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) February 2, 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 February 2, 2023, regarding earnings for the fourth quarter and year end of 2022, 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 February 2, 2023, regarding earnings<br>for the fourth quarter and year end of 2022 |
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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<br>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: February 2, 2023 | By: | /s/<br>Kelly E. W. Grez |
| Kelly E. W. Grez | ||
| Corporate Secretary |
Exhibit 99.1
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News<br>Release |
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| FOR IMMEDIATE RELEASE |
Merck Announces Fourth-Quarter and Full-Year2022 Financial Results
| - | Fourth-Quarter and Full-Year 2022 Results Reflect Sustained Strong Revenue Growth |
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| - | Fourth-Quarter 2022 Worldwide Sales Were $13.8 Billion, an Increase of 2% From Fourth Quarter<br>2021; Growth Excluding the Impact of Foreign Exchange Was 8% |
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| - | Fourth-Quarter 2022 GAAP EPS From Continuing Operations Was $1.18; Fourth-Quarter 2022 Non-GAAP EPS Was $1.62 |
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| - | Full-Year 2022 Worldwide Sales Were $59.3 Billion, an Increase of 22% From Full Year 2021; Growth<br>Excluding LAGEVRIO Was 12%; Growth Excluding LAGEVRIO and the Impact of Foreign Exchange Was 15% |
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| o | KEYTRUDA Sales Grew 22% to $20.9 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 27% |
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| o | GARDASIL/GARDASIL 9 Sales Grew 22% to $6.9 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 27% |
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| - | Full-Year 2022 GAAP EPS From Continuing Operations Was $5.71; Full-Year 2022 Non-GAAP EPS Was<br>$7.48 |
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| - | In 2022, Augmented Pipeline Through Strategic Business Development, Including Acquisition of Imago and Key Agreements With Moderna,<br>Orna, Orion and Kelun-Biotech |
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| - | 2023 Financial Outlook |
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| o | Anticipates Full-Year 2023 Worldwide Sales To Be Between $57.2 Billion and $58.7 Billion; Outlook Includes Approximately $1.0 Billion<br>of LAGEVRIO Sales |
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| o | Expects Full-Year 2023 GAAP EPS To Be Between $5.86 and $6.01; Expects Non-GAAP EPS To Be Between $6.80 and $6.95 |
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RAHWAY, N.J., Feb. 2, 2023 – Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2022.
"2022 was an exceptional year for Merck, which is a testament to the profound impact our medicines and vaccines are having on patients globally," said Robert M. Davis, chairman and chief executive officer. “I am extremely proud of what our talented and dedicated colleagues have accomplished scientifically, commercially and operationally. Our science-led strategy is working as we continue to build a sustainable engine that will drive innovation and generate long-term value for patients and shareholders well into the next decade.”
Financial Summary
Financial information presented in this release reflects Merck’s results on a continuing operations basis, which excludes Organon & Co. that was spun off in 2021.
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| --- | | | Fourth Quarter | | | | | | | | | | Year Ended | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | $ in millions, except EPS amounts | 2022 | | 2021 | | Change | | | Change<br> Ex-Exchange | | | Dec. 31,<br><br> 2022 | | Dec. 31,<br><br> 2021 | | Change | | | Change<br> Ex-Exchange | | | | Sales | $ | 13,830 | $ | 13,521 | | 2 | % | | 8 | % | $ | 59,283 | $ | 48,704 | | 22 | % | | 26 | % | | GAAP net income^1^ | | 3,017 | | 3,820 | | -21 | % | | -17 | % | | 14,519 | | 12,345 | | 18 | % | | 21 | % | | Non-GAAP net income that excludes certain items^1,2^* | | 4,129 | | 4,592 | | -10 | % | | -7 | % | | 19,005 | | 13,623 | | 40 | % | | 43 | % | | GAAP EPS | | 1.18 | | 1.51 | | -22 | % | | -17 | % | | 5.71 | | 4.86 | | 17 | % | | 21 | % | | Non-GAAP EPS that excludes certain items^2^* | | 1.62 | | 1.81 | | -10 | % | | -7 | % | | 7.48 | | 5.37 | | 39 | % | | 43 | % |
*Refer to table on page 11.
Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) assuming dilution was $1.18 for the fourth quarter and $5.71 for the full year of 2022. Non-GAAP EPS was $1.62 for the fourth quarter and $7.48 for the full year of 2022. The declines in GAAP and non-GAAP EPS in the fourth quarter versus the prior year were primarily due to lower fourth quarter 2021 effective tax rates and the unfavorable impact of foreign exchange, partially offset by strong underlying business performance. The GAAP EPS decline in the fourth quarter also reflects the unfavorable impact of losses from investments in equity securities compared with gains in the prior year. Full-year 2022 and 2021 GAAP and non-GAAP EPS were negatively impacted by $0.22 and $0.65, respectively, related to an asset acquisition, and collaboration and licensing agreements.
Non-GAAP EPS excludes acquisition- and divestiture-related costs (including pretax intangible asset impairment research and development [R&D] charges of $780 million and $1.7 billion in the fourth quarter and full year of 2022, respectively, largely related to nemtabrutinib) and restructuring costs, as well as income and losses from investments in equity securities.
In 2022, the company changed the treatment of certain items for purposes of its non-GAAP reporting. Results for 2021 have been recast to conform to the new presentation. For more information, refer to the Form 8-K filed by the company on April 21, 2022.
^1^ Net income from continuing operations attributable to Merck & Co., Inc.
^2^ Merck is providing certain 2022 and 2021 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. Non-GAAP results for 2021 have been recast to conform to presentation changes implemented in 2022.
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Oncology Program Highlights
| · | Merck announced the following regulatory and clinical milestones for KEYTRUDA<br>(pembrolizumab), Merck’s anti-PD-1 therapy: |
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| o | KEYTRUDA approved by the U.S. Food and Drug Administration (FDA) as adjuvant treatment following resection and platinum-based chemotherapy<br>for adult patients with stage IB (T2a ≥4 centimeters), II, or IIIA non-small cell lung cancer (NSCLC), based on the pivotal Phase<br>3 KEYNOTE-091 trial. |
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| o | In collaboration with Moderna, Inc. (Moderna), positive topline results from the Phase 2b KEYNOTE-942/mRNA-4157-P201 trial, which<br>showed that KEYTRUDA in combination with mRNA-4157/V940, an investigational personalized mRNA therapeutic cancer vaccine, demonstrated<br>a statistically significant and clinically meaningful improvement in the primary endpoint of recurrence-free survival versus KEYTRUDA<br>alone for the adjuvant treatment of patients with stage III/IV melanoma following complete resection. |
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| o | In collaboration with Seagen Inc. and Astellas Pharma Inc., acceptance by the FDA for priority review of the supplemental Biologics<br>License Application for KEYTRUDA in combination with Padcev®^3^ (enfortumab vedotin-ejfv)<br>for the treatment of patients with locally advanced or metastatic urothelial cancer who are not eligible to receive cisplatin-containing<br>chemotherapy. |
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| o | Positive topline results from the pivotal Phase 3 KEYNOTE-859 trial investigating KEYTRUDA in combination with chemotherapy for the<br>first-line treatment of patients with human epidermal growth factor receptor 2 (HER2)-negative locally advanced unresectable or metastatic<br>gastric or gastroesophageal junction adenocarcinoma. |
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| o | Positive topline results from the Phase 3 KEYNOTE-966 trial investigating KEYTRUDA in combination with standard of care chemotherapy<br>(gemcitabine and cisplatin) for the first-line treatment of patients with advanced or unresectable biliary tract cancer. |
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| · | Merck announced that Lynparza (olaparib), an oral PARP inhibitor being co-developed<br>and co-commercialized with AstraZeneca, was approved in the European Union (EU) in combination with abiraterone and prednisone or prednisolone<br>for the treatment of adult patients with metastatic castration-resistant prostate cancer in whom chemotherapy is not clinically indicated,<br>based on the Phase 3 PROpel trial. |
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Vaccine Program Highlights
| · | Merck announced that an updated systematic literature review of 138 peer-reviewed<br>studies observed that use of GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] led to reductions<br>in the rates of high-grade (precancerous) and low-grade cervical lesions, as well as reductions in certain non-cervical HPV-related diseases<br>and HPV infection in women and men. |
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^3^ Registered trademark of Seagen and Agensys.
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Cardiovascular Program Highlights
| · | Merck will present results from the Phase 3 STELLAR study evaluating investigational<br>sotatercept for the treatment of patients with pulmonary arterial hypertension, and from the Phase 2 study evaluating MK-0616, the company’s<br>investigational oral macrocyclic peptide PCSK9 inhibitor for the treatment of patients with hypercholesterolemia, at the American College<br>of Cardiology’s 72nd Annual Scientific Session together with the World Heart Federation’s World Congress of Cardiology (ACC.23/WCC).<br>Merck will host an investor event at ACC.23/WCC on March 6, 2023, to discuss these results. Further details will be announced at<br>a later date. |
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Business Development Highlights
| · | Merck announced and successfully completed the acquisition of Imago BioSciences, Inc.<br>(Imago), for an approximate total equity value of $1.35 billion, expanding Merck’s growing hematology portfolio. |
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| · | Merck announced that it has expanded its relationship and entered into an<br>exclusive license and collaboration agreement with Kelun-Biotech (a holding subsidiary of Sichuan Kelun Pharmaceutical Co., Ltd) to develop<br>up to seven investigational preclinical antibody-drug conjugates (ADCs) for the treatment of cancer. |
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Environmental, Social and Governance (ESG) Updates
| · | Merck was named one of America’s most JUST companies by JUST Capital<br>and CNBC, ranking No. 1 in the pharmaceuticals and biotech industry for the third straight year and No. 26 overall of all companies<br>named. |
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| · | Merck published its Sustainability Bond Allocation Report, which highlighted<br>how the company’s initial $1.0 billion sustainability bond is helping to drive progress across ESG focus areas. |
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Fourth-Quarter and Full-Year Revenue Performance
The following table reflects sales of the company’s top pharmaceutical products, as well as sales of Animal Health products.
