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July 27, 2018 5:45 am ET

• Second-Quarter 2018 Worldwide Sales Were $10.5 Billion, an Increase of 5 Percent, Including a 1 Percent Positive Impact from Foreign Exchange
• Second-Quarter 2018 GAAP EPS was $0.63, Second-Quarter Non-GAAP EPS was $1.06
• Company Narrows 2018 Full-Year Revenue Range to be Between $42.0 Billion and $42.8 Billion, Including a Slightly Positive Impact from Foreign Exchange
• Company Narrows and Raises 2018 Full-Year GAAP EPS Range to be Between $2.51 and $2.59; Narrows and Raises 2018 Full-Year Non-GAAP EPS Range to be Between $4.22 and $4.30; Both Include an Approximately 1 Percent Negative Impact from Foreign Exchange
• Continued Leadership in NSCLC with Positive Results from Phase 3 KEYNOTE-407 and KEYNOTE-042 Studies Presented at ASCO 2018 Evaluating KEYTRUDA as a First-Line Treatment for NSCLC; sBLA for KEYNOTE-407 Under Priority Review in the United States with an Oct. 30, 2018 PDUFA Date
• KEYTRUDA Approved in China for the Treatment of Adult Patients with Unresectable or Metastatic Melanoma Following Failure of One Prior Line of Therapy; First and Only Anti-PD-1 Therapy Approved in China for Advanced Melanoma

Merck (NYSE: MRK), known as MSD outside the United States and Canada,
today announced financial results for the second quarter of 2018.

“Strong commercial execution globally for KEYTRUDA, GARDASIL, BRIDION
and other products led the company to deliver growth in the second
quarter,” said Kenneth C. Frazier, Merck Chairman and CEO. “We continue
to solidify our leadership in immuno-oncology and, along with our other
key pillars of growth including Animal Health, we are confident in the
strength of our business.”

Financial Summary

Worldwide sales were $10.5 billion for the second quarter of 2018, an
increase of 5 percent compared with the second quarter of 2017,
including a 1 percent positive impact from foreign exchange.

GAAP (generally accepted accounting principles) earnings per share
assuming dilution (EPS) were $0.63 for the second quarter of 2018.
Non-GAAP EPS of $1.06 for the second quarter of 2018 excludes
acquisition- and divestiture-related costs, restructuring costs and
certain other items. Year-to-date results can be found in the attached
tables.

Oncology Pipeline Highlights

Merck continued to expand its oncology program by further advancing 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.

KEYTRUDA

• Merck announced
  that the U.S. Food and Drug Administration (FDA) accepted for review a
  supplemental Biologics License Application (sBLA) for KEYTRUDA as a
  first-line treatment for metastatic squamous non-small cell lung
  cancer (NSCLC), regardless of PD-L1 expression. The sBLA, which is
  seeking accelerated approval for this new indication, is based on
  overall response rate (ORR) data from the pivotal Phase 3 KEYNOTE-407
  trial, which were recently presented at the American Society of
  Clinical Oncology (ASCO) 2018 Annual Meeting. The FDA granted Priority
  Review and set a PDUFA date of Oct. 30, 2018. Additional data showing
  a significant improvement in overall survival (OS) were also
  presented, making this the fifth study in advanced NSCLC in which
  KEYTRUDA demonstrated an improved survival benefit.

• Merck announced
  results from KEYNOTE-042, a pivotal Phase 3 study evaluating KEYTRUDA
  as monotherapy for the first-line treatment of locally advanced or
  metastatic nonsquamous or squamous NSCLC with PD-L1 tumor proportion
  score of ≥1 percent without EGFR or ALK genomic tumor aberrations. In
  this study, KEYTRUDA monotherapy resulted in significantly longer OS
  than platinum-based chemotherapy. These results were presented in the
  plenary session and during the press program at ASCO 2018.
• Merck announced
  interim data from a cohort of the Phase 2 KEYNOTE-158 study evaluating
  KEYTRUDA as monotherapy in patients with previously treated advanced
  small cell lung cancer (SCLC). Findings showed an ORR, the primary
  endpoint of the study, of 18.7 percent in patients in the SCLC cohort.
  Additionally, in a pre-specified exploratory analysis, ORR was 35.7
  percent in patients whose tumors expressed PD-L1 with a combined
  positive score (CPS) of ≥1. These results, as well as other findings
  from the KEYNOTE-158 cohort in SCLC, were presented for the first time
  at ASCO 2018.
• The company announced
  that the pivotal Phase 3 KEYNOTE-048 trial investigating KEYTRUDA for
  first-line treatment of recurrent or metastatic head and neck squamous
  cell carcinoma (HNSCC), met a primary endpoint of OS as monotherapy in
  patients whose tumors expressed PD-L1 (CPS≥20). KEYTRUDA is the first
  anti-PD-1 therapy to show an OS benefit as first-line therapy for
  recurrent or metastatic HNSCC. At the time of the interim analysis,
  the dual-primary endpoint of progression-free survival (PFS) for
  patients whose tumors expressed PD-L1 (CPS≥20) had not been reached.
  These results will be presented at an upcoming medical meeting and
  submitted to regulatory authorities worldwide.
• Merck announced
  that KEYTRUDA has been approved by the China National Drug
  Administration for the treatment of adult patients with unresectable
  or metastatic melanoma following failure of one prior line of therapy.
  This is the first and only approval of an anti-PD-1 therapy for
  advanced melanoma in China.

