8-K
Merck & Co., Inc. (MRK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 27, 2023
Merck & Co., Inc.
(Exact name of registrant as specified in its charter)
| New Jersey<br> <br>(State or other jurisdiction<br> <br>of incorporation) | 1-6571<br> <br>(Commission<br> <br>File Number) | 22-1918501<br> <br>(I.R.S Employer<br> <br>Identification No.) |
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| 126 East Lincoln Avenue, Rahway, NJ<br> <br>(Address of principal executive offices) | 07065<br> <br>(Zip Code) |
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(Registrant’s telephone number, including area code)
(908) 740-4000
Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common<br> Stock ($0.50 par value) | MRK | New York Stock Exchange |
| 0.500% Notes due 2024 | MRK 24 | New York Stock Exchange |
| 1.875% Notes due 2026 | MRK/26 | New York Stock Exchange |
| 2.500% Notes due 2034 | MRK/34 | New York Stock Exchange |
| 1.375% Notes due 2036 | MRK 36A | New York Stock Exchange |
Item2.02. Results of Operations and Financial Condition**.**
The following information, including the exhibits hereto, is being furnished pursuant to this Item 2.02.
Incorporated by reference is a press release issued by Merck & Co., Inc. on April 27, 2023, regarding earnings for the first quarter of 2023 attached as Exhibit 99.1. Also incorporated by reference is certain supplemental information not included in the press release, attached as Exhibit 99.2.
This information shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and is not incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit 99.1 | Press release issued April 27, 2023, regarding earnings for the first quarter of 2023 |
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| Exhibit 99.2 | Certain supplemental information not included in the press release |
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| Exhibit 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Merck & Co., Inc. | ||
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| Date: April 27, 2023 | By: | /s/ Kelly E. W. Grez |
| Kelly E. W. Grez <br><br>Corporate Secretary |
Exhibit 99.1
| News<br> Release |
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Merck Announces First-Quarter 2023 FinancialResults
| - | First Quarter 2023 Reflected Continued Strong Underlying Performance<br> Across Key Growth Drivers, Particularly in Oncology and Vaccines |
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| - | Total Worldwide Sales Were $14.5 Billion, a Decrease of 9% From First<br> Quarter 2022; Excluding LAGEVRIO, Growth Was 11%; Excluding LAGEVRIO and the Impact of Foreign<br> Exchange, Growth Was 15% |
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| o | KEYTRUDA<br> Sales Grew 20% to $5.8 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 24% |
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| o | GARDASIL/GARDASIL<br> 9 Sales Grew 35% to $2.0 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 43% |
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| o | LAGEVRIO<br> Sales Declined 88% to $392 Million; Excluding the Impact of Foreign Exchange, Sales Declined<br> 87% |
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| - | GAAP EPS Was $1.11; Non-GAAP EPS Was $1.40; GAAP and Non-GAAP EPS<br> Include $0.52 of Charges Related to Acquisition of Imago and Collaboration and Licensing<br> Agreement With Kelun-Biotech |
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| - | Announced Proposed Acquisition of Prometheus Biosciences to Strengthen<br> Immunology Pipeline |
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| - | Presented Compelling Data From Innovative Cardiovascular Pipeline<br> With: |
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| o | Positive<br> Phase 3 Results for Sotatercept |
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| o | Positive<br> Phase 2b Results for MK-0616; Plans to Start Phase 3 Studies in 2023 |
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| - | Advanced Oncology Research Efforts, Sharing Notable Progress for Earlier<br> Stages of Disease in Certain Tumor Types, Including: |
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| o | Positive<br> Topline Results From Phase 3 KEYNOTE-671 Trial |
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| o | Positive<br> Detailed Results in Collaboration With Moderna From Phase 2b KEYNOTE-942/mRNA-4157-P201 Trial |
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| - | 2023 Financial Outlook |
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| o | Raises<br> and Narrows Expected Full-Year 2023 Worldwide Sales Range To Be Between $57.7 Billion and<br> $58.9 Billion, Including Negative Impact of Foreign Exchange of Approximately 2 Percentage<br> Points; Outlook Includes Approximately $1.0 Billion of LAGEVRIO Sales |
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| o | Lowers<br> and Narrows Expected Full-Year 2023 GAAP EPS Range To Be Between $5.85 and $5.97, Reflecting<br> Zetia Antitrust Litigation Settlement |
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| o | Raises<br> and Narrows Expected Full-Year 2023 Non-GAAP EPS Range To Be Between $6.88 and $7.00, Including<br> Negative Impact of Foreign Exchange of Approximately 4 Percentage Points |
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| o | Outlook<br> Does Not Reflect Any Impact From Proposed Acquisition of Prometheus Biosciences, Which Is<br> Expected to Close in Third Quarter 2023, and Would Result in a One-Time Charge to Both GAAP<br> and Non-GAAP Results of Approximately $10.3 Billion or Approximately $4.00 per Share |
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RAHWAY, N.J., April 27, 2023 – Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the first quarter of 2023.
“Inspired by our commitment to bring bold science forward to address critical unmet patient needs, we began 2023 with significant advancements across our innovative pipeline,” said Robert M. Davis, chairman and chief executive officer, Merck. “Our first-quarter results are a reflection of the focused execution of our science-led strategy, strong performance across our key growth drivers, continued momentum commercially and operationally, and – most importantly – the collective and dedicated efforts of our colleagues around the world. I’m proud of the progress we’ve made, and we will continue to move with speed and agility to deliver value for patients and shareholders, now and well into the future.”
Financial Summary
| in millions, except EPS<br> amounts | 2023 | 2022 | Change | Change Ex-Exchange | |||||
| Sales | 14,487 | $ | 15,901 | -9 | % | -5 | % | ||
| GAAP<br> net income1 | 2,821 | 4,310 | -35 | % | -29 | % | |||
| Non-GAAP<br> net income that excludes certain items1,2* | 3,564 | 5,429 | -34 | % | -30 | % | |||
| GAAP EPS | 1.11 | 1.70 | -35 | % | -30 | % | |||
| Non-GAAP<br> EPS that excludes certain items2* | 1.40 | 2.14 | -35 | % | -30 | % |
All values are in US Dollars.
*Refer to table on page 10.
Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) assuming dilution was $1.11 for the first quarter of 2023. Non-GAAP EPS was $1.40 for the first quarter of 2023. The declines in GAAP and non-GAAP EPS in the first quarter versus the prior year were primarily due to $0.52 of charges related to the acquisition of Imago BioSciences, Inc. (Imago) and the collaboration and licensing agreement with Kelun-Biotech (a holding subsidiary of Sichuan Kelun Pharmaceutical Co., Ltd). The declines in GAAP and non-GAAP EPS were also due to lower sales of COVID-19 medicine LAGEVRIO (molnupiravir) and the unfavorable impact of foreign exchange. Additionally, the GAAP EPS decline reflects a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation. The GAAP EPS decline was partially offset by the favorable impact of net gains from investments in equity securities compared with net losses in the prior year.
Non-GAAP EPS excludes acquisition- and divestiture-related costs and costs related to restructuring programs, as well as income and losses from investments in equity securities and a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.
^1^ Net income attributable to Merck & Co., Inc.
^2^ Merck is providing certain 2023 and 2022 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 because management uses non-GAAP results to assess performance. Management uses non-GAAP 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 a non-GAAP pre-tax income metric. 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.