| Year Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in millions | 2022 | 2021 | Change | Change Ex-Exchange | Dec. 31,2022 | Dec. 31,2021 | Change | Change Ex-Exchange | |||||||
| Total Sales | 13,830 | $ | 13,521 | 2 | % | 8 | % | $ | 59,283 | $ | 48,704 | 22 | % | 26 | % |
| Pharmaceutical | 12,180 | 12,039 | 1 | % | 9 | % | 52,005 | 42,754 | 22 | % | 28 | % | |||
| KEYTRUDA | 5,450 | 4,577 | 19 | % | 26 | % | 20,937 | 17,186 | 22 | % | 27 | % | |||
| GARDASIL / GARDASIL 9 | 1,470 | 1,528 | -4 | % | 6 | % | 6,897 | 5,673 | 22 | % | 27 | % | |||
| LAGEVRIO | 825 | 952 | -13 | % | 2 | % | 5,684 | 952 | *** | *** | |||||
| JANUVIA / JANUMET | 913 | 1,393 | -34 | % | -29 | % | 4,513 | 5,288 | -15 | % | -9 | % | |||
| PROQUAD, M-M-R II and VARIVAX | 526 | 509 | 3 | % | 6 | % | 2,241 | 2,135 | 5 | % | 7 | % | |||
| BRIDION | 441 | 436 | 1 | % | 7 | % | 1,685 | 1,532 | 10 | % | 16 | % | |||
| Lynparza* | 292 | 268 | 9 | % | 14 | % | 1,116 | 989 | 13 | % | 18 | % | |||
| Lenvima* | 216 | 206 | 5 | % | 9 | % | 876 | 704 | 24 | % | 28 | % | |||
| ROTATEQ | 139 | 213 | -35 | % | -31 | % | 783 | 807 | -3 | % | 0 | % | |||
| SIMPONI | 166 | 206 | -19 | % | -8 | % | 706 | 825 | -14 | % | -4 | % | |||
| Animal Health | 1,230 | 1,261 | -2 | % | 6 | % | 5,550 | 5,568 | 0 | % | 6 | % | |||
| Livestock | 814 | 791 | 3 | % | 12 | % | 3,300 | 3,295 | 0 | % | 7 | % | |||
| Companion Animals | 416 | 470 | -11 | % | -5 | % | 2,250 | 2,273 | -1 | % | 4 | % | |||
| Other Revenues** | 420 | 221 | 90 | % | -25 | % | 1,728 | 382 | *** | 87 | % |
All values are in US Dollars.
*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.
***>100%
Pharmaceutical Revenue
Fourth-quarter pharmaceutical sales grew 1% to $12.2 billion. Excluding the unfavorable impact of foreign exchange, pharmaceutical sales grew 9%, primarily driven by oncology and hospital acute care, partially offset by diabetes.
Growth in oncology was largely driven by higher sales of KEYTRUDA, which rose 19% to $5.5 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. Also contributing to growth in oncology was increased alliance revenue from Lynparza, which grew 9% to $292 million, driven primarily by higher demand in the U.S. In addition, sales of WELIREG (belzutifan), an oral hypoxia-inducible factor-2 alpha inhibitor, increased to $40 million due to continued uptake in the U.S. following the product’s launch in 2021.
Growth in hospital acute care reflects higher sales of ZERBAXA (ceftolozane and tazobactam), a combination cephalosporin antibacterial and beta-lactamase inhibitor for the treatment of patients with certain bacterial infections. ZERBAXA sales of $49 million in the fourth quarter of 2022 increased from $10 million in the fourth quarter of 2021, reflecting uptake from the completion of the phased resupply in 2022 that was initiated in the fourth quarter of 2021. Growth in hospital acute care also reflects higher sales of PREVYMIS (letermovir), a medicine for prophylaxis of CMV infection and disease in adult CMV-seropositive recipients of an allogenic hematopoietic stem cell transplant, which increased 17% to $118 million, reflecting higher demand globally.
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Vaccines sales performance reflects lower combined sales of GARDASIL and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), vaccines to prevent certain cancers and other diseases caused by HPV, which declined 4% to $1.5 billion. Excluding the unfavorable impact of foreign exchange, GARDASIL/GARDASIL 9 sales grew 6%, reflecting higher demand outside of the U.S., particularly in China. Vaccines sales performance also reflects lower sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, which declined 50% to $145 million, primarily reflecting lower U.S. demand as the market continues to shift toward newer adult pneumococcal conjugate vaccines. In addition, sales of ROTATEQ (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children, declined 35% to $139 million, primarily due to lower sales in China, which benefited in the fourth quarter of 2021 from increased supply, and lower sales in the U.S. largely due to the timing of public sector purchases. Vaccines sales performance benefited from the ongoing pediatric launch of VAXNEUVANCE (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help prevent invasive pneumococcal disease, which had sales of $138 million, largely due to inventory stocking in the U.S.
Pharmaceutical sales growth was partially offset by lower combined sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI), for the treatment of type 2 diabetes, which declined 34% to $913 million, primarily reflecting generic competition in certain international markets, particularly in Europe and the Asia Pacific region, and lower demand and net pricing in the U.S.
Sales of LAGEVRIO (molnupiravir), an investigational oral antiviral COVID-19 medicine, decreased 13% to $825 million. Excluding the unfavorable impact of foreign exchange, sales increased 2%, primarily driven by strong growth in Japan and the U.K. and the launch in Australia, offset by a decline in the U.S.
Full-year 2022 pharmaceutical sales grew 22% to $52.0 billion. Pharmaceutical sales growth was 16% excluding LAGEVRIO and the unfavorable impact of foreign exchange, primarily driven by higher sales in oncology, particularly KEYTRUDA, higher sales of vaccines, reflecting strong growth of GARDASIL/GARDASIL 9 and the ongoing pediatric launch of VAXNEUVANCE, as well as growth in hospital acute care products, including ZERBAXA and BRIDION (sugammadex) injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults and pediatric patients ages 2 years and older undergoing surgery. Pharmaceutical sales growth in 2022 was partially offset by lower sales of JANUVIA and JANUMET, primarily reflecting lower demand in Europe as a result of generic competition, and a decline in PNEUMOVAX 23 sales as the U.S. market continues to shift toward newer adult pneumococcal conjugate vaccines. COVID-19-related disruptions negatively affected sales in 2022, but to a lesser extent than in 2021, which benefited year-over-year sales growth.
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Animal Health Revenue
Animal Health sales totaled $1.2 billion for the fourth quarter of 2022, a 2% decline compared with the fourth quarter of 2021. Excluding the unfavorable effect of foreign exchange, Animal Health sales increased 6%. Sales growth of livestock products reflects higher demand, notably in the ruminant and poultry product portfolio, which includes technology solutions products, as well as higher pricing. Sales of companion animal products were negatively impacted by a reduction in veterinary visits in the broader companion animal market following the more favorable trend during the pandemic, as well as supply constraints for certain vaccines, partially offset by higher pricing.
Full-year 2022 Animal Health sales were $5.5 billion, in line with the prior year. Excluding the unfavorable effect of foreign exchange, Animal Health sales grew 6%, primarily due to higher pricing. Full-year sales growth was also driven by higher demand of livestock products, led by ruminant, poultry and swine products. Sales of companion animal products also reflect higher demand for the BRAVECTO (fluralaner) parasiticide line of products, which had sales of $1.0 billion, partially offset by supply constraints for certain vaccines.
Fourth-Quarter and Full-Year 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) Loss<br><br> From<br><br> Investments in<br><br> Equity<br><br> Securities | Certain <br><br>Other <br><br>Items | Non-GAAP^2^ | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fourth Quarter 2022 | |||||||||||||||||
| Cost of sales | $ | 3,881 | $ | 482 | $ | 38 | $ | - | $ | - | $ | 3,361 | |||||
| Selling, general and administrative | 2,687 | 39 | 20 | - | - | 2,628 | |||||||||||
| Research and development | 3,775 | 740 | - | - | - | 3,035 | |||||||||||
| Restructuring costs | 49 | - | 49 | - | - | - | |||||||||||
| Other (income) expense, net | (75 | ) | (69 | ) | - | 80 | - | (86 | ) | ||||||||
| Fourth Quarter 2021 | |||||||||||||||||
| Cost of sales | $ | 3,873 | $ | 419 | $ | 47 | $ | - | $ | (4 | ) | $ | 3,411 | ||||
| Selling, general and administrative | 2,830 | 226 | 10 | - | - | 2,594 | |||||||||||
| Research and development | 3,068 | 397 | 7 | - | - | 2,664 | |||||||||||
| Restructuring costs | 174 | - | 174 | - | - | - | |||||||||||
| Other (income) expense, net | (333 | ) | (3 | ) | - | (381 | ) | - | 51 |
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| --- | | $<br>in millions | GAAP | | | Acquisition- and Divestiture- Related Costs^4^ | | | Restructuring <br> Costs | | (Income) Loss<br> From<br> Investments in<br> Equity <br> Securities | | | Certain<br> Other <br> Items | | Non- GAAP^2^ | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Year Ended Dec. 31, 2022 | | | | | | | | | | | | | | | | | Cost of sales | $ | 17,411 | | $ | 2,059 | | $ | 205 | $ | - | | $ | - | $ | 15,147 | | Selling, general and administrative | | 10,042 | | | 176 | | | 94 | | - | | | - | | 9,772 | | Research and development | | 13,548 | | | 1,676 | | | 30 | | - | | | - | | 11,842 | | Restructuring costs | | 337 | | | - | | | 337 | | - | | | - | | - | | Other (income) expense, net | | 1,501 | | | (207 | ) | | - | | 1,348 | | | - | | 360 | | YearEnded Dec. 31, 2021 | | | | | | | | | | | | | | | | | Cost of sales | $ | 13,626 | | $ | 1,607 | | $ | 160 | $ | - | | $ | 221 | $ | 11,638 | | Selling, general and administrative | | 9,634 | | | 322 | | | 19 | | - | | | - | | 9,293 | | Research and development | | 12,245 | | | 479 | | | 28 | | - | | | - | | 11,738 | | Restructuring costs | | 661 | | | - | | | 661 | | - | | | - | | - | | Other (income) expense, net | | (1,341 | ) | | 76 | | | - | | (1,884 | ) | | - | | 467 |
GAAP Expense, EPS and Related Information
Gross margin was 71.9% for the fourth quarter of 2022 compared with 71.4% for the fourth quarter of 2021. The increase primarily reflects favorable product mix and foreign exchange. Gross margin was 70.6% for the full year of 2022 compared to 72.0% for the full year of 2021. The decline primarily reflects the unfavorable impacts of higher amortization of intangible assets, as well as higher revenue from third-party manufacturing arrangements and sales of LAGEVRIO, both of which have lower gross margins. The full-year gross margin decline was partially offset by the favorable effects of product mix, foreign exchange and charges in the prior year related to the discontinuation of COVID-19 development programs.