• The FDA accepted
  and granted Priority Review for a new sBLA seeking approval for
  KEYTRUDA as a treatment for previously treated patients with advanced
  hepatocellular carcinoma, based on data from the Phase 2 KEYNOTE-224
  trial, which were presented at ASCO 2018. The FDA set a PDUFA date of
  Nov. 9, 2018.
• Merck announced
  that the FDA accepted for standard review a new sBLA for KEYTRUDA as
  adjuvant therapy in the treatment of patients with resected, high-risk
  stage III melanoma and granted a PDUFA date of Feb. 16, 2019. This
  sBLA is based on a significant benefit in recurrence-free survival
  demonstrated by KEYTRUDA in the pivotal Phase 3 EORTC1325/ KEYNOTE-054
  trial, which was conducted in collaboration with the European
  Organisation for Research and Treatment of Cancer.
• The FDA approved KEYTRUDA for two new indications under its
  accelerated approval regulations based on tumor response rate and
  durability of response:
  • For the treatment
    of adult and pediatric patients with refractory primary
    mediastinal large B-cell lymphoma, or who have relapsed after two
    or more prior lines of therapy.
  • For the treatment
    of patients with recurrent or metastatic cervical cancer with
    disease progression on or after chemotherapy whose tumors express
    PD-L1 as determined by an FDA-approved test.

Lynparza

• Merck and AstraZeneca announced
  positive results from the randomized, double-blinded,
  placebo-controlled, Phase 3 SOLO-1 trial of Lynparza tablets, showing
  women with BRCA-mutated (BRCAm) advanced ovarian cancer
  treated first-line with Lynparza maintenance therapy had a
  statistically significant and clinically meaningful improvement in PFS
  compared to placebo.

• Merck and AstraZeneca announced
  that Japan’s Pharmaceuticals and Medical Devices Agency approved
  Lynparza tablets for use in patients with unresectable or recurrent BRCAm,
  human epidermal growth factor receptor 2 (HER2)-negative breast cancer
  who have received prior chemotherapy.
• Merck and AstraZeneca announced
  that the European Medicines Agency approved Lynparza tablets for use
  as a maintenance therapy for patients with platinum-sensitive relapsed
  high-grade, epithelial ovarian, fallopian tube or primary peritoneal
  cancer who are in complete response or partial response to
  platinum-based chemotherapy, regardless of BRCA status.
• Merck and AstraZeneca presented
  data from the Phase 2 Study 08 trial, which showed clinical
  improvement in median radiologic PFS with Lynparza in combination with
  abiraterone compared to abiraterone monotherapy, a current standard of
  care, in metastatic castration-resistant prostate cancer.

Lenvima

• Merck and Eisai announced
  results from presentations of new data and analyses of Lenvima in
  combination with KEYTRUDA in four different tumor types: unresectable
  hepatocellular carcinoma, squamous cell carcinoma of the head and
  neck, advanced renal cell carcinoma and advanced endometrial
  carcinoma. The data were included in presentations at ASCO 2018.

Other Pipeline Highlights

The company also continued to advance its vaccines and HIV pipelines.

• Merck announced
  that the FDA accepted for review a new sBLA for GARDASIL 9 (Human
  Papillomavirus 9-valent Vaccine, Recombinant), the company’s
  nine-valent HPV vaccine, for an expanded age indication for use in
  women and men 27 to 45 years old for the prevention of certain cancers
  and diseases caused by the nine human papillomavirus (HPV) types
  covered by the vaccine. The FDA granted Priority Review and set a
  PDUFA date of Oct. 6, 2018.
• China’s Food and Drug Administration approved GARDASIL 9 for use in
  girls and women 16 to 26 years old.
• Merck announced
  Week 96 results from the Phase 3 DRIVE-FORWARD clinical trial
  evaluating the efficacy and safety of doravirine (DOR), the company’s
  investigational non-nucleoside reverse transcriptase inhibitor, in
  combination with other antiretroviral agents, for the treatment of
  HIV-1 infection in adult patients with no prior antiretroviral
  treatment history. At Week 96, 73.1 percent of the group treated with
  once-daily DOR plus FTC/TDF or ABC/3TC achieved viral suppression as
  measured by the proportion of patients who achieved HIV-1 RNA of less
  than 50 copies/mL, compared to 66.0 percent of the group treated with
  once-daily ritonavir-boosted darunavir (DRV+r) plus FTC/TDF or
  ABC/3TC. These study results were presented as a late-breaking
  abstract at the recent 22nd International AIDS Conference.

