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April 28, 2015 6:00 am ET

• First-Quarter 2015 Non-GAAP EPS of $0.85, Excluding Certain Items; GAAP EPS of $0.33
• Company Narrows and Raises 2015 Full-Year Non-GAAP EPS Target to $3.35 to $3.48, Excluding Certain Items; Lowers 2015 Full-Year GAAP EPS Target to $1.58 to $1.85
• First-Quarter 2015 Worldwide Sales Were $9.4 Billion, a Decrease of 8 Percent, Reflecting Net Unfavorable Impact of Acquisitions and Divestitures and a 5 Percent Negative Impact from Foreign Exchange
• First-Quarter Results Reflect Sales Growth in Diabetes, Vaccines, Hospital Acute Care, Oncology and Animal Health and Sales Decline in Hepatitis C
• Company Submitted sBLA for KEYTRUDA for Advanced Non-Small Cell Lung Cancer and Expects to Submit sBLA for First-Line Indication in Advanced Melanoma in Mid-2015
• Multiple Data Sets Evaluating Chronic Hepatitis C Combination Regimen Grazoprevir/Elbasvir Were Presented at EASL; Company Reiterated Plans for NDA Submission in the First Half of 2015

Merck (NYSE:MRK), known as MSD outside the United States and Canada,
today announced financial results for the first quarter of 2015.

Non-GAAP (generally accepted accounting principles) earnings per share
(EPS) of $0.85 for the first quarter exclude acquisition- and
divestiture-related costs and restructuring costs.

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

Commentary from Chairman and Chief Executive Officer Kenneth C.
Frazier

“Our strong performance this quarter demonstrates that our scientific
and business strategies, together with our focused investments, are
paying off.”

“We remain focused on bringing forward the best scientific and medical
innovations.”

“By capitalizing on the exciting scientific and clinical opportunities
that lie ahead, Merck is poised to play a major role in transforming
health care for patients, as well as payers and shareholders.”

Select Business Highlights

Worldwide sales were $9.4 billion for the first quarter of 2015, a
decrease of 8 percent compared with the first quarter of 2014, including
a 5 percent negative impact from foreign exchange and a 9 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.

Commercial and Pipeline Highlights

The company focused on important launches in the first quarter of 2015,
including KEYTRUDA (pembrolizumab) 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/tazobactam), a combination product for the treatment of
certain serious bacterial infections in adults. ZERBAXA was acquired
through the acquisition of Cubist, which was completed in late January.

• Merck continued to accelerate its KEYTRUDA clinical development
  program.
  • The company has submitted a supplemental
    Biologics License Application (sBLA) to the U.S. Food and Drug
    Administration (FDA) for KEYTRUDA for the treatment of patients
    with advanced non-small cell lung cancer (NSCLC) whose disease has
    progressed on or after platinum-containing chemotherapy and an
    FDA-approved therapy for EGFR or ALK genomic tumor aberrations, if
    present. Under PDUFA, the FDA has 60 days from submission of the
    sBLA to determine if the application will be accepted for review. Data
    used to form the basis for the sBLA submission, presented last
    week at the American Association for Cancer Research (AACR) Annual
    Meeting and simultaneously published in the New England Journal
    of Medicine, demonstrated robust response rates and durable
    clinical benefit in naïve and previously treated patients with
    NSCLC.
  • Additionally, the company expects to file a sBLA in mid-2015 for
    KEYTRUDA for the first-line treatment of advanced melanoma based
    on data from the Phase 3 KEYNOTE-006
    study, presented last week at AACR and simultaneously
    published in the New England Journal of Medicine. These
    data demonstrated KEYTRUDA was statistically superior to
    ipilimumab, the current standard of care, for overall survival,
    progression-free survival and overall response rate in patients
    with advanced melanoma. In March, the company announced
    the study would be stopped early based on the recommendation of
    the study’s independent Data Monitoring Committee.
  • The company also recently submitted data from the KEYNOTE-002
    study in ipilimumab-refractory melanoma as part of a supplemental
    application to the FDA.
  • Early findings with KEYTRUDA in patients with malignant
    pleural mesothelioma presented last week at AACR demonstrated
    encouraging overall response and disease control rates in the
    difficult-to-treat cancer of the lining of the lungs, abdomen and
    other organs.
  • Merck announced collaborations with Eli
    Lilly and Company, Eisai
    Co., Ltd., Syndax
    Pharmaceuticals, Inc. and TetraLogic
    Pharmaceuticals Corporation to evaluate KEYTRUDA in
    combination settings. Merck is advancing a broad and fast-growing
    clinical development program for KEYTRUDA with more than 85
    clinical trials – across more than 30 tumor types and more than
    14,000 patients – both as a monotherapy and in combination with
    other therapies.
  • In March, KEYTRUDA became the first treatment to be accepted
    under the U.K.’s new Early Access to Medicines Scheme for the
    treatment of advanced melanoma.