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Proposed Acquisition of Prometheus Biosciences Strengthens ImmunologyPipeline
| · | On April 16,<br> 2023, Merck announced a definitive agreement to acquire Prometheus Biosciences, Inc. (Prometheus)<br> through a subsidiary for $200 per share in cash for a total equity value of approximately<br> $10.8 billion. The agreement accelerates Merck’s growing presence in immunology and<br> adds diversity to Merck’s overall portfolio with PRA023, a novel, late-stage candidate<br> for ulcerative colitis, Crohn’s disease and other autoimmune conditions, as well as<br> Prometheus’ comprehensive data set that enables its target discovery and precision<br> medicine approach in inflammation and immunology. The transaction is expected to close in<br> the third quarter of 2023, subject to Prometheus shareholder approval and certain conditions. |
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Cardiovascular Program Highlights
| · | The following data<br> were presented at the American College of Cardiology’s 72^nd^ Annual Scientific<br> Session together with World Heart Federation’s World Congress of Cardiology: |
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| o | Results<br> from the Phase 3 STELLAR trial, which evaluated sotatercept, Merck’s novel investigational<br> activin signaling inhibitor, in combination with stable background therapy for the treatment<br> of adult patients with pulmonary arterial hypertension (PAH) (World Health Organization Group<br> 1). These landmark data included a significant improvement in exercise capacity for patients<br> receiving sotatercept compared to placebo, increasing 6-minute walk distance (6MWD) by 40.8<br> meters from baseline at week 24, the study’s primary endpoint. In addition, sotatercept<br> demonstrated statistically significant improvements in eight of nine secondary measures,<br> including reduction in risk of clinical worsening or death. These data were simultaneously<br> published in The New England Journal of Medicine (NEJM). |
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| o | Results<br> from the Phase 2b clinical trial evaluating MK-0616, an investigational once-daily oral proprotein<br> convertase subtilisin/kexin type 9 (PCSK9) inhibitor in adults with hypercholesterolemia.<br> MK-0616 significantly reduced low-density lipoprotein cholesterol (LDL-C) across all dose<br> levels compared to placebo and was generally well tolerated. These data were simultaneously<br> published in the Journal of The American College of Cardiology. |
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Oncology Program Highlights
| · | Merck announced the<br> following regulatory and clinical milestones for KEYTRUDA (pembrolizumab): |
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| o | Positive<br> topline results from the Phase 3 KEYNOTE-671 trial investigating KEYTRUDA as a perioperative<br> treatment regimen for patients with resectable stage II, IIIA or IIIB non-small cell lung<br> cancer (NSCLC). The U.S. Food and Drug Administration (FDA) accepted Merck’s supplemental<br> Biologics License Application (sBLA) based on these data and has set a Prescription Drug<br> User Fee Act (PDUFA), or target action, date of Oct. 16, 2023. |
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| o | In<br> collaboration with Moderna, Inc., first presentation of detailed results from the Phase 2b<br> KEYNOTE-942/mRNA-4157-P201 trial at the American Association for Cancer Research Annual Meeting.<br> Data showed that KEYTRUDA in combination with mRNA-4157/V940, an investigational individualized<br> neoantigen therapy, demonstrated a statistically significant and clinically meaningful improvement<br> in the primary endpoint of recurrence-free survival versus KEYTRUDA alone for the adjuvant<br> treatment of patients with stage III/IV melanoma following complete resection. |
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| § | In addition,<br> the combination of KEYTRUDA and mRNA-4157/V940 received Breakthrough Therapy Designation<br> by the FDA and was granted Priority Medicines (PRIME) scheme designation by the European<br> Medicines Agency. |
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| o | Accelerated<br> approval of KEYTRUDA by the FDA in combination with Padcev®^3^(enfortumab vedotin-ejfv) for the treatment of adult patients with locally advanced<br> or metastatic urothelial carcinoma who are not eligible for cisplatin-containing chemotherapy,<br> based on data from the KEYNOTE-869 trial. |
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| o | Results<br> from the Phase 3 NRG-GY018<br> trial investigating KEYTRUDA in combination with chemotherapy, then continued as a single<br> agent, for the first-line treatment of patients with stage III-IV or recurrent endometrial<br> carcinoma, presented at the 2023 Society of Gynecologic Oncology Annual Meeting on Women’s<br> Cancer, with simultaneous publication in NEJM. Results showed KEYTRUDA plus chemotherapy<br> significantly improved progression-free survival compared to chemotherapy alone in these<br> patients, regardless of tumor DNA mismatch repair status. |
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| o | Results<br> from the pivotal Phase 3 KEYNOTE-859 trial, investigating KEYTRUDA in combination with chemotherapy<br> for the first-line treatment of patients with human epidermal growth factor receptor 2 (HER2)-negative<br> locally advanced unresectable or metastatic gastric or gastroesophageal junction adenocarcinoma,<br> presented at a European Society for Medical Oncology Virtual Plenary. Study showed KEYTRUDA<br> in combination with chemotherapy significantly improved overall survival (OS) versus chemotherapy<br> alone in these patients, regardless of PD-L1 expression. |
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| § | In addition,<br> the FDA accepted Merck’s sBLA based on these data and has set a PDUFA date of Dec.<br> 16, 2023. |
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| o | Positive<br> topline results from the Phase 2/3 Canadian Cancer Trials Group IND.227/KEYNOTE-483 trial<br> evaluating KEYTRUDA in combination with chemotherapy for the first-line treatment of patients<br> with unresectable advanced or metastatic malignant pleural mesothelioma. |
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| · | Merck announced<br> that the FDA will convene a meeting of the Oncologic Drugs Advisory Committee on April 28,<br> 2023, to discuss the supplemental New Drug Application (sNDA) for use of Lynparza (olaparib)<br> in combination with abiraterone and prednisone or prednisolone (abi/pred), for the treatment<br> of adult patients with metastatic castration-resistant prostate cancer. The sNDA is based<br> on the results of the Phase 3 PROpel trial, including the primary endpoint of radiographic<br> progression-free survival. Merck also announced results from the final analysis of the<br> key secondary endpoint of OS from PROpel. |
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| · | Merck will host an<br> Oncology Investor Event to coincide with the American Society for Clinical Oncology Annual<br> Meeting on Monday, June 5, 2023, 6:00 p.m. CT, at which senior management will provide an<br> update on the company’s oncology strategy and program. The event will take place in<br> Chicago, Ill., and will be accessible via webcast. Further details, including the webcast<br> link, will be announced at a later date. |
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^3^ Registered trademark of Seagen and Agensys.