Second-Quarter Revenue Performance

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

Pharmaceutical Revenue

Second-quarter pharmaceutical sales increased 6 percent to $9.3 billion,
including a 3 percent positive impact from foreign exchange. The
increase was primarily driven by growth in oncology, vaccines and
hospital acute care, partially offset by lower sales in virology and the
ongoing impacts of the loss of market exclusivity for several products.

Growth in oncology was driven by a significant increase in sales of
KEYTRUDA, reflecting the company’s continued launches with new
indications globally and the strong momentum for the treatment of
patients with NSCLC, as KEYTRUDA is the only anti-PD-1 approved in the
first-line setting. Additionally, oncology sales reflect alliance
revenue of $44 million related to Lynparza and $35 million related to
Lenvima, which represents Merck’s share of profits from product sales,
net of cost of sales and commercialization costs.

Growth in vaccines was primarily driven by higher sales of GARDASIL
[Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine,
Recombinant] and GARDASIL 9, vaccines to prevent certain cancers and
other diseases caused by HPV, reflecting growth in Asia Pacific,
primarily due to the ongoing commercial launch in China, and growth in
Europe, partially offset by lower sales in the United States due to the
continued transition to the two-dose regimen. Vaccines performance was
negatively affected by a significant decrease in sales of ZOSTAVAX
(zoster vaccine live), a vaccine for the prevention of herpes zoster,
primarily due to the approval of a competitor product that received a
preferential recommendation from the U.S. Advisory Committee on
Immunization Practices in October 2017. The company anticipates that
future sales of ZOSTAVAX will continue to be unfavorably affected by
this competition.

Growth in hospital acute care reflects strong global demand of 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.

Pharmaceutical sales growth in the quarter was partially offset by lower
sales in virology, largely reflecting a significant decline in ZEPATIER
(elbasvir and grazoprevir), a medicine for the treatment of chronic
hepatitis C virus genotypes 1 or 4 infection, due to increasing
competition and declining patient volumes, which the company expects to
continue.

Pharmaceutical sales growth for the quarter was also partially offset by
the ongoing impacts from the loss of U.S. market exclusivity for ZETIA
(ezetimibe) in late 2016 and VYTORIN (ezetimibe/simvastatin) in April
2017, medicines for lowering LDL cholesterol; and biosimilar competition
for REMICADE (infliximab), a treatment for inflammatory diseases, in the
company’s marketing territories in Europe.

Animal Health

Animal Health sales totaled $1.1 billion for the second quarter of 2018,
an increase of 14 percent compared with the second quarter of 2017,
including a 2 percent positive impact from foreign exchange. Growth was
driven by higher sales of companion animal products, primarily from the
BRAVECTO (fluralaner) line of products that kill fleas and ticks in dogs
and cats for up to 12 weeks, due in part to a delayed flea and tick
season and the timing of customer purchases. Growth was also driven by
livestock products, including poultry, ruminants and swine products.

Animal Health segment profits were $450 million in the second quarter of
2018, an increase of 14 percent compared with $395 million in the second
quarter of 2017.³

Second-Quarter Expense, EPS and Related Information

The table below presents selected expense information.

GAAP Expense, EPS and Related Information

Gross margin was 67.3 percent for the second quarter of 2018 compared to
68.6 percent for the second quarter of 2017. The decrease in gross
margin for the second quarter of 2018 was primarily driven by the
amortization of amounts capitalized for potential future milestone
payments related to collaborations, the amortization of unfavorable
manufacturing variances, in part resulting from the June 2017
cyber-attack, as well as the unfavorable effects of foreign exchange.
The decrease was partially offset by a lower net impact of acquisition-
and divestiture-related costs and restructuring costs, which reduced
gross margin by 7.1 percentage points in the second quarter of 2018
compared with 8.7 percentage points in the second quarter of 2017.

Marketing and administrative expenses were $2.5 billion in the second
quarter of 2018, comparable to the second quarter of 2017, reflecting
the unfavorable effects of foreign exchange and higher administrative
costs, offset by lower promotion and direct selling costs.

Research and development (R&D) expenses were $2.3 billion in the second
quarter of 2018 compared with $1.8 billion in the second quarter of
2017. The increase was driven primarily by a $344 million charge for the
Viralytics Limited (Viralytics) acquisition, increased clinical
development spending, in particular from oncology collaborations, as
well as investment in early drug development.

