc.
common shareholders used to calculate earnings per common share assuming
dilution was $1,401 million and $1,510 million for the fourth quarter of 2012
and 2011, respectively, and was $6,658 million and $6,257 million for the full
year of 2012 and 2011, respectively.
(6) The GAAP effective tax rates for the fourth quarter and full year of 2012
were 21.1% and 26.4%, respectively. Excluding the impact of the non-GAAP
reconciling items detailed in the accompanying tables, the effective tax rates
were 23.6% and 23.8% for the fourth quarter and full year of 2012,
respectively. Both the GAAP and non-GAAP effective tax rates for the fourth
quarter and full year of 2012 reflect a favorable ruling on a state tax
matter. In addition, both the GAAP and non-GAAP effective tax rates for the
full year of 2012 reflect the favorable impacts of a settlement with a foreign
tax authority and the realization of foreign tax credits. The GAAP effective
tax rates for the fourth quarter and full year of 2011 were 2.3% and 12.8%,
respectively. Excluding the impact of the non-GAAP reconciling items detailed
in the accompanying tables, the effective tax rates were 19.9% and 23.4% for
the fourth quarter and full year of 2011, respectively.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
FOURTH QUARTER 2012
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a
Acquisition- Restructuring Adjustment
GAAP Related Costs^(2) Subtotal Non-GAAP
Costs ^(1)
Sales $ 11,738 $ - $ 11,738
Costs,
Expenses and
Other
Materials and 4,160 1,185 40 1,225 2,935
production
Marketing and 3,390 89 20 109 3,281
administrative
Research and 2,224 24 3 27 2,197
development
Restructuring 191 191 191 -
costs
Equity income
from (231 ) - (231 )
affiliates
Other (income) 176 - 176
expense, net
Income Before 1,828 (1,298 ) (254 ) (1,552 ) 3,380
Taxes
Taxes on 385 (413 ) ^(3) 798
Income
Net Income 1,443 (1,139 ) 2,582
Less: Net
Income
Attributable 42 - 42
to
Noncontrolling
Interests
Net Income
Attributable $ 1,401 $ (1,139 ) $ 2,540
to Merck &
Co., Inc.
Earnings per
Common Share $ 0.46 $ 0.83 ^(4)
Assuming
Dilution
Average Shares
Outstanding 3,074 3,074
Assuming
Dilution
Tax Rate 21.1 % 23.6 %
Merck is providing non-GAAP information that excludes certain items because of
the nature of these items and the impact they have on the analysis of
underlying business performance and trends. Management believes that providing
this information enhances investors' understanding of the company's
performance. This information should be considered in addition to, but not in
lieu of, information prepared in accordance with GAAP.
(1) Amounts included in materials and production costs reflect expenses for
the amortization of intangible assets recognized as a result of mergers and
acquisitions. Amounts included in marketing and administrative expenses
reflect merger integration costs. Amounts included in research and development
expenses represent in-process research and development (“IPR&D”) impairment
charges.
(2) Amounts primarily include employee separation costs and accelerated
depreciation associated with facilities to be closed or divested related to
actions under the company's formal restructuring programs.
(3) Represents the estimated tax impact on the reconciling items.
(4) The company calculates earnings per share pursuant to the two-class method
which requires the allocation of net income between common shareholders and
participating security holders. Net income attributable to Merck & Co., Inc.
common shareholders used to calculate non-GAAP earnings per common share
assuming dilution was $2,540 million for the fourth quarter of 2012.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
FULL YEAR 2012
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2b
Acquisition- Restructuring Adjustment
GAAP Related Costs ^(2) Subtotal Non-GAAP
Costs ^(1)
Sales $ 47,267 $ - $ 47,267
Costs,
Expenses and
Other
Materials and 16,446 4,872 188 5,060 11,386
production
Marketing and 12,776 272 90 362 12,414
administrative
Research and 8,168 200 57 257 7,911
development
Restructuring 664 664 664 -
costs
Equity income
from (642 ) - (642 )
affiliates
Other (income) 623 - 623
expense, net
Income Before 9,232 (5,344 ) (999 ) (6,343 ) 15,575
Taxes
Taxes on 2,440 (1,261 ) ^(3) 3,701
Income
Net Income 6,792 (5,082 ) 11,874
Less: Net
Income
Attributable 131 - 131
to
Noncontrolling
Interests
Net Income
Attributable $ 6,661 $ (5,082 ) $ 11,743
to Merck &
Co., Inc.
Earnings per
Common Share $ 2.16 $ 3.82 ^(4)
Assuming
Dilution
Average Shares
Outstanding 3,076 3,076
Assuming
Dilution
Tax Rate 26.4 % 23.8 %
Merck is providing non-GAAP information that excludes certain items because of
the nature of these items and the impact they have on the analysis of
underlying business performance and trends. Management believes that providing
this information enhances investors' understanding of the company's
performance. This information should be considered in addition to, but not in
lieu of, information prepared in accordance with GAAP.
(1) Amounts included in materials and production costs reflect expenses for
the amortization of intangible assets recognized as a result of mergers and
acquisitions. Amounts included in marketing and administrative expenses
reflect merger integration costs. Amounts included in research and development
expenses represent in-process research and development (“IPR&D”) impairment
charges.
(2) Amounts primarily include employee separation costs and accelerated
depreciation associated with facilities to be closed or divested related to
actions under the company's formal restructuring programs.
(3) Represents the estimated tax impact on the reconciling items.
(4) The company calculates earnings per share pursuant to the two-class method
which requires the allocation of net income between common shareholders and
participating security holders. Net income attributable to Merck & Co., Inc.
common shareholders used to calculate non-GAAP earnings per common share
assuming dilution was $11,738 million for the full year of 2012.
MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3
2012 2011 % %
Change Change
1Q 2Q 3Q 4Q Full 1Q 2Q 3Q 4Q Full 4Q Full
Year Year Year
TOTAL SALES $11,731 $12,311 $11,488 $11,738 $47,267 $11,580 $12,151 $12,022 $12,294 $48,047 -5 -2
^(1)
PHARMACEUTICAL 10,082 10,560 9,875 10,085 40,601 9,820 10,360 10,354 10,755 41,289 -6 -2
Primary Care
and Women's
Health
Cardiovascular
Zetia 614 632 645 676 2,567 582 592 614 640 2,428 6 6
Vytorin 444 445 423 435 1,747 480 459 469 475 1,882 -8 -7
Diabetes &
Obesity
Januvia 919 1,058 975 1,134 4,086 739 779 846 960 3,324 18 23
Janumet 392 411 405 452 1,659 305 321 350 386 1,363 17 22
Respiratory
Singulair 1,340 1,431 602 480 3,853 1,328 1,354 1,336 1,461 5,479 -67 -30
Nasonex 375 293 292 308 1,268 373 323 266 325 1,286 -5 -1
Clarinex 134 140 64 56 393 155 209 128 129 621 -57 -37
Dulera 39 50 52 67 207 13 25 22 37 96 83 *
Asmanex 48 51 42 44 185 60 47 42 57 206 -23 -10
Women's Health
& Endocrine
Fosamax 184 186 152 154 676 208 221 215 211 855 -27 -21
NuvaRing 146 157 156 164 623 142 154 159 168 623 -2 --
Follistim AQ 116 125 111 116 468 133 143 129 126 530 -8 -12
Implanon 76 85 93 94 348 60 81 80 74 294 27 18
Cerazette 67 72 64 68 271 59 66 74 69 268 -1 1
Other
Maxalt 156 154 166 162 638 173 131 156 178 639 -9 --
Arcoxia 112 117 109 115 453 114 100 108 110 431 5 5
Avelox 73 44 30 55 201 106 61 59 95 322 -42 -37
Hospital and
Specialty
Immunology
Remicade 519 518 490 549 2,076 753 842 561 511 2,667 8 -22
Simponi 74 76 86 95 331 54 75 74 61 264 56 25
Infectious
Disease
Isentress 337 398 399 381 1,515 292 337 343 387 1,359 -2 11
PegIntron 162 183 165 143 653 166 154 163 175 657 -18 -1
Cancidas 145 166 163 145 619 158 168 150 164 640 -11 -3
Victrelis 111 126 149 115 502 1 21 31 87 140 32 *
Invanz 101 110 118 116 445 87 103 107 110 406 6 10
Primaxin 88 104 109 83 384 136 136 124 119 515 -30 -25
Noxafil 59 66 66 68 258 55 56 61 59 230 15 13
Oncology
Temodar 237 225 227 229 917 248 234 223 230 935 -1 -2
Emend 102 145 111 131 489 87 120 98 114 419 16 17
Other
Cosopt / 124 105 102 113 444 114 122 124 117 477 -3 -7
Trusopt
Bridion 58 60 68 75 261 41 47 52 60 201 26 30
Integrilin 53 60 48 51 211 64 56 53 57 230 -11 -8
Diversified
Brands
Cozaar / 336 337 295 315 1,284 426 406 404 427 1,663 -26 -23
Hyzaar
Propecia 108 100 104 112 424 106 112 112 117 447 -4 -5
Zocor 103 96 86 98 383 127 107 110 111 456 -12 -16
Claritin Rx 87 48 47 63 244 120 65 55 74 314 -15 -22
Remeron 57 66 52 57 232 60 57 65 59 241 -4 -4
Proscar 51 55 55 56 217 60 53 58 52 223 7 -3
Vasotec / 53 49 42 48 192 57 59 57 58 231 -17 -17
Vaseretic
Vaccines
Gardasil 284 324 581 442 1,631 214 277 445 274 1,209 61 35
ProQuad, M-M-R 255 316 396 306 1,273 244 291 391 276 1,202 11 6
II and Varivax
Zostavax 76 148 202 225 651 24 122 108 78 332 * 96
RotaTeq 142 142 150 168 601 125 148 184 195 651 -14 -8
Pneumovax 112 101 160 208 580 79 64 133 222 498 -7 17
Other
Pharmaceutical 1,013 985 1,023 1,113 4,141 892 1,064 1,015 1,064 4,035 5 3
^(2)
ANIMAL HEALTH 821 865 815 898 3,399 758 802 826 868 3,253 3 4
CONSUMER CARE 554 552 451 395 1,952 517 541 421 361 1,840 9 6
Claritin OTC 169 145 118 100 532 167 134 118 92 511 9 4
Other Revenues 274 333 347 360 1,315 486 448 421 310 1,666 16 -21
^(3)
Astra 186 223 255 251 915 322 306 299 256 1,184 -2 -23
* 100% or greater
Sum of quarterly amounts may not equal year-to-date amounts due to
rounding.
^(1) Only select products are shown.
^(2) Includes Pharmaceutical products not individually shown above. Other
Vaccines sales included in Other Pharmaceutical were $60 million, $75 million,
$116 million, and $69 million for the first, second, third, and fourth
quarters of 2012, respectively. Other Vaccines sales included in Other
Pharmaceutical were $54 million, $67 million, $100 million and $62 million for
the first, second, third and fourth quarters of 2011, respectively.
(3) Other revenues are primarily comprised of alliance revenue, miscellaneous
corporate revenues and third party manufacturing sales.
Contact:
Merck
Media Contacts:
Ron Rogers, 908-423-6449
Steve Cragle, 908-423-3461
or
Investor Contacts:
Carol Ferguson, 908-423-4465
Justin Holko, 908-423-5088
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