• The company also advanced its clinical development program for the
  treatment of chronic hepatitis C virus (HCV) infection.
  • The first data presentations of the pivotal Phase
    3 C-EDGE program evaluating grazoprevir/elbasvir, an
    investigational oral once-daily regimen for the treatment of
    chronic HCV infection, presented last week at The International
    Liver Congress 2015 – the 50^th annual congress of the
    European Association for the Study of the Liver (EASL), showed
    high rates of sustained virologic response 12 weeks after
    completion of treatment (SVR12) across a broad range of patients
    with genotypes 1, 4 and 6 infection in a number of trials.
  • Additional Phase
    2/3 data for grazoprevir/elbasvir presented last week at EASL
    showed a high rate of SVR12 in treatment-naïve and
    treatment-experienced patients with advanced chronic kidney
    disease infected with chronic HCV genotype 1.
  • The company reiterated its plans to submit a New Drug Application
    (NDA) to the FDA for grazoprevir/elbasvir in the first half of
    2015.
  • The company received
    two Breakthrough Therapy Designations from the FDA for
    grazoprevir/elbasvir for the treatment of patients with chronic
    HCV genotype 4 infection, and for the treatment of chronic HCV
    genotype 1 infection in patients with end stage renal disease on
    hemodialysis.
• At this week’s European
  Congress of Clinical Microbiology and Infectious Diseases, more
  than 30 abstracts are being presented on the company’s portfolio of
  marketed and investigational anti-infective medicines.
• The company announced 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, achieved its primary endpoint of
  non-inferiority for the composite cardiovascular endpoint. Among
  secondary endpoints, there was no increase in hospitalization for
  heart failure in the sitagliptin group versus placebo.
• The company received a Complete Response Letter (CRL) from the FDA for
  sugammadex injection, an investigational medicine for the reversal of
  neuromuscular blockade induced by rocuronium or vecuronium. Merck is
  evaluating the information provided in the CRL. Sugammadex injection
  is marketed as BRIDION in more than 60 countries.
• The company submitted data from the IMPROVE-IT study to the FDA to
  support a new indication for reduction of cardiovascular events for
  ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), medicines for
  lowering LDL cholesterol.

Pharmaceutical Revenue Performance

First-quarter pharmaceutical sales declined 2 percent to $8.3 billion,
including a 7 percent negative impact from foreign exchange. Excluding
the impact of exchange, growth was driven by the four core therapeutic
areas – diabetes, vaccines, hospital acute care and oncology. The
increase in hospital acute care was driven by strong sales growth of
inline brands, as well as the addition of $208 million of Cubist product
sales following Merck’s acquisition of Cubist in late January, including
$182 million in sales of CUBICIN (daptomycin for injection), an I.V.
antibiotic. Sales of CUBICIN in 2015 prior to Merck’s acquisition of
Cubist were $74 million. Oncology growth was due to $83 million in sales
from the continued launch of KEYTRUDA. Pharmaceutical sales also reflect
the continued decline in the HCV portfolio of VICTRELIS (boceprevir) and
PEGINTRON (peginterferon alfa-2b).

Animal Health Revenue Performance

Animal Health sales totaled $829 million for the first quarter of 2015,
an increase of 2 percent compared with the first quarter of 2014,
including an 11 percent negative impact from foreign exchange. Growth
was primarily driven by an increase in sales of companion animal
products mainly from the continued launch of 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 28
percent to $328 million compared to the first quarter of 2014. The
decrease was driven primarily by $232 million in proceeds from the sale
of marketing rights for SAPHRIS (asenapine) in the United States
recognized in the first quarter of 2014, as well as the loss of revenue
from AstraZeneca recorded by Merck, which was $147 million in the first
quarter of 2014.

First-Quarter 2015 Expense and Other Information

The costs detailed below totaled $8.0 billion on a GAAP basis during the
first quarter of 2015 and include $1.8 billion of acquisition- and
divestiture-related costs and restructuring costs.

The gross margin was 62.1 percent for the first quarter of 2015 compared
to 62.0 percent for the first quarter of 2014, reflecting 14.4 and 12.1
unfavorable percentage point impacts, respectively, from the
acquisition- and divestiture-related costs and restructuring costs noted
above. The increase in non-GAAP gross margin was driven by product mix,
including the impact of acquisitions and divestitures, and foreign
exchange.

Marketing and administrative expenses, on a non-GAAP basis, were $2.3
billion in the first quarter of 2015, a decrease from $2.7 billion in
the same period of 2014, which was primarily driven by the sale of the
Consumer Care business and declines in direct selling costs.

R&D expenses, on a non-GAAP basis, were $1.7 billion in the first
quarter of 2015, a 10 percent increase compared to the first quarter of
2014, largely driven by an increase in licensing expenses.

Other (income) expense, net, was $55 million of expense in the first
quarter of 2015 compared to $163 million of income in the first quarter
of 2014. The first quarter of 2014 included a $182 million gain on the
divestiture of the company’s Sirna Therapeutics, Inc. subsidiary.

