WHITEHOUSE STATION, N.J.--(BUSINESS WIRE)--Merck (NYSE:MRK), known as MSD outside the United States and Canada, today announced financial results for the second quarter of 2014.
| Second Quarter | Second Quarter | ||||
| $ in millions, except EPS amounts | 2014 | 2013 | |||
| Sales | $10,934 | $11,010 | |||
| GAAP EPS | 0.68 | 0.30 | |||
|
Non-GAAP EPS that excludes items listed below1 |
0.85 | 0.84 | |||
|
GAAP Net Income2 |
2,004 | 906 | |||
| Non-GAAP Net Income that excludes items listed below1,2 | 2,493 | 2,530 | |||
Non-GAAP (generally accepted accounting principles) earnings per share (EPS) for the second quarter of $0.85 exclude acquisition- and divestiture-related costs, restructuring costs and certain other items.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow. Year-to-date results can be found in the attached tables.
| Second Quarter | Second Quarter | ||||
| $ in millions, except EPS amounts | 2014 | 2013 | |||
| EPS | |||||
| GAAP EPS | $0.68 | $0.30 | |||
|
Difference3 |
0.17 | 0.54 | |||
| Non-GAAP EPS that excludes items listed below1 | $0.85 | $0.84 | |||
| Net Income | |||||
| GAAP net income2 | $2,004 | $906 | |||
| Difference | 489 | 1,624 | |||
| Non-GAAP net income that excludes items listed below1,2 | $2,493 | $2,530 | |||
| Decrease (Increase) in Net Income Due to Excluded Items: | |||||
|
Acquisition- and divestiture-related costs4 |
$1,756 | $1,768 | |||
| Restructuring costs | 421 | 278 | |||
| Gain on AstraZeneca option exercise | (741) | -- | |||
| Other | -- | (13) | |||
| Net decrease (increase) in income before taxes | 1,436 | 2,033 | |||
|
Income tax (benefit) expense5 |
(947) | (409) | |||
| Decrease (increase) in net income | $489 | $1,624 | |||
“We delivered a strong first half of the year, making progress in transforming our operating model, fueling innovation and managing costs, while focusing on our best opportunities,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “I’m excited as we are preparing for a series of important and promising product launches later this year that we believe will make a meaningful difference to patients, healthcare providers and payers, while creating value for society and shareholders.”
Select Revenue Highlights
Worldwide sales were $10.9 billion for the second quarter of 2014, a decrease of 1 percent compared with the second quarter of 2013, with no net impact from foreign exchange.
The following table reflects sales of the company's top pharmaceutical products, as well as total sales of Animal Health and Consumer Care products.
| Second Quarter | Second Quarter | Change | Change | ||||||||
| $ in millions | 2014 | 2013 | Ex-exchange | ||||||||
| Total Sales | $10,934 | $11,010 | -1% | -1% | |||||||
| Pharmaceutical | 9,087 | 9,310 | -2% | -2% | |||||||
| JANUVIA/JANUMET | 1,577 | 1,547 | 2% | 2% | |||||||
| ZETIA/VYTORIN | 1,134 | 1,067 | 6% | 5% | |||||||
| REMICADE | 607 | 527 | 15% | 9% | |||||||
| ISENTRESS | 453 | 412 | 10% | 10% | |||||||
| GARDASIL | 409 | 383 | 7% | 9% | |||||||
| PROQUAD, M-M-R II and VARIVAX | 326 | 339 | -4% | -3% | |||||||
| SINGULAIR | 284 | 281 | 1% | 3% | |||||||
| NASONEX | 258 | 325 | -21% | -20% | |||||||
| Animal Health | 872 | 851 | 2% | 3% | |||||||
| Consumer Care | 583 | 490 | 19% | 20% | |||||||
| Other Revenues | 392 | 359 | 9% | 6% | |||||||
Pharmaceutical Revenue Performance
Second-quarter pharmaceutical sales declined 2 percent to $9.1 billion. Expected declines occurred due to the ongoing impact of the loss of market exclusivity for TEMODAR (temozolomide) and NASONEX (mometasone furoate monohydrate). Additionally, sales from the hepatitis franchise of VICTRELIS (boceprevir) and PEGINTRON (peginterferon alfa-2b) declined as a result of increased competition. These declines were partially offset by growth in REMICADE (infliximab), SIMPONI (golimumab) and ISENTRESS (raltegravir), as well as the cardiovascular franchise of ZETIA (ezetimibe)/VYTORIN (ezetimibe/simvastatin) and the diabetes franchise of JANUVIA (sitagliptin)/JANUMET (sitagliptin and metformin HCI).
