(Source: Business Wire)
Merck & Co., Inc. today announced financial results for the third
quarter of 2009. The company reported non-GAAP (generally accepted
accounting principles) earnings per share (EPS) for the quarter of
$0.90, which excludes a $1.7 billion after-tax gain from the sale of the
company's interest in Merial Limited as well as restructuring charges
and pre-closing merger-related expenses. Third-quarter GAAP EPS was
$1.61.
Worldwide sales for the third quarter of 2009 were $6.0 billion, an
increase of 2 percent compared to the third quarter of 2008. Foreign
exchange for the third quarter unfavorably affected global sales
performance by 3 percent. Net income1 for the third quarter
was $3,424.3 million, compared with $1,092.7 million in the third
quarter of 2008. For the first nine months of 2009, worldwide sales were
$17.3 billion and net income1 was $6,405.6
million.
A reconciliation of EPS as reported in accordance with GAAP to EPS,
excluding certain items, is provided in the table that follows.
Quarter Ended Sept. 30 Nine Months Ended Sept. 30
2009 2008 2009 2008
GAAP EPS $ 1.61 $ 0.51 $ 3.03 $ 2.85
EPS impact of items* (0.71 ) 0.29 (0.56 ) (0.31 )
Non-GAAP EPS that excludes items listed below2 $ 0.90 $ 0.80 $ 2.47 $ 2.54
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1 Net income attributable to Merck & Co., Inc.
2 Merck is providing information on 2009 and 2008
non-GAAP earnings per share 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, earnings per share prepared in accordance with
GAAP.
* Amount calculated as follows (in millions except per share amounts) Third-Quarter 2009 Third-Quarter 2008 Nine Months Ended Sept. 30, 2009 Nine Months Ended Sept. 30, 2008
Gain from sale of interest in Merial $ (2,763 ) $ -- $ (2,763 ) $ --
Gain on distribution from AstraZeneca -- -- -- (2,223 )
Costs related to 2008 global restructuring program 117 720 484 720
Costs related to 2005 global restructuring program -- 127 -- 330
Pre-closing merger-related expenses 144 -- 257 --
Net decrease (increase) in income before taxes (2,502 ) 847 (2,022 ) (1,173 )
Income tax (benefit) expense impact on above items 986 (235 ) 848 503
Decrease (increase) in net income $ (1,516 ) $ 612 $ (1,174 ) $ (670 )
EPS impact of items $ (0.71 ) $ 0.29 $ (0.56 ) $ (0.31 )
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"Growth of key products, JANUVIA, JANUMET, ISENTRESS and SINGULAIR, plus
continued expense management allowed Merck to deliver strong third
quarter results," said Richard T. Clark, chairman, president and chief
executive officer. "While focused on the day-to-day business priorities
that are fundamental to our success, we're also primed for our pending
merger with Schering-Plough, and the benefits it will bring to patients
around the world."
Financial Highlights
Materials and production costs were $1.4 billion for the quarter, a
decrease of 3 percent from the third quarter of 2008. The third quarters
of 2009 and 2008 include $27 million and $59 million, respectively, for
costs associated with global restructuring programs. The gross margin
was 76.4 percent for the quarter versus 75.1 percent for the same period
in 2008, reflecting 0.4 and 1.0 percentage point unfavorable impacts,
respectively, from restructuring costs noted above.
Marketing and administrative expenses were $1.7 billion for the third
quarter of 2009, comparable with the third quarter of 2008. Costs for
the third quarter of 2009 include $56 million of pre-closing
merger-related expenses and $55 million of increased legal defense
reserves.
Research and development expenses were $1.3 billion for the quarter, an
increase of 7 percent from the third quarter of 2008 primarily
reflecting the closing of the Portola transaction. The third quarters of
2009 and 2008 include $48 million and $31 million, respectively, for
costs associated with the company's 2008 global restructuring program.
Restructuring costs, primarily related to employee separations, were $42
million for the third quarter of 2009 and $757 million for the third
quarter of 2008. As of Sept. 30, 2009, Merck had approximately 52,700
employees.
Total overall costs associated with the company's global restructuring
programs included in materials and production, research and development,
and restructuring costs were $117 million and $847 million for the third
quarter of 2009 and 2008, respectively, primarily comprised of employee
separations and accelerated depreciation.
Equity income from affiliates was $688 million in the third quarter of
2009, an increase of 3 percent from the third quarter of 2008 primarily
as a result of higher contributions from AstraZeneca LP partially offset
by lower contributions from Merial due to the sale of Merck's interest
in this joint venture.
Other (income) expense, net for the third quarter of 2009 was $2.8
billion of income primarily reflecting a $2.8 billion gain on the sale
of the Merck's interest in Merial, as well as $127 million of recognized
gains in the company's investment portfolio and $88 million of
commitment fees and interest expense related to the financing of the
Schering-Plough merger. Other (income) expense, net for the third
quarter of 2008 was $31 million of expense, which included $88 million
of recognized losses in the company's investment portfolio.
The third-quarter 2009 GAAP effective tax rate was 31.9%. Excluding the
impact of the gain on the sale of the company's interest in Merial,
restructuring charges and pre-closing merger-related costs, the
effective tax rate was 24.7%.
