Merck Announces First-Quarter 2013 Financial Results
*2013 First-Quarter Non-GAAP EPS of $0.85, Excluding Certain Items; GAAP
EPS of $0.52
*Worldwide Sales were $10.7 Billion, a Decrease of 9 Percent Primarily as a
Result of Patent Expiries, and Including a 2 Percent Unfavorable Impact
from Foreign Exchange
*Growth in Vaccines, Immunology, HIV, Animal Health and Consumer Care
*Received Breakthrough Therapy Designation for Lambrolizumab, an
Investigational Candidate for Advanced Melanoma; Five Products Currently
Under Regulatory Review
*Announced New $15 Billion Share Repurchase Program; Plans to Repurchase
Approximately $7.5 Billion of Common Stock over the Next Twelve Months
*Revises 2013 Full-Year Non-GAAP EPS Target to $3.45 to $3.55, Excluding
Certain Items; Revises GAAP EPS Range to $1.92 to $2.16
WHITEHOUSE STATION, N.J. -- May 01, 2013
Merck (NYSE: MRK), known as MSD outside the United States and Canada, today
announced financial results for the first quarter of 2013.
$ in millions, except EPS amounts Quarter Quarter
Sales $10,671 $11,731
GAAP EPS 0.52 0.56
Non-GAAP EPS that excludes items listed below^1 0.85 0.99
GAAP Net Income^2 1,593 1,738
Non-GAAP Net Income that excludes items listed below^1,2 2,585 3,044
Non-GAAP (generally accepted accounting principles) earnings per share (EPS)
for the first quarter of $0.85 exclude acquisition-related costs,
restructuring costs and certain other items. First quarter non-GAAP EPS
included unanticipated net tax benefits of approximately $0.06 per share.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the
tables that follow.
$ in millions, except EPS amounts First Quarter
GAAP EPS $0.52 $0.56
Difference^3 0.33 0.43
Non-GAAP EPS that excludes items listed below^1 $0.85 $0.99
GAAP net income^2 $1,593 $1,738
Difference 992 1,306
Non-GAAP net income that excludes items listed below^1,2 $2,585 $3,044
Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition-related costs^4 $1,237 $1,289
Restructuring costs 194 293
Net decrease (increase) in income before taxes 1,431 1,582
Income tax (benefit) expense^5 (439) (276)
Decrease (increase) in net income $992 $1,306
“Our first quarter performance reflects the challenges of major patent
expiries coupled with the impact of currency and other headwinds,” said
Kenneth C. Frazier, chairman and chief executive officer, Merck. “During the
quarter, we took focused actions to reach our EPS target while at the same
time advancing Merck’s pipeline in our laboratories and through strategic
deals and partnerships. I remain confident in the future opportunities for our
strong and diverse business and committed to delivering long-term value to our
Select Revenue Highlights
Worldwide sales were $10.7 billion for the first quarter of 2013, a decrease
of 9 percent compared with the first quarter of 2012, including a 2 percent
negative effect from foreign exchange.
The following table reflects sales of the company's top pharmaceutical
products, as well as total sales of animal health and consumer care products.
First First Change
$ in millions Quarter Quarter Change Ex-exchange
Total Sales $10,671 $11,731 -9% -7%
Pharmaceutical 8,891 10,082 -12% -10%
JANUVIA 884 919 -4% -1%
ZETIA 629 614 2% 4%
REMICADE 549 519 6% 5%
JANUMET 409 392 4% 4%
VYTORIN 394 444 -11% -11%
GARDASIL 390 284 37% 39%
NASONEX 385 375 3% 7%
ISENTRESS 362 337 8% 8%
SINGULAIR 337 1,340 -75% -73%
PROQUAD, M-M-R II and 272 255 7% 7%
Animal Health 840 821 2% 4%
Consumer Care 571 554 3% 4%
Other Revenues 369 274 34% 33%
Pharmaceutical Revenue Performance
First-quarter pharmaceutical sales declined 12 percent to $8.9 billion,
including a 2 percent negative impact due to foreign exchange. Declines of
SINGULAIR (montelukast sodium), MAXALT (rizatriptan benzoate) and CLARINEX
(desloratadine) following loss of market exclusivity were partially offset by
strong growth for GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16
and 18) Vaccine, Recombinant], ZOSTAVAX (zoster vaccine live), REMICADE
(infliximab), SIMPONI (golimumab) and ISENTRESS (raltegravir).
Sales from emerging markets grew 6 percent, including a 2 percent negative
impact from foreign exchange. Emerging market sales accounted for
approximately 21 percent of pharmaceutical sales in the first quarter of 2013.