Selling, general and administrative (SG&A) expenses were $2.7 billion in the fourth quarter of 2022, a decrease of 5% compared to the fourth quarter of 2021. The decrease primarily reflects lower acquisition- and divestiture-related costs and the favorable effect of foreign exchange, partially offset by higher promotional spending, as well as higher administrative costs. Full-year SG&A expenses were $10.0 billion, an increase of 4% compared to the full year of 2021. The increase primarily reflects higher administrative costs, as well as higher promotional spending, partially offset by the favorable impact of foreign exchange and lower acquisition- and divestiture-related costs.
R&D expenses were $3.8 billion in the fourth quarter of 2022, an increase of 23% compared to the fourth quarter of 2021. The increase was primarily driven by higher intangible asset impairment charges related to nemtabrutinib, which were $780 million in the fourth quarter of 2022 compared with $275 million in the fourth quarter of 2021, lower reimbursement of LAGEVRIO R&D costs from Ridgeback Biotherapeutics (Ridgeback), higher compensation and benefit costs reflecting in part increased headcount to support expanded clinical development activity, and higher clinical development spending. R&D expenses were $13.5 billion for the full year of 2022, an increase of 11% compared with the full year of 2021. The increase was primarily driven by higher intangible asset impairment charges, which were $1.7 billion in 2022 compared with $275 million in 2021, largely related to nemtabrutinib, $690 million of charges in 2022 related to collaboration and licensing agreements with Moderna, Orna Therapeutics (Orna) and Orion Corporation (Orion), as well as higher compensation and benefit costs and clinical development spending. The increase was partially offset by a $1.7 billion charge in the prior year for the acquisition of Pandion Therapeutics, Inc. (Pandion).
^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. R&D expenses include intangible asset impairment charges of $780 million and $1.7 billion in fourth quarter and full year 2022, respectively, and $275 million in both fourth quarter and full year 2021, largely related to nemtabrutinib, which was obtained as part of the 2020 acquisition of ArQule, Inc. Also includes integration, transaction and certain other costs related to acquisitions and divestitures.
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Other (income) expense, net, was $75 million of income in the fourth quarter of 2022 compared to $333 million of income in the fourth quarter of 2021. Other (income) expense, net, was $1.5 billion of expense in the full year of 2022 compared to $1.3 billion of income in the full year of 2021. The change in both periods is primarily due to net losses from investments in equity securities in 2022 compared with net gains from investments in equity securities in 2021.
The effective tax rate for the fourth quarter of 2022 of 14.1% reflects the unfavorable impact of a higher than anticipated full-year rate of 11.7% due to a less favorable mix of income and expense than previously anticipated, while the effective tax rate for the fourth quarter of 2021 of 2.2% reflects the favorable impact of a lower than previously expected full-year 2021 rate of 11.0%.
GAAP EPS was $1.18 for the fourth quarter of 2022 compared to $1.51 for the fourth quarter of 2021. GAAP EPS was $5.71 for the full year of 2022 compared to $4.86 for the full year of 2021.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 75.7% for the fourth quarter of 2022 compared to 74.8% for the fourth quarter of 2021. The increase primarily reflects the favorable effects of product mix and foreign exchange. Non-GAAP gross margin was 74.4% for the full year of 2022 compared to 76.1% for the full year of 2021. The decrease primarily reflects the impact of higher revenue from third-party manufacturing arrangements and sales of LAGEVRIO, both of which have lower gross margins, partially offset by the favorable effects of product mix and foreign exchange.
Non-GAAP SG&A expenses were $2.6 billion in the fourth quarter of 2022, an increase of 1% compared to the fourth quarter of 2021. Non-GAAP SG&A expenses for the full year were $9.8 billion, an increase of 5% compared to the full year of 2021. The increase in both periods primarily reflects higher administrative costs, as well as higher promotional spending, partially offset by the favorable impact of foreign exchange.
| - 10 - |
| --- |
Non-GAAP R&D expenses were $3.0 billion in the fourth quarter of 2022, an increase of 14% compared with the fourth quarter of 2021. The increase was primarily driven by lower reimbursement of LAGEVRIO R&D costs from Ridgeback, higher compensation and benefit costs reflecting in part increased headcount to support expanded clinical development activity, and higher clinical development spending. Non-GAAP R&D expenses were $11.8 billion for the full year of 2022, an increase of 1% compared with the full year of 2021. The increase was primarily driven by $690 million of charges in 2022 related to collaboration and licensing agreements with Moderna, Orna and Orion, as well as higher compensation and benefit costs and clinical development spending. The increase was partially offset by a $1.7 billion charge in the prior year for the acquisition of Pandion.
Non-GAAP other (income) expense, net, was $86 million of income in the fourth quarter of 2022 compared to $51 million of expense in the fourth quarter of 2021. Non-GAAP other (income) expense, net, was $360 million of expense in the full year of 2022 compared to $467 million of expense in the full year of 2021.
The non-GAAP effective tax rate for the fourth quarter of 2022 of 15.6% reflects the unfavorable impact of a higher than anticipated full-year rate of 14.2% due to a less favorable mix of income and expense than previously anticipated, while the non-GAAP effective tax rate for the fourth quarter of 2021 of 4.3% reflects the favorable impact of a lower than previously expected full-year 2021 rate of 12.4%.
Non-GAAP EPS was $1.62 for the fourth quarter of 2022 compared to $1.81 for the fourth quarter of 2021. Non-GAAP EPS was $7.48 for the full year of 2022 compared to $5.37 for the full year of 2021.
| - 11 - |
| --- |
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.
| YearEnded | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| in millions, except EPS amounts | 2022 | 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |||||||
| EPS | |||||||||||
| GAAP EPS | 1.18 | $ | 1.51 | $ | 5.71 | $ | 4.86 | ||||
| Difference | 0.44 | 0.30 | 1.77 | 0.51 | |||||||
| Non-GAAP EPS that excludes items listed below2 | 1.62 | $ | 1.81 | $ | 7.48 | $ | 5.37 | ||||
| Net Income | |||||||||||
| GAAP net income1 | 3,017 | $ | 3,820 | $ | 14,519 | $ | 12,345 | ||||
| Difference | 1,112 | 772 | 4,486 | 1,278 | |||||||
| Non-GAAP net income that excludes items listed below1,2 | 4,129 | $ | 4,592 | $ | 19,005 | $ | 13,623 | ||||
| Decrease (Increase) in Net Income Due to Excluded Items: | |||||||||||
| Acquisition- and divestiture-related costs4 | 1,192 | $ | 1,039 | $ | 3,704 | $ | 2,484 | ||||
| Restructuring costs | 107 | 238 | 666 | 868 | |||||||
| Loss (income) from investments in equity securities | 80 | (381 | ) | 1,348 | (1,884 | ) | |||||
| Charges for the discontinuation of COVID-19 development<br> programs | - | - | - | 221 | |||||||
| Other | - | (4 | ) | - | - | ||||||
| Net decrease (increase) in income before taxes | 1,379 | 892 | 5,718 | 1,689 | |||||||
| Income tax (benefit) expense5 | (267 | ) | (120 | ) | (1,232 | ) | (411 | ) | |||
| Decrease (increase) in net income | 1,112 | $ | 772 | $ | 4,486 | $ | 1,278 |
All values are in US Dollars.
Financial Outlook
The following table summarizes the company’s full-year 2023 financial guidance.
| GAAP | Non-GAAP^2^ | |
|---|---|---|
| Revenue* | $57.2 to $58.7 billion | $57.2 to $58.7 billion |
| Gross margin | Approximately 73% | Approximately 77% |
| Operating expenses** | $23.3 to $24.3 billion | $23.1 to $24.1 billion |
| Effective tax rate | 17% to 18% | 17% to 18% |
| EPS*** | $5.86 to $6.01 | $6.80 to $6.95 |
*Includes approximately $1.0 billion of LAGEVRIO sales. The company does not have any non-GAAP adjustments to revenue.
**Includes an aggregate $1.4 billion of R&D expenses related to the Imago acquisition and upfront payment for a license and collaboration agreement with Kelun-Biotech.
***Includes $0.53 of charges related to the Imago acquisition and upfront payment to Kelun-Biotech. EPS guidance for 2023 assumes a share count (assuming dilution) of approximately 2.55 billion shares.
Merck anticipates full-year 2023 revenue to be between $57.2 billion and $58.7 billion, including a negative impact of foreign exchange of approximately 2% at mid-January 2023 exchange rates. The company expects a significant decline in sales of LAGEVRIO, which are expected to be approximately $1.0 billion.
Merck expects full-year 2023 GAAP EPS to be between $5.86 and $6.01.
^5^ Includes the estimated tax impact on the reconciling items. In addition, the amount for full-year 2021 includes a $207 million net tax benefit related to the settlement of certain federal income tax matters.
| - 12 - |
| --- |
Merck expects full-year 2023 non-GAAP EPS to be between $6.80 and $6.95, including a negative impact of foreign exchange of approximately 4%. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs, as well as income and losses from investment in equity securities.
