OREANDA-NEWS. Merck (NYSE:MRK), known as MSD outside the United States and Canada, today announced financial results for the second quarter of 2015.
       
    Second Quarter  
$ in millions, except EPS amounts   2015   2014  
Sales   $9,785   $10,934  
GAAP EPS   0.24   0.68  

Non-GAAP EPS that excludes items listed below1

   0.86   0.85  

GAAP Net Income2

   687   2,004  

Non-GAAP Net Income that excludes items listed below 1,2

   2,441   2,493  

Non-GAAP (generally accepted accounting principles) earnings per share (EPS) of $0.86 for the second quarter exclude acquisition- and divestiture-related costs, restructuring costs and certain other items, including foreign exchange losses related to Venezuela.

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.

       
$ in millions, except EPS amounts   Second Quarter  
    2015   2014  
EPS          
GAAP EPS   $0.24   $0.68  

Difference3

   0.62   0.17  

Non-GAAP EPS that excludes items listed below1

   $0.86   $0.85  
           
Net Income          
GAAP net income2   $687   $2,004  
Difference   1,754   489  
Non-GAAP net income that excludes items listed below1,2   $2,441   $2,493  
           
Decrease (Increase) in Net Income Due to Excluded Items:          
Acquisition- and divestiture-related costs4   $1,448   $1,756  
Restructuring costs   328   421  
Foreign exchange losses related to Venezuela   715   –-  
Gain on AstraZeneca option exercise   –-   (741)  
Net decrease (increase) in income before taxes   2,491   1,436  
Income tax (benefit) expense5   (737)   (947)  
Decrease (increase) in net income   $1,754   $489  

Commentary from Chairman and Chief Executive Officer Kenneth C. Frazier

“We’re investing resources to grow our strongest brands and to support the most promising assets in our pipeline, while at the same time lowering our cost base and delivering operating leverage.”

“We’ve made significant progress this quarter in two of our most important assets, the KEYTRUDA and hepatitis C programs, and will be fully prepared to take advantage of these potentially breakthrough opportunities.”

“We’re witnessing the introduction of breakthrough therapies for some of the most difficult-to-treat diseases. Merck’s late-stage pipeline and ongoing launches reflect scientific and therapeutic progress with the potential to provide significant value to patients and society.”

Select Business Highlights

Worldwide sales were $9.8 billion for the second quarter of 2015, a decrease of 11 percent compared with the second quarter of 2014, including a 7 percent negative impact from foreign exchange and a 7 percent net unfavorable impact resulting from the divestiture of the Consumer Care business and select products, partially offset by the acquisition of Cubist Pharmaceuticals, Inc. (Cubist).

The following table reflects sales of the company’s top pharmaceutical products, as well as total sales of Animal Health and Consumer Care products.

$ in millions   Second Quarter   Change   Change

Ex-Exchange

  
    2015   2014      
Total Sales   $9,785   $10,934   -11%   -4%  
Pharmaceutical   8,564   9,087   -6%   3%  
JANUVIA / JANUMET   1,598   1,577   1%   9%  
ZETIA / VYTORIN   955   1,134   -16%   -8%  
REMICADE   455   607   -25%   -7%  
GARDASIL / GARDASIL 9   427   409   4%   6%  
ISENTRESS   375   453   -17%   -10%  
PROQUAD, M-M-R II and VARIVAX   358   326   10%   12%  
CUBICIN   293   6*   **   **  
Animal Health   840   872   -4%   10%  
Consumer Care***   –-   583   **   **  
Other Revenues   381   392   -3%   -51%  
*Reflects licensing agreement with Cubist in Japan prior to acquisition by Merck on Jan. 21, 2015  
**?100%  
***divested on Oct. 1, 2014  

Commercial and Pipeline Highlights

During the second quarter of 2015, Merck continued to advance its pipeline while also focusing on the ongoing launches of KEYTRUDA (pembrolizumab), its anti-PD-1 therapy, for the treatment of advanced melanoma in patients whose disease has progressed after other therapies; BELSOMRA (suvorexant) for the treatment of insomnia; and ZERBAXA (ceftolozane and tazobactam), a combination product for the treatment of certain serious bacterial infections in adults.