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Infectious Diseases Program Highlights
| · | Merck opened<br> enrollment in new Phase 3 clinical trials evaluating the investigational once-daily combination<br> of doravirine, 100 mg, and islatravir, 0.25 mg (DOR/ISL) for the treatment of people with<br> HIV-1 infection, as part of the company’s ongoing commitment to HIV. |
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| · | Merck and Gilead<br> Sciences have resumed under an amended protocol a Phase 2 clinical study evaluating an investigational<br> once-weekly oral combination treatment regimen of islatravir and lenacapavir, for people<br> living with HIV who are virologically suppressed on antiretroviral therapy. |
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Environmental, Social and Governance (ESG) Updates
| · | Merck was named<br> one of Barron’s Top 100 Most Sustainable U.S. Companies for the third consecutive year,<br> ranking No. 1 in the pharmaceutical industry and No. 29 overall. |
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First-Quarter Revenue Performance
The following table reflects sales of the company’s top Pharmaceutical products, as well as sales of Animal Health products.
| First Quarter | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| $ in millions | 2023 | 2022 | Change | Change Ex-Exchange | ||||||
| Total Sales | $ | 14,487 | $ | 15,901 | -9 | % | -5 | % | ||
| Pharmaceutical | 12,721 | 14,107 | -10 | % | -6 | % | ||||
| KEYTRUDA | 5,795 | 4,809 | 20 | % | 24 | % | ||||
| GARDASIL / GARDASIL 9 | 1,972 | 1,460 | 35 | % | 43 | % | ||||
| JANUVIA / JANUMET | 880 | 1,233 | -29 | % | -25 | % | ||||
| PROQUAD, M-M-R II and VARIVAX | 528 | 470 | 12 | % | 14 | % | ||||
| BRIDION | 487 | 395 | 23 | % | 27 | % | ||||
| LAGEVRIO | 392 | 3,247 | -88 | % | -87 | % | ||||
| ROTATEQ | 297 | 216 | 38 | % | 42 | % | ||||
| Lynparza* | 275 | 266 | 3 | % | 8 | % | ||||
| Lenvima* | 232 | 227 | 2 | % | 5 | % | ||||
| SIMPONI | 180 | 186 | -3 | % | 2 | % | ||||
| Animal Health | 1,491 | 1,482 | 1 | % | 5 | % | ||||
| Livestock | 849 | 832 | 2 | % | 8 | % | ||||
| Companion Animals | 642 | 650 | -1 | % | 2 | % | ||||
| Other Revenues** | 275 | 312 | -12 | % | -22 | % |
*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 revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities.
Pharmaceutical Revenue
First-quarter Pharmaceutical sales declined 10% to $12.7 billion, primarily due to lower sales in virology, largely attributable to LAGEVRIO, and diabetes, partially offset by growth in oncology, vaccines and hospital acute care. Excluding LAGEVRIO, Pharmaceutical sales grew 14%, and excluding LAGEVRIO and the unfavorable impact of foreign exchange, Pharmaceutical sales grew 18%.
The decline in virology was primarily due to lower sales of LAGEVRIO, which decreased 88% to $392 million, largely attributable to sales in the U.S. and U.K. markets in the first quarter of 2022 that did not recur in the first quarter of 2023. The LAGEVRIO sales decline was also attributable to lower sales in Japan and Australia.
The sales decline within diabetes primarily reflects lower combined sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI), which declined 29% to $880 million, primarily due to generic competition in several international markets, particularly in Europe, and lower demand and pricing in the U.S.
Growth in oncology was largely driven by higher sales of KEYTRUDA, which rose 20% to $5.8 billion in the quarter. Global sales growth of KEYTRUDA reflects continued strong momentum from metastatic indications, including certain types of NSCLC, renal cell carcinoma, head and neck squamous cell carcinoma, triple-negative breast cancer (TNBC) and microsatellite instability-high (MSI-H) cancers, and increased uptake across recent earlier-stage launches, including certain types of neoadjuvant/adjuvant TNBC in the U.S.
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Growth in vaccines reflects 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), which grew 35% to $2.0 billion, reflecting strong demand outside of the U.S., particularly in China, which also benefited from the timing of shipments and increased supply. Growth in vaccines also reflects higher sales of VAXNEUVANCE (Pneumococcal 15-valent Conjugate Vaccine), which increased to $106 million, primarily due to continued uptake in the pediatric indication following launch in the U.S. In addition, vaccines sales performance reflects higher sales of ROTATEQ (Rotavirus Vaccine, Live Oral, Pentavalent), which grew 38% to $297 million, primarily due to inventory stocking in China. Growth in vaccines was partially offset by lower sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), which declined 44% to $96 million, primarily reflecting lower U.S. demand as the market continues to shift toward newer adult pneumococcal conjugate vaccines.
Growth in hospital acute care reflects higher sales of BRIDION (sugammadex) injection 100 mg/ML, which grew 23% to $487 million, primarily due to increased demand, particularly in the U.S., reflecting an increase in its share among neuromuscular blockade reversal agents.
Animal Health Revenue
Animal Health sales totaled $1.5 billion for the first quarter of 2023, a 1% increase compared with the first quarter of 2022. Excluding the impact of foreign exchange, Animal Health sales increased 5%. Growth in livestock products reflects strong demand notably in the ruminant and poultry product portfolio, which includes technology solution products, as well as higher pricing. Excluding the unfavorable impact of foreign exchange, growth in companion animal products reflects the impact of higher pricing. The BRAVECTO (fluralaner) parasiticide line of products had sales of $314 million in the quarter.
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First-Quarter Expense, EPS and Related Information
The tables below present selected expense information.
| $ in millions | GAAP | Acquisition- and Divestiture- Related Costs^4^ | Restructuring<br><br> Costs | (Income) <br><br> Loss From<br><br> Investments<br><br> in Equity<br><br> Securities | Certain Other Items | Non- GAAP^2^ | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| First Quarter 2023 | |||||||||||||||
| Cost of sales | $ | 3,926 | $ | 545 | $ | 29 | $ | - | $ | - | $ | 3,352 | |||
| Selling, general and administrative | 2,479 | 20 | 1 | - | - | 2,458 | |||||||||
| Research and development | 4,276 | 10 | - | - | - | 4,266 | |||||||||
| Restructuring costs | 67 | - | 67 | - | - | - | |||||||||
| Other (income) expense, net | 89 | 15 | - | (429 | ) | 573 | (70 | ) | |||||||
| First Quarter 2022 | |||||||||||||||
| Cost of sales | $ | 5,380 | $ | 680 | $ | 46 | $ | - | $ | - | $ | 4,654 | |||
| Selling, general and administrative | 2,323 | 50 | 21 | - | - | 2,252 | |||||||||
| Research and development | 2,576 | 22 | 7 | - | - | 2,547 | |||||||||
| Restructuring costs | 53 | - | 53 | - | - | - | |||||||||
| Other (income) expense, net | 708 | (115 | ) | - | 684 | - | 139 |
GAAP Expense, EPS and Related Information
Gross margin was 72.9% for the first quarter of 2023 compared with 66.2% for the first quarter of 2022. The increase primarily reflects lower LAGEVRIO sales, which have a low gross margin, as well as the favorable impacts of product mix and lower amortization of intangible assets.
Selling, general and administrative (SG&A) expenses were $2.5 billion in the first quarter of 2023, an increase of 7% compared with the first quarter of 2022. The increase primarily reflects higher administrative costs and higher promotional spending, partially offset by the favorable impact of foreign exchange.
R&D expenses were $4.3 billion in the first quarter of 2023, an increase of 66% compared with the first quarter of 2022. The increase was primarily driven by a $1.2 billion charge for the acquisition of Imago and a $175 million charge related to a collaboration and licensing agreement with Kelun-Biotech. In addition, the increase was driven by higher compensation and benefit costs, reflecting in part increased headcount to support expanded clinical development activity, higher investments in discovery research and early drug development, and higher clinical development spending.
