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Merck Announces First-Quarter 2024 Financial Results
"Merck has begun 2024 with continuing momentum in our business. We are harnessing the power of innovation to advance our deep pipeline and are maximizing the impact of our broad commercial portfolio for the benefit of patients," said Robert M. Davis, chairman and chief executive officer, Merck. "We drove strong growth across key therapeutic areas, executed strategic business development, and in the U.S., we are now launching WINREVAIR, a significant new product in the cardiometabolic space for adults with pulmonary arterial hypertension, a progressive and debilitating disease. We have important opportunities ahead of us across all areas of our business, and we are highly focused on realizing them."
Financial Summary
First Quarter
$ in millions, except EPS amounts
---------------------------
2023 Change Change Ex-
Exchange
------- ------- ----------
$15,775 $14,487 9% 12%
Sales
------------------------------------------------------ ------- ------- ---------- ---
4,762 2,821 69% 76%
GAAP net income(1)
------------------------------------------------------ ------- ------- ---------- ---
5,279 3,564 48% 54%
Non-GAAP net income that excludes certain items(1,2*)
------------------------------------------------------ ------- ------- ---------- ---
1.87 1.11 68% 76%
GAAP EPS
------------------------------------------------------ ------- ------- ---------- ---
2.07 1.40 48% 54%
Non-GAAP EPS that excludes certain items(2*)
------------------------------------------------------ ------- ------- ---------- ---
Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) assuming dilution was $1.87 for the first quarter of 2024. Non-GAAP EPS was $2.07 for the first quarter of 2024. GAAP and non-GAAP EPS in the first quarter of 2024 include a charge of $0.26 per share for the acquisition of Harpoon Therapeutics, Inc. (Harpoon). GAAP and non-GAAP EPS in the first quarter of 2023 include charges of $0.52 per share related to the acquisition of Imago BioSciences, Inc. (Imago) and a collaboration and licensing agreement with Kelun-Biotech.
Non-GAAP EPS excludes acquisition- and divestiture-related costs, costs related to restructuring programs, as well as income and losses from investments in equity securities. Non-GAAP EPS for the first quarter of 2023 also excludes a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.
First-Quarter Sales Performance
The following table reflects sales of the company's top products and significant performance drivers.
First Quarter
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2024 2023 Change Change Ex-Exchange
$ in millions Commentary
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
$15,775 $14,487 9% 12%
Total Sales Approximately 2% of the negative impact of foreign exchange was due to devaluation of Argentine peso, which was largely offset by inflation-related price increases, consistent with practice in that market.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
14,006 12,721 10% 13%
Pharmaceutical Increase driven by growth in oncology and vaccines, partially offset by a decline in diabetes.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
6,947 5,795 20% 24%
KEYTRUDA Growth driven by increased global uptake in earlier-stage indications, including triple-negative breast cancer and renal cell carcinoma, as well as non-small cell lung cancer (NSCLC) in the U.S., and continued strong global demand from metastatic indications. Substantially all of the 4% negative impact of foreign exchange was due to devaluation of Argentine peso, which was largely offset by inflation-related price increases.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2,249 1,972 14% 17%
GARDASIL/GARDASIL 9 Growth due to strong demand, particularly in China, which also benefited from timing of shipments, as well as public-sector buying patterns in the U.S., and higher pricing.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
670 880 -24% -21%
JANUVIA/JANUMET Decline primarily due to lower pricing and demand in the U.S., as well as ongoing generic competition in many international markets, particularly in Europe, Canada and the Asia Pacific region.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
570 528 8% 8%
PROQUAD, M-M-R II and VARIVAX Growth largely from higher pricing in the U.S., as well as higher sales in Latin America, due in part to timing of government tenders.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
440 487 -10% -8%
BRIDION Decline primarily due to generic competition in certain ex-U.S. markets, particularly in Europe, partially offset by higher demand in the U.S.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
350 392 -11% -5%
LAGEVRIO Decline due to lower demand in certain markets in the Asia Pacific region, partially offset by higher demand in Japan and the U.S.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
292 275 6% 7%
Lynparza* Growth driven primarily by higher demand in certain international markets, particularly in Latin America.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
255 232 10% 10%