In the fourth quarter of 2022, Merck announced the acquisition of Imago for an approximate total value of $1.35 billion and a license and collaboration agreement with Kelun-Biotech, which includes an upfront payment of $175 million. The Imago acquisition closed in January 2023 and the collaboration with Kelun-Biotech is expected to close in the first quarter of 2023, resulting in the inclusion of an aggregate $1.4 billion of R&D expenses in Merck’s GAAP and non-GAAP results for the first quarter and full year of 2023. The Imago acquisition is also anticipated to result in an approximate 1 percentage point unfavorable impact to Merck’s expected full-year 2023 GAAP and non-GAAP tax rates. The impact of these two transactions on expected full-year 2023 GAAP and non-GAAP EPS is approximately $0.53. GAAP and non-GAAP EPS in 2022 were negatively impacted by $0.22 of charges related to the collaboration and licensing agreements with Moderna, Orna and Orion.
Operating expenses include incremental R&D spending to advance the development of the Imago and Kelun-Biotech programs, as well as other promising programs related to the collaboration and licensing agreements with Moderna, Orna and Orion.
The financial outlook does not assume additional significant potential business development transactions.
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 | 5.86 to 6.01 |
| Difference | 0.94 |
| Non-GAAP EPS that excludes items listed below^2^ | 6.80 to 6.95 |
| Acquisition- and divestiture-related costs | 2,500 |
| Restructuring costs | 400 |
| (Income) loss from investments in equity securities | (20 |
| Net decrease (increase) in income before taxes | 2,880 |
| Estimated income tax (benefit) expense | (480 |
| Decrease (increase) in net income | 2,400 |
All values are in US Dollars.
Earnings Conference Call
Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Thursday, Feb. 2, at 8:00 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. Toll-Free) or (517) 308-9208 (International) and using the access code 8206435.
| - 13 - |
| --- |
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, 2021, and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).
| - 14 - |
| --- | | 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 |
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1
On June 2, 2021, Merck completed the spinoff of products from its women’s health, biosimilars and established brands businesses into a new, independent, publicly traded company named Organon & Co. (Organon). The historical results of the businesses that were contributed to Organon in the spin-off are excluded from sales and expenses below and reflected as discontinued operations in the company’s Consolidated Statements of Income provided below.
| GAAP | GAAP | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 4Q22 | 4Q21 | % Change | Full Year2022 | Full Year 2021 | % Change | |||||||||||
| Sales | $ | 13,830 | $ | 13,521 | 2 | % | $ | 59,283 | $ | 48,704 | 22 | % | ||||
| Costs, Expenses and Other | ||||||||||||||||
| Cost of sales | 3,881 | 3,873 | 0 | % | 17,411 | 13,626 | 28 | % | ||||||||
| Selling, general and administrative | 2,687 | 2,830 | -5 | % | 10,042 | 9,634 | 4 | % | ||||||||
| Research and development | 3,775 | 3,068 | 23 | % | 13,548 | 12,245 | 11 | % | ||||||||
| Restructuring costs | 49 | 174 | -72 | % | 337 | 661 | -49 | % | ||||||||
| Other (income) expense, net | (75 | ) | (333 | ) | -77 | % | 1,501 | (1,341 | ) | * | ||||||
| Income from Continuing Operations Before Taxes | 3,513 | 3,909 | -10 | % | 16,444 | 13,879 | 18 | % | ||||||||
| Income Tax Provision | 495 | 85 | 1,918 | 1,521 | ||||||||||||
| Net Income from Continuing Operations | 3,018 | 3,824 | -21 | % | 14,526 | 12,358 | 18 | % | ||||||||
| Less: Net Income Attributable to Noncontrolling Interests | 1 | 4 | 7 | 13 | ||||||||||||
| Net Income from Continuing Operations Attributable to Merck & Co., Inc. | 3,017 | 3,820 | -21 | % | 14,519 | 12,345 | 18 | % | ||||||||
| (Loss) Income from Discontinued Operations, Net of Taxes and<br> Amounts Attributable to Noncontrolling Interests | - | (62 | ) | * | - | 704 | * | |||||||||
| Net Income Attributable to Merck & Co., Inc. | $ | 3,017 | $ | 3,758 | -20 | % | $ | 14,519 | $ | 13,049 | 11 | % | ||||
| Basic Earnings (Loss) per Common Share Attributable to Merck & Co., Inc. Common Shareholders: | ||||||||||||||||
| Income from Continuing Operations | $ | 1.19 | $ | 1.51 | -21 | % | $ | 5.73 | $ | 4.88 | 17 | % | ||||
| (Loss) Income from Discontinued Operations | - | (0.02 | ) | * | - | 0.28 | * | |||||||||
| Net Income | $ | 1.19 | $ | 1.49 | -20 | % | $ | 5.73 | $ | 5.16 | 11 | % | ||||
| Earnings (Loss) per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders: | ||||||||||||||||
| Income from Continuing Operations | $ | 1.18 | $ | 1.51 | -22 | % | $ | 5.71 | $ | 4.86 | 17 | % | ||||
| (Loss) Income from Discontinued Operations | - | (0.02 | ) | * | - | 0.28 | * | |||||||||
| Net Income | $ | 1.18 | $ | 1.48 | -20 | % | $ | 5.71 | $ | 5.14 | 11 | % | ||||
| Average Shares Outstanding | 2,536 | 2,527 | 2,532 | 2,530 | ||||||||||||
| Average Shares Outstanding Assuming Dilution | 2,548 | 2,535 | 2,542 | 2,538 | ||||||||||||
| Tax Rate from Continuing Operations | 14.1 | % | 2.2 | % | 11.7 | % | 11.0 | % |
* 100% or greater
MERCK & CO., INC.
FOURTH QUARTER AND FULL YEAR 2022 GAAP TO NON-GAAP RECONCILIATION - CONTINUING OPERATIONS
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a
| 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 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fourth Quarter | ||||||||||||||||||
| Cost of sales | $ | 3,881 | 482 | 38 | 520 | $ | 3,361 | |||||||||||
| Selling, general and administrative | 2,687 | 39 | 20 | 59 | 2,628 | |||||||||||||
| Research and development | 3,775 | 740 | 740 | 3,035 | ||||||||||||||
| Restructuring costs | 49 | 49 | 49 | - | ||||||||||||||
| Other (income) expense, net | (75 | ) | (69 | ) | 80 | 11 | (86 | ) | ||||||||||
| Income from Continuing Operations Before Taxes | 3,513 | (1,192 | ) | (107 | ) | (80 | ) | (1,379 | ) | 4,892 | ||||||||
| Income Tax Provision (Benefit) | 495 | (222 | )^(3)^ | (32 | )^(3)^ | (13 | )^(3)^ | (267 | ) | 762 | ||||||||
| Net Income from Continuing Operations | 3,018 | (970 | ) | (75 | ) | (67 | ) | (1,112 | ) | 4,130 | ||||||||
| Net Income from Continuing Operations Attributable to Merck & Co., Inc. | 3,017 | (970 | ) | (75 | ) | (67 | ) | (1,112 | ) | 4,129 | ||||||||
| Earnings per Common Share Assuming Dilution from Continuing Operations | $ | 1.18 | (0.38 | ) | (0.03 | ) | (0.03 | ) | (0.44 | ) | $ | 1.62 | ||||||
| Tax Rate | 14.1 | % | 15.6 | % | ||||||||||||||
| Full Year | ||||||||||||||||||
| Cost of sales | $ | 17,411 | 2,059 | 205 | 2,264 | $ | 15,147 | |||||||||||
| Selling, general and administrative | 10,042 | 176 | 94 | 270 | 9,772 | |||||||||||||
| Research and development | 13,548 | 1,676 | 30 | 1,706 | 11,842 | |||||||||||||
| Restructuring costs | 337 | 337 | 337 | - | ||||||||||||||
| Other (income) expense, net | 1,501 | (207 | ) | 1,348 | 1,141 | 360 | ||||||||||||
| Income from Continuing Operations Before Taxes | 16,444 | (3,704 | ) | (666 | ) | (1,348 | ) | (5,718 | ) | 22,162 | ||||||||
| Income Tax Provision (Benefit) | 1,918 | (809 | )^(3)^ | (129 | )^(3)^ | (294 | )^(3)^ | (1,232 | ) | 3,150 | ||||||||
| Net Income from Continuing Operations | 14,526 | (2,895 | ) | (537 | ) | (1,054 | ) | (4,486 | ) | 19,012 | ||||||||
| Net Income from Continuing Operations Attributable to Merck & Co., Inc. | 14,519 | (2,895 | ) | (537 | ) | (1,054 | ) | (4,486 | ) | 19,005 | ||||||||
| Earnings per Common Share Assuming Dilution from Continuing Operations | $ | 5.71 | (1.14 | ) | (0.21 | ) | (0.42 | ) | (1.77 | ) | $ | 7.48 | ||||||
| Tax Rate | 11.7 | % | 14.2 | % |
Only the line items that are affected by non-GAAP adjustments are shown.
Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing non-GAAP information enhances investors’ understanding of the company’s results because management uses non-GAAP measures 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 pretax income metric. The non-GAAP information presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.
^(1)^Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets. Amounts included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to acquisitions and divestitures. Amounts included in research and development expenses for the fourth quarter and full year primarily reflect $780 million and $1.7 billion, respectively, of intangible asset impairment charges largely related to nemtabrutinib, which was obtained as part of the 2020 ArQule, Inc. acquisition, and expenses for the amortization of intangible assets, partially offset by a reduction in expenses related to changes in the estimated fair value of liabilities for contingent consideration. Amounts included in other (income) expense, net, for the fourth quarter and full year reflect royalty income and decreases in the estimated fair value measurement of liabilities for contingent consideration related to the prior termination of the Sanofi-Pasteur MSD joint venture.