Combined sales of JANUVIA and JANUMET, medicines that help lower blood sugar levels in adults with type 2 diabetes, grew 2 percent to $1.6 billion in the second quarter. The growth reflects higher sales in Europe and the emerging markets, which were partially offset by declines in Japan. Sales in the United States decreased 1 percent.
Combined sales of ZETIA and VYTORIN, medicines for lowering LDL cholesterol, increased 6 percent to $1.1 billion in the second quarter, including a 1 percent positive impact from foreign exchange. The growth was driven by higher sales of ZETIA in the United States, reflecting wholesaler purchases and price increases.
Combined sales of REMICADE and SIMPONI, treatments for inflammatory diseases, grew 21 percent to $781 million in the second quarter, including a 6 percent positive impact from foreign exchange.
Worldwide sales of ISENTRESS, an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, increased 10 percent to $453 million in the second quarter. The increase was driven by strong growth in Europe and the emerging markets.
Animal Health Revenue Performance
Animal Health sales totaled $872 million for the second quarter of 2014, a 2 percent increase compared with the second quarter of 2013, including a 1 percent negative impact due to foreign exchange. The growth was primarily driven by BRAVECTO (fluralaner), a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks, which launched in Europe and the United States, as well as higher sales in poultry and aqua products. This growth was partially offset by the loss of sales of ZILMAX (zilpaterol hydrochloride), a feed supplement for beef cattle. The company decided last year to voluntarily suspend sales of ZILMAX in the United States and Canada. Excluding the impact of the ZILMAX sales suspension, Animal Health sales increased 9 percent in the second quarter.
Consumer Care Revenue Performance
Second-quarter global sales of Consumer Care products were $583 million, an increase of 19 percent compared to the second quarter of 2013, including a 1 percent negative impact due to foreign exchange. The increase reflects sales reversals in the second quarter of 2013 from the termination in China of certain Consumer Care distribution arrangements together with associated termination costs. Excluding those actions, Consumer Care global sales grew 4 percent, including the 1 percent negative impact due to foreign exchange. Consumer Care global sales in the second quarter of 2014 benefited from the strong performance of CLARITIN and COPPERTONE.
Other Revenue Performance
Other revenues – primarily comprising alliance revenue, miscellaneous corporate revenues and third-party manufacturing sales – increased 9 percent to $392 million compared to the second quarter of 2013. The increase was primarily driven by higher revenue from AstraZeneca (AZ) recorded by Merck, which grew 29 percent to $316 million in the second quarter of 2014, partially offset by lower third-party manufacturing sales.
On June 30, 2014, AZ exercised its option to buy the company’s interest in a subsidiary and, through it, the company’s interest in Nexium and Prilosec. As of July 1, 2014, Merck no longer records equity income from AZ and supply sales to AZ have ended.
Second-Quarter Expense and Other Information
The costs detailed below totaled $9.7 billion on a GAAP basis during the second quarter of 2014 and include $2.2 billion of acquisition- and divestiture-related costs and restructuring costs.
| $ in millions | Included in expenses for the period | ||||||||
| Acquisition- | |||||||||
| and | Restructuring | ||||||||
| GAAP | Divestiture- | Costs |
Non-GAAP1 |
||||||
| Second Quarter | Related | ||||||||
| 2014 |
Costs4 |
||||||||
| Materials and production | $4,893 | $1,724 | $171 | $2,998 | |||||
| Marketing and administrative | 2,973 | 32 | 44 | 2,897 | |||||
| Research and development | 1,664 | -- | 43 | 1,621 | |||||
| Restructuring costs | 163 | -- | 163 | -- | |||||
| Second Quarter | |||||||||
| 2013 | |||||||||
| Materials and production | $4,284 | $1,515 | $93 | $2,676 | |||||
| Marketing and administrative | 3,140 | 19 | 16 | 3,105 | |||||
| Research and development | 2,101 | 234 | 14 | 1,853 | |||||
| Restructuring costs | 155 | -- | 155 | -- | |||||
The gross margin was 55.2 percent for the second quarter of 2014 compared to 61.1 percent for the second quarter of 2013, reflecting 17.4 and 14.6 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs, and restructuring costs noted above. The non-GAAP gross margin decline primarily reflects the impacts of product mix, patent expiries, foreign exchange and inventory write-offs, primarily VICTRELIS.