Other (income) expense, net, was $89 million of expense in the first quarter of 2023 compared with $708 million of expense in the first quarter of 2022. The change is primarily due to net gains from investments in equity securities in the first quarter of 2023 compared with net losses from investments in equity securities in the first quarter of 2022, as well as higher interest income in the first quarter of 2023. The favorability was partially offset by a $573 million charge in the first quarter of 2023 related to settlements with certain plaintiffs in the Zetia antitrust litigation.
^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 liabilities for contingent consideration. Also includes integration, transaction and certain other costs related to acquisitions and divestitures.
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The effective tax rate of 22.6% for the first quarter of 2023 reflects the unfavorable discrete impact of a charge for the acquisition of Imago for which no tax benefit was recognized, as well as the unfavorable effects of higher foreign taxes, the R&D capitalization provision of the Tax Cuts and Jobs Act of 2017, and net unrealized gains from investments in equity securities, which were taxed at the U.S. tax rate.
GAAP EPS was $1.11 for the first quarter of 2023 compared with $1.70 for the first quarter of 2022.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 76.9% for the first quarter of 2023 compared with 70.7% for the first quarter of 2022. The increase primarily reflects lower LAGEVRIO sales, which have a low gross margin, as well as the favorable impact of product mix.
Non-GAAP SG&A expenses were $2.5 billion in the first quarter of 2023, an increase of 9% compared with the first quarter of 2022. The increase primarily reflects higher administrative costs and higher promotional spending, partially offset by the favorable impact of foreign exchange.
Non-GAAP R&D expenses were $4.3 billion in the first quarter of 2023, an increase of 67% compared with the first quarter of 2022. The increase was primarily driven by a $1.2 billion charge for the acquisition of Imago and a $175 million charge related to a collaboration and licensing agreement with Kelun-Biotech. In addition, the increase was driven by higher compensation and benefit costs, reflecting in part increased headcount to support expanded clinical development activity, higher investments in discovery research and early drug development, and higher clinical development spending.
Non-GAAP other (income) expense, net, was $70 million of income in the first quarter of 2023 compared with $139 million of expense in the first quarter of 2022, primarily reflecting higher interest income in the first quarter of 2023.
The non-GAAP effective tax rate of 20.4% for the first quarter of 2023 reflects the unfavorable discrete impact of a charge for the acquisition of Imago for which no tax benefit was recognized, as well as the unfavorable effects of higher foreign taxes and the R&D capitalization provision of the Tax Cuts and Jobs Act of 2017.
Non-GAAP EPS was $1.40 for the first quarter of 2023 compared with $2.14 for the first quarter of 2022.
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A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.
| First Quarter | ||||||
|---|---|---|---|---|---|---|
| $ in millions, except EPS amounts | 2023 | 2022 | ||||
| EPS | ||||||
| GAAP EPS | $ | 1.11 | $ | 1.70 | ||
| Difference | 0.29 | 0.44 | ||||
| Non-GAAP EPS that excludes items listed below^2^ | $ | 1.40 | $ | 2.14 | ||
| Net Income | ||||||
| GAAP net income^1^ | $ | 2,821 | $ | 4,310 | ||
| Difference | 743 | 1,119 | ||||
| Non-GAAP net income that excludes items listed below^1,2^ | $ | 3,564 | $ | 5,429 | ||
| Decrease (Increase) in Net Income Due to Excluded Items: | ||||||
| Acquisition- and divestiture-related<br> costs^4^ | $ | 590 | $ | 637 | ||
| Restructuring costs | 97 | 127 | ||||
| (Income) loss from investments in equity securities | (429 | ) | 684 | |||
| Charge for Zetia antitrust litigation settlements | 573 | - | ||||
| Net decrease (increase) in income before taxes | 831 | 1,448 | ||||
| Estimated income tax (benefit) expense | (88 | ) | (329 | ) | ||
| Decrease (increase) in net income | $ | 743 | $ | 1,119 |
Financial Outlook
The following table summarizes the company’s full-year 2023 financial outlook.
| GAAP | Non-GAAP^2^ | |
|---|---|---|
| Sales* | $57.7 to $58.9 billion | $57.7 to $58.9 billion |
| Gross margin | Approximately 73% | Approximately 77% |
| Operating expenses** | $23.5 to $24.3 billion | $23.3 to $24.1 billion |
| Effective tax rate | 17% to 18% | 17% to 18% |
| EPS*** | $5.85 to $5.97 | $6.88 to $7.00 |
*Includes approximately $1.0 billion of LAGEVRIO sales. The company does not have any non-GAAP adjustments to sales.
**Includes an aggregate $1.4 billion of R&D expenses related to the Imago acquisition and upfront payment for the license and collaboration agreement with Kelun-Biotech. Outlook does not assume the proposed acquisition of Prometheus or any additional significant potential business development transactions.
***Includes $0.52 of charges related to the Imago acquisition and upfront payment to Kelun-Biotech.
Assumes a share count (assuming dilution) of approximately 2.55 billion shares.
Merck continues to experience strong global underlying demand across its key pillars of growth. Consequently, Merck is raising and narrowing its full-year outlook ranges for sales and non-GAAP EPS. For GAAP EPS, Merck is lowering and narrowing its full-year outlook, attributable to a GAAP-only charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.
Merck now expects full-year 2023 sales to be between $57.7 billion and $58.9 billion, including a negative impact of foreign exchange of approximately 2 percentage points, at mid-April 2023 exchange rates. This full-year outlook includes expected sales of LAGEVRIO of approximately $1.0 billion.
Merck’s full-year effective income tax rate is expected to be between 17% and 18%.
- 11 -
Merck is lowering and narrowing its full-year 2023 GAAP EPS range to be between $5.85 and $5.97.
Merck is raising and narrowing its full-year 2023 non-GAAP EPS range to be between $6.88 and $7.00, including a negative impact of foreign exchange of approximately 4 percentage points, at mid-April 2023 exchange rates. The non-GAAP range excludes acquisition- and divestiture-related costs and costs related to restructuring programs, as well as income and losses from investments in equity securities and a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.
A reconciliation of anticipated 2023 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 2023 |
|---|---|
| GAAP EPS | 5.85 to 5.97 |
| Difference | |
| Non-GAAP EPS that excludes items listed below^2^ | |
| Acquisition- and divestiture-related costs | |
| Restructuring costs | |
| (Income) loss from investments in equity securities | |
| Charge for Zetia antitrust litigation settlements | |
| Net decrease (increase) in income before taxes | |
| Estimated income tax (benefit) expense | |
| Decrease (increase) in net income |
All values are in US Dollars.
In April, Merck announced it has agreed to acquire Prometheus; the acquisition is expected to close in the third quarter of 2023. Merck’s outlook does not reflect this transaction, which is expected to be accounted for as an asset acquisition, and would result in a one-time charge of approximately $10.3 billion recorded to both GAAP and non-GAAP R&D expenses in 2023, or approximately $4.00 per share. In addition, taking into consideration operational investment to advance the pipeline assets as well as the cost of financing, Merck also anticipates EPS will be negatively impacted by approximately $0.25 in the first 12 months following close. Once the transaction closes, Merck will incorporate the anticipated impacts of this acquisition in both its GAAP and non-GAAP financial outlook.
Earnings Conference Call
Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Thursday, April 27, at 9:00 a.m. ET via this weblink. A replay of the webcast, along with the sales and earnings news release, supplemental financial disclosures, and slides highlighting the results, will be available at www.merck.com.
