- First-Quarter 2021 Sales Were $12.1 Billion, In-Line with First-Quarter 2020; Excluding the Impact from Foreign Exchange, Sales Declined 1%
- First-Quarter 2021 Sales Reflect Strong Underlying Performance of KEYTRUDA, Lynparza, BRIDION and Animal Health, Which Was Offset by COVID-19 Pandemic Impacts to Patient Access, Particularly for Vaccines
- First-Quarter 2021 GAAP EPS Was $1.25; First-Quarter Non-GAAP EPS Was $1.40
- Entered into HIV Collaboration with Gilead Sciences, Inc. and Completed Acquisition of Pandion Therapeutics, Inc.
- Merck Will Host an Investor Event Featuring Organon on May 3; Organon Spinoff is Expected to be Completed on June 2, with First Day of Trading Scheduled for June 3
- 2021 Financial Outlook
- Continues to Expect Sales Growth of 8% to 12%; Full-Year 2021 Sales Estimated to be Between $51.8 Billion and $53.8 Billion, Including a Positive Impact from Foreign Exchange of Less Than 2%, Assuming Organon is Part of Merck for the Full Year
- Expects Full-Year 2021 GAAP EPS to be Between $5.05 and $5.25; Continues to Expect Non-GAAP EPS to be Between $6.48 and $6.68, Including a Positive Impact from Foreign Exchange of Less Than 3%, Assuming Organon is Part of Merck for the Full Year
- Assuming the Completion of the Organon Spinoff, Expects Full-Year 2021 Sales from Continuing Operations to be Between $45.8 Billion and $47.8 Billion
KENILWORTH, N.J. — (BUSINESS WIRE) — #earnings–Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the first quarter of 2021.
“While our results this quarter were impacted by the pandemic, the underlying demand for our innovative products remains strong and we remain confident in our future growth prospects,” said Kenneth C. Frazier, chairman and CEO, Merck. “We are also taking the right steps to evolve Merck’s operating model to continue to create value for patients, shareholders and society.”
“As I transition into the CEO role, one of my immediate priorities is to ensure that our experienced leadership team continues to build on our solid foundation,” said Robert M. Davis, president, Merck. “Our company is well positioned for strong long-term performance, with scientific innovation remaining the source of our company’s energy and value creation.”
Financial Summary
|
$ in millions, except EPS amounts |
First Quarter |
||||||||||||
|
2021 |
2020 |
Change |
Change Ex- Exchange |
||||||||||
|
Sales |
$12,080 |
$12,057 |
0% |
-1% |
|||||||||
|
GAAP net income1 |
3,179 |
3,219 |
-1% |
-3% |
|||||||||
|
Non-GAAP net income that excludes certain items1,2* |
3,556 |
3,851 |
-8% |
-9% |
|||||||||
|
GAAP EPS |
1.25 |
1.26 |
-1% |
-3% |
|||||||||
|
Non-GAAP EPS that excludes certain items2* |
1.40 |
1.51 |
-7% |
-9% |
|||||||||
|
*Refer to table on page 11. |
|||||||||||||
GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) was $1.25 for the first quarter of 2021. Non-GAAP EPS of $1.40 for the first quarter of 2021 excludes acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities and certain other items.
Oncology Pipeline Highlights
Merck continued to advance the development programs for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy; Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca; and Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai), in addition to other notable developments as follows:
- Merck announced the following regulatory actions for KEYTRUDA:
- Approval by the U.S. Food and Drug Administration (FDA) in combination with platinum- and fluropyrimidine-based chemotherapy for the first-line treatment of patients with locally advanced or metastatic esophageal or gastroesophageal junction (GEJ) (tumors with epicenter 1 to 5 centimeters above the GEJ) carcinoma that is not amenable to surgical resection or definitive chemoradiation, based on results from the Phase 3 KEYNOTE-590 trial.
- Approval by the European Commission (EC) for the treatment of adult and pediatric patients aged 3 years and older with relapsed or refractory classical Hodgkin lymphoma (cHL) who have failed autologous stem cell transplant (ASCT) or following at least two prior therapies when ASCT is not a treatment option, based on results from the Phase 3 KEYNOTE-204 trial.
- Approval by the EC for the first-line treatment of adult patients with metastatic microsatellite instability-high (MSI-H) or mismatch repair deficient colorectal cancer based on results from the Phase 3 KEYNOTE-177 trial.
- A Complete Response Letter was received from the FDA regarding Merck’s supplemental Biologics License Application for the treatment of patients with high-risk early-stage triple-negative breast cancer (TNBC), in combination with chemotherapy as neoadjuvant (pre-operative) treatment, then continuing as a single agent as adjuvant (post-operative) treatment after surgery.