Lenvima* Growth primarily from higher demand in the U.S.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
219 106 106% 106%
VAXNEUVANCE Growth largely driven by continued uptake for pediatric indication in the U.S. and launches in Europe. Sales growth in the U.S. also benefited from public-sector buying patterns.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
216 297 -27% -27%
ROTATEQ Decline primarily due to timing of shipments in China and public-sector buying patterns in the U.S.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1,511 1,491 1% 4%
Animal Health Growth primarily driven by higher pricing in both Livestock and Companion Animal product portfolios, partially offset by lower volumes. Approximately 2% of the negative impact of foreign exchange was due to devaluation of Argentine peso, which was largely offset by inflation-related price increases.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
850 849 0% 4%
Livestock Sales were flat reflecting higher pricing across product portfolio, as well as higher demand for swine and poultry products, partially offset by lower demand for ruminant products.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
661 642 3% 4%
Companion Animal Growth due to higher pricing across product portfolio. Sales of BRAVECTO were $332 million and $314 million in current and prior-year quarters, respectively, which represented growth of 6%, or 7% excluding impact of foreign exchange.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
258 275 -6% 11%
Other Revenues** Decline due to impact of revenue hedging activities.
--------------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
*Alliance revenue for this product represents Merck's share of profits, which are product sales net of cost of sales and commercialization costs.
First-Quarter Expense, EPS and Related Information
The table below presents selected expense information.
GAAP Acquisition- Restructuring (Income) Non-
$ in millions and Costs Loss From GAAP(2)
Divestiture- Investments Certain Other Items
Related Costs(3) in Equity
Securities
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
First Quarter 2024
------------------------------------ -------------------- -------------------- -------------------- -------------------- --------------------
$3,540 $463 $116 $- $- $2,961
Cost of sales
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
2,483 21 5 - - 2,457
Selling, general and administrative
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
3,992 16 2 - - 3,974
Research and development
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
123 - 123 - - -
Restructuring costs
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
(33) (4) - (116) - 87
Other (income) expense, net
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
First Quarter 2023
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
$3,926 $545 $29 $- $- $3,352
Cost of sales
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
2,479 20 1 - - 2,458
Selling, general and administrative
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
4,276 10 - - - 4,266
Research and development
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
67 - 67 - - -
Restructuring costs
------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
GAAP Expense, EPS and Related Information
Gross margin was 77.6% for the first quarter of 2024 compared with 72.9% for the first quarter of 2023. The increase was primarily due to the favorable impacts of product mix (including lower royalty rates related to KEYTRUDA and GARDASIL/GARDASIL 9), foreign exchange and lower amortization of intangible assets, partially offset by higher restructuring costs and inventory write-offs.
Selling, general and administrative (SG&A) expenses were $2.5 billion in both the first quarters of 2024 and 2023, primarily due to higher administrative costs, offset by lower promotional costs, reflecting the prioritization of spending on key growth products, and the favorable impact of foreign exchange.
Research and development (R&D) expenses were $4.0 billion in the first quarter of 2024 compared with $4.3 billion in the first quarter of 2023. The decrease was primarily due to lower charges for business development activity, which included a $656 million charge for the acquisition of Harpoon in the first quarter of 2024, compared with charges of $1.2 billion for the acquisition of Imago and $175 million for a license and collaboration agreement with Kelun-Biotech in the first quarter of 2023. The decline was partially offset by increased compensation and benefit costs, higher clinical development spending, as well as higher investments in discovery research and early drug development in the first quarter of 2024.
Other (income) expense, net, was $33 million of income in the first quarter of 2024 compared with $89 million of expense in the first quarter of 2023. The favorability primarily reflects a $572.5 million charge in 2023 related to settlements with certain plaintiffs in the Zetia antitrust litigation, largely offset by lower income from investments in equity securities and higher net interest expense in 2024.