Marketing and administrative expenses, on a non-GAAP basis, were $2.9 billion in the second quarter of 2014, a decrease from $3.1 billion in the same period of 2013. The decline was primarily due to productivity measures.
Research and development (R&D) expenses, on a non-GAAP basis, were $1.6 billion in the second quarter of 2014, a decrease from $1.9 billion in the second quarter of 2013. The decline reflects targeted reductions and lower clinical development spending as a result of portfolio prioritization and increased focus on the company’s key therapeutic opportunities, as well as timing of certain programs set to begin in the second half of 2014.
Equity income from affiliates was $92 million for the second quarter, primarily reflecting the performance of partnerships with AZ and Sanofi Pasteur MSD.
Other (income) expense, net, was $558 million of income in the second quarter of 2014, compared to $201 million of expense in the second quarter of 2013. The second quarter of 2014 includes a $741 million gain recorded in connection with AZ’s option exercise.
The GAAP effective tax rate of (7.5) percent for the second quarter of 2014 reflects the impacts of acquisition- and divestiture-related costs and restructuring costs, as well as a net benefit of $517 million associated with AZ’s option exercise. The non-GAAP effective tax rate, which excludes these items, was 24.2 percent for the quarter.
Key Developments
- Merck announced an agreement to acquire Idenix Pharmaceuticals, Inc. for $24.50 per share in cash (approximately $3.85 billion) to expand its portfolio of investigational therapies for hepatitis C. The company commenced a tender offer, which is expected to close on Aug. 4, 2014.
- The U.S. Food and Drug Administration (FDA) and European Medicines Agency have accepted regulatory applications for pembrolizumab (MK-3475), an investigational anti-PD-1 antibody, for the treatment of patients with advanced melanoma. Regulatory action in the United States is expected by Oct. 28, 2014.
- Bayer AG agreed to purchase Merck Consumer Care for $14.2 billion; the sale is expected to close in the second half of 2014. The companies also announced that Merck will pay Bayer AG $1 billion as part of a clinical development collaboration.
- Merck received a Complete Response Letter from the U.S. FDA for its New Drug Application for corifollitropin alfa, a sustained follicle stimulant for controlled ovarian stimulation in women participating in assisted reproductive technologies. Merck is evaluating the information provided in the Complete Response Letter. Corifollitropin alfa is marketed as ELONVA in more than 75 countries.
For a full listing of company developments that occurred in the second quarter of 2014, visit the newsroom at www.merck.com.
Financial Outlook
Merck expects full-year 2014 non-GAAP EPS to be between $3.43 and $3.53, which excludes the potential impact of a Venezuelan Bolivar devaluation that was previously included in the range. The full-year 2014 non-GAAP EPS range reflects strong performance in the first half of the year and also includes anticipated dilution of $0.06 to $0.09 from the planned sale of Merck Consumer Care and the research collaboration with Bayer, and the planned acquisition of Idenix. The 2014 non-GAAP EPS range excludes acquisition- and divestiture-related costs and costs related to restructuring programs. The 2014 non-GAAP EPS range also excludes one-time gains associated with AZ’s option exercise, the sale of the company’s ophthalmics business in certain international markets and the planned sale of Merck Consumer Care, as well as certain other items. Merck now expects full-year 2014 GAAP EPS to be between $4.44 and $4.77.
At current exchange rates, Merck continues to expect full-year 2014 revenues to be between $42.4 billion and $43.2 billion.
In addition, the company continues to expect full-year 2014 non-GAAP marketing and administrative as well as R&D expenses to be below 2013 levels. The company continues to anticipate its full-year 2014 non-GAAP tax rate to be in the range of 24 to 26 percent; the rate does not include a 2014 benefit of an R&D tax credit.