- A voluntary withdrawal in the United States for the treatment of patients with metastatic small cell lung cancer with disease progression on or after platinum-based chemotherapy and at least one other prior line of therapy. This withdrawal does not affect other indications for KEYTRUDA.
- Merck announced that an interim analysis from the pivotal Phase 3 KEYNOTE-564 trial evaluating KEYTRUDA met its primary endpoint of disease-free survival for the potential adjuvant treatment of patients with renal cell carcinoma (RCC) following nephrectomy or following nephrectomy and resection of metastatic lesions. Data will be presented at the 2021 American Society for Clinical Oncology (ASCO) Annual Meeting.
- Merck announced that the FDA has accepted and granted priority review for a New Drug Application (NDA) for the hypoxia-inducible factor-2 alpha (HIF-2α) inhibitor, belzutifan, a novel investigational candidate in Merck’s oncology pipeline, for the potential treatment of certain patients with von Hippel-Lindau (VHL) disease-associated RCC, not requiring immediate surgery. The FDA has set a PDUFA date of Sept. 15, 2021.
- Merck and Eisai announced the first presentation of new investigational data from the pivotal Phase 3 CLEAR study (KEYNOTE-581/Study 307) at the 2021 Genitourinary Cancers Symposium (ASCO GU) and simultaneously published in the New England Journal of Medicine. The combination of KEYTRUDA plus Lenvima significantly improved the primary endpoint of progression-free survival (PFS) and key secondary endpoint of overall survival (OS) versus sunitinib in first-line treatment of patients with advanced RCC.
- Merck and Eisai announced the first presentation of investigational data from the pivotal Phase 3 KEYNOTE-775/Study 309 trial at the Society of Gynecologic Oncology (SGO) 2021 Annual Meeting. The combination of KEYTRUDA plus Lenvima significantly improved the dual primary endpoints of PFS and OS versus chemotherapy for the treatment of patients with advanced endometrial cancer following one prior platinum-based regimen in any setting.
- Merck and AstraZeneca announced that the Phase 3 OlympiA trial for Lynparza will move to early primary analysis and reporting following a recommendation from the Independent Data Monitoring Committee (IDMC). Based on the planned interim analysis, the IDMC concluded that the trial crossed the superiority boundary for its primary endpoint of invasive disease-free survival versus placebo in the adjuvant treatment of germline BRCA-mutated (gBRCAm), high-risk human epidermal growth factor receptor 2 (HER2)-negative early-stage breast cancer following definitive local treatment and neoadjuvant or adjuvant chemotherapy. The trial will continue to evaluate the key secondary endpoints of OS and distant disease-free survival. Data will be presented at the 2021 ASCO Annual Meeting.
- Merck began enrollment for the Phase 3 study evaluating vibostolimab, its investigational anti-TIGIT antibody, in combination with KEYTRUDA in non-small cell lung cancer patients whose tumors express PD-L1.
Business Development and Other Pipeline Highlights
- Merck and Gilead Sciences, Inc. (Gilead) announced that they have entered into an agreement to co-develop and co-commercialize long-acting treatments in HIV that combine Gilead’s investigational capsid inhibitor, lenacapavir, and Merck’s investigational nucleoside reverse transcriptase translocation inhibitor (NRTTI), islatravir, into a two-drug regimen in oral and injectable formulations with the potential to provide new, meaningful treatment options for people living with HIV.
- Merck acquired Pandion Therapeutics, Inc. (Pandion), a clinical-stage biotechnology company developing novel therapeutics designed to address the unmet needs of patients living with autoimmune diseases, on April 1, 2021.
- Merck announced that a Phase 2/3 trial of molnupiravir (EIDD-2801/MK-4482), an investigational oral antiviral agent being developed in collaboration with Ridgeback Biotherapeutics, for the treatment of outpatients diagnosed with COVID-19, will proceed to Phase 3. Interim results from Phase 2/3 studies evaluating molnupiravir in both outpatients and inpatients will be shared with the scientific community at an upcoming medical meeting.
- Merck announced results from a Phase 1 study evaluating the safety, tolerability and pharmacokinetics (PK) of the company’s investigational subdermal drug-eluting implant with potential for extended administration of islatravir, an investigational NRTTI, for pre-exposure prophylaxis (PrEP) of HIV-1 infection. Study results demonstrated that the implant achieved active drug concentrations above the pre-specified PK threshold at 12 weeks across the three doses of islatravir studied (48 mg, 52 mg and 56 mg), and is projected to provide drug concentrations likely above threshold for one year at the 56 mg dose. Based on these findings, Merck plans to initiate a Phase 2 trial to further explore the potential of a subdermal implant containing islatravir as a long-acting option for PrEP for up to 12 months.