The effective tax rate was 15.9% for the first quarter of 2024 (which includes a 1.6 percentage point unfavorable impact for the acquisition of Harpoon), compared with 22.6% in the first quarter of 2023 (which includes a 5.5 percentage point unfavorable impact for the acquisition of Imago).
GAAP EPS was $1.87 for the first quarter of 2024 compared with $1.11 for the first quarter of 2023.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 81.2% for the first quarter of 2024 compared with 76.9% for the first quarter of 2023. The increase was primarily due to the favorable impacts of product mix (including lower royalty rates related to KEYTRUDA and GARDASIL/GARDASIL 9) and foreign exchange, partially offset by higher inventory write-offs.
Non-GAAP SG&A expenses were $2.5 billion for both the first quarters of 2024 and 2023, primarily due to higher administrative costs, offset by lower promotional costs, reflecting the prioritization of spending on key growth products, and the favorable impact of foreign exchange.
Non-GAAP R&D expenses were $4.0 billion in the first quarter of 2024 compared with $4.3 billion in the first quarter of 2023. The decrease was primarily due to lower charges for business development activity, which included a $656 million charge for the acquisition of Harpoon in the first quarter of 2024, compared with charges of $1.2 billion for the acquisition of Imago and $175 million for a license and collaboration agreement with Kelun-Biotech in the first quarter of 2023. The decline was partially offset by increased compensation and benefit costs, higher clinical development spending, as well as higher investments in discovery research and early drug development in the first quarter of 2024.
Non-GAAP other (income) expense, net, was $87 million of expense in the first quarter of 2024 compared with $70 million of income in the first quarter of 2023, primarily due to higher net interest expense.
The non-GAAP effective tax rate was 16.1% for the first quarter of 2024 (which includes a 1.5 percentage point unfavorable impact for the acquisition of Harpoon), compared with 20.4% in the first quarter of 2023 (which includes a 4.3 percentage point unfavorable impact for the acquisition of Imago).
Non-GAAP EPS was $2.07 for the first quarter of 2024 compared with $1.40 for the first quarter of 2023.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.
First Quarter First Quarter
---------------------------------------------------------- ----------------------------------------
2024 2023
$ in millions, except EPS amounts
---------------------------------------------------------- -------------------- --------------------
EPS
---------------------------------------------------------- -------------------- --------------------
$1.87 $1.11
GAAP EPS
---------------------------------------------------------- -------------------- --------------------
0.20 0.29
Difference
---------------------------------------------------------- -------------------- --------------------
$2.07 $1.40
Non-GAAP EPS that excludes items listed below(2)
---------------------------------------------------------- -------------------- --------------------
---------------------------------------------------------- -------------------- --------------------
Net Income
---------------------------------------------------------- -------------------- --------------------
$4,762 $2,821
GAAP net income(1)
---------------------------------------------------------- -------------------- --------------------
517 743
Difference
---------------------------------------------------------- -------------------- --------------------
$5,279 $3,564
Non-GAAP net income that excludes items listed below(1,2)
---------------------------------------------------------- -------------------- --------------------
---------------------------------------------------------- -------------------- --------------------
Excluded Items:
---------------------------------------------------------- -------------------- --------------------
$496 $590
Acquisition- and divestiture-related costs(3)
---------------------------------------------------------- -------------------- --------------------
246 97
Restructuring costs
---------------------------------------------------------- -------------------- --------------------
(116) (429)
Income from investments in equity securities
---------------------------------------------------------- -------------------- --------------------
- 573
Charge for Zetia antitrust litigation settlements
---------------------------------------------------------- -------------------- --------------------
626 831
Net decrease in income before taxes
---------------------------------------------------------- -------------------- --------------------
(109) (88)
Estimated income tax (benefit) expense
---------------------------------------------------------- -------------------- --------------------
Pipeline and Portfolio Highlights
Merck continued to achieve key regulatory and clinical milestones across therapeutic areas in the first quarter.