A reconciliation of anticipated 2014 EPS, as reported in accordance with GAAP to non-GAAP EPS that excludes certain items, is provided in the table below.
| Full Year | ||
| $ in millions, except EPS amounts | 2014 | |
| GAAP EPS | $4.44 to $4.77 | |
| Difference3 | (1.01) to (1.24) | |
| Non-GAAP EPS that excludes items listed below | $3.43 to $3.53 | |
| Acquisition- and divestiture-related costs | $5,300 to $5,000 | |
| Restructuring costs | 1,500 to 1,200 | |
| Gain on AZ option exercise | (741) | |
| Gain on sale of ophthalmics business | (500) to (550) | |
| Gain on planned sale of Merck Consumer Care | (11,000) to (11,300) | |
| Net decrease (increase) in income before taxes | (5,441) to (6,391) | |
| Estimated income tax (benefit) expense | 2,485 to 2,755 | |
| Decrease (increase) in net income | ($2,956) to ($3,636) | |
Total Employees
As of June 30, 2014, Merck had approximately 73,000 employees worldwide. In addition, the company’s joint ventures in China and Brazil, which are included in the consolidated results of Merck, had about 1,100 employees.
Earnings Conference Call
Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EDT on Merck’s website at http://www.merck.com/investors/events-and-presentations/home.html. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 62998996. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 62998996. Journalists who wish to ask questions are requested to contact a member of Merck's Media Relations team at the conclusion of the call.
About Merck
Today's Merck is a global healthcare leader working to help the world be well. Merck is known as MSD outside the United States and Canada. Through our prescription medicines, vaccines, biologic therapies, and consumer care and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to healthcare through far-reaching policies, programs and partnerships. For more information, visit www.merck.com and connect with us on Twitter, Facebook and YouTube. You can also follow our Twitter conversation at $MRK.
Forward-Looking Statement
This news release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of Merck’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.
Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; Merck’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of Merck’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.
Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Merck’s 2013 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).
1 Merck is providing certain 2014 and 2013 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP. For description of the items, see Table 2a, including the related footnotes, attached to this release.
2 Net income attributable to Merck & Co., Inc.
3 Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the period.
4 Includes expenses of $1.1 billion and $1.2 billion in the second quarter of 2014 and 2013, respectively, for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as intangible asset impairment charges of $660 million and $564 million in the second quarter of 2014 and 2013, respectively. Also includes merger integration costs, as well as transaction and certain other costs related to business acquisitions and divestitures.
5 Includes the estimated tax impact on the reconciling items, which for the second quarter of 2014 includes a net benefit of $517 million recorded in connection with AstraZeneca’s option exercise.
| MERCK & CO., INC. | |||||||||||||||||||||
| CONSOLIDATED STATEMENT OF INCOME - GAAP | |||||||||||||||||||||
| (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) | |||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||
| Table 1 | |||||||||||||||||||||
| GAAP |
% Change |
GAAP |
% Change |
||||||||||||||||||
| 2Q14 | 2Q13 |
June YTD |
June YTD |
||||||||||||||||||
| Sales | $ | 10,934 | $ | 11,010 | -1% | $ | 21,198 | $ | 21,681 | -2% | |||||||||||
| Costs, Expenses and Other | |||||||||||||||||||||
| Materials and production (1) | 4,893 | 4,284 | 14% | 8,796 | 8,243 | 7% | |||||||||||||||
| Marketing and administrative (1) | 2,973 | 3,140 | -5% | 5,707 | 6,126 | -7% | |||||||||||||||
| Research and development (1) | 1,664 | 2,101 | -21% | 3,238 | 4,008 | -19% | |||||||||||||||
| Restructuring costs (2) | 163 | 155 | 5% | 288 | 274 | 5% | |||||||||||||||
| Equity income from affiliates (3) | (92 | ) | (116 | ) | -21% | (217 | ) | (249 | ) | -13% | |||||||||||
| Other (income) expense, net (1) (4) | (558 | ) | 201 | * | (596 | ) | 484 | * | |||||||||||||
| Income Before Taxes | 1,891 | 1,245 | 52% | 3,982 | 2,795 | 42% | |||||||||||||||
| Income Tax (Benefit) Provision | (142 | ) | 310 | 218 | 244 | ||||||||||||||||
| Net Income | 2,033 | 935 | * | 3,764 | 2,551 | 48% | |||||||||||||||
| Less: Net Income Attributable to Noncontrolling Interests | 29 | 29 | 55 | 52 | |||||||||||||||||
| Net Income Attributable to Merck & Co., Inc. | $ | 2,004 | $ | 906 | * | $ | 3,709 | $ | 2,499 | 48% | |||||||||||
| Earnings per Common Share Assuming Dilution | $ | 0.68 | $ | 0.30 | * | $ | 1.25 | $ | 0.82 | 52% | |||||||||||
| Average Shares Outstanding Assuming Dilution | 2,949 | 3,010 | 2,957 | 3,030 | |||||||||||||||||
| Tax Rate (5) | -7.5 | % | 24.9 | % | 5.5 | % | 8.7 | % | |||||||||||||
* 100% or greater
(1) Amounts include the impact of acquisition and divestiture-related costs, restructuring costs and certain other items. See accompanying tables for details.