China continues to be a key driver of growth in the emerging markets with
sales increasing 23 percent for the first quarter, including a 2 percent
benefit from foreign exchange.
Worldwide sales of the combined diabetes franchise of JANUVIA
(sitagliptin)/JANUMET (sitagliptin/metformin HCI) declined 1 percent to $1.3
billion in the first quarter, including a 2 percent negative impact from
foreign exchange. The decline reflects lower sales in the United States of 5
percent, primarily driven by reduced customer inventory levels, which were
partially offset by growth in the rest of the world.
Sales of ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), medicines for
lowering LDL cholesterol, declined 3 percent to $1.0 billion in the first
quarter driven by lower sales of VYTORIN, partially offset by growth of ZETIA
in the United States.
Combined sales of REMICADE and SIMPONI, treatments for inflammatory diseases,
increased 11 percent to $657 million in the first quarter of 2013.
Merck’s sales of GARDASIL, a vaccine to help prevent certain diseases caused
by four types of human papillomavirus (HPV), were $390 million, an increase of
37 percent for the quarter. The increase was 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 the emerging markets.
ISENTRESS, an HIV integrase inhibitor for use in combination with other
antiretroviral agents for the treatment of HIV-1 infection, grew 8 percent to
$362 million in the first quarter driven by strong growth in the emerging
markets and Europe.
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
75 percent to $337 million in the first quarter. The patents for SINGULAIR
expired in the United States in August 2012 and expired in major European
markets in February 2013. The company experienced a significant and rapid
reduction in sales in the United States and is now also experiencing a
substantial decline in Europe.
Sales of VICTRELIS (boceprevir), the company's oral hepatitis C virus protease
inhibitor, declined 1 percent in the first quarter to $110 million, including
a 2 percent negative impact from foreign exchange. Lower sales in the United
States were partially offset by continued growth in international markets.
Sales of ZOSTAVAX, a vaccine for the prevention of herpes zoster, were $168
million in the first quarter of 2013, up from $76 million in the first quarter
of 2012, driven by strong demand in the United States.
Animal Health Revenue Performance
Animal Health sales totaled $840 million for the first quarter of 2013, a 2
percent increase compared with the first quarter of 2012, including a 2
percent negative impact due to foreign exchange. The increase was driven by
strong performance in companion animal products, including sales of ACTIVYL, a
new product for the treatment and prevention of fleas and ticks in dogs and
cats, as well as continued growth in poultry products. Animal Health products
include pharmaceutical and vaccine products for the prevention, treatment and
control of disease in all major farm and companion animal species.
Consumer Care Revenue Performance
First-quarter global sales of Consumer Care were $571 million, an increase of
3 percent compared to the first quarter of 2012, including a 1 percent
negative impact due to foreign exchange. The sales increase was primarily due
to COPPERTONE suncare products and CLARITIN.
Other Revenue Performance
Other revenues – primarily comprising alliance revenue, miscellaneous
corporate revenues and third-party manufacturing sales – increased 34 percent
to $369 million compared to the first quarter of 2012. The increase was
primarily driven by higher revenue from AstraZeneca LP (AZLP) recorded by
Merck, which increased 41 percent to $262 million as compared with atypically
lower first quarter 2012 AZLP revenues.
First-Quarter Expense and Other Information
The costs detailed below totaled $9.0 billion on a GAAP basis during the first
quarter of 2013 and include $1.4 billion of acquisition-related costs and
$ in millions Included in expenses for the period
First Quarter 2013 Related Costs Non-GAAP^1
Materials and production $3,959 $1,184 $43 $2,732
Marketing and 2,987 23 17 2,947
Research and 1,907 30 15 1,862
Restructuring costs 119 –- 119 –-
First Quarter 2012
Materials and $4,037 $1,229 $5 $2,803
Marketing and 3,074 51 24 2,999
Research and 1,862 9 45 1,808
Restructuring costs 219 –- 219 –
The gross margin was 62.9 percent for the first quarter of 2013 and 65.6
percent for the first quarter of 2012, reflecting 11.5 and 10.5 percentage
point unfavorable impacts, respectively, from the acquisition-related costs
and restructuring costs noted above. The gross margin decline primarily
reflects the impact of the SINGULAIR patent expiries.
Marketing and administrative expenses, on a non-GAAP basis, were $2.9 billion
in the first quarter of 2013, a decrease from $3.0 billion in the first
quarter of 2012.