- Merck announced that the FDA has accepted for review the company’s NDA for gefapixant, an investigational, orally administered, selective P2X3 receptor antagonist, for the treatment of refractory chronic cough or unexplained chronic cough in adults based on results from the COUGH-1 and COUGH-2 studies. This application for gefapixant will be discussed at an upcoming advisory committee meeting. The FDA has set a PDUFA date of Dec. 21, 2021.
- Merck announced that supply for VAXELIS (Diphtheria and Tetanus Toxoids and Acellular Pertussis, Inactivated Poliovirus, Haemophilus b Conjugate and Hepatitis B Vaccine) in the United States will be available in June 2021. Developed as part of a joint-partnership between Sanofi and Merck, VAXELIS is the first and only hexavalent combination vaccine approved in the United States to help protect infants and children 6 weeks through 4 years of age against diseases caused by six infectious agents: diphtheria, tetanus, pertussis (whooping cough), poliomyelitis, hepatitis B and invasive disease due to Haemophilus influenzae type b.
Organon Highlights
- Merck filed a Form 10 registration statement with the United States Securities and Exchange Commission (SEC) in connection with the intended spinoff of its women’s health, biosimilars and established brands businesses into a standalone, publicly-traded company, Organon & Co. (Organon).
- In April 2021, Organon Finance 1 LLC issued senior secured notes of €1.25 billion aggregate principal amount of 2.875% senior secured notes due 2028, $2.1 billion aggregate principal amount of 4.125% senior secured notes due 2028 and $2.0 billon aggregate principal amount of 5.125% senior unsecured notes due 2031, in connection with the intended spinoff of Organon from Merck.
- Merck announced a definitive agreement pursuant to which, after the intended spinoff of Organon, Organon will acquire Alydia Health. Alydia Health is a commercial-stage medical device company focused on preventing maternal morbidity and mortality caused by postpartum hemorrhage or abnormal postpartum uterine bleeding.
- Merck will host an investor event featuring Organon on May 3. The Organon spinoff is expected to be completed on June 2, with first day of trading scheduled for June 3.
Corporate Developments
- Merck announced goals to achieve carbon neutrality in its operations (Scopes 1 & 2 emissions) by 2025 through ongoing innovation to increase efficiency and reduce carbon emissions, applying sustainable building standards and continuing to transition away from fossil fuel use. Remaining Scope 1 emissions will be offset each year with a portfolio of high-quality carbon credits, including carbon removals. Merck has also set a goal of achieving a 30% reduction in its value chain emissions by 2030 (Scope 3 emissions).
First-Quarter Revenue Performance
The following table reflects sales of the company’s top pharmaceutical products, as well as sales of animal health products.
|
$ in millions |
First Quarter |
|||||
|
|
2021 |
2020 |
Change |
Change Ex-Exchange |
||
|
Total Sales |
$12,080 |
$12,057 |
0% |
-1% |
||
|
Pharmaceutical |
10,675 |
10,655 |
0% |
-3% |
||
|
KEYTRUDA |
3,899 |
3,284 |
19% |
16% |
||
|
JANUVIA / JANUMET |
1,295 |
1,277 |
1% |
-2% |
||
|
GARDASIL / GARDASIL 9 |
917 |
1,097 |
-16% |
-20% |
||
|
PROQUAD, M-M-R II and VARIVAX |
449 |
435 |
3% |
2% |
||
|
BRIDION |
340 |
299 |
14% |
11% |
||
|
Lynparza* SIMPONI |
228 214 |
145 215 |
57% 0% |
51% -8% |
||
|
ISENTRESS / ISENTRESS HD |
209 |
245 |
-15% |
-15% |
||
|
PNEUMOVAX 23 ROTATEQ |
171 158 |
256 222 |
-33% -29% |
-36% -29% |
||
|
Animal Health |
1,418 |
1,214 |
17% |
15% |
||
|
Livestock |
819 |
739 |
11% |
9% |
||
|
Companion Animals |
599 |
475 |
26% |
24% |
||
|
Other Revenues** |
(13) |
188 |
-107% |
-21% |
||
|
*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 third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. The revenue hedging activities resulted in negative revenue in the first quarter of 2021. |
||||||
Pharmaceutical Revenue
First-quarter pharmaceutical sales of $10.7 billion were in-line with the first quarter of 2020. Excluding the favorable effect of foreign exchange, sales declined by 3%. Sales performance reflects underlying strength in the business, offset by negative impacts of the COVID-19 pandemic, and the ongoing impacts of the loss of market exclusivity for several products. With respect to the COVID-19 pandemic, the estimated negative impact to Merck’s first quarter pharmaceutical revenue was approximately $600 million. Continued reduced access to health care providers, combined with the prioritization of COVID-19 vaccines has negatively impacted the sales of certain products, notably vaccines in the United States.