All participants may join the call by dialing (888) 769-8514 (U.S. and Canada Toll-Free) or (517) 308-9208 and using the access code 8206435.
- 12 -
About Merck
At Merck, known as MSD outside of the United States and Canada, we are unified around our purpose: We use the power of leading-edge science to save and improve lives around the world. For more than 130 years, we have brought hope to humanity through the development of important medicines and vaccines. We aspire to be the premier research-intensive biopharmaceutical company in the world – and today, we are at the forefront of research to deliver innovative health solutions that advance the prevention and treatment of diseases in people and animals. We foster a diverse and inclusive global workforce and operate responsibly every day to enable a safe, sustainable and healthy future for all people and communities. 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., Rahway, N.J.,USA
This news release of Merck & Co., Inc., Rahway, 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 candidates that the candidates 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 Annual Report on Form 10-K for the year ended December 31, 2022, and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).
- 13 -
| Media Contacts: | Investor Contacts: |
|---|---|
| Robert Josephson<br><br> <br>(203) 914-2372<br><br> <br>robert.josephson@merck.com<br><br> <br><br><br> <br>Michael Levey<br><br> <br>(215) 872-1462<br><br> <br>michael.levey@merck.com | Peter Dannenbaum<br><br> <br>(908) 740-1037<br><br> <br>peter.dannenbaum@merck.com<br><br> <br><br><br> <br>Steven Graziano<br><br> <br>(908) 740-6582<br><br> <br>steven.graziano@merck.com |
- 14 -
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1
| GAAP | ||||||||
|---|---|---|---|---|---|---|---|---|
| **** | **** | 1Q23 | **** | 1Q22 | % Change | **** | ||
| Sales | $ | 14,487 | $ | 15,901 | -9 | % | ||
| Costs, Expenses and Other | ||||||||
| Cost of sales | 3,926 | 5,380 | -27 | % | ||||
| Selling, general and administrative | 2,479 | 2,323 | 7 | % | ||||
| Research and development | 4,276 | 2,576 | 66 | % | ||||
| Restructuring costs | 67 | 53 | 26 | % | ||||
| Other (income) expense, net | 89 | 708 | -87 | % | ||||
| Income Before Taxes | 3,650 | 4,861 | -25 | % | ||||
| Income Tax Provision | 825 | 554 | ||||||
| Net Income | 2,825 | 4,307 | -34 | % | ||||
| Less: Net Income (Loss) Attributable to Noncontrolling Interests | 4 | (3 | ) | |||||
| Net Income Attributable to Merck & Co., Inc. | $ | 2,821 | $ | 4,310 | -35 | % | ||
| Earnings per Common Share Assuming Dilution | $ | 1.11 | $ | 1.70 | -35 | % | ||
| Average Shares Outstanding Assuming Dilution | 2,551 | 2,537 | ||||||
| Tax Rate | 22.6 | % | 11.4 | % |
- 15 -
MERCK & CO., INC.
FIRST QUARTER 2023 GAAP TO NON-GAAP RECONCILIATION
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a
| **** | **** | **** | **** | **** | **** | **** | (Income) Loss from | **** | **** | **** | **** | **** | **** | **** | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | **** | **** | Acquisition and Divestiture- | **** | **** | **** | Investments in Equity | **** | **** | **** | **** | **** | **** | **** | |||||||
| GAAP | **** | Related Costs ^(1)^ | **** | Restructuring Costs ^(2)^ | **** | Securities | **** | Certain Other Items | **** | Adjustment Subtotal | **** | Non-GAAP | **** | ||||||||
| First Quarter | |||||||||||||||||||||
| Cost of sales | $ | 3,926 | 545 | 29 | 574 | $ | 3,352 | ||||||||||||||
| Selling, general and administrative | 2,479 | 20 | 1 | 21 | 2,458 | ||||||||||||||||
| Research and development | 4,276 | 10 | 10 | 4,266 | |||||||||||||||||
| Restructuring costs | 67 | 67 | 67 | - | |||||||||||||||||
| Other (income) expense, net | 89 | 15 | (429 | ) | 573 | ^(3)^ | 159 | (70 | ) | ||||||||||||
| Income Before Taxes | 3,650 | (590 | ) | (97 | ) | 429 | (573 | ) | (831 | ) | 4,481 | ||||||||||
| Income Tax Provision (Benefit) | 825 | (105 | )^(4)^ | (18 | )^(4)^ | 95 | ^(4)^ | (60 | )^(4)^ | (88 | ) | 913 | |||||||||
| Net Income | 2,825 | (485 | ) | (79 | ) | 334 | (513 | ) | (743 | ) | 3,568 | ||||||||||
| Net Income Attributable to Merck & Co., Inc. | 2,821 | (485 | ) | (79 | ) | 334 | (513 | ) | (743 | ) | 3,564 | ||||||||||
| Earnings per Common Share Assuming<br> Dilution | $ | 1.11 | (0.19 | ) | (0.03 | ) | 0.13 | (0.20 | ) | (0.29 | ) | $ | 1.40 | ||||||||
| Tax Rate | 22.6 | % | 20.4 | % | |||||||||||||||||
| Only the line items that are affected by non-GAAP adjustments<br> are shown. | |||||||||||||||||||||
| --- | |||||||||||||||||||||
| Merck is providing certain non-GAAP information that excludes<br> certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and<br> trends. Management believes that providing non-GAAP information enhances investors’ understanding of the company’s<br> results because management uses non-GAAP measures to assess performance. Management uses non-GAAP measures internally<br> for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition,<br> senior management’s annual compensation is derived in part using a non-GAAP pretax income metric. The non-GAAP information<br> presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with<br> GAAP. | |||||||||||||||||||||
| ^(1)^Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets. Amounts<br> included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to acquisitions<br> and divestitures. Amounts included in research and development expenses primarily reflect the amortization of intangible<br> assets. Amounts included in other (income) expense, net, reflect a $37 million loss on the sale of a business and an increase<br> in the estimated fair value measurement of liabilities for contingent consideration related to the prior termination of the Sanofi-Pasteur<br> MSD joint venture, partially offset by royalty income. | |||||||||||||||||||||