^(2)^Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs.
^(3)^Represents the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.
| MERCK & CO., INC. | ||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FRANCHISE / KEY PRODUCT SALES - CONTINUING OPERATIONS | ||||||||||||||||||||||||||||
| (AMOUNTS IN MILLIONS) | ||||||||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||||||||
| Table 3 | ||||||||||||||||||||||||||||
| 2022 | 2021 | 4Q | Full Year | |||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| **** | **** | 1Q | **** | 2Q | **** | 3****Q | **** | 4****Q | **** | Full Year | **** | 1****Q | **** | 2****Q | **** | 3****Q | **** | 4****Q | **** | Full Year | **** | Nom % | Ex-Exch % | Nom % | Ex-Exch % | |||
| TOTAL SALES ^(1)^ | $ | 15,901 | $ | 14,593 | $ | 14,959 | $ | 13,830 | $ | 59,283 | $ | 10,627 | $ | 11,402 | $ | 13,154 | $ | 13,521 | $ | 48,704 | 2 | 8 | 22 | 26 | ||||
| PHARMACEUTICAL | 14,107 | 12,756 | 12,963 | 12,180 | 52,005 | 9,238 | 9,980 | 11,496 | 12,039 | 42,754 | 1 | 9 | 22 | 28 | ||||||||||||||
| Oncology | ||||||||||||||||||||||||||||
| Keytruda | 4,809 | 5,252 | 5,426 | 5,450 | 20,937 | 3,899 | 4,176 | 4,534 | 4,577 | 17,186 | 19 | 26 | 22 | 27 | ||||||||||||||
| Alliance<br> Revenue – Lynparza ^(2)^ | 266 | 275 | 284 | 292 | 1,116 | 228 | 248 | 246 | 268 | 989 | 9 | 14 | 13 | 18 | ||||||||||||||
| Alliance<br> Revenue – Lenvima ^(2)^ | 227 | 231 | 202 | 216 | 876 | 130 | 181 | 188 | 206 | 704 | 5 | 9 | 24 | 28 | ||||||||||||||
| Alliance<br> Revenue – Reblozyl ^(3)^ | 52 | 33 | 39 | 41 | 166 | 17 | 17 | 145 | 145 | * | * | |||||||||||||||||
| Vaccines ^(4)^ | ||||||||||||||||||||||||||||
| Gardasil<br> / Gardasil 9 | 1,460 | 1,674 | 2,294 | 1,470 | 6,897 | 917 | 1,234 | 1,993 | 1,528 | 5,673 | -4 | 6 | 22 | 27 | ||||||||||||||
| ProQuad<br> / M-M-R II / Varivax | 470 | 578 | 668 | 526 | 2,241 | 449 | 516 | 661 | 509 | 2,135 | 3 | 6 | 5 | 7 | ||||||||||||||
| RotaTeq | 216 | 173 | 256 | 139 | 783 | 158 | 208 | 227 | 213 | 807 | -35 | -31 | -3 | 0 | ||||||||||||||
| Pneumovax<br> 23 | 173 | 153 | 131 | 145 | 602 | 171 | 152 | 277 | 292 | 893 | -50 | -47 | -33 | -30 | ||||||||||||||
| Vaqta | 36 | 35 | 64 | 39 | 173 | 34 | 56 | 48 | 41 | 179 | -5 | -2 | -3 | -2 | ||||||||||||||
| Hospital<br> Acute Care | ||||||||||||||||||||||||||||
| Bridion | 395 | 426 | 423 | 441 | 1,685 | 340 | 387 | 369 | 436 | 1,532 | 1 | 7 | 10 | 16 | ||||||||||||||
| Prevymis | 94 | 103 | 114 | 118 | 428 | 82 | 93 | 96 | 100 | 370 | 17 | 28 | 16 | 24 | ||||||||||||||
| Dificid | 52 | 66 | 77 | 67 | 263 | 27 | 34 | 54 | 60 | 175 | 12 | 12 | 50 | 50 | ||||||||||||||
| Primaxin | 58 | 64 | 63 | 54 | 239 | 65 | 60 | 70 | 65 | 259 | -17 | -7 | -8 | -4 | ||||||||||||||
| Noxafil | 57 | 60 | 62 | 58 | 238 | 67 | 66 | 64 | 62 | 259 | -5 | 7 | -8 | -1 | ||||||||||||||
| Invanz | 52 | 46 | 50 | 40 | 189 | 57 | 48 | 53 | 45 | 202 | -10 | -2 | -7 | -1 | ||||||||||||||
| Cancidas | 53 | 42 | 43 | 36 | 174 | 57 | 54 | 56 | 45 | 212 | -19 | -10 | -18 | -14 | ||||||||||||||
| Zerbaxa | 30 | 46 | 43 | 49 | 169 | (8 | ) | (1 | ) | (2 | ) | 10 | (1 | ) | * | * | * | * | ||||||||||
| Cardiovascular | ||||||||||||||||||||||||||||
| Alliance<br> Revenue - Adempas/Verquvo ^(5)^ | 72 | 98 | 88 | 82 | 341 | 74 | 74 | 100 | 94 | 342 | -12 | -12 | - | - | ||||||||||||||
| Adempas<br> ^(6)^ | 61 | 63 | 57 | 57 | 238 | 55 | 74 | 59 | 63 | 252 | -10 | 6 | -6 | 7 | ||||||||||||||
| Virology | ||||||||||||||||||||||||||||
| Lagevrio | 3,247 | 1,177 | 436 | 825 | 5,684 | 952 | 952 | -13 | 2 | * | * | |||||||||||||||||
| Isentress<br> / Isentress HD | 158 | 147 | 161 | 167 | 633 | 209 | 192 | 189 | 178 | 769 | -7 | -1 | -18 | -13 | ||||||||||||||
| Neuroscience | ||||||||||||||||||||||||||||
| Belsomra | 69 | 69 | 62 | 59 | 258 | 79 | 78 | 81 | 80 | 318 | -27 | -14 | -19 | -9 | ||||||||||||||
| Immunology | ||||||||||||||||||||||||||||
| Simponi | 186 | 181 | 173 | 166 | 706 | 214 | 202 | 203 | 206 | 825 | -19 | -8 | -14 | -4 | ||||||||||||||
| Remicade | 61 | 53 | 49 | 44 | 207 | 85 | 75 | 73 | 67 | 299 | -34 | -22 | -31 | -21 | ||||||||||||||
| Diabetes ^(7)^ | ||||||||||||||||||||||||||||
| Januvia | 779 | 756 | 717 | 561 | 2,813 | 809 | 784 | 852 | 878 | 3,324 | -36 | -31 | -15 | -11 | ||||||||||||||
| Janumet | 454 | 476 | 417 | 353 | 1,700 | 486 | 477 | 487 | 514 | 1,964 | -31 | -25 | -13 | -7 | ||||||||||||||
| Other Pharmaceutical ^(8)^ | 520 | 479 | 564 | 685 | 2,249 | 554 | 512 | 518 | 533 | 2,118 | 29 | 37 | 6 | 12 | ||||||||||||||
| ANIMAL<br> HEALTH | 1,482 | 1,467 | 1,371 | 1,230 | 5,550 | 1,418 | 1,472 | 1,417 | 1,261 | 5,568 | -2 | 6 | - | 6 | ||||||||||||||
| Livestock | 832 | 826 | 829 | 814 | 3,300 | 819 | 821 | 864 | 791 | 3,295 | 3 | 12 | - | 7 | ||||||||||||||
| Companion<br> Animals | 650 | 641 | 542 | 416 | 2,250 | 599 | 651 | 553 | 470 | 2,273 | -11 | -5 | -1 | 4 | ||||||||||||||
| Other Revenues ^(9)^ | 312 | 370 | 625 | 420 | 1,728 | (29 | ) | (50 | ) | 241 | 221 | 382 | 90 | -25 | * | 87 |
* 200% or greater
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
^(1)^Only select products are shown.
^(2)^Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.
^(3)^Alliance Revenue represents royalties and a milestone payment.
^(4)^Total Vaccines sales were $2,481 million, $2,709 million, $3,552 million and $2,554 million in the first, second, third and fourth quarter of 2022, respectively, and $1,809 million, $2,293 million, $3,315 million and $2,715 million in the first, second, third and fourth quarter of 2021, respectively.
^(5)^Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs.
^(6)^Net product sales in Merck's marketing territories.
^(7)^Total Diabetes sales were $1,305 million, $1,300 million, $1,231 million and $1,012 million in the first, second, third quarter and fourth quarter of 2022, respectively, and $1,363 million, $1,330 million, $1,417 million and $1,475 million in the first, second, third and fourth quarter of 2021, respectively.
^(8)^Includes Pharmaceutical products not individually shown above.
^(9)^Other Revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities. Other Revenues related to the receipt of upfront and milestone payments for out-licensed products were $114 million, $32 million, $10 million and $10 million in the first, second, third and fourth quarter of 2022, respectively, and $56 million, $135 million and $27 million in the first, third and fourth quarter of 2021, respectively.
Exhibit 99.2
MERCK & CO., INC.