(2) Represents separation and other related costs associated with restructuring activities under the company's formal restructuring programs.
(3) Primarily reflects equity income from the AstraZeneca LP and Sanofi Pasteur MSD partnerships.
(4) Other (income) expense, net in the second quarter and first six months of 2014 includes a gain of $741 million related to AstraZeneca's option exercise. In addition, other (income) expense, net in the first six months of 2014 includes net gains of $168 million related to the divestiture of the company's Sirna Therapeutics, Inc. subsidiary. Other (income) expense, net in the first six months of 2013 reflects approximately $140 million of exchange losses as a result of a Venezuelan currency devaluation.
(5) The effective income tax rates for the second quarter and first six months of 2014 reflect a net benefit of $517 million recorded in connection with AstraZeneca's option exercise. In addition, the effective income tax rate for the first six months of 2014 reflects a benefit of approximately $300 million associated with a capital loss generated in the first quarter of 2014.
The effective income tax rates for the second quarter and first six months of 2013 reflect benefits from reductions in tax reserves upon expiration of applicable statute of limitations. In addition, the effective tax rate for the first six months of 2013 reflects the favorable impact of tax legislation enacted in the first quarter of 2013, as well as a benefit of approximately $160 million associated with the resolution of a previously disclosed federal income tax issue.
| MERCK & CO., INC. | ||||||||||||||||||||||
| CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||||||
| GAAP TO NON-GAAP RECONCILIATION | ||||||||||||||||||||||
| SECOND QUARTER 2014 | ||||||||||||||||||||||
| (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) | ||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||
| Table 2a | ||||||||||||||||||||||
| Acquisition and | Restructuring | Certain Other | Adjustment | |||||||||||||||||||
| GAAP | Divestiture- |
Costs (2) |
Items (3) |
Subtotal | Non-GAAP | |||||||||||||||||
|
Related Costs (1) |
||||||||||||||||||||||
| Sales | $ | 10,934 | $ | 10,934 | ||||||||||||||||||
| Costs, Expenses and Other | ||||||||||||||||||||||
| Materials and production | 4,893 | 1,724 | 171 | 1,895 | 2,998 | |||||||||||||||||
| Marketing and administrative | 2,973 | 32 | 44 | 76 | 2,897 | |||||||||||||||||
| Research and development | 1,664 | 43 | 43 | 1,621 | ||||||||||||||||||
| Restructuring costs | 163 | 163 | 163 | - | ||||||||||||||||||
| Equity income from affiliates | (92 | ) | (92 | ) | ||||||||||||||||||
| Other (income) expense, net | (558 | ) | (741 | ) | (741 | ) | 183 | |||||||||||||||
| Income Before Taxes | 1,891 | (1,756 | ) | (421 | ) | 741 | (1,436 | ) | 3,327 | |||||||||||||
| Taxes on Income | (142 | ) | (947 | ) |
(4) |
805 | ||||||||||||||||
| Net Income | 2,033 | (489 | ) | 2,522 | ||||||||||||||||||
| Less: Net Income Attributable to Noncontrolling Interests | 29 | 29 | ||||||||||||||||||||
| Net Income Attributable to Merck & Co., Inc. | $ | 2,004 | $ | (489 | ) | $ | 2,493 | |||||||||||||||
| Earnings per Common Share Assuming Dilution | $ | 0.68 | $ | 0.85 | ||||||||||||||||||
| Average Shares Outstanding Assuming Dilution | 2,949 | 2,949 | ||||||||||||||||||||
| Tax Rate | -7.5 | % | 24.2 | % | ||||||||||||||||||
Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the company's performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
(1) Amounts included in materials and production costs reflect expenses of $1.1 billion for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as $660 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect merger integration costs, as well as transaction and certain other costs related to business acquisitions and divestitures.