| ^(2)^Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or<br> divested related to activities under the company's formal restructuring programs. | |||||||||||||||||||||
| ^(3)^Reflects a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation. | |||||||||||||||||||||
| ^(4)^Represents the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory<br> of the non-GAAP adjustments. |
- 16 -
MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3
| 2023 | 2022 | 1Q | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 1Q | 1Q | 2Q | 3Q | 4Q | Full Year | Nom % | Ex-Exch % | |||||||||
| TOTAL SALES ^(1)^ | $ | 14,487 | $ | 15,901 | $ | 14,593 | $ | 14,959 | $ | 13,830 | $ | 59,283 | -9 | -5 | ||
| PHARMACEUTICAL | 12,721 | 14,107 | 12,756 | 12,963 | 12,180 | 52,005 | -10 | -6 | ||||||||
| Oncology | ||||||||||||||||
| Keytruda | 5,795 | 4,809 | 5,252 | 5,426 | 5,450 | 20,937 | 20 | 24 | ||||||||
| Alliance Revenue – Lynparza ^(2)^ | 275 | 266 | 275 | 284 | 292 | 1,116 | 3 | 8 | ||||||||
| Alliance Revenue – Lenvima ^(2)^ | 232 | 227 | 231 | 202 | 216 | 876 | 2 | 5 | ||||||||
| Alliance Revenue – Reblozyl ^(3)^ | 43 | 52 | 33 | 39 | 41 | 166 | -19 | -19 | ||||||||
| Welireg | 42 | 18 | 27 | 38 | 40 | 123 | 128 | 128 | ||||||||
| Vaccines ^(4)^ | ||||||||||||||||
| Gardasil / Gardasil 9 | 1,972 | 1,460 | 1,674 | 2,294 | 1,470 | 6,897 | 35 | 43 | ||||||||
| ProQuad / M-M-R II / Varivax | 528 | 470 | 578 | 668 | 526 | 2,241 | 12 | 14 | ||||||||
| RotaTeq | 297 | 216 | 173 | 256 | 139 | 783 | 38 | 42 | ||||||||
| Vaxneuvance | 106 | 5 | 12 | 16 | 138 | 170 | * | * | ||||||||
| Pneumovax 23 | 96 | 173 | 153 | 131 | 145 | 602 | -44 | -40 | ||||||||
| Vaqta | 40 | 36 | 35 | 64 | 39 | 173 | 12 | 13 | ||||||||
| Hospital Acute Care | ||||||||||||||||
| Bridion | 487 | 395 | 426 | 423 | 441 | 1,685 | 23 | 27 | ||||||||
| Prevymis | 129 | 94 | 103 | 114 | 118 | 428 | 38 | 44 | ||||||||
| Primaxin | 80 | 58 | 64 | 63 | 54 | 239 | 37 | 48 | ||||||||
| Dificid | 65 | 52 | 66 | 77 | 67 | 263 | 25 | 25 | ||||||||
| Noxafil | 60 | 57 | 60 | 62 | 58 | 238 | 5 | 14 | ||||||||
| Zerbaxa | 50 | 30 | 46 | 43 | 49 | 169 | 66 | 70 | ||||||||
| Cardiovascular | ||||||||||||||||
| Alliance Revenue - Adempas/Verquvo ^(5)^ | 99 | 72 | 98 | 88 | 82 | 341 | 38 | 38 | ||||||||
| Adempas ^(6)^ | 59 | 61 | 63 | 57 | 57 | 238 | -3 | 5 | ||||||||
| Virology | ||||||||||||||||
| Lagevrio | 392 | 3,247 | 1,177 | 436 | 825 | 5,684 | -88 | -87 | ||||||||
| Isentress / Isentress HD | 123 | 158 | 147 | 161 | 167 | 633 | -23 | -20 | ||||||||
| Neuroscience | ||||||||||||||||
| Belsomra | 56 | 69 | 69 | 62 | 59 | 258 | -19 | -9 | ||||||||
| Immunology | ||||||||||||||||
| Simponi | 180 | 186 | 181 | 173 | 166 | 706 | -3 | 2 | ||||||||
| Remicade | 51 | 61 | 53 | 49 | 44 | 207 | -15 | -10 | ||||||||
| Diabetes ^(7)^ | ||||||||||||||||
| Januvia | 551 | 779 | 756 | 717 | 561 | 2,813 | -29 | -26 | ||||||||
| Janumet | 329 | 454 | 476 | 417 | 353 | 1,700 | -28 | -24 | ||||||||
| Other Pharmaceutical ^(8)^ | 584 | 602 | 528 | 603 | 583 | 2,319 | -3 | 1 | ||||||||
| ANIMAL HEALTH | 1,491 | 1,482 | 1,467 | 1,371 | 1,230 | 5,550 | 1 | 5 | ||||||||
| Livestock | 849 | 832 | 826 | 829 | 814 | 3,300 | 2 | 8 | ||||||||
| Companion Animals | 642 | 650 | 641 | 542 | 416 | 2,250 | -1 | 2 | ||||||||
| Other Revenues ^(9)^ | 275 | 312 | 370 | 625 | 420 | 1,728 | -12 | -22 |
*200% or greater
| ^(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<br> costs. |
| ^(3)^Alliance Revenue represents royalties and a milestone payment of $20 million received in the first quarter of 2022. |
| ^(4)^Total Vaccines sales were $3,133 million in the first quarter of 2023 and $2,481 million in the first quarter of 2022. |
| ^(5)^Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net<br> of cost of sales and commercialization costs. |
| ^(6)^Net product sales in Merck's marketing territories. |
| ^(7)^Total Diabetes sales were $950 million in the first quarter of 2023 and $1,305 million in the first quarter of 2022. |
| ^(8)^Includes Pharmaceutical products not individually shown above. |
| ^(9)^Other Revenues<br> are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging<br> activities. Other Revenues related to the receipt of upfront and milestone payments for out-licensed products were $51<br> million in the first quarter of 2023 and $114 million in the first quarter of 2022. |
Exhibit 99.2
Proprietary
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1a
| **** | 2023 | **** | 2022 | **** | % Change | **** | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | 1Q | **** | 1Q | **** | 2Q | **** | 3Q | **** | 4Q | **** | Full Year | **** | 1Q | **** | |||||||
| Sales | $ | 14,487 | $ | 15,901 | $ | 14,593 | $ | 14,959 | $ | 13,830 | $ | 59,283 | -9 | % | |||||||
| Costs, Expenses and Other | |||||||||||||||||||||
| Cost of sales | 3,926 | 5,380 | 4,216 | 3,934 | 3,881 | 17,411 | -27 | % | |||||||||||||
| Selling, general and administrative | 2,479 | 2,323 | 2,512 | 2,520 | 2,687 | 10,042 | 7 | % | |||||||||||||
| Research and development | 4,276 | 2,576 | 2,798 | 4,399 | 3,775 | 13,548 | 66 | % | |||||||||||||
| Restructuring costs | 67 | 53 | 142 | 94 | 49 | 337 | 26 | % | |||||||||||||
| Other (income) expense, net | 89 | 708 | 438 | 429 | (75 | ) | 1,501 | -87 | % | ||||||||||||
| Income Before Taxes | 3,650 | 4,861 | 4,487 | 3,583 | 3,513 | 16,444 | -25 | % | |||||||||||||
| Income Tax Provision | 825 | 554 | 538 | 330 | 495 | 1,918 | |||||||||||||||
| Net Income | 2,825 | 4,307 | 3,949 | 3,253 | 3,018 | 14,526 | -34 | % | |||||||||||||
| Less: Net Income (Loss) Attributable to Noncontrolling<br> Interests | 4 | (3 | ) | 5 | 5 | 1 | 7 | ||||||||||||||
| Net Income Attributable to Merck & Co., Inc. | $ | 2,821 | $ | 4,310 | $ | 3,944 | $ | 3,248 | $ | 3,017 | $ | 14,519 | -35 | % | |||||||
