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Merck Announces First-Quarter 2016 Financial ResultsMerck (NYSE:MRK), known as MSD outside the United States and Canada, today announced financial results for the first quarter of 2016. This Smart News Release features multimedia. View the full release here: http://www.businesswire.com/news/home/20160505005707/en/ "Our first quarter's performance sets us on a good course for the year," said Kenneth C. Frazier, chairman and chief executive officer, Merck. "We remain focused on advancing our pipeline and driving the commercial success of our key launches and inline medicines and vaccines." Financial Summary
Non-GAAP (generally accepted accounting principles) earnings per share (EPS) of $0.89 for the first quarter exclude acquisition- and divestiture-related costs and restructuring costs. A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow.
Additional Executive Commentary "Business development is a top priority, and we are actively pursuing the best external science through licensing or bolt-on acquisitions to bolster our pipeline and grow our company," said Frazier. "The Global Human Health business performed well in the first quarter. The JANUVIA franchise demonstrated strong growth, and we remain pleased with the ongoing launch of KEYTRUDA in markets around the world," said Adam Schechter, president, Global Human Health. "Additionally, we are already seeing positive signs in the launch of ZEPATIER in the United States." "Merck Research Laboratories advanced several clinical development programs in the first quarter of 2016. We continued to accelerate the development of KEYTRUDA with an additional supplemental filing in head and neck cancer, and by securing a fourth Breakthrough Therapy Designation in classical Hodgkin lymphoma," said Dr. Roger M. Perlmutter, president, Merck Research Laboratories. "We demonstrated strong performance with a leveraged P&L, growing sales and EPS, excluding the impact of foreign exchange. We benefited from the contribution of new product launches, while continuing to sustain growth in our key franchises and driving operational improvements across the company," said Robert Davis, chief financial officer. Select Business Highlights Worldwide sales were $9.3 billion for the first quarter of 2016, a decrease of 1 percent compared with the first quarter of 2015, including a 4 percent negative impact from foreign exchange. The following table reflects sales of the company's top pharmaceutical products, as well as total sales of Animal Health products.
*First quarter of 2015 reflects approximately two months of sales
following the acquisition of Cubist Pharmaceuticals, Inc. (Cubist) by
Merck on Jan. 21, 2015. Percentages reflect comparison to full quarter
of sales in 2016. Commercial and Pipeline Highlights During the first quarter of 2016, the company continued to focus on advancing its pipeline, and achieved regulatory and clinical milestones for multiple products in its portfolio.
Pharmaceutical Revenue Performance First-quarter pharmaceutical sales declined 2 percent to $8.1 billion, including a 4 percent negative impact from foreign exchange. Excluding the impact of exchange, growth reflects higher sales in oncology, hospital acute care and diabetes. Growth in oncology was driven by higher sales of KEYTRUDA as the company continues to launch the product with new indications and in new markets. Growth in hospital acute care was driven by sales of the Cubist portfolio and sales growth of certain inline brands. Pharmaceutical sales also reflect an increase in the diabetes franchise of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCl), medicines that help lower blood sugar in adults with type 2 diabetes, driven by strong growth in the United States and Europe, partially offset by lower sales in emerging markets. First-quarter pharmaceutical sales reflect a decrease in REMICADE (infliximab), a treatment for inflammatory diseases, due to the accelerating impact of biosimilar competition in the company's marketing territories in Europe. Pharmaceutical sales also reflect declines in NASONEX (mometasone furoate monohydrate), an inhaled nasal corticosteroid for the treatment of nasal allergy symptoms, and ZOSTAVAX (zoster vaccine live), a vaccine for the prevention of herpes zoster. Pharmaceutical sales were unfavorably affected in the first quarter of 2016 by the company's reduced operations in Venezuela. A generic version of NASONEX became available in the United States in March 2016; as a result, the company anticipates significant losses of future NASONEX sales. Additionally, in June 2016 the company will lose U.S. patent protection for CUBICIN (daptomycin for injection), an I.V. antibiotic, and significant losses of CUBICIN sales are expected to occur thereafter. Animal Health Revenue Performance Animal Health sales, which totaled $829 million for the first quarter of 2016, were in line with sales from the first quarter of 2015. Excluding the impact of foreign exchange, Animal Health sales grew 9 percent, primarily driven by BRAVECTO (fluralaner), a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks. First-Quarter 2016 Expense and Other Information The tables that follow present selected expense information.