Research and development (R&D) expenses, on a non-GAAP basis, were $1.9
billion in the first quarter of 2013, an increase from $1.8 billion in the
first quarter of 2012.
Equity income from affiliates was $133 million for the first quarter,
primarily reflecting the performance of partnerships with AZLP and Sanofi
Other (income) expense, net was $282 million of expense in the first quarter
of 2013, compared to $142 million of expense in the first quarter of 2012. The
first quarter of 2013 includes approximately $140 million of exchange losses
due to a Venezuelan currency devaluation.
The GAAP effective tax rate of (4.3)% for the first quarter of 2013 reflects
the impact of acquisition-related costs and restructuring costs, as well as an
out-of-period tax benefit of approximately $160 million associated with the
resolution of a previously disclosed legacy Schering-Plough federal income tax
issue. The non-GAAP effective tax rate, which excludes these items, was 12.5%
for the quarter. Both the GAAP and non-GAAP first quarter effective tax rates
reflect the favorable impact of tax legislation enacted in the first quarter
of 2013. The first quarter 2013 tax rates also reflect the net favorable
impact of other discrete items, primarily a reduction in tax reserves upon
expiration of applicable statute of limitations, which resulted in
unanticipated net tax benefits of approximately $0.06 per share as noted
The company noted the following developments:
*Announced a new share repurchase program of up to $15 billion of Merck’s
common stock for its treasury. The company expects to repurchase
approximately $7.5 billion of common stock over the next 12 months,
financed through a combination of debt issuance and operating cash flows,
with the remainder to be repurchased over time with no time limit.
*Entered into a worldwide (except Japan) collaboration agreement with
Pfizer Inc. (Pfizer) to develop and commercialize ertugliflozin, an
investigational oral sodium glucose cotransporter (SGLT2) inhibitor being
evaluated for the treatment of type 2 diabetes. Merck and Pfizer will
collaborate on the clinical development and commercialization of
ertugliflozin and ertugliflozin-containing fixed-dose combinations with
metformin and JANUVIA.
*Announced that the U.S. Food and Drug Administration (FDA) has designated
lambrolizumab (MK-3475), an investigational antibody therapy for advanced
melanoma, as a “Breakthrough Therapy.”
*Entered into an agreement with Bristol-Myers Squibb (BMS) to conduct a
Phase II clinical trial to evaluate the safety and efficacy of a
once-daily oral combination regimen consisting of BMS’ investigational
NS5A replication complex inhibitor and Merck’s investigational NS3/4A
protease inhibitor (MK-5172) for the treatment of genotype 1 hepatitis C
*Increased investment in emerging markets with the opening of a new
pharmaceutical manufacturing facility in Hangzhou, China. The site will
package Merck medicines for China and the Asia Pacific region and become a
critical part of the company’s global supply chain.
*Announced FDA acceptance of a Biologics License Application (BLA) for an
investigational Timothy grass pollen (Phleum pratense) allergy
immunotherapy tablet (AIT) for review. The company also submitted a BLA to
the FDA for its investigational ragweed pollen (Ambrosia artemisiifolia)
*Entered into an agreement with Samsung Bioepis Co., Ltd (Samsung) to
develop and commercialize multiple biosimilar candidates. Under the
agreement, Samsung will be responsible for preclinical and clinical
development, process development and manufacturing, clinical trials and
registration and Merck will be responsible for commercialization.
Merck now expects full-year 2013 non-GAAP EPS to be between $3.45 and $3.55,
and 2013 GAAP EPS to be between $1.92 and $2.16. The 2013 non-GAAP range
excludes acquisition-related costs, costs related to restructuring programs
and certain other items. The company updated its full-year guidance due to
pressures on sales that are greater than previously anticipated, including
foreign exchange, as well as new R&D programs and a revised tax rate.
At current exchange rates, Merck now expects full-year 2013 sales to be
approximately 3 to 4 percent below prior year levels with foreign exchange
accounting for more than 2 percentage points of the decline.
In addition, the company now expects full-year 2013 non-GAAP R&D expense to be
slightly higher than 2012 levels. The company now expects its full-year 2013
non-GAAP tax rate to be in the range of 22 to 23 percent.
A reconciliation of anticipated 2013 EPS, as reported in accordance with GAAP
to non-GAAP EPS that excludes certain items, is provided in the table below.
$ in millions, except EPS amounts Full Year 2013
GAAP EPS $1.92 to $2.16
Difference^3 1.53 to 1.39
Non-GAAP EPS that excludes items listed below $3.45 to $3.55
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
Income tax (benefit) expense^5 (1,180) to (1,070)
Decrease (increase) in net income $4,645 to $4,230
As of March 31, 2013, Merck had approximately 82,000 employees worldwide.