GAAP EPS was $0.63 for the second quarter of 2018 compared with $0.71
for the second quarter of 2017.

Non-GAAP Expense, EPS and Related Information

The non-GAAP gross margin was 74.4 percent for the second quarter of
2018 compared to 77.3 percent for the second quarter of 2017. The
decrease in non-GAAP gross margin was predominantly due to the
amortization of amounts capitalized for potential future milestone
payments related to collaborations, the amortization of unfavorable
manufacturing variances, in part resulting from the June 2017
cyber-attack, as well as the unfavorable effects of foreign exchange.

Non-GAAP marketing and administrative expenses were $2.5 billion in the
second quarter of 2018, comparable to the second quarter of 2017,
reflecting the unfavorable effects of foreign exchange and higher
administrative costs, offset by lower promotion and direct selling costs.

Non-GAAP R&D expenses were $1.9 billion in the second quarter of 2018, a
9 percent increase compared to the second quarter of 2017. The increase
primarily reflects higher clinical development spending, in particular
from oncology collaborations, as well as investment in early drug
development.

Non-GAAP EPS was $1.06 for the second quarter of 2018 compared with
$1.01 for the second quarter of 2017.

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

Financial Outlook

Merck narrowed its full-year 2018 revenue range to be between $42.0
billion and $42.8 billion, including a slightly positive impact from
foreign exchange at current exchange rates.

Merck narrowed and raised its full-year 2018 GAAP EPS range to be
between $2.51 and $2.59. Merck narrowed and raised its full-year 2018
non-GAAP EPS range to be between $4.22 and $4.30. Both include an
approximately 1 percent negative impact from foreign exchange at current
exchange rates. The non-GAAP range excludes acquisition- and
divestiture-related costs, costs related to restructuring programs,
charges related to the formation of the Eisai collaboration and the
Viralytics acquisition, and certain other items.

The following table summarizes the company’s 2018 financial guidance.

A reconciliation of anticipated 2018 GAAP EPS to non-GAAP EPS and the
items excluded from non-GAAP EPS are provided in the table below.

The expected full-year 2018 GAAP effective tax rate of 23.0 percent to
24.0 percent reflects an unfavorable impact of approximately 4.5
percentage points from the above items.

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://investors.merck.com/events-and-presentations/default.aspx.
Institutional investors and analysts can participate in the call by
dialing (706) 758-9927 or (877) 381-5782 and using ID code number
6985606. Members of the media are invited to monitor the call by dialing
(706) 758-9928 or (800) 399-7917 and using ID code number 6985606.
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

For more than a century, Merck, a leading global biopharmaceutical
company known as MSD outside of the United States and Canada, has been
inventing for life, bringing forward medicines and vaccines for many of
the world’s most challenging diseases. 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. Today, Merck continues to be at the forefront of
research to advance the prevention and treatment of diseases that
threaten people and communities around the world – including cancer,
cardio-metabolic diseases, emerging animal diseases, Alzheimer’s disease
and infectious diseases including HIV and Ebola. For more information,
visit www.merck.com
and connect with us on Twitter, Facebook, Instagram,
YouTube
and LinkedIn.

Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA

This news release of Merck & Co., Inc., Kenilworth, 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 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; 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 2017 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 Net income attributable to Merck & Co., Inc.

² Merck is providing certain 2018 and 2017 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
as it permits investors to understand how management assesses
performance. Management uses these measures internally for planning and
forecasting purposes and to measure the performance of the company along
with other metrics. Senior management’s annual compensation is derived
in part using non-GAAP income and non-GAAP EPS. 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 items, see Table 2a attached to this release.

³ Animal Health segment profits are comprised of segment
sales, less all materials and production costs, as well as marketing and
administrative expenses and research and development costs directly
incurred by the segment. For internal management reporting, Merck does
not allocate general and administrative expenses not directly incurred
by the segment, nor the cost of financing these activities. Separate
divisions maintain responsibility for monitoring and managing these
costs, including depreciation related to fixed assets utilized by these
divisions and, therefore, they are not included in segment profits.

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 estimated fair value measurement of
contingent consideration. Also includes integration, transaction and
certain other costs related to business acquisitions and divestitures.

⁵ On Jan. 1, 2018, the company adopted a new accounting
standard related to defined benefit plans. Upon adoption, net periodic
benefit cost/credit other than service cost was reclassified to Other
(income) expense, net from the previous classifications within Materials
and production costs, Marketing and administrative expenses and Research
and development costs. Previously reported amounts have been
reclassified to conform to the new presentation.

⁶ 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.

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

Merck
Media:
Tracy Ogden, (908) 740-1747
Claire Gillespie, (267) 305-0932
or
Investor:
Teri Loxam, (908) 740-1986
Michael DeCarbo, (908) 740-1807