The gross margin was 61.6 percent for the first quarter of 2016 compared to 62.1 percent for the first quarter of 2015, reflecting 15.4 and 14.4 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs and restructuring costs noted above. Research and development (R&D) expenses, on a non-GAAP basis, were $1.6 billion in the first quarter of 2016, a 6 percent decrease compared to the first quarter of 2015, primarily driven by lower licensing expenses. Financial Outlook Merck continues to expect its full-year 2016 GAAP EPS to be between $1.96 and $2.23. The company has narrowed and raised its full-year 2016 non-GAAP EPS to be between $3.65 and $3.77, including an approximately 2 percent negative impact from foreign exchange at mid-April exchange rates. The non-GAAP range excludes acquisition- and divestiture-related costs and costs related to restructuring programs. The change in the non-GAAP EPS range reflects recent favorability in foreign exchange rates, partially offset by the earlier than expected entry of a generic version of NASONEX in the United States. At mid-April exchange rates, Merck now anticipates full-year 2016 revenues to be between $39.0 billion and $40.2 billion, including an approximately 2 percent negative impact from foreign exchange. In addition, the company continues to expect full-year 2016 non-GAAP marketing and administrative expenses to be below 2015 levels and R&D expenses to be modestly above 2015 levels. The company continues to anticipate its full-year 2016 non-GAAP tax rate will be in the range of 21.5 to 22.5 percent, including a 2016 R&D tax credit. A reconciliation of anticipated 2016 EPS, as reported in accordance with GAAP to non-GAAP EPS that excludes certain items, is provided in the table below.
Total Employees As of March 31, 2016, Merck had approximately 68,000 employees worldwide. Earnings Conference Call Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EDT on Merck's website at http://investors.merck.com/investors/webcasts-and-presentations. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 75256428. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 75256428. 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 125 years, Merck has been a global health care leader working to help the world be well. Merck is known as MSD outside the United States and Canada. Through our prescription medicines, vaccines, biologic therapies, and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to health care through far-reaching policies, programs and partnerships. For more information, visit www.merck.com and connect with us on Twitter, Facebook, YouTube and LinkedIn. You can also follow our Twitter conversation at $MRK. Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA This news release of Merck & Co., Inc., Kenilworth, N.J., USA (the "company") includes "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company's management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements. Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company's ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company's patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions. The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company's 2015 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 2016 and 2015 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 period. 4 Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges and expense or income related to changes in the estimated fair value measurement of contingent consideration. Also includes integration, transaction and certain other costs related to business acquisitions and divestitures.
(1) Amounts include the impact of acquisition and divestiture-related costs, restructuring costs and certain other items. See accompanying tables for details. (2) Represents separation and other related costs associated with restructuring activities under the company's formal restructuring programs.
Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the company's performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP. (1) Amounts included in materials and production costs reflect $1.1 billion of expenses for the amortization of intangible assets recognized as a result of acquisitions, as well as $24 million of amortization of purchase accounting adjustments to inventories as a result of the prior year acquisition of Cubist Pharmaceuticals, Inc., and $252 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions, including severance costs which are not part of the company's formal restructuring programs, as well as transaction and certain other costs related to divestitures. Amounts included in research and development expenses primarily reflect in-process research and development ("IPR&D") impairment charges. (2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs. (3) Represents the estimated tax impact on the reconciling items.
* 100% or greater Sum of quarterly amounts may not equal year-to-date amounts due to rounding. (1) Only select products are shown. (2) First quarter of 2015 reflects approximately two months of sales following the acquisition of Cubist Pharmaceuticals, Inc. by Merck on Jan. 21, 2015. Percentage reflects comparison to full quarter of sales in 2016. (3) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $103 million in the first quarter of 2016 and $78 million, $76 million, $99 million and $148 million for the first, second, third and fourth quarters of 2015, respectively. (4) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. View source version on businesswire.com: http://www.businesswire.com/news/home/20160505005707/en/ |