Financial Guidance
The company updated its expectations for 2009 non-GAAP EPS to be between
$3.20 to $3.30, excluding certain items, and its 2009 GAAP EPS to be in
the range of $3.69 to $3.89. The 2009 GAAP guidance includes a pretax
charge of approximately $400 million to $600 million associated with the
company's 2008 global restructuring program and $250 million to $350
million of pre-closing costs related to the Schering-Plough merger.
Merck said it is reaffirming its guidance for full-year 2009 revenue (as
reported by Merck & Co., Inc.) of $23.2 billion to $23.7 billion.
All of the 2009 guidance provided by the company excludes contributions
from Schering-Plough that would result from the merger and any costs
incurred upon closing of the merger, which is expected to occur in the
fourth quarter. Therefore, Merck's standalone 2009 guidance will no
longer be applicable once the merger closes.
A reconciliation of EPS as reported in accordance with GAAP to EPS,
excluding certain items, is provided in the table that follows.
Full-Year 2009
GAAP EPS $3.69 to $3.89
EPS impact of items* $(0.49) to $(0.59)
Non-GAAP EPS that excludes items listed below $3.20 to $3.30
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* Amount calculated as follows (in millions except per share amounts) Full-Year 2009
Costs related to the global restructuring program $600 to $400
Pre-closing merger-related expenses 350 to 250
Gain from sale of interest in Merial (2,763 )
Income tax expense (benefit) on above items 785 to 870
(Increase) decrease in net income $(1,028) to $(1,243)
EPS impact of items $(0.49) to $(0.59)
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Details on Merck's full-year 2009 financial guidance can be found on
page 9 of this news release.
Product Performance Highlights
Worldwide sales of SINGULAIR (montelukast sodium), a once-a-day oral
medicine indicated for the chronic treatment of asthma and the relief of
symptoms of allergic rhinitis, were $1.1 billion for the third quarter
of 2009, representing a 5 percent increase compared with the third
quarter of 2008.
Combined global sales of ZETIA (ezetimibe) and VYTORIN
(ezetimibe/simvastatin), as reported by the Merck/Schering-Plough
partnership, were $1.0 billion for the third quarter of 2009,
representing a 7 percent decline compared with the third quarter of
2008. Global sales of ZETIA, marketed as EZETROL outside the United
States, were $514 million in the third quarter, a decrease of 4 percent
compared with the third quarter of 2008. Third-quarter 2009 global sales
of VYTORIN, marketed outside the United States as INEGY, were $514
million, a decrease of 9 percent compared with the same period in 2008.
The company records the results from its interest in the
Merck/Schering-Plough partnership, which totaled $391 million in the
third quarter, in equity income from affiliates.
Global sales of Merck's antihypertensive medicines, COZAAR (losartan
potassium) and HYZAAR3 (losartan potassium and
hydrochlorothiazide), were $861 million for the third quarter of 2009,
representing a 3 percent decrease compared with the third quarter of
2008. The company is expecting a significant decline in future
COZAAR/HYZAAR sales since these medicines will lose marketing
exclusivity in the U.S. and major European markets during the first half
of 2010.
3 COZAAR and HYZAAR are registered trademarks of E.I. duPont
de Nemours and Company, Wilmington, Del.
JANUVIA (sitagliptin), Merck's first-in-class DPP-4 inhibitor for the
treatment of type 2 diabetes, recorded worldwide sales of $491 million
during the third quarter of 2009, representing a 30 percent increase
compared with same quarter in 2008. JANUMET (sitagliptin/metformin
hydrochloride), a single tablet that targets all three key defects of
type 2 diabetes, achieved worldwide sales of $173 million during the
quarter, an increase of 72 percent compared with the third quarter 2008.
JANUVIA recently received regulatory approval in Japan as the first oral
treatment for type 2 diabetes with a new mechanism of action in 10 years.
Merck's cervical cancer vaccine, GARDASIL (human papillomavirus (HPV)
quadrivalent (types 6, 11, 16, 18) vaccine, recombinant), posted total
sales as recorded by Merck of $311 million for the third quarter of
2009, a 22 percent decline from the same quarter in 2008. Vaccines in
most major European markets are sold through the company's joint
venture, Sanofi Pasteur MSD, and the results from the company's interest
in the joint venture are recorded in equity income from affiliates.
Worldwide sales of ROTATEQ (rotavirus vaccine, live, oral, pentavalent),
Merck's vaccine to help protect children against rotavirus
gastroenteritis, as recorded by the company, were $127 million in the
third quarter of 2009, a decrease of 6 percent from the third quarter of
2008.
ZOSTAVAX (zoster vaccine live), the company's vaccine to help prevent
shingles (herpes zoster), recorded sales of $84 million in the United
States for the third quarter of 2009, compared with $11 million for the
third quarter of 2008. The company returned to normal shipping schedules
in early June for ZOSTAVAX.
ISENTRESS (raltegravir), Merck's first-in-class HIV integrase inhibitor
for use in combination with other antiretroviral agents for the
treatment of HIV-1 infection, reported worldwide sales of $197 million
for the third quarter of 2009, an increase of 84 percent compared with
the third quarter 2008.
Merck's Other Reported Products category is comprised of a number of
products that treat or prevent a broad range of medical conditions.