Earnings Conference Call
Investors, journalists and the general public may access a live audio webcast
of the call today at 8:00 a.m. EDT on Merck’s website at
Institutional investors and analysts can participate in the call by dialing
(706) 758-9927 or (877) 381-5782 and using ID code number 22104203. Members of
the media are invited to monitor the call by dialing (706) 758-9928 or (800)
399-7917 and using ID code number 22104203. Journalists who wish to ask
questions are requested to contact a member of Merck's Media Relations team at
the conclusion of the call.
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.
This news release includes “forward-looking statements” within the meaning of
the safe harbor provisions of the United States Private Securities Litigation
Reform Act of 1995. These statements are based upon the current beliefs and
expectations of Merck’s management and are subject to significant risks and
uncertainties. There can be no guarantees with respect to pipeline products
that the products will receive the necessary regulatory approvals or that they
will prove to be commercially successful. If underlying assumptions prove
inaccurate or risks or uncertainties materialize, actual results may differ
materially from those set forth in the forward-looking statements.
Risks and uncertainties include but are not limited to, general industry
conditions and competition; general economic factors, including interest rate
and currency exchange rate fluctuations; the impact of pharmaceutical industry
regulation and health care legislation in the United States and
internationally; global trends toward health care cost containment;
technological advances, new products and patents attained by competitors;
challenges inherent in new product development, including obtaining regulatory
approval; Merck’s ability to accurately predict future market conditions;
manufacturing difficulties or delays; financial instability of international
economies and sovereign risk; dependence on the effectiveness of Merck’s
patents and other protections for innovative products; and the exposure to
litigation, including patent litigation, and/or regulatory actions.
Merck undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events or otherwise.
Additional factors that could cause results to differ materially from those
described in the forward-looking statements can be found in Merck’s 2012
Annual Report on Form 10-K and the company’s other filings with the Securities
and Exchange Commission (SEC) available at the SEC’s Internet site
^1 Merck is providing certain 2013 and 2012 non-GAAP information that excludes
certain items because of the nature of these items and the impact they have on
the analysis of underlying business performance and trends. Management
believes that providing this information enhances investors’ understanding of
the company’s performance. This information should be considered in addition
to, but not in lieu of, information prepared in accordance with GAAP. For
description of the items, see Table 2a, including the related footnotes,
attached to this release.
^2 Net income attributable to Merck & Co., Inc.
^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
^4 Includes expenses for the amortization of intangible assets recognized as a
result of mergers and acquisitions, as well as intangible asset impairment
charges. Also includes integration and other costs associated with mergers and
^5 Includes the estimated tax impact on the reconciling items. In addition,
amount for 2013 includes a benefit of approximately $160 million associated
with the resolution of a previously disclosed legacy Schering-Plough federal
income tax issue.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
GAAP % Change
Sales $ 10,671 $ 11,731 -9%
Costs, Expenses and Other
Materials and production ^(1) 3,959 4,037 -2%
Marketing and administrative ^(1) 2,987 3,074 -3%
Research and development ^(1) 1,907 1,862 2%
Restructuring costs ^(2) 119 219 -46%
Equity income from affiliates ^(3) (133 ) (110 ) 21%
Other (income) expense, net ^(4) 282 142 99%
Income Before Taxes 1,550 2,507 -38%
Income Tax (Benefit) Provision (66 ) 740
Net Income 1,616 1,767 -9%
Less: Net Income Attributable to 23 29
Net Income Attributable to Merck & $ 1,593 $ 1,738 -8%
Earnings per Common Share Assuming $ 0.52 $ 0.56 -7%
Average Shares Outstanding Assuming 3,053 3,074
Tax Rate ^(5) -4.3 % 29.5 %
(1) Amounts include the impact of acquisition-related costs and restructuring
costs. 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 first quarter of 2013 reflects
approximately $140 million of losses due to exchange as a result of a
Venezuelan currency devaluation.