| Earnings per Common Share Assuming<br> Dilution | $ | 1.11 | $ | 1.70 | $ | 1.55 | $ | 1.28 | $ | 1.18 | $ | 5.71 | -35 | % | |||||||
| Average Shares Outstanding Assuming Dilution | 2,551 | 2,537 | 2,540 | 2,542 | 2,548 | 2,542 | |||||||||||||||
| Tax Rate | 22.6 | % | 11.4 | % | 12.0 | % | 9.2 | % | 14.1 | % | 11.7 | % |
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
| MERCK & CO., INC. | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FIRST QUARTER 2022 GAAP TO NON-GAAP RECONCILIATION | ||||||||||||||||||||
| (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Table 2b | ||||||||||||||||||||
| GAAP | Acquisition and Divestiture-Related Costs ^(1)^ | Restructuring Costs ^(2)^ | (Income) Loss from<br><br> Investments in Equity<br><br> Securities | Adjustment Subtotal | Non-GAAP | |||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| First Quarter | ||||||||||||||||||||
| Cost of sales | $ | 5,380 | 680 | 46 | 726 | $ | 4,654 | |||||||||||||
| Selling, general and administrative | 2,323 | 50 | 21 | 71 | 2,252 | |||||||||||||||
| Research and development | 2,576 | 22 | 7 | 29 | 2,547 | |||||||||||||||
| Restructuring costs | 53 | - | 53 | 53 | - | |||||||||||||||
| Other (income) expense, net | 708 | (115 | ) | 684 | 569 | 139 | ||||||||||||||
| Income Before Taxes | 4,861 | (637 | ) | (127 | ) | (684 | ) | (1,448 | ) | 6,309 | ||||||||||
| Income Tax Provision (Benefit) | 554 | (155 | )^(3)^ | (22 | )^(3)^ | (152 | )^(3)^ | (329 | ) | 883 | ||||||||||
| Net Income | 4,307 | (482 | ) | (105 | ) | (532 | ) | (1,119 | ) | 5,426 | ||||||||||
| Net Income Attributable to Merck & Co., Inc. | 4,310 | (482 | ) | (105 | ) | (532 | ) | (1,119 | ) | 5,429 | ||||||||||
| Earnings per Common Share Assuming Dilution | $ | 1.70 | (0.19 | ) | (0.04 | ) | (0.21 | ) | (0.44 | ) | $ | 2.14 | ||||||||
| Tax Rate | 11.4 | % | 14.0 | % | ||||||||||||||||
| Only<br> the line items that are affected by non-GAAP adjustments are shown. | ||||||||||||||||||||
| --- | ||||||||||||||||||||
| Merck<br> is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have<br> on the analysis of underlying business performance and trends. Management believes that providing non-GAAP information enhances investors’<br> understanding of the company’s results because management uses non-GAAP measures to assess performance. Management uses non-GAAP<br> measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics.<br> In addition, senior management’s annual compensation is derived in part using a non-GAAP pretax income metric. The non-GAAP<br> information presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance<br> with GAAP. | ||||||||||||||||||||
| ^(1)^Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets. Amounts<br> included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to acquisitions<br> and divestitures. Amounts included in other (income) expense, net, primarily reflect royalty income and a decrease in<br> the estimated fair value measurement of liabilities for contingent consideration related to the prior termination of the Sanofi-Pasteur<br> MSD joint venture. | ||||||||||||||||||||
| ^(2)^Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or<br> divested related to activities under the company's formal restructuring programs. | ||||||||||||||||||||
| ^(3)^Represents the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory<br> of the non-GAAP adjustments. | ||||||||||||||||||||
| MERCK & CO., INC. | ||||||||||||||||||||
| --- | ||||||||||||||||||||
| FRANCHISE / KEY PRODUCT SALES | ||||||||||||||||||||
| FIRST QUARTER 2023 | ||||||||||||||||||||
| (AMOUNTS IN MILLIONS) | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Table 3a | ||||||||||||||||||||
| Global | U.S. | International | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| 1Q 2023 | 1Q 2022 | % Change | 1Q 2023 | 1Q 2022 | % Change | 1Q 2023 | 1Q 2022 | % Change | ||||||||||||
| TOTAL SALES ^(1)^ | $ | 14,487 | $ | 15,901 | -9 | $ | 6,659 | $ | 7,339 | -9 | $ | 7,828 | $ | 8,563 | -9 | |||||
| PHARMACEUTICAL | 12,721 | 14,107 | -10 | 6,117 | 6,773 | -10 | 6,604 | 7,334 | -10 | |||||||||||
| Oncology | ||||||||||||||||||||
| Keytruda | 5,795 | 4,809 | 20 | 3,485 | 2,779 | 25 | 2,310 | 2,030 | 14 | |||||||||||
| Alliance Revenue – Lynparza ^(2)^ | 275 | 266 | 3 | 142 | 141 | 1 | 133 | 125 | 6 | |||||||||||
| Alliance Revenue – Lenvima ^(2)^ | 232 | 227 | 2 | 153 | 156 | -2 | 79 | 71 | 11 | |||||||||||
| Alliance Revenue – Reblozyl ^(3)^ | 43 | 52 | -19 | 30 | 27 | 11 | 12 | 25 | -51 | |||||||||||
| Welireg | 42 | 18 | 128 | 41 | 18 | 122 | 1 | - | ||||||||||||
| Vaccines ^(4)^ | ||||||||||||||||||||
| Gardasil / Gardasil 9 | 1,972 | 1,460 | 35 | 416 | 418 | - | 1,556 | 1,042 | 49 | |||||||||||
| ProQuad / M-M-R II / Varivax | 528 | 470 | 12 | 421 | 371 | 14 | 107 | 99 | 8 | |||||||||||
| RotaTeq | 297 | 216 | 38 | 180 | 175 | 3 | 117 | 41 | 185 | |||||||||||
| Vaxneuvance | 106 | 5 | * | 94 | 5 | * | 13 | * | ||||||||||||
| Pneumovax 23 | 96 | 173 | -44 | 40 | 118 | -66 | 56 | 55 | 2 | |||||||||||
| Vaqta | 40 | 36 | 12 | 30 | 29 | 4 | 10 | 7 | 48 | |||||||||||
| Hospital Acute Care | ||||||||||||||||||||
| Bridion | 487 | 395 | 23 | 276 | 195 | 41 | 210 | 199 | 6 | |||||||||||
| Prevymis | 129 | 94 | 38 | 54 | 40 | 37 | 75 | 54 | 39 | |||||||||||
| Primaxin | 80 | 58 | 37 | 4 | 1 | * | 76 | 58 | 32 | |||||||||||
| Dificid | 65 | 52 | 25 | 62 | 49 | 25 | 3 | 3 | 12 | |||||||||||
| Noxafil | 60 | 57 | 5 | 14 | 10 | 47 | 46 | 48 | -3 | |||||||||||
| Zerbaxa | 50 | 30 | 66 | 27 | 18 | 49 | 23 | 12 | 92 | |||||||||||
| Cardiovascular | ||||||||||||||||||||
| Alliance Revenue - Adempas/Verquvo ^(5)^ | 99 | 72 | 38 | 83 | 71 | 17 | 16 | 1 | * | |||||||||||
| Adempas ^(6)^ | 59 | 61 | -3 | 59 | 61 | -3 | ||||||||||||||
| Virology | ||||||||||||||||||||
| Lagevrio | 392 | 3,247 | -88 | -2 | 1,523 | -100 | 394 | 1,723 | -77 | |||||||||||