In cardiometabolic disease, Merck received approval from the U.S. Food and Drug Administration (FDA) for WINREVAIR (sotatercept-csrk) for the treatment of adults with pulmonary arterial hypertension (PAH, World Health Organization [WHO] Group 1) to increase exercise capacity, improve WHO functional class, and reduce the risk of clinical worsening events. WINREVAIR is a breakthrough biologic and the first FDA-approved activin signaling inhibitor therapy for PAH, a rare, progressive disease. WINREVAIR is currently under review in the European Union and is being evaluated in ongoing Phase 3 trials in additional PAH patient populations.
In oncology, KEYTRUDA continued to demonstrate its role as a foundational therapy for certain types of cancers, receiving the first approval in Europe for an anti-PD-1/L1 therapy as part of a treatment regimen for adult patients with resectable NSCLC at high risk of recurrence. In addition, the FDA granted Priority Review to a new supplemental Biologics License Application (sBLA) that would establish KEYTRUDA as the first immunotherapy indicated for the frontline treatment of advanced endometrial cancer regardless of DNA mismatch repair status. Merck also made meaningful progress in its clinical development programs, including initiating a Phase 3 trial for MK-1084, its investigational oral selective KRAS G12C inhibitor, in combination with KEYTRUDA for the first-line treatment of certain patients with metastatic NSCLC. And, in collaboration with Daiichi Sankyo, the company initiated the REJOICE-OVARIAN01 Phase 2/3 trial evaluating the efficacy and safety of investigational raludotatug deruxtecan (R-DXd) in patients with platinum-resistant ovarian cancer.
In vaccines, Merck shared positive data from multiple Phase 3 studies evaluating V116, the company's investigational, 21-valent pneumococcal conjugate vaccine designed for adults. If approved, V116 would be the first pneumococcal conjugate vaccine designed to address the serotypes responsible for approximately 83% of invasive pneumococcal disease in adults 65 and older. Merck also announced plans to initiate clinical development of a new investigational, multi-valent HPV vaccine designed to provide broader protection against certain cancers and diseases caused by additional HPV types, as well as plans to conduct clinical trials in both females and males (16-26 years old) to evaluate the efficacy and safety of a single-dose regimen of GARDASIL 9.
In infectious diseases, Merck presented new data from its HIV development programs at the 31st Conference on Retroviruses and Opportunistic Infections in March, demonstrating significant momentum within the HIV pipeline. These data included the Phase 2 study evaluating a once-weekly oral combination regimen of islatravir, the company's investigational nucleoside reverse transcriptase translocation inhibitor (NRTTI), and Gilead Sciences, Inc.'s lenacapavir, a first-in-class capsid inhibitor, for the treatment of adults living with HIV. And, for the first time, Merck presented data for MK-8527, the company's novel NRTTI that is being developed as an oral once-monthly agent for HIV-1 pre-exposure prophylaxis (PrEP), which recently entered Phase 2 development.
Merck has the following three Prescription Drug User Fee Act (PDUFA), or target action, dates set by the FDA in the second quarter of 2024: V116 (June 17), KEYTRUDA plus chemotherapy as treatment for primary advanced or recurrent endometrial carcinoma (June 21) and, in collaboration with Daiichi Sankyo, patritumab deruxtecan (HER3-DXd) for the treatment of certain patients with previously treated locally advanced or metastatic EGFR-mutated NSCLC (June 26).
Merck continued to expand and complement its pipeline and product portfolio through business development. Merck completed the acquisition of Harpoon, expanding its oncology pipeline with novel T-cell engagers, including MK-6070, an investigational delta-like ligand 3 targeting T-cell engager. The company also entered into a definitive agreement to acquire the aqua business of Elanco Animal Health Incorporated (Elanco), which will broaden its aqua portfolio with new products.
Notable recent news releases on Merck's pipeline and portfolio are provided in the table that follows.