(5) The GAAP effective tax rate for the first quarter of 2013 reflects the
favorable impact of various discrete items, including the impact of tax
legislation enacted in the first quarter of 2013, a reduction in tax reserves
upon expiration of applicable statute of limitations, as well as a benefit of
approximately $160 million associated with the resolution of a previously
disclosed legacy Schering-Plough federal income tax issue.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME
GAAP TO NON-GAAP RECONCILIATION
FIRST QUARTER 2013
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
Acquisition- Restructuring Adjustment
GAAP Related Costs ^(2) Subtotal Non-GAAP
Sales $ 10,671 $ 10,671
Materials and 3,959 1,184 43 1,227 2,732
Marketing and 2,987 23 17 40 2,947
Research and 1,907 30 15 45 1,862
Restructuring 119 119 119 -
from (133 ) (133 )
Other (income) 282 282
Income Before 1,550 (1,237 ) (194 ) (1,431 ) 2,981
Taxes on (66 ) (439 ) ^(3) 373
Net Income 1,616 (992 ) 2,608
Attributable 23 23
Attributable $ 1,593 (992 ) $ 2,585
to Merck &
Common Share $ 0.52 $ 0.85
Outstanding 3,053 3,053
Tax Rate -4.3 % 12.5 %
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 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
(2) Amounts primarily include employee separation costs and accelerated
depreciation associated with facilities to be closed or divested related to
actions under the company's formal restructuring programs.
(3) Represents the estimated tax impact on the reconciling items, as well as a
benefit of approximately $160 million associated with the resolution of a
previously disclosed legacy Schering-Plough federal income tax issue.
MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
(AMOUNTS IN MILLIONS)
2013 2012 %
1Q 2Q 3Q 4Q Full Change
TOTAL SALES $10,671 $11,731 $12,311 $11,488 $11,738 $47,267 -9
PHARMACEUTICAL 8,891 10,082 10,560 9,875 10,085 40,601 -12
Zetia 629 614 632 645 676 2,567 2
Vytorin 394 444 445 423 435 1,747 -11
Januvia 884 919 1,058 975 1,134 4,086 -4
Janumet 409 392 411 405 452 1,659 4
Nasonex 385 375 293 292 308 1,268 3
Singulair 337 1,340 1,431 602 480 3,853 -75
Dulera 68 39 50 52 67 207 76
Asmanex 40 48 51 42 44 185 -16
NuvaRing 151 146 157 156 164 623 4
Fosamax 137 184 186 152 154 676 -26
Follistim AQ 122 116 125 111 116 468 5
Implanon 84 76 85 93 94 348 12
Cerazette 61 67 72 64 68 271 -9
Arcoxia 121 112 117 109 115 453 8
Avelox 36 73 44 30 55 201 -51
Remicade 549 519 518 490 549 2,076 6
Simponi 108 74 76 86 95 331 46
Isentress 362 337 398 399 381 1,515 8
Cancidas 162 145 166 163 145 619 12
PegIntron 126 162 183 165 143 653 -23
Victrelis 110 111 126 149 115 502 -1
Invanz 110 101 110 118 116 445 9
Noxafil 65 59 66 66 68 258 11
Temodar 216 237 225 227 229 917 -9
Emend 116 102 145 111 131 489 14
Cosopt / 105 124 105 102 113 444 -15
Bridion 63 58 60 68 75 261 8
Integrilin 47 53 60 48 51 211 -11
Cozaar / 267 336 337 295 315 1,284 -21
Primaxin 84 88 104 109 83 384 -5
Zocor 82 103 96 86 98 383 -20
Claritin Rx 76 87 48 47 63 244 -13
Propecia 68 108 100 104 112 424 -37
Clarinex 61 134 140 64 56 393 -55
Remeron 52 57 66 52 57 232 -8
Maxalt 40 156 154 166 162 638 -74
Proscar 39 51 55 55 56 217 -23
Gardasil 390 284 324 581 442 1,631 37
ProQuad, M-M-R 272 255 316 396 306 1,273 7
II and Varivax
Zostavax 168 76 148 202 225 651 *
RotaTeq 162 142 142 150 168 601 14
Pneumovax 23 111 112 101 160 208 580 -1
Pharmaceutical 1,022 1,066 1,034 1,065 1,161 4,333 -4
ANIMAL HEALTH 840 821 865 815 898 3,399 2
CONSUMER CARE 571 554 552 451 395 1,952 3
Claritin OTC 177 169 145 118 100 532 5
Other Revenues 369 274 333 347 360 1,315 34
Astra 262 186 223 255 251 915 41
* 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 $53 million for the first
quarter of 2013. Other Vaccines sales included in Other Pharmaceutical were
$60 million, $75 million, $116 million, and $69 million for the first, second,
third, and fourth quarters of 2012, respectively.
^(3) Other revenues are primarily comprised of alliance revenue, miscellaneous
corporate revenues and third party manufacturing sales.
Steve Cragle, 908-423-3461
Kelley Dougherty, 908-423-4291
Carol Ferguson, 908-423-4465
Alex Kelly, 908-423-5185
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