CONSOLIDATEDSTATEMENT OF INCOME - GAAP
(AMOUNTSIN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table1a
| **** | **** | 2022 | **** | **** | 2021 | **** | % Change | **** | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| **** | **** | 1Q | **** | **** | 2Q | **** | **** | 3Q | **** | **** | 4Q | **** | **** | FullYear | **** | **** | 1Q | **** | **** | 2Q | **** | **** | 3Q | **** | **** | 4Q | **** | **** | Full Year | **** | 4Q | **** | Full Year | **** |
| Sales | $ | 15,901 | $ | 14,593 | $ | 14,959 | $ | 13,830 | $ | 59,283 | $ | 10,627 | $ | 11,402 | $ | 13,154 | $ | 13,521 | $ | 48,704 | 2 | % | 22 | % | ||||||||||
| Costs, Expenses and Other | ||||||||||||||||||||||||||||||||||
| Cost of sales | 5,380 | 4,216 | 3,934 | 3,881 | 17,411 | 3,199 | 3,104 | 3,450 | 3,873 | 13,626 | 0 | % | 28 | % | ||||||||||||||||||||
| Selling, general and administrative | 2,323 | 2,512 | 2,520 | 2,687 | 10,042 | 2,187 | 2,281 | 2,336 | 2,830 | 9,634 | -5 | % | 4 | % | ||||||||||||||||||||
| Research and development | 2,576 | 2,798 | 4,399 | 3,775 | 13,548 | 2,412 | 4,321 | 2,445 | 3,068 | 12,245 | 23 | % | 11 | % | ||||||||||||||||||||
| Restructuring costs | 53 | 142 | 94 | 49 | 337 | 297 | 82 | 107 | 174 | 661 | -72 | % | -49 | % | ||||||||||||||||||||
| Other (income) expense, net | 708 | 438 | 429 | (75 | ) | 1,501 | (455 | ) | (103 | ) | (450 | ) | (333 | ) | (1,341 | ) | -77 | % | * | |||||||||||||||
| Income from Continuing Operations Before Taxes | 4,861 | 4,487 | 3,583 | 3,513 | 16,444 | 2,987 | 1,717 | 5,266 | 3,909 | 13,879 | -10 | % | 18 | % | ||||||||||||||||||||
| Income Tax Provision | 554 | 538 | 330 | 495 | 1,918 | 238 | 503 | 695 | 85 | 1,521 | ||||||||||||||||||||||||
| Net Income from Continuing Operations | 4,307 | 3,949 | 3,253 | 3,018 | 14,526 | 2,749 | 1,214 | 4,571 | 3,824 | 12,358 | -21 | % | 18 | % | ||||||||||||||||||||
| Less: Net (Loss) Income Attributable to Noncontrolling Interests | (3 | ) | 5 | 5 | 1 | 7 | 4 | 1 | 4 | 4 | 13 | |||||||||||||||||||||||
| Net Income from Continuing Operations Attributable to Merck & Co., Inc. | 4,310 | 3,944 | 3,248 | 3,017 | 14,519 | 2,745 | 1,213 | 4,567 | 3,820 | 12,345 | -21 | % | 18 | % | ||||||||||||||||||||
| Income (Loss) from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests | - | - | - | - | - | 434 | 332 | - | (62 | ) | 704 | * | * | |||||||||||||||||||||
| Net Income Attributable to Merck & Co., Inc. | $ | 4,310 | $ | 3,944 | $ | 3,248 | $ | 3,017 | $ | 14,519 | $ | 3,179 | $ | 1,545 | $ | 4,567 | $ | 3,758 | $ | 13,049 | -20 | % | 11 | % | ||||||||||
| Basic Earnings (Loss) per Common Share Attributable to Merck & Co., Inc. Common Shareholders: | ||||||||||||||||||||||||||||||||||
| Income from Continuing Operations | $ | 1.70 | $ | 1.56 | $ | 1.28 | $ | 1.19 | $ | 5.73 | $ | 1.08 | $ | 0.48 | $ | 1.81 | $ | 1.51 | $ | 4.88 | -21 | % | 17 | % | ||||||||||
| Income (Loss) from Discontinued Operations | - | - | - | - | - | 0.17 | 0.13 | - | (0.02 | ) | 0.28 | * | * | |||||||||||||||||||||
| Net Income | $ | 1.70 | $ | 1.56 | $ | 1.28 | $ | 1.19 | $ | 5.73 | $ | 1.26 | $ | 0.61 | $ | 1.81 | $ | 1.49 | $ | 5.16 | -20 | % | 11 | % | ||||||||||
| Earnings (Loss) per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders: | ||||||||||||||||||||||||||||||||||
| Income from Continuing Operations | $ | 1.70 | $ | 1.55 | $ | 1.28 | $ | 1.18 | $ | 5.71 | $ | 1.08 | $ | 0.48 | $ | 1.80 | $ | 1.51 | $ | 4.86 | -22 | % | 17 | % | ||||||||||
| Income (Loss) from Discontinued Operations | - | - | - | - | - | 0.17 | 0.13 | - | (0.02 | ) | 0.28 | * | * | |||||||||||||||||||||
| Net Income | $ | 1.70 | $ | 1.55 | $ | 1.28 | $ | 1.18 | $ | 5.71 | $ | 1.25 | $ | 0.61 | $ | 1.80 | $ | 1.48 | $ | 5.14 | -20 | % | 11 | % | ||||||||||
| Average Shares Outstanding | 2,528 | 2,531 | 2,533 | 2,536 | 2,532 | 2,531 | 2,533 | 2,530 | 2,527 | 2,530 | ||||||||||||||||||||||||
| Average Shares Outstanding Assuming Dilution | 2,537 | 2,540 | 2,542 | 2,548 | 2,542 | 2,541 | 2,540 | 2,536 | 2,535 | 2,538 | ||||||||||||||||||||||||
| Tax Rate from Continuing Operations | 11.4 | % | 12.0 | % | 9.2 | % | 14.1 | % | 11.7 | % | 8.0 | % | 29.3 | % | 13.2 | % | 2.2 | % | 11.0 | % |
* 100% or greater
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
| MERCK & CO., INC. |
|---|
| FOURTH QUARTER AND FULL YEAR 2021 GAAP TO NON-GAAP RECONCILIATION - CONTINUING OPERATIONS |
| (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) |
| (UNAUDITED) |
| Table 2b |
| In 2022, the company changed<br> the treatment of certain items for purposes of its non-GAAP reporting. Historically, Merck’s non-GAAP results excluded<br> expenses for upfront and milestone payments related to collaborations and licensing agreements, as well as charges related to pre-approval<br> assets obtained in transactions accounted for as asset acquisitions, to the extent the charges were considered by the company to<br> be significant to the results of a particular period (as well as any related adjustments recorded in a subsequent period). Beginning<br> in 2022, Merck’s non-GAAP results no longer exclude charges related to these items. Results for 2021 have been recast<br> to conform to the new presentation. | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| The table below reflects a<br> reconciliation of GAAP to non-GAAP financial information on a continuing operations basis. As Organon results are reflected<br> within discontinued operations, they are excluded from the financial information provided below. | ||||||||||||||||
| GAAP | Acquisition and Divestiture- Related Costs ^(1)^ | Restructuring Costs ^(2)^ | (Income) Loss from Investments in Equity Securities | Certain Other Items | Adjustment Subtotal | Non-GAAP | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Fourth<br> Quarter | ||||||||||||||||
| Cost<br> of sales | $ | 3,873 | 419 | 47 | (4 | ) | 462 | $ | 3,411 | |||||||
| Selling,<br> general and administrative | 2,830 | 226 | 10 | 236 | 2,594 | |||||||||||
| Research<br> and development | 3,068 | 397 | 7 | 404 | 2,664 | |||||||||||
| Restructuring<br> costs | 174 | 174 | 174 | - | ||||||||||||
| Other<br> (income) expense, net | (333 | ) | (3 | ) | (381 | ) | (384 | ) | 51 | |||||||
| Income<br> from Continuing Operations Before Taxes | 3,909 | (1,039 | ) | (238 | ) | 381 | 4 | (892 | ) | 4,801 | ||||||
| Income<br> Tax Provision (Benefit) | 85 | (163 | )^(4)^ | (39 | )^(4)^ | 84 | ^(4)^ | (2 | )^(4)^ | (120 | ) | 205 | ||||
| Net<br> Income from Continuing Operations | 3,824 | (876 | ) | (199 | ) | 297 | 6 | (772 | ) | 4,596 | ||||||
| Net<br> Income from Continuing Operations Attributable to Merck & Co., Inc. | 3,820 | (876 | ) | (199 | ) | 297 | 6 | (772 | ) | 4,592 | ||||||
| Earnings<br> per Common Share Assuming Dilution from Continuing Operations | $ | 1.51 | (0.34 | ) | (0.08 | ) | 0.12 | - | (0.30 | ) | $ | 1.81 | ||||
| Tax<br> Rate | 2.2 | % | 4.3 | % | ||||||||||||
| Full<br> Year | ||||||||||||||||
| Cost<br> of sales | $ | 13,626 | 1,607 | 160 | 221 | ^(3)^ | 1,988 | $ | 11,638 | |||||||
| Selling,<br> general and administrative | 9,634 | 322 | 19 | 341 | 9,293 | |||||||||||
| Research<br> and development | 12,245 | 479 | 28 | 507 | 11,738 | |||||||||||
| Restructuring<br> costs | 661 | 661 | 661 | - | ||||||||||||
| Other<br> (income) expense, net | (1,341 | ) | 76 | (1,884 | ) | (1,808 | ) | 467 | ||||||||
| Income<br> from Continuing Operations Before Taxes | 13,879 | (2,484 | ) | (868 | ) | 1,884 | (221 | ) | (1,689 | ) | 15,568 | |||||
| Income<br> Tax Provision (Benefit) | 1,521 | (446 | )^(4)^ | (121 | )^(4)^ | 415 | ^(4)^ | (259 | )^(4)^ | (411 | ) | 1,932 | ||||
| Net<br> Income from Continuing Operations | 12,358 | (2,038 | ) | (747 | ) | 1,469 | 38 | (1,278 | ) | 13,636 | ||||||
| Net<br> Income from Continuing Operations Attributable to Merck & Co., Inc. | 12,345 | (2,038 | ) | (747 | ) | 1,469 | 38 | (1,278 | ) | 13,623 | ||||||
| Earnings<br> per Common Share Assuming Dilution from Continuing Operations | $ | 4.86 | (0.80 | ) | (0.30 | ) | 0.58 | 0.01 | (0.51 | ) | $ | 5.37 | ||||
| Tax<br> Rate | 11.0 | % | 12.4 | % |
Only the line items that are affected by non-GAAP adjustments are shown.
Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing non-GAAP information enhances investors’ understanding of the company’s results because management uses non-GAAP measures 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 pretax income metric. The non-GAAP information presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.
^(1)^Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets. Amounts included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to acquisitions and divestitures, including $169 million of transaction costs related to the acquisition of Acceleron Pharma Inc. (Acceleron) in 2021. Amounts included in research and development expenses primarily reflect a $275 million in-process research and development (IPR&D) impairment charge related to nemtabrutinib, which was obtained as part of the 2020 ArQule, Inc. acquisition, $105 million of Acceleron transaction costs, and expenses for the amortization of intangible assets. Amounts included in other (income) expense, net, reflect increases in the estimated fair value measurement of liabilities for contingent consideration and royalty income related to the prior termination of the Sanofi-Pasteur MSD joint venture. Additionally, the full year includes a loss on a forward exchange contract entered into in conjunction with the Organon spin-off.
^(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)^Reflects charges for the discontinuation of COVID-19 development programs.
^(4)^Represent the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. Certain other items for the full year also includes a $207 million net tax benefit related to the settlement of certain federal income tax matters.
| MERCK & CO., INC. | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FRANCHISE / KEY PRODUCT SALES - CONTINUING OPERATIONS | ||||||||||||||||||||
| FOURTH QUARTER 2022 | ||||||||||||||||||||
| (AMOUNTS IN MILLIONS) | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Table 3a | ||||||||||||||||||||
| Global | U.S. | International | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 4Q<br> 2022 | 4Q<br> 2021 | %<br> Change | 4Q<br> 2022 | 4Q<br> 2021 | %<br> Change | 4Q<br> 2022 | 4Q<br> 2021 | %<br> Change | ||||||||||||
| TOTAL SALES ^(1)^ | $ | 13,830 | $ | 13,521 | 2 | $ | 6,279 | $ | 6,259 | - | $ | 7,551 | $ | 7,262 | 4 | |||||
| PHARMACEUTICAL | 12,180 | 12,039 | 1 | 5,871 | 5,790 | 1 | 6,309 | 6,249 | 1 | |||||||||||
| Oncology | ||||||||||||||||||||
| Keytruda | 5,450 | 4,577 | 19 | 3,378 | 2,657 | 27 | 2,071 | 1,920 | 8 | |||||||||||
| Alliance<br> Revenue - Lynparza ^(2)^ | 292 | 268 | 9 | 157 | 144 | 9 | 135 | 123 | 9 | |||||||||||
| Alliance<br> Revenue - Lenvima ^(2)^ | 216 | 206 | 5 | 154 | 131 | 18 | 62 | 75 | -18 | |||||||||||
| Alliance<br> Revenue - Reblozyl ^(3)^ | 41 | 17 | 145 | 36 | 100 | 6 | 17 | -66 | ||||||||||||
| Vaccines ^(4)^ | ||||||||||||||||||||
| Gardasil<br> / Gardasil 9 | 1,470 | 1,528 | -4 | 262 | 275 | -5 | 1,207 | 1,253 | -4 | |||||||||||
| ProQuad<br> / M-M-R II / Varivax | 526 | 509 | 3 | 387 | 374 | 4 | 139 | 135 | 3 | |||||||||||
| Pneumovax<br> 23 | 145 | 292 | -50 | 66 | 193 | -66 | 79 | 99 | -20 | |||||||||||
| RotaTeq | 139 | 213 | -35 | 82 | 109 | -25 | 57 | 105 | -46 | |||||||||||
| Vaqta | 39 | 41 | -5 | 23 | 20 | 14 | 16 | 21 | -24 | |||||||||||
| Hospital<br> Acute Care | ||||||||||||||||||||
| Bridion | 441 | 436 | 1 | 257 | 218 | 18 | 183 | 218 | -16 | |||||||||||
| Prevymis | 118 | 100 | 17 | 52 | 42 | 25 | 65 | 58 | 12 | |||||||||||
| Dificid | 67 | 60 | 12 | 57 | 57 | -1 | 10 | 3 | * | |||||||||||
| Noxafil | 58 | 62 | -5 | 13 | 11 | 11 | 46 | 50 | -9 | |||||||||||
| Primaxin | 54 | 65 | -17 | 1 | 1 | -53 | 53 | 64 | -16 | |||||||||||
| Zerbaxa | 49 | 10 | * | 25 | 9 | 169 | 24 | 1 | * | |||||||||||
| Invanz | 40 | 45 | -10 | (3 | ) | -86 | 41 | 48 | -15 | |||||||||||
| Cancidas | 36 | 45 | -19 | 1 | * | 35 | 45 | -21 | ||||||||||||
| Cardiovascular | ||||||||||||||||||||
| Alliance<br> Revenue - Adempas/Verquvo ^(5)^ | 82 | 94 | -12 | 85 | 90 | -6 | (2 | ) | 4 | -166 | ||||||||||
| Adempas<br> ^(6)^ | 57 | 63 | -10 | 57 | 63 | -10 | ||||||||||||||
| Virology | ||||||||||||||||||||
| Lagevrio | 825 | 952 | -13 | 632 | -100 | 825 | 320 | 158 | ||||||||||||
| Isentress<br> / Isentress HD | 167 | 178 | -7 | 78 | 72 | 7 | 89 | 106 | -16 | |||||||||||
| Neuroscience | ||||||||||||||||||||
| Belsomra | 59 | 80 | -27 | 19 | 22 | -12 | 39 | 58 | -32 | |||||||||||
| Immunology | ||||||||||||||||||||
| Simponi | 166 | 206 | -19 | 166 | 206 | -19 | ||||||||||||||
| Remicade | 44 | 67 | -34 | 44 | 67 | -34 | ||||||||||||||
| Diabetes ^(7)^ | ||||||||||||||||||||
| Januvia | 561 | 878 | -36 | 290 | 407 | -29 | 271 | 472 | -43 | |||||||||||
| Janumet | 353 | 514 | -31 | 97 | 123 | -21 | 255 | 391 | -35 | |||||||||||
| Other Pharmaceutical ^(8)^ | 685 | 533 | 29 | 351 | 206 | 70 | 336 | 327 | 3 | |||||||||||
| ANIMAL<br> HEALTH | 1,230 | 1,261 | -2 | 396 | 395 | - | 834 | 866 | -4 | |||||||||||
| Livestock | 814 | 791 | 3 | 188 | 158 | 19 | 626 | 633 | -1 | |||||||||||
| Companion<br> Animals | 416 | 470 | -11 | 208 | 237 | -12 | 208 | 233 | -10 | |||||||||||
| Other Revenues ^(9)^ | 420 | 221 | 90 | 12 | 74 | -84 | 408 | 147 | 178 |
* 200% or greater
Sum 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 costs.
^(3)^Alliance Revenue represents royalties.
^(4)^Total Vaccines sales were $2,554 million in the fourth quarter of 2022 and $2,715 million in the fourth quarter of 2021.
^(5)^Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs.
^(6)^Net product sales in Merck's marketing territories.
^(7)^Total Diabetes sales were $1,012 million in the fourth quarter of 2022 and $1,475 million in the fourth quarter of 2021.
^(8)^Includes Pharmaceutical products not individually shown above.
^(9)^Other Revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities. Other Revenues related to the receipt of upfront and milestone payments for out-licensed products were $10 million in the fourth quarter of 2022, and $27 million in the fourth quarter of 2021.