The GAAP effective tax rate of 30.6 percent for the first quarter of
2015 reflects the impacts of acquisition- and divestiture-related costs
and restructuring costs. The non-GAAP effective tax rate, which excludes
these items, was 22.4 percent for the first quarter of 2015.

Financial Outlook

Merck has narrowed and raised its full-year 2015 non-GAAP EPS range to
be between $3.35 and $3.48, including a $0.27 negative impact from
foreign exchange. The range excludes acquisition- and
divestiture-related costs and costs related to restructuring programs.
The company has lowered its full-year 2015 GAAP EPS range to be between
$1.58 and $1.85. The change in the GAAP EPS range primarily reflects the
incorporation of updated estimated Cubist intangible amortization
expense.

At current exchange rates, the company continues to anticipate full-year
2015 revenues to be between $38.3 billion and $39.8 billion, including a
$2.8 billion negative impact from foreign exchange and approximately $1
billion of net lost sales from acquisitions and divestitures.

In addition, the company continues to expect full-year 2015 non-GAAP
marketing and administrative expenses to be below 2014 levels and R&D
expenses to be modestly above 2014 levels.

The company continues to anticipate its full-year 2015 non-GAAP tax rate
will be in the range of 22 to 23 percent, not including a 2015 R&D tax
credit.

A reconciliation of anticipated 2015 EPS, as reported in accordance with
GAAP to non-GAAP EPS that excludes certain items, is provided in the
table below.

Total Employees

As of March 31, 2015, Merck had approximately 70,000 employees worldwide.

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
96680253. Members of the media are invited to monitor the call by
dialing (706) 758-9928 or (800) 399-7917 and using ID code number
96680253. 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 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. 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 U.S. 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 2014 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 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 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 for the amortization of intangible assets
and purchase accounting adjustments to inventories recognized as a
result of acquisitions, intangible asset impairment charges and expense
or income related to changes in the fair value measurement of contingent
consideration. Also includes integration, transaction and certain other
costs related to business acquisitions and divestitures.

⁵ Includes the estimated tax impact on the reconciling items.
In addition, amount for the first quarter of 2014 includes a benefit of
approximately $300 million associated with a capital loss generated in
the quarter.

(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) Other (income) expense, net in the first quarter of 2014 includes a
gain of $182 million on the divestiture of the company’s Sirna
Therapeutics, Inc. subsidiary. Other (income) expense, net includes
equity income from affiliates. Prior period amounts have been
reclassified to conform to the current presentation.

(4) The effective income tax rate for the first quarter of 2014 includes
a benefit of approximately $300 million associated with a capital loss
generated in the quarter.

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 $1.2
billion of expenses for the amortization of intangible assets recognized
as a result of acquisitions, as well as $20 million of amortization of
purchase accounting adjustments to inventories as a result of the Cubist
acquisition. Amounts included in marketing and administrative expenses
reflect integration, transaction and certain other costs related to
business acquisitions, including severance costs which are not part of
the company’s formal restructuring programs, as well as transaction and
certain other costs related to divestitures. Amounts included in
research and development expenses reflect $61 million of charges to
increase the fair value of liabilities for contingent consideration, as
well as $2 million of in-process research and development (“IPR&D”)
impairment charges.

(2) Amounts primarily include employee separation costs and accelerated
depreciation associated with facilities to be closed or divested related
to activities under the company’s formal restructuring programs.

(3) Represents the estimated tax impact on the reconciling items.

(4) Other (income) expense, net includes equity income from affiliates.

* 100% or greater

Sum of quarterly amounts may not equal year-to-date amounts due to
rounding.

⁽¹⁾ Only select products are shown.

⁽²⁾ Cubicin results for the first quarter 2015 represent
sales for the two months following Merck’s acquisition of Cubist.
Cubicin sales for 2014 represent the previous licensing agreement in
Japan prior to the acquisition.

⁽³⁾ Includes Pharmaceutical products not individually shown
above. Other Vaccines sales included in Other Pharmaceutical were $78
million for the first quarter of 2015. Other Vaccines sales included in
Other Pharmaceutical were $98 million, $76 million, $116 million and $88
million for the first, second, third and fourth quarters of 2014,
respectively.

⁽⁴⁾ On October 1, 2014, the company divested the Consumer
Care business to Bayer.

⁽⁵⁾ Other revenues are comprised primarily of alliance
revenue, third-party manufacturing sales and miscellaneous corporate
revenues, including revenue hedging activities. On June 30, 2014,
AstraZeneca exercised its option to buy Merck’s interest in a subsidiary
and through it, Merck’s interest in Nexium and Prilosec. As a result,
the company no longer records supply sales for these products. Other
revenues in the first quarter 2014 include $232 million of revenue
recognized in connection with the sale of U.S. Saphris rights.

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Merck
Media:
Lainie Keller, 908-236-5036
Steven Cragle, 908-740-1801
or
Investors:
Justin Holko, 908-740-1879
Joe Romanelli, 908-740-1986