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company's formal restructuring programs.
(3) Represents the gain related to AstraZeneca's option exercise.
(4) Represents the estimated tax impact on the reconciling items, including a net benefit of $517 million recorded in connection with AstraZeneca's option exercise.
| MERCK & CO., INC. | ||||||||||||||||||||||
| CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||||||
| GAAP TO NON-GAAP RECONCILIATION | ||||||||||||||||||||||
| SIX MONTHS ENDED JUNE 30, 2014 | ||||||||||||||||||||||
| (AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES) | ||||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||||
| Table 2b | ||||||||||||||||||||||
| Acquisition and | Restructuring | Certain Other | Adjustment | |||||||||||||||||||
| GAAP | Divestiture- |
Costs (2) |
Items (3) |
Subtotal | Non-GAAP | |||||||||||||||||
|
Related Costs (1) |
||||||||||||||||||||||
| Sales | $ | 21,198 | $ | 21,198 | ||||||||||||||||||
| Costs, Expenses and Other | ||||||||||||||||||||||
| Materials and production | 8,796 | 2,850 | 290 | 3,140 | 5,656 | |||||||||||||||||
| Marketing and administrative | 5,707 | 43 | 75 | 118 | 5,589 | |||||||||||||||||
| Research and development | 3,238 | 94 | 94 | 3,144 | ||||||||||||||||||
| Restructuring costs | 288 | 288 | 288 | - | ||||||||||||||||||
| Equity income from affiliates | (217 | ) | (217 | ) | ||||||||||||||||||
| Other (income) expense, net | (596 | ) | (741 | ) | (741 | ) | 145 | |||||||||||||||
| Income Before Taxes | 3,982 | (2,893 | ) | (747 | ) | 741 | (2,899 | ) | 6,881 | |||||||||||||
| Taxes on Income | 218 | (1,514 | ) |
(4) |
1,732 | |||||||||||||||||
| Net Income | 3,764 | (1,385 | ) | 5,149 | ||||||||||||||||||
| Less: Net Income Attributable to Noncontrolling Interests | 55 | 55 | ||||||||||||||||||||
| Net Income Attributable to Merck & Co., Inc. | $ | 3,709 | $ | (1,385 | ) | $ | 5,094 | |||||||||||||||
| Earnings per Common Share Assuming Dilution | $ | 1.25 | $ | 1.72 | ||||||||||||||||||
| Average Shares Outstanding Assuming Dilution | 2,957 | 2,957 | ||||||||||||||||||||
| Tax Rate | 5.5 | % | 25.2 | % | ||||||||||||||||||
Merck is providing non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors' understanding of the company's performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
(1) Amounts included in materials and production costs reflect expenses of $2.2 billion for the amortization of intangible assets recognized as a result of mergers and acquisitions, as well as $660 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect merger integration costs, as well as transaction and certain other costs related to business acquisitions and divestitures.
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company's formal restructuring programs.
(3) Represents the gain related to AstraZeneca's option exercise.
(4) Represents the estimated tax impact on the reconciling items, including a net benefit of approximately $517 million recorded in connection with AstraZeneca's option exercise, as well as a benefit of approximately $300 million associated with a capital loss generated in the first quarter.
