OREANDA-NEWS. Merck (NYSE:MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2015.

“The past year was one of considerable progress and execution for Merck,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “I’m excited by the near-term opportunities, as we continue launching important new products like ZEPATIER and KEYTRUDA while augmenting and advancing our pipeline.”

           
Financial Summary   Fourth Quarter   Year Ended  
            Dec. 31,   Dec. 31,  
$ in millions, except EPS amounts   2015   2014   2015   2014  
Sales   $10,215   $10,482   $39,498   $42,237  
GAAP EPS   0.35   2.54   1.56   4.07  

Non-GAAP EPS that excludes items listed below1

   0.93   0.87   3.59   3.49  

GAAP net income2

   976   7,316   4,442   11,920  
Non-GAAP net income that excludes items listed below1,2   2,608   2,504   10,195   10,215  
                   

Non-GAAP (generally accepted accounting principles) earnings per share (EPS) of $0.93 for the fourth quarter and $3.59 for the full year of 2015 exclude acquisition- and divestiture-related costs, restructuring costs and certain other items, as well as a net charge to settle Vioxx shareholder class action litigation.

A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow.

           
    Fourth Quarter   Year Ended  
            Dec. 31,   Dec. 31,  
$ in millions, except EPS amounts   2015   2014   2015   2014  
EPS                  
GAAP EPS   $0.35   $2.54   $1.56   $4.07  

Difference3

   0.58   (1.67)   2.03   (0.58)  
Non-GAAP EPS that excludes items listed below1   $ 0.93   $0.87   $3.59   $3.49  
                   
Net Income                  
GAAP net income2   $976   $7,316   $4,442   $11,920  
Difference   1,632   (4,812)   5,753   (1,705)  
Non-GAAP net income that excludes items listed below1,2   $2,608   $2,504   $10,195   $10,215  
                   
Decrease (Increase) in Net Income Due to Excluded Items:                  

Acquisition- and divestiture-related costs4

   $ 1,264   $1,394   $5,398   $5,946  
Restructuring costs   340   619   1,110   1,978  
Net charge to settle Vioxx shareholder class action litigation   680   –   680   –  
Foreign exchange losses related to Venezuela   161   –   876   –  
Loss on extinguishment of debt   –   628   –   628  
Additional year of health care reform fee   –   –   –   193  
Gain on divestiture of certain ophthalmic products   (147)   (84)   (147)   (480)  
Gain on divestiture of certain migraine clinical development programs   –   –   (250)   –  
Gain on sale of Merck Consumer Care   –   (11,209)   –   (11,209)  
Gain on AstraZeneca option exercise   –   –   –   (741)  
Other   13   (14)   (34)   (9)  
Net decrease (increase) in income before taxes   2,311   (8,666)   7,633   (3,694)  

Income tax (benefit) expense5

   (679)   3,854   (1,880)   2,045  
Acquisition- and divestiture-related costs attributable to non-controlling interests   –   –   –   (56)  
Decrease (increase) in net income   $1,632   $(4,812)   $5,753   $(1,705)  

1 Merck is providing certain 2015 and 2014 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 Tables 2a and 2b, 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 for the amortization of intangible assets recognized as a result of acquisitions, intangible asset impairment charges and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also includes 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. In addition, amounts for fourth-quarter and full-year 2015 include net benefits of $40 million and $410 million, respectively, related to the settlement of certain federal income tax issues. Additionally, amount for full-year 2014 includes a net benefit of $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.

Additional Executive Commentary

“In 2016 we will build upon the strong foundation we established last year. We will continue to invest resources to launch and grow our strongest brands, support the most promising internal assets, enhance our pipeline with the best available external science and maintain a balanced and differentiated portfolio, with the goal of delivering long-term growth and shareholder value,” said Frazier.

“Global Human Health delivered a solid performance in 2015,” said Adam Schechter, president, Global Human Health, Merck. “In 2016 we will continue to prioritize resources focusing on JANUVIA, on our key launches, including KEYTRUDA and ZEPATIER, and on our hospital acute care and vaccines businesses.”

“We will pursue numerous filings and approvals in 2016,” said Dr. Roger M. Perlmutter, president, Merck Research Laboratories. “For example, we view KEYTRUDA as foundational in the next-generation treatment of malignant disease, and hence have embarked upon an exceptionally broad development program for this agent, with registration-enabling studies underway in more than a dozen tumor types. We will also pursue more than 100 studies involving combinations of KEYTRUDA with other drugs.”

“The fourth quarter was a strong finish to a solid year of execution. We expect this momentum to continue into 2016, as we further innovate in our labs, invest behind our launches and continue our focus on disciplined resource allocation and continuous productivity to deliver a leveraged P&L and shareholder returns,” said Robert Davis, chief financial officer, Merck.

Select Business Highlights

Worldwide sales were $10.2 billion for the fourth quarter of 2015, a decrease of 3 percent compared with the fourth quarter of 2014, including a 7 percent negative impact from foreign exchange and a 3 percent net positive impact primarily from the acquisition of Cubist Pharmaceuticals, Inc. (Cubist). Full-year 2015 worldwide sales were $39.5 billion, a decrease of 6 percent compared with the full year of 2014, including a 6 percent negative impact from foreign exchange and a 3 percent net negative impact resulting from the divestiture of the Consumer Care business and select products, partially offset by the Cubist acquisition.

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

   Fourth Quarter  

Change

   Change

Ex-

Exchange

   Year Ended   Change   Change

Ex-

Exchange

  
  2015   2014       Dec. 31,

2015

   Dec. 31,

2014

      
Total Sales   $10,215   $10,482   -3%   4%   $39,498   $42,237   -6%   0%  
Pharmaceutical   9,027   9,370   -4%   4%   34,782   36,042   -3%   4%  

JANUVIA /
JANUMET

   1,447   1,652   -12%   -6%   6,014   6,002   0%   7%  

ZETIA /
VYTORIN

   999   1,032   -3%   4%   3,777   4,166   -9%   -2%  

GARDASIL /
GARDASIL 9

   497   356   40%   42%   1,908   1,738   10%   11%  
PROQUAD, M-M-R II and VARIVAX   409   366   12%   14%   1,505   1,394   8%   10%  
REMICADE   396   557   -29%   -18%   1,794   2,372   -24%   -10%  
ISENTRESS   374   418   -11%   -4%   1,511   1,673   -10%   -2%  
CUBICIN   322   7*   **   **   1,127   25*   **   **  
SINGULAIR   273   319   -14%   -7%   931   1,092   -15%   -5%  
ZOSTAVAX   246   285   -14%   -11%   749   765   -2%   0%  
NASONEX   231   268   -14%   -8%   858   1,099   -22%   -16%  
KEYTRUDA   214   50   **   **   566   55   **   **  
Animal Health   830   885   -6%   8%   3,324   3,454   -4%   9%  
Consumer Care***   –   16   **   **   3   1,547   **   **  
Other Revenues   358   211   69%   19%   1,389   1,194   16%   -33%  
*Reflects licensing agreement with Cubist in Japan prior to acquisition by Merck on Jan. 21, 2015
**?100%
***divested on Oct. 1, 2014

 

About Merck

Today's Merck is a global health care 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 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 health care through far-reaching policies, programs and partnerships.