| Isentress / Isentress HD | 123 | 158 | -23 | 52 | 61 | -16 | 71 | 97 | -27 | |||||||||||
| Neuroscience | ||||||||||||||||||||
| Belsomra | 56 | 69 | -19 | 16 | 20 | -21 | 40 | 48 | -17 | |||||||||||
| Immunology | ||||||||||||||||||||
| Simponi | 180 | 186 | -3 | 180 | 186 | -3 | ||||||||||||||
| Remicade | 51 | 61 | -15 | 51 | 61 | -15 | ||||||||||||||
| Diabetes ^(7)^ | ||||||||||||||||||||
| Januvia | 551 | 779 | -29 | 271 | 325 | -17 | 280 | 454 | -38 | |||||||||||
| Janumet | 329 | 454 | -28 | 56 | 63 | -11 | 272 | 391 | -30 | |||||||||||
| Other Pharmaceutical ^(8)^ | 584 | 602 | -3 | 172 | 160 | 8 | 414 | 443 | -7 | |||||||||||
| ANIMAL HEALTH | 1,491 | 1,482 | 1 | 482 | 473 | 2 | 1,010 | 1,009 | - | |||||||||||
| Livestock | 849 | 832 | 2 | 174 | 171 | 2 | 676 | 660 | 2 | |||||||||||
| Companion Animals | 642 | 650 | -1 | 308 | 302 | 2 | 334 | 349 | -4 | |||||||||||
| Other Revenues ^(9)^ | 275 | 312 | -12 | 60 | 93 | -35 | 214 | 220 | -3 | |||||||||||
| *200%<br> or greater | ||||||||||||||||||||
| --- | ||||||||||||||||||||
| Sum<br> of U.S. plus international may not equal global 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<br> costs. | ||||||||||||||||||||
| ^(3)^Alliance Revenue represents royalties and a milestone payment of $20 million received in the first quarter of 2022. | ||||||||||||||||||||
| ^(4)^Total Vaccines sales were $3,133 million in the first quarter of 2023 and $2,481 million in the first quarter of 2022. | ||||||||||||||||||||
| ^(5)^Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net<br> of cost of sales and commercialization costs. | ||||||||||||||||||||
| ^(6)^Net product sales in Merck's marketing territories. | ||||||||||||||||||||
| ^(7)^Total Diabetes sales were $950 million in the first quarter of 2023 and $1,305 million in the first quarter of 2022. | ||||||||||||||||||||
| ^(8)^Includes Pharmaceutical products not individually shown above. | ||||||||||||||||||||
| ^(9)^Other Revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate<br> revenues, including revenue-hedging activities. Other Revenues related to the receipt of upfront and milestone payments<br> for out-licensed products were $51 million in the first quarter of 2023 and $114 million in the first quarter of 2022. | ||||||||||||||||||||
| MERCK & CO., INC. | ||||||||||||||||||||
| --- | ||||||||||||||||||||
| PHARMACEUTICAL GEOGRAPHIC SALES | ||||||||||||||||||||
| (AMOUNTS IN MILLIONS) | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Table 3b | ||||||||||||||||||||
| 2023 | 2022 | % Change | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 1Q | 1Q | 2Q | 3Q | 4Q | Full Year | 1Q | ||||||||||||||
| TOTAL PHARMACEUTICAL | $ | 12,721 | $ | 14,107 | $ | 12,756 | $ | 12,963 | $ | 12,180 | $ | 52,005 | -10 | |||||||
| United States | 6,117 | 6,773 | 5,726 | 6,620 | 5,871 | 24,989 | -10 | |||||||||||||
| % Pharmaceutical Sales | 48.1 | % | 48.0 | % | 44.9 | % | 51.1 | % | 48.2 | % | 48.1 | % | ||||||||
| Europe ^(1)^ | 2,326 | 3,309 | 2,677 | 2,427 | 2,494 | 10,906 | -30 | |||||||||||||
| % Pharmaceutical Sales | 18.3 | % | 23.5 | % | 21.0 | % | 18.7 | % | 20.5 | % | 21.0 | % | ||||||||
| China | 1,694 | 1,113 | 1,355 | 1,419 | 1,216 | 5,102 | 52 | |||||||||||||
| % Pharmaceutical Sales | 13.3 | % | 7.9 | % | 10.6 | % | 10.9 | % | 10.0 | % | 9.8 | % | ||||||||
| Japan | 737 | 965 | 1,092 | 653 | 832 | 3,542 | -24 | |||||||||||||
| % Pharmaceutical Sales | 5.8 | % | 6.8 | % | 8.6 | % | 5.0 | % | 6.8 | % | 6.8 | % | ||||||||
| Asia Pacific (other than China and Japan) | 703 | 786 | 854 | 702 | 691 | 3,034 | -11 | |||||||||||||
| % Pharmaceutical Sales | 5.5 | % | 5.6 | % | 6.7 | % | 5.4 | % | 5.7 | % | 5.8 | % | ||||||||
| Latin America | 470 | 435 | 453 | 511 | 472 | 1,871 | 8 | |||||||||||||
| % Pharmaceutical Sales | 3.7 | % | 3.1 | % | 3.6 | % | 3.9 | % | 3.9 | % | 3.6 | % | ||||||||
| Eastern Europe/Middle East/Africa | 381 | 450 | 339 | 360 | 320 | 1,469 | -15 | |||||||||||||
| % Pharmaceutical Sales | 3.0 | % | 3.2 | % | 2.7 | % | 2.8 | % | 2.6 | % | 2.8 | % | ||||||||
| Canada | 141 | 189 | 166 | 166 | 158 | 678 | -25 | |||||||||||||
| % Pharmaceutical Sales | 1.1 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | ||||||||
| Other | 152 | 87 | 94 | 105 | 126 | 414 | 75 | |||||||||||||
| % Pharmaceutical Sales | 1.2 | % | 0.6 | % | 0.6 | % | 0.9 | % | 1.0 | % | 0.8 | % | ||||||||
| Sum<br> of quarterly amounts may not equal year-to-date amounts due to rounding. | ||||||||||||||||||||
| --- | ||||||||||||||||||||
| ^(1)^Europe represents all European Union countries, the European Union accession markets and the United Kingdom. | ||||||||||||||||||||
| MERCK & CO., INC. | ||||||||||||||||||||
| --- | ||||||||||||||||||||
| OTHER (INCOME) EXPENSE, NET - GAAP | ||||||||||||||||||||
| (AMOUNTS IN MILLIONS) | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Table 4 | ||||||||||||||||||||
| OTHER (INCOME) EXPENSE, NET | ||||||||||||||||||||
| --- | ||||||||||||||||||||
| **** | 1Q23 | **** | 1Q22 | **** | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| Interest income | $ | (112 | ) | $ | (7 | ) | ||||||||||||||
| Interest expense | 242 | 243 | ||||||||||||||||||
| Exchange losses | 61 | 39 | ||||||||||||||||||
| (Income) loss from investments in equity securities, net ^(1)^ | (450 | ) | 708 | |||||||||||||||||
| Net periodic defined benefit plan (credit) cost other than service cost | (115 | ) | (121 | ) | ||||||||||||||||
| Other, net | 463 | (154 | ) | |||||||||||||||||
| Total | $ | 89 | $ | 708 | ||||||||||||||||
| ^(1)^Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through<br> ownership interests in investment funds. Unrealized gains and losses from investments that are directly owned are determined<br> at the end of the reporting period, while gains and losses from ownership interests in investment funds are accounted for on a one<br> quarter lag. | ||||||||||||||||||||
| --- |