| MERCK & CO., INC. | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FRANCHISE / KEY PRODUCT SALES - CONTINUING OPERATIONS | |||||||||||||||||||||
| FULL YEAR 2022 | |||||||||||||||||||||
| (AMOUNTS IN MILLIONS) | |||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||
| Table 3b | |||||||||||||||||||||
| Global | U.S. | International | |||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Full<br> Year 2022 | Full<br> Year 2021 | %<br> Change | Full<br> Year 2022 | Full<br> Year 2021 | %<br> Change | Full<br> Year 2022 | Full<br> Year 2021 | %<br> Change | |||||||||||||
| TOTAL SALES ^(1)^ | $ | 59,283 | $ | 48,704 | 22 | $ | 27,206 | $ | 22,425 | 21 | $ | 32,077 | $ | 26,279 | 22 | ||||||
| PHARMACEUTICAL | 52,005 | 42,754 | 22 | 24,989 | 20,401 | 22 | 27,016 | 22,353 | 21 | ||||||||||||
| Oncology | |||||||||||||||||||||
| Keytruda | 20,937 | 17,186 | 22 | 12,686 | 9,765 | 30 | 8,251 | 7,421 | 11 | ||||||||||||
| Alliance<br> Revenue - Lynparza ^(2)^ | 1,116 | 989 | 13 | 584 | 515 | 13 | 532 | 473 | 12 | ||||||||||||
| Alliance<br> Revenue - Lenvima ^(2)^ | 876 | 704 | 24 | 579 | 417 | 39 | 297 | 287 | 3 | ||||||||||||
| Alliance<br> Revenue - Reblozyl ^(3)^ | 166 | 17 | * | 123 | 100 | 43 | 17 | 153 | |||||||||||||
| Vaccines ^(4)^ | |||||||||||||||||||||
| Gardasil<br> / Gardasil 9 | 6,897 | 5,673 | 22 | 2,065 | 1,881 | 10 | 4,832 | 3,792 | 27 | ||||||||||||
| ProQuad<br> / M-M-R II / Varivax | 2,241 | 2,135 | 5 | 1,724 | 1,629 | 6 | 518 | 506 | 2 | ||||||||||||
| RotaTeq | 783 | 807 | -3 | 508 | 473 | 8 | 275 | 334 | -18 | ||||||||||||
| Pneumovax<br> 23 | 602 | 893 | -33 | 346 | 547 | -37 | 256 | 346 | -26 | ||||||||||||
| Vaqta | 173 | 179 | -3 | 95 | 100 | -4 | 78 | 79 | -2 | ||||||||||||
| Hospital<br> Acute Care | |||||||||||||||||||||
| Bridion | 1,685 | 1,532 | 10 | 922 | 762 | 21 | 762 | 770 | -1 | ||||||||||||
| Prevymis | 428 | 370 | 16 | 188 | 153 | 23 | 240 | 218 | 10 | ||||||||||||
| Dificid | 263 | 175 | 50 | 241 | 166 | 45 | 22 | 10 | 130 | ||||||||||||
| Primaxin | 239 | 259 | -8 | 1 | 2 | -9 | 238 | 258 | -8 | ||||||||||||
| Noxafil | 238 | 259 | -8 | 51 | 60 | -14 | 187 | 199 | -6 | ||||||||||||
| Invanz | 189 | 202 | -7 | 4 | (5 | ) | -171 | 185 | 207 | -11 | |||||||||||
| Cancidas | 174 | 212 | -18 | 6 | 4 | 51 | 168 | 208 | -19 | ||||||||||||
| Zerbaxa | 169 | (1 | ) | * | 89 | 4 | * | 79 | (5 | ) | * | ||||||||||
| Cardiovascular | |||||||||||||||||||||
| Alliance<br> Revenue - Adempas/Verquvo ^(5)^ | 341 | 342 | - | 329 | 312 | 5 | 12 | 30 | -62 | ||||||||||||
| Adempas<br> ^(6)^ | 238 | 252 | -6 | 238 | 252 | -6 | |||||||||||||||
| Virology | |||||||||||||||||||||
| Lagevrio | 5,684 | 952 | * | 1,523 | 632 | 141 | 4,161 | 320 | * | ||||||||||||
| Isentress<br> / Isentress HD | 633 | 769 | -18 | 274 | 294 | -7 | 359 | 474 | -24 | ||||||||||||
| Neuroscience | |||||||||||||||||||||
| Belsomra | 258 | 318 | -19 | 79 | 78 | 2 | 179 | 241 | -26 | ||||||||||||
| Immunology | |||||||||||||||||||||
| Simponi | 706 | 825 | -14 | 706 | 825 | -14 | |||||||||||||||
| Remicade | 207 | 299 | -31 | 207 | 299 | -31 | |||||||||||||||
| Diabetes ^(7)^ | |||||||||||||||||||||
| Januvia | 2,813 | 3,324 | -15 | 1,248 | 1,404 | -11 | 1,565 | 1,920 | -18 | ||||||||||||
| Janumet | 1,700 | 1,964 | -13 | 355 | 367 | -3 | 1,344 | 1,597 | -16 | ||||||||||||
| Other Pharmaceutical ^(8)^ | 2,249 | 2,118 | 6 | 969 | 841 | 15 | 1,282 | 1,275 | 1 | ||||||||||||
| ANIMAL<br> HEALTH | 5,550 | 5,568 | - | 1,822 | 1,758 | 4 | 3,728 | 3,810 | -2 | ||||||||||||
| Livestock | 3,300 | 3,295 | - | 710 | 667 | 6 | 2,590 | 2,628 | -1 | ||||||||||||
| Companion<br> Animals | 2,250 | 2,273 | -1 | 1,112 | 1,091 | 2 | 1,138 | 1,182 | -4 | ||||||||||||
| Other Revenues ^(9)^ | 1,728 | 382 | * | 395 | 266 | 48 | 1,333 | 116 | * |
* 200% or greater
Sum 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 costs.
^(3)^Alliance Revenue represents royalties and a milestone payment.
^(4)^Total Vaccines sales were $11,297 million and $10,132 million on a global basis for December YTD 2022 and 2021, respectively.
^(5)^Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs.
^(6)^Net product sales in Merck's marketing territories.
^(7)^Total Diabetes sales were $4,848 million and $5,584 million on a global basis for December YTD 2022 and 2021, respectively.
^(8)^Includes Pharmaceutical products not individually shown above.
^(9)^Other Revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities. Other Revenues related to the receipt of upfront and milestone payments for out-licensed products were $165 million and $218 million on a global basis for December YTD 2022 and 2021 respectively.
| MERCK & CO., INC. | ||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| PHARMACEUTICAL GEOGRAPHIC SALES - CONTINUING OPERATIONS | ||||||||||||||||||||||||||||||||||
| (AMOUNTS IN MILLIONS) | ||||||||||||||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||||||||||||||
| Table 3c | ||||||||||||||||||||||||||||||||||
| **** | 2022 | **** | 2021 | **** | % Change | |||||||||||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| **** | 1Q | **** | 2Q | **** | 3Q | **** | 4Q | **** | Full Year | **** | 1Q | **** | 2Q | **** | 3Q | **** | 4Q | **** | Full Year | **** | 4Q | Full Year | ||||||||||||
| TOTAL<br> PHARMACEUTICAL | $ | 14,107 | $ | 12,756 | $ | 12,963 | $ | 12,180 | $ | 52,005 | $ | 9,238 | $ | 9,980 | $ | 11,496 | $ | 12,039 | $ | 42,754 | 1 | 22 | ||||||||||||
| United<br> States | 6,773 | 5,726 | 6,620 | 5,871 | 24,989 | 4,294 | 4,647 | 5,670 | 5,790 | 20,401 | 1 | 22 | ||||||||||||||||||||||
| %<br> Pharmaceutical Sales | 48.0 | % | 44.9 | % | 51.1 | % | 48.2 | % | 48.1 | % | 46.5 | % | 46.6 | % | 49.3 | % | 48.1 | % | 47.7 | % | ||||||||||||||
| Europe ^(1)^ | 3,309 | 2,677 | 2,427 | 2,494 | 10,906 | 2,276 | 2,404 | 2,445 | 2,655 | 9,780 | -6 | 12 | ||||||||||||||||||||||
| %<br> Pharmaceutical Sales | 23.5 | % | 21.0 | % | 18.7 | % | 20.5 | % | 21.0 | % | 24.6 | % | 24.1 | % | 21.3 | % | 22.1 | % | 22.9 | % | ||||||||||||||
| China | 1,113 | 1,355 | 1,419 | 1,216 | 5,102 | 688 | 944 | 1,278 | 1,352 | 4,262 | -10 | 20 | ||||||||||||||||||||||
| %<br> Pharmaceutical Sales | 7.9 | % | 10.6 | % | 10.9 | % | 10.0 | % | 9.8 | % | 7.4 | % | 9.5 | % | 11.1 | % | 11.2 | % | 10.0 | % | ||||||||||||||
| Japan | 965 | 1,092 | 653 | 832 | 3,542 | 607 | 637 | 614 | 771 | 2,629 | 8 | 35 | ||||||||||||||||||||||
| %<br> Pharmaceutical Sales | 6.8 | % | 8.6 | % | 5.0 | % | 6.8 | % | 6.8 | % | 6.6 | % | 6.4 | % | 5.3 | % | 6.4 | % | 6.1 | % | ||||||||||||||
| Asia<br> Pacific (other than China and Japan) | 786 | 854 | 702 | 691 | 3,034 | 437 | 442 | 450 | 488 | 1,817 | 42 | 67 | ||||||||||||||||||||||
| %<br> Pharmaceutical Sales | 5.6 | % | 6.7 | % | 5.4 | % | 5.7 | % | 5.8 | % | 4.7 | % | 4.4 | % | 3.9 | % | 4.1 | % | 4.2 | % | ||||||||||||||
| Latin<br> America | 435 | 453 | 511 | 472 | 1,871 | 353 | 379 | 434 | 421 | 1,587 | 12 | 18 | ||||||||||||||||||||||
| %<br> Pharmaceutical Sales | 3.1 | % | 3.6 | % | 3.9 | % | 3.9 | % | 3.6 | % | 3.8 | % | 3.8 | % | 3.8 | % | 3.5 | % | 3.7 | % | ||||||||||||||
| Eastern<br> Europe/Middle East/Africa | 450 | 339 | 360 | 320 | 1,469 | 357 | 318 | 362 | 278 | 1,315 | 15 | 12 | ||||||||||||||||||||||
| %<br> Pharmaceutical Sales | 3.2 | % | 2.7 | % | 2.8 | % | 2.6 | % | 2.8 | % | 3.9 | % | 3.2 | % | 3.1 | % | 2.3 | % | 3.1 | % | ||||||||||||||
| Canada | 189 | 166 | 166 | 158 | 678 | 160 | 157 | 164 | 167 | 650 | -6 | 4 | ||||||||||||||||||||||
| %<br> Pharmaceutical Sales | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.3 | % | 1.7 | % | 1.6 | % | 1.4 | % | 1.4 | % | 1.5 | % | ||||||||||||||
| Other | 87 | 94 | 105 | 126 | 414 | 66 | 52 | 79 | 117 | 313 | 8 | 32 | ||||||||||||||||||||||
| %<br> Pharmaceutical Sales | 0.6 | % | 0.6 | % | 0.9 | % | 1.0 | % | 0.8 | % | 0.8 | % | 0.4 | % | 0.8 | % | 0.9 | % | 0.8 | % |
Sum 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
| 4Q22 | 4Q21 | Full Year 2022 | Full Year 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest income | $ | (95 | ) | $ | (9 | ) | $ | (157 | ) | $ | (36 | ) |
| Interest expense | 235 | 208 | 962 | 806 | ||||||||
| Exchange losses | 17 | 95 | 237 | 297 | ||||||||
| Loss (income) from investments in equity securities, net ^(1)^ | 59 | (403 | ) | 1,419 | (1,940 | ) | ||||||
| Net periodic defined benefit plan cost (credit) other than service cost | (71 | ) | (53 | ) | (279 | ) | (212 | ) | ||||
| Other, net | (220 | ) | (171 | ) | (681 | ) | (256 | ) | ||||
| Total | $ | (75 | ) | $ | (333 | ) | $ | 1,501 | $ | (1,341 | ) |
^(1)^ Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds. Unrealized gains and losses from investments that are directly owned are determined at the end of the reporting period, while gains and losses from ownership interests in investment funds are accounted for on a one quarter lag.