Cardiometabolic (Read Announcement)
FDA Approved Merck's WINREVAIR, a First-in-Class Treatment for Adults With PAH, Based on Results From Phase 3 STELLAR Trial
------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ -------------------
Oncology (Read Announcement)
European Commission Approved Merck's KEYTRUDA Plus Chemotherapy as Neoadjuvant Treatment, Then Continued as Monotherapy as Adjuvant Treatment, for Resectable NSCLC at High Risk of Recurrence in Adults, Based on Results From Phase 3 KEYNOTE-671 Trial
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ -------------------
(Read Announcement)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(Read Announcement)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(Read Announcement)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(Read Announcement)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Vaccines (Read Announcement)
Merck Announced Positive Data on V116, an Investigational, 21-Valent Pneumococcal Conjugate Vaccine Specifically Designed for Adults, Demonstrated Immune Responses in Adults, Based on Results From Multiple Phase 3 Trials
------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ -------------------
(Read Announcement)
Merck Announced Plans to Conduct Clinical Trials of a Novel Investigational Multi-Valent HPV and Single-Dose Regimen for GARDASIL 9
------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Upcoming Investor Event
Merck will host an Oncology Investor Event to coincide with the American Society for Clinical Oncology Annual Meeting on Monday, June 3, 2024, 6 p.m. CT, at which senior management will provide an update on the company's oncology strategy and program. The event will take place in Chicago, Ill., and will be accessible via live audio webcast at this weblink.
Full-Year 2024 Financial Outlook
The following table summarizes the company's full-year financial outlook.
Full Year 2024
------------------------------------------------------------------------------------------------------------------------
Updated Prior
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
$63.1 to $64.3 billion $62.7 to $64.2 billion
Sales*
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
Approximately 81% Approximately 80.5%
Non-GAAP Gross margin(2)
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
$25.2 to $26.1 billion $25.1 to $26.1 billion
Non-GAAPOperating expenses(2**)
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
Approximately $250 million expense Approximately $200 million expense
Non-GAAPOther (income) expense, net(2)
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
14.5% to 15.5% 14.5% to 15.5%
Non-GAAPEffective tax rate(2)
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
$8.53 to $8.65 $8.44 to $8.59
Non-GAAPEPS(2***)
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
Approximately 2.55 billion Approximately 2.54 billion
Share count (assuming dilution)
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
*The company does not have any non-GAAP adjustments to sales.
**Includes a one-time R&D charge of $656 million related to the Harpoon acquisition. Outlook does not assume any additional significant potential business development transactions.
Merck has not provided a reconciliation of forward-looking non-GAAP gross margin, non-GAAP operating expenses, non-GAAP other (income) expense, net, non-GAAP effective tax rate and non-GAAP EPS to the most directly comparable GAAP measures, given it cannot predict with reasonable certainty the amounts necessary for such a reconciliation, including intangible asset impairment charges, legal settlements, and gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds, without unreasonable effort. These items are inherently difficult to forecast and could have a significant impact on the company's future GAAP results.
Merck continues to experience strong global demand for key growth products in oncology and vaccines. Consequently, Merck is raising and narrowing its full-year outlook ranges for sales and non-GAAP EPS.
Merck now expects its full-year 2024 sales to be between $63.1 billion and $64.3 billion, including a negative impact of foreign exchange of approximately 3% at mid-April 2024 exchange rates. Approximately 2% of the negative impact of foreign exchange is due to the devaluation of the Argentine peso, which the company expects will largely be offset by inflation-related price increases, consistent with practice in that market.
Merck continues to expect its full-year non-GAAP effective income tax rate to be between 14.5% and 15.5%.
Merck now expects its full-year non-GAAP EPS to be between $8.53 and $8.65, including a charge of $0.26 per share for the acquisition of Harpoon that closed in the first quarter of 2024 and a negative impact of foreign exchange of approximately $0.30 per share. The negative impact of foreign exchange is primarily due to the devaluation of the Argentine peso, which the company expects will largely be offset by inflation-related price increases, consistent with practice in that market.
Consistent with past practice, the financial outlook does not assume additional significant potential business development transactions.
Full-year 2023 non-GAAP EPS of $1.51 was negatively impacted by charges of $6.21 per share related to certain acquisitions and collaboration agreements.