Pharmaceutical revenue reflects growth in oncology, largely driven by higher sales of KEYTRUDA, which rose 19% to $3.9 billion in the quarter, although the COVID-19 pandemic had a dampening effect on growing demand due to a decline in the number of new patients starting treatment. Global sales growth of KEYTRUDA reflects continued strong momentum from the non-small-cell lung cancer indications as well as continued uptake in other indications, including adjuvant melanoma, RCC, bladder, head and neck squamous cell carcinoma (HNSCC) and MSI-H cancers, as well as uptake following the recent launch of the 400mg every 6 weeks adult dosing regimen in the United States, partially offset by pricing pressure in Europe and Japan. Also contributing to growth in oncology was 57% growth in Lynparza alliance revenue, reflecting continued uptake in approved indications in the United States, Europe and China.
The decline in vaccine sales was primarily driven by GARDASIL (Human Papillomavirus Quadrivalent [Types 6,11,16 and 18] Vaccine, Recombinant)/GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), vaccines to prevent certain cancers and other diseases caused by HPV, primarily attributable to buying patterns in the United States and the timing of shipments in China, which in total negatively affected the year over year GARDASIL/GARDASIL 9 sales comparison by approximately $230 million. The COVID-19 pandemic also negatively affected sales for GARDASIL/GARDASIL 9, particularly in the United States and Europe.
Also contributing to the decline in vaccine sales were lower sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, primarily reflecting the impact of the COVID-19 pandemic on demand in the United States, partially offset by higher volumes in international markets.
Vaccines sales were also negatively affected by lower sales of ROTATEQ (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children, largely due to the timing of shipments in China and lower demand in the United States.
Pharmaceutical sales in the quarter were negatively affected by the ongoing impacts from the loss of market exclusivity, including for ZETIA (ezetimibe) and NOXAFIL (posaconazole), as well as certain products in diversified brands.
Performance in hospital acute care primarily reflects the decline in sales of ZERBAXA (ceftolozane and tazobactam) for injection, a combination cephalosporin antibacterial and beta-lactamase inhibitor for the treatment of adults with certain bacterial infections due to the temporary suspension of sales and product recall in the fourth quarter of 2020. Hospital acute care performance also reflects higher demand globally for BRIDION (sugammadex) Injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery; and the continued uptake of PREVYMIS (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant.
Animal Health Revenue
Animal Health sales totaled $1.4 billion for the first quarter of 2021, an increase of 17% compared with the first quarter of 2020; excluding the favorable effect from foreign exchange, Animal Health sales grew 15%. Sales growth reflects higher demand globally for companion animal products, including parasiticide lines of products, primarily BRAVECTO (fluralaner), as well as higher sales of companion animal vaccines. Sales growth in livestock products reflects higher demand in international markets for ruminant, poultry and swine products, as well as higher demand globally for Animal Intelligence products.
First-Quarter Expense, EPS and Related Information
The tables below present selected expense information.
|
$ in millions First-Quarter 2021 |
GAAP |
Acquisition- and Divestiture- Related Costs3 |
Restructuring Costs |
(Income) Loss from Investments in Equity Securities |
Certain Other Items |
Non- GAAP2 |
||||||||
|
Cost of sales |
$3,670 |
$517 |
$27 |
$− |
$188 |
$2,938 |
||||||||
|
Selling, general and administrative |
2,633 |
218 |
3 |
− |
− |
2,412 |
||||||||
|
Research and development |
2,465 |
18 |
7 |
− |
− |
2,440 |
||||||||
|
Restructuring costs |
298 |
− |
298 |
− |
− |
− |
||||||||
|
Other (income) expense, net |
(448) |
(28) |
− |
(561) |
− |
141 |
||||||||
|
First-Quarter 2020 |
|
|
|
|
|
|
||||||||
|
Cost of sales |
$3,312 |
$407 |
$68 |
$− |
$− |
$2,837 |
||||||||
|
Selling, general and administrative |
2,555 |
278 |
11 |
− |
− |
2,266 |
||||||||
|
Research and development |
2,209 |
40 |
17 |
− |
− |
2,152 |
||||||||
|
Restructuring costs |
72 |
− |
72 |
− |
− |
− |
||||||||
|
Other (income) expense, net |
71 |
(11) |
– |
(87) |
− |
169 |
GAAP Expense, EPS and Related Information
Gross margin was 69.6% for the first quarter of 2021 compared to 72.5% for the first quarter of 2020. The decrease reflects higher costs associated with COVID-19 development programs, including a charge related to the discontinuation of certain COVID-19 development programs, as well as higher acquisition- and divestiture-related costs, and pricing pressure, partially offset by favorable product mix.