| MERCK & CO., INC. | |||||||||||||||||||||||
| FRANCHISE / KEY PRODUCT SALES | |||||||||||||||||||||||
| (AMOUNTS IN MILLIONS) | |||||||||||||||||||||||
| Table 3 | |||||||||||||||||||||||
| 2014 | 2013 | % Change | |||||||||||||||||||||
| 1Q | 2Q | June | 1Q | 2Q | June | 3Q | 4Q | Full | 2Q | June | |||||||||||||
| YTD | YTD | Year | YTD | ||||||||||||||||||||
| TOTAL SALES (1) | $10,264 | $10,934 | $21,198 | $10,671 | $11,010 | $21,681 | $11,032 | $11,319 | $44,033 | -1 | -2 | ||||||||||||
| PHARMACEUTICAL | 8,451 | 9,087 | 17,538 | 8,891 | 9,310 | 18,201 | 9,475 | 9,760 | 37,437 | -2 | -4 | ||||||||||||
| Primary Care and Women's Health | |||||||||||||||||||||||
| Cardiovascular | |||||||||||||||||||||||
| Zetia | 611 | 717 | 1,328 | 629 | 650 | 1,279 | 662 | 716 | 2,658 | 10 | 4 | ||||||||||||
| Vytorin | 361 | 417 | 777 | 394 | 417 | 810 | 396 | 436 | 1,643 | -4 | |||||||||||||
| Diabetes | |||||||||||||||||||||||
| Januvia | 858 | 1,058 | 1,916 | 884 | 1,072 | 1,956 | 927 | 1,121 | 4,004 | -1 | -2 | ||||||||||||
| Janumet | 476 | 519 | 995 | 409 | 474 | 883 | 442 | 503 | 1,829 | 9 | 13 | ||||||||||||
| General Medicine & Women's Health | |||||||||||||||||||||||
| NuvaRing | 168 | 178 | 346 | 151 | 171 | 322 | 170 | 193 | 686 | 4 | 7 | ||||||||||||
| Implanon | 102 | 119 | 221 | 84 | 102 | 187 | 96 | 120 | 403 | 16 | 18 | ||||||||||||
| Follistim AQ | 110 | 102 | 213 | 122 | 134 | 257 | 124 | 101 | 481 | -24 | -17 | ||||||||||||
| Dulera | 102 | 103 | 205 | 68 | 79 | 147 | 82 | 95 | 324 | 30 | 39 | ||||||||||||
| Hospital and Specialty | |||||||||||||||||||||||
| Hepatitis | |||||||||||||||||||||||
| PegIntron | 112 | 103 | 216 | 126 | 142 | 268 | 104 | 124 | 496 | -27 | -19 | ||||||||||||
| Victrelis | 59 | 46 | 105 | 110 | 116 | 226 | 121 | 81 | 428 | -60 | -53 | ||||||||||||
| HIV | |||||||||||||||||||||||
| Isentress | 390 | 453 | 843 | 362 | 412 | 775 | 427 | 442 | 1,643 | 10 | 9 | ||||||||||||
| Hospital | |||||||||||||||||||||||
| Cancidas | 166 | 156 | 322 | 162 | 163 | 326 | 151 | 183 | 660 | -5 | -1 | ||||||||||||
| Invanz | 114 | 134 | 249 | 110 | 120 | 230 | 130 | 128 | 488 | 12 | 8 | ||||||||||||
| Noxafil | 74 | 98 | 172 | 65 | 71 | 136 | 75 | 98 | 309 | 38 | 26 | ||||||||||||
| Bridion | 73 | 82 | 155 | 63 | 69 | 131 | 75 | 82 | 288 | 20 | 18 | ||||||||||||
| Primaxin | 71 | 81 | 151 | 84 | 85 | 168 | 88 | 79 | 335 | -5 | -10 | ||||||||||||
| Immunology | |||||||||||||||||||||||
| Remicade | 604 | 607 | 1,211 | 549 | 527 | 1,076 | 574 | 620 | 2,271 | 15 | 13 | ||||||||||||
| Simponi | 157 | 174 | 330 | 108 | 120 | 228 | 126 | 146 | 500 | 44 | 45 | ||||||||||||
| Other | |||||||||||||||||||||||
| Cosopt / Trusopt | 99 | 100 | 198 | 105 | 103 | 209 | 104 | 103 | 416 | -3 | -5 | ||||||||||||
| Oncology | |||||||||||||||||||||||
| Emend | 122 | 144 | 266 | 116 | 135 | 250 | 123 | 134 | 507 | 7 | 6 | ||||||||||||
| Temodar | 83 | 93 | 176 | 216 | 219 | 434 | 162 | 111 | 708 | -57 | -59 | ||||||||||||
| Diversified Brands | |||||||||||||||||||||||
| Respiratory | |||||||||||||||||||||||