Non-GAAP EPS excludes acquisition- and divestiture-related costs, costs related to restructuring programs, income and losses from investments in equity securities, and a previously disclosed charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.
Earnings Conference Call
Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Thursday, April 25, at 9 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) 847-9708 (U.S. and Canada Toll-Free) or (630) 395-0358 and using the access code 4164932.
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 X (formerly 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 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, 2023 and the company's other filings with the Securities and Exchange Commission (SEC) available at the SEC's Internet site (www.sec.gov).
Appendix
Generic product names are provided below.
Pharmaceutical BRIDION (sugammadex) GARDASIL (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant) GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) JANUMET (sitagliptin and metformin HCl) JANUVIA (sitagliptin) KEYTRUDA (pembrolizumab) LAGEVRIO (molnupiravir) Lenvima (lenvatinib) Lynparza (olaparib) M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live) PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live) ROTATEQ (Rotavirus Vaccine, Live, Oral, Pentavalent) VARIVAX (Varicella Virus Vaccine Live) VAXNEUVANCE (Pneumococcal 15-valent Conjugate Vaccine) WINREVAIR (sotatercept-csrk)
Animal Health BRAVECTO (fluralaner)
________________________________ (1) Net income attributable to Merck & Co., Inc. (2) Merck is providing certain 2024 and 2023 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, annual employee compensation, including senior management's compensation, is derived in part using a non-GAAP pretax 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.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1
---------------------------------------------------------------- --------------------- ------------------------------------------------------------------------------------------------------------------------ ---------------------
GAAP GAAP GAAP % Change
---------------------------------------------------------------- ---------------------
----------------------------------------------------------------------------------------------
1Q24 1Q23
---------------------------------------------------------------- --------------------- --------------------- ------ -------------------- --------------------- ------ --------------------
-------------------
---------------------------------------------------------------- --------------------- ------------------------------------------------------------------------------------------------------------------------ ---------------------
Sales $ $ 15,775 $ 14,487 9 %
Costs, Expenses and Other
Cost of sales 3,540 3,926 -10 %
Selling, general and administrative 2,483 2,479 0 %
Research and development 3,992 4,276 -7 %
Restructuring costs 123 67 84 %
Other (income) expense, net (33 ) 89 *
Income Before Taxes 5,670 3,650 55 %
Income Tax Provision 903 825
Net Income 4,767 2,825 69 %
Less: Net Income Attributable to Noncontrolling Interests 5 4
Net Income Attributable to Merck & Co., Inc. $ $ 4,762 $ 2,821 69 %
Earnings per Common Share Assuming Dilution $ $ 1.87 $ 1.11 68 %
--------------------- --------------------- ------ -------------------- --------------------- ------ -------------------- ---------- ---------
---------------------------------------------------------------- --------------------- ----------------------------------------------------------------------------------------------------
Average Shares Outstanding Assuming Dilution 2,544 2,551
Tax Rate 15.9 % 22.6 %
--------------------- --------------------- ------ -------------------- --------------------- ------ --------------------
MERCK & CO., INC.
FIRST QUARTER 2024 GAAP TO NON-GAAP RECONCILIATION
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a
-------------------------------------------- --------------------- ----------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------
GAAP GAAP GAAP Acquisition and Divestiture-Related Costs (1) Acquisition and Divestiture-Related Costs (1) Restructuring Costs (2) Restructuring Costs (2) (Income) Loss from Investments in Equity Securities (Income) Loss from Investments in Equity Securities Adjustment Subtotal Adjustment Subtotal Non-GAAP Non-GAAP
-------------------------------------------- --------------------- --------------------------------------------- --------------------------------- ---------------------------------------------------- --------------------- ---------------------
----------------------------------------------- ------------------------------- -------------------------------------------------- ------------------------------ -------------------------------------------------------
First Quarter
Cost of sales $ $ 3,540 463 463 116 116 579 579 579 579 $ $ 2,961
Selling, general and administrative 2,483 21 21 5 5 26 26 26 26 2,457
Research and development 3,992 16 16 2 2 18 18