Selling, general and administrative expenses were $2.6 billion in the first quarter of 2021, an increase of 3% compared to the first quarter of 2020. The increase primarily reflects higher promotion and administrative costs, the unfavorable effects of foreign exchange and higher costs related to the company’s planned spinoff of Organon, partially offset by lower selling costs due in part to the COVID-19 pandemic.
Research and development expenses were $2.5 billion in the first quarter of 2021, an increase of 12% compared with the first quarter of 2020. The increase was primarily driven by higher expenses related to clinical development, including investment in COVID-19 development programs, as well as increased investment in discovery research and early drug development, partially offset by lower licensing costs.
Other (income) expense, net, was $448 million of income in the first quarter of 2021 compared to $71 million of expense in the first quarter of 2020, primarily reflecting higher income from investments in equity securities in 2021 compared with 2020.
The effective income tax rate of 8.0% for the first quarter of 2021 reflects a net tax benefit of $237 million related to the settlement of certain federal income tax matters.
GAAP EPS was $1.25 for the first quarter of 2021 compared with $1.26 for the first quarter of 2020.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 75.7% for the first quarter of 2021 compared to 76.5% for the first quarter of 2020. The decrease in non-GAAP gross margin reflects higher costs associated with COVID-19 development programs, as well as pricing pressure, partially offset by favorable product mix.
Non-GAAP selling, general and administrative expenses were $2.4 billion in the first quarter of 2021, an increase of 6% compared to the first quarter of 2020. The increase primarily reflects higher promotion and administrative costs and the unfavorable effects of foreign exchange, partially offset by lower selling costs due in part to the COVID-19 pandemic.
Non-GAAP R&D expenses were $2.4 billion in the first quarter of 2021, a 13% increase compared to the first quarter of 2020. The increase primarily reflects higher expenses related to clinical development, including investment in COVID-19 development programs, as well as increased investment in discovery research and early drug development, partially offset by lower licensing costs.
Non-GAAP other (income) expense, net, was $141 million of expense in the first quarter of 2021 compared to $169 million of expense in the first quarter of 2020.
The non-GAAP effective income tax rate was 14.1% for the first quarter of 2021.
Non-GAAP EPS was $1.40 for the first quarter of 2021 compared with $1.51 for the first quarter of 2020.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.
|
$ in millions, except EPS amounts |
First Quarter |
|||||
|
2021 |
2020 |
|||||
|
EPS |
|
|
||||
|
GAAP EPS |
$1.25 |
$1.26 |
||||
|
Difference |
0.15 |
0.25 |
||||
|
Non-GAAP EPS that excludes items listed below2 |
$1.40 |
$1.51 |
||||
|
|
|
|
||||
|
Net Income |
|
|
||||
|
GAAP net income1 |
$3,179 |
$3,219 |
||||
|
Difference |
377 |
632 |
||||
|
Non-GAAP net income that excludes items listed below1,2 |
$3,556 |
$3,851 |
||||
|
|
|
|
||||
|
Decrease (Increase) in Net Income Due to Excluded Items: |
|
|
||||
|
Acquisition- and divestiture-related costs3 |
$725 |
$714 |
||||
|
Restructuring costs |
335 |
168 |
||||
|
(Income) loss from investments in equity securities |
(561) |
(87) |
||||
|
Charge for the discontinuation of COVID-19 development programs |
188 |
– |
||||
|
Net decrease (increase) in income before taxes |
687 |
795 |
||||
|
Income tax (benefit) expense4 |
(310) |
(163) |
||||
|
Decrease (increase) in net income |
$377 |
$632 |
||||
Financial Outlook
The guidance provided below is based on the assumption that the Organon business will be part of Merck for all of 2021; however, the Company expects that the Organon spinoff will occur on June 2, 2021.
Contacts
Media Contact:
Patrick Ryan
(973) 275-7075
Investor Contacts:
Peter Dannenbaum
(908) 740-1037
Raychel Kruper
(908) 740-2107