| Nasonex | 312 | 258 | 570 | 385 | 325 | 711 | 297 | 327 | 1,335 | -21 | -20 | ||||||||||||
| Singulair | 271 | 284 | 554 | 337 | 281 | 618 | 280 | 298 | 1,196 | 1 | -10 | ||||||||||||
| Clarinex | 62 | 69 | 131 | 61 | 64 | 125 | 54 | 55 | 235 | 7 | 5 | ||||||||||||
| Other | |||||||||||||||||||||||
| Cozaar / Hyzaar | 205 | 214 | 419 | 267 | 255 | 522 | 238 | 246 | 1,006 | -16 | -20 | ||||||||||||
| Arcoxia | 128 | 141 | 268 | 121 | 121 | 242 | 112 | 131 | 484 | 16 | 11 | ||||||||||||
| Fosamax | 123 | 121 | 245 | 137 | 144 | 281 | 140 | 139 | 560 | -16 | -13 | ||||||||||||
| Zocor | 64 | 69 | 133 | 82 | 74 | 156 | 65 | 79 | 301 | -8 | -15 | ||||||||||||
| Propecia | 74 | 58 | 131 | 68 | 67 | 135 | 71 | 77 | 283 | -14 | -3 | ||||||||||||
| Remeron | 50 | 40 | 90 | 52 | 53 | 106 | 44 | 56 | 206 | -26 | -15 | ||||||||||||
| Vaccines | |||||||||||||||||||||||
| Gardasil | 383 | 409 | 792 | 390 | 383 | 773 | 665 | 394 | 1,831 | 7 | 3 | ||||||||||||
| ProQuad, M-M-R II and Varivax | 280 | 326 | 606 | 272 | 339 | 611 | 421 | 273 | 1,306 | -4 | -1 | ||||||||||||
| RotaTeq | 169 | 147 | 316 | 162 | 144 | 306 | 201 | 129 | 636 | 3 | 3 | ||||||||||||
| Zostavax | 142 | 156 | 298 | 168 | 141 | 309 | 185 | 264 | 758 | 11 | -3 | ||||||||||||
| Pneumovax 23 | 101 | 102 | 203 | 111 | 108 | 219 | 193 | 241 | 653 | -6 | -7 | ||||||||||||
| Other Pharmaceutical (2) | 1,175 | 1,209 | 2,387 | 1,361 | 1,430 | 2,789 | 1,350 | 1,435 | 5,570 | -15 | -14 | ||||||||||||
| ANIMAL HEALTH | 813 | 872 | 1,685 | 840 | 851 | 1,691 | 800 | 871 | 3,362 | 2 | |||||||||||||
| CONSUMER CARE (3) | 546 | 583 | 1,130 | 571 | 490 | 1,061 | 443 | 390 | 1,894 | 19 | 6 | ||||||||||||
| Claritin OTC | 170 | 153 | 323 | 177 | 78 | 256 | 123 | 92 | 471 | 95 | 26 | ||||||||||||
| Other Revenues (4) | 454 | 392 | 845 | 369 | 359 | 727 | 314 | 298 | 1,340 | 9 | 16 | ||||||||||||
| Astra | 147 | 316 | 463 | 262 | 245 | 507 | 220 | 193 | 920 | 29 | -9 | ||||||||||||
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
(1) Only select products are shown.
(2) Includes Pharmaceutical products not individually shown above. Other Vaccines sales included in Other Pharmaceutical were $98 million and $76 million for the first and second quarters of 2014. Other Vaccines sales included in Other Pharmaceutical were $53 million, $86 million, $127 million, and $101 million for the first, second, third, and fourth quarters of 2013, respectively.
(3) The decrease in Consumer Care sales in the second quarter and full year of 2013 resulted from the termination in China of distribution arrangements and a reversal of sales previously made to those distributors, together with associated termination costs.
(4) Other revenues are comprised primarily of alliance revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. On October 1, 2013, the Company divested a substantial portion of its third-party manufacturing sales. In addition, Other revenues in the fourth quarter and full year of 2013 reflect $50 million of revenue for the out-license of a pipeline compound.