  • The company accelerated its KEYTRUDA clinical development program.
    • The European Commission approved KEYTRUDA last week at a dose of 2 mg/kg every three weeks for the treatment of advanced (unresectable or metastatic) melanoma in adults, allowing marketing of KEYTRUDA in all 28 European Union member states.
    • The U.S. Food and Drug Administration (FDA) accepted for review the supplemental Biologics License Application (sBLA) for KEYTRUDA for the treatment of patients with advanced non-small cell lung cancer whose disease has progressed on or after platinum-containing chemotherapy and an FDA-approved therapy for EGFR or ALK genomic tumor aberrations, if present. The FDA granted Priority Review with a PDUFA action date of Oct. 2, 2015; the sBLA will be reviewed under the FDA’s Accelerated Approval program.
    • At the 51st Annual Meeting of the American Society of Clinical Oncology in June, data sets were presented investigating the use of KEYTRUDA in advanced head and neck cancer (KEYNOTE-012) and in multiple difficult-to-treat cancers, including advanced small cell lung cancer, esophageal cancer and ovarian cancer (KEYNOTE-028). Additionally, data were presented and simultaneously published in The New England Journal of Medicine suggesting that the presence of DNA repair mutations in colorectal cancer cells is associated with favorable responses to KEYTRUDA.
  • The clinical development program for the treatment of chronic hepatitis C virus (HCV) infection made substantial progress in the second quarter of 2015.
    • As announced earlier today, the FDA has accepted for review the New Drug Application (NDA) for grazoprevir/elbasvir, an investigational once-daily, single tablet combination therapy for the treatment of adult patients infected with chronic HCV genotypes (GT) 1, 4 or 6. The FDA granted Priority Review with a PDUFA action date of Jan. 28, 2016.
    • Last week the European Medicines Agency (EMA) accepted for review the company’s marketing authorization application (MAA) for grazoprevir/elbasvir for the treatment of adult patients infected with chronic HCV GT 1, 3, 4 or 6. The EMA said it will initiate a review of the MAA under accelerated assessment timelines.
  • Results from the Trial Evaluating Cardiovascular Outcomes with Sitagliptin (TECOS) of JANUVIA (sitagliptin), a medicine that helps lower blood sugar levels in adults with type 2 diabetes, were presented in June at the 75th Scientific Sessions of the American Diabetes Association and simultaneously published online in The New England Journal of Medicine. The study found that, added to usual care, treatment with JANUVIA did not increase the risk of major adverse cardiovascular events in the primary composite endpoint, or hospitalization for heart failure, compared to placebo.
  • The FDA has accepted the resubmission of the NDA for sugammadex injection, an investigational medicine for the reversal of neuromuscular blockade induced by rocuronium or vecuronium, with a PDUFA action date of Dec. 19, 2015. Sugammadex injection is marketed as BRIDION in more than 60 countries.
  • The FDA has extended its planned review timeline of the Biologics License Application for V419, the investigational pediatric hexavalent combination vaccine, DTaP5-IPV-Hib-HepB, which is being developed and, if approved, will be commercialized through a partnership of Merck and Sanofi Pasteur. The FDA has not requested additional clinical studies for licensure.

Pharmaceutical Revenue Performance

Second-quarter pharmaceutical sales declined 6 percent to $8.6 billion, including a 9 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was driven by sales in the core therapeutic areas of hospital acute care, oncology and diabetes. The increase in hospital acute care was driven by the addition of the Cubist portfolio and sales growth of inline brands. Growth in oncology reflects sales of $110 million for KEYTRUDA. Growth in diabetes primarily reflects higher sales in the United States, Europe and emerging markets.

Second-quarter pharmaceutical sales reflect declines in the cardiovascular portfolio of ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), medicines for lowering LDL cholesterol, primarily due to loss of exclusivity of ZETIA in Canada (where it is marketed as EZETROL) and volume declines of both products in the United States, as well as lower sales of REMICADE (infliximab), a treatment for inflammatory diseases, due to loss of exclusivity in Europe. Pharmaceutical sales also reflect declines in the HCV portfolio of VICTRELIS (boceprevir) and PEGINTRON (peginterferon alfa-2b), as well as for ISENTRESS (raltegravir), an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection. The decline for ISENTRESS was due to timing of tender purchases in the emerging markets and volume declines in the United States.

Animal Health Revenue Performance

Animal Health sales totaled $840 million for the second quarter of 2015, a decrease of 4 percent compared with the second quarter of 2014, including a 14 percent negative impact from foreign exchange. Excluding the impact of exchange, growth was primarily driven by an increase in sales of companion animal and swine products, including continued strong growth from BRAVECTO (fluralaner), a chewable tablet that kills fleas and ticks in dogs for up to 12 weeks.

Other Revenue Performance

Other revenues – primarily comprising alliance revenue, miscellaneous corporate revenues and third-party manufacturing sales – decreased 3 percent to $381 million compared to the second quarter of 2014. The decrease was driven primarily by the loss of revenue from AstraZeneca recorded by Merck, which was $316 million in the second quarter of 2014, partially offset by higher third-party manufacturing sales.