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Merck Announces First-Quarter 2016 Financial Results

KENILWORTH, N.J.--(BUSINESS WIRE)--Merck (NYSE:MRK), known as MSD outside the United States and Canada, today announced financial results for the first quarter of 2016.

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“Our first quarter’s performance sets us on a good course for the year,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “We remain focused on advancing our pipeline and driving the commercial success of our key launches and inline medicines and vaccines.”

Financial Summary

First Quarter
$ in millions, except EPS amounts 2016 2015
Sales $9,312 $9,425

GAAP EPS

0.40 0.33

Non-GAAP EPS that excludes items listed below1

0.89 0.85

GAAP net income2

1,125 953

Non-GAAP net income that excludes items listed below1,2

2,492 2,426

Non-GAAP (generally accepted accounting principles) earnings per share (EPS) of $0.89 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.

$ in millions, except EPS amounts First Quarter
2016 2015
EPS
GAAP EPS $0.40 $0.33

Difference3

0.49 0.52

Non-GAAP EPS that excludes items listed below1

$0.89 $0.85
Net Income
GAAP net income2 $1,125 $953
Difference 1,367 1,473
Non-GAAP net income that excludes items listed below1,2 $2,492 $2,426
Decrease (Increase) in Net Income Due to Excluded Items:

Acquisition- and divestiture-related costs4

$1,423 $1,526
Restructuring costs 196 225
Net decrease (increase) in income before taxes 1,619 1,751
Estimated income tax (benefit) expense (252) (278)
Decrease (increase) in net income $1,367 $1,473

Additional Executive Commentary

“Business development is a top priority, and we are actively pursuing the best external science through licensing or bolt-on acquisitions to bolster our pipeline and grow our company,” said Frazier.

“The Global Human Health business performed well in the first quarter. The JANUVIA franchise demonstrated strong growth, and we remain pleased with the ongoing launch of KEYTRUDA in markets around the world,” said Adam Schechter, president, Global Human Health. “Additionally, we are already seeing positive signs in the launch of ZEPATIER in the United States.”

“Merck Research Laboratories advanced several clinical development programs in the first quarter of 2016. We continued to accelerate the development of KEYTRUDA with an additional supplemental filing in head and neck cancer, and by securing a fourth Breakthrough Therapy Designation in classical Hodgkin lymphoma,” said Dr. Roger M. Perlmutter, president, Merck Research Laboratories.

“We demonstrated strong performance with a leveraged P&L, growing sales and EPS, excluding the impact of foreign exchange. We benefited from the contribution of new product launches, while continuing to sustain growth in our key franchises and driving operational improvements across the company,” said Robert Davis, chief financial officer.

Select Business Highlights

Worldwide sales were $9.3 billion for the first quarter of 2016, a decrease of 1 percent compared with the first quarter of 2015, including a 4 percent negative impact from foreign exchange.

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

$ in millions First Quarter Change Change

Ex-Exchange

2016 2015
Total Sales $9,312 $9,425 -1% 3%
Pharmaceutical 8,104 8,266 -2% 2%
JANUVIA / JANUMET 1,412 1,393 1% 4%
ZETIA / VYTORIN 889 887 0% 4%
GARDASIL / GARDASIL 9 378 359 5% 7%

PROQUAD, M-M-R II and VARIVAX

357 348 3% 4%
REMICADE 349 501 -30% -26%
ISENTRESS 340 385 -12% -8%
CUBICIN 292 187* 56%* 57%*
KEYTRUDA 249 83 ** **
SINGULAIR 237 245 -3% -1%
NASONEX 229 289 -21% -19%
Animal Health 829 829 0% 9%
Other Revenues 379 330 15% 23%

*First quarter of 2015 reflects approximately two months of sales following the acquisition of Cubist Pharmaceuticals, Inc. (Cubist) by Merck on Jan. 21, 2015. Percentages reflect comparison to full quarter of sales in 2016.
**≥ 100%

Commercial and Pipeline Highlights

During the first quarter of 2016, the company continued to focus on advancing its pipeline, and achieved regulatory and clinical milestones for multiple products in its portfolio.

  • Merck advanced its development program for KEYTRUDA (pembrolizumab), an anti-PD-1 therapy for the treatment of metastatic non-small cell lung cancer (NSCLC) in previously treated patients whose tumors express PD-L1, as well as advanced melanoma.
    • The U.S. Food and Drug Administration (FDA) accepted for review a supplemental Biologics License Application (sBLA) for KEYTRUDA for the treatment of patients with recurrent or metastatic head and neck squamous cell carcinoma with disease progression on or after platinum-containing chemotherapy. The FDA granted Priority Review with a PDUFA action date of Aug. 9, 2016; the sBLA will be reviewed under the FDA’s Accelerated Approval program.
    • KEYTRUDA received Breakthrough Therapy Designation from the FDA for the treatment of patients with relapsed or refractory classical Hodgkin lymphoma. It is the fourth Breakthrough Therapy Designation granted for KEYTRUDA.
    • The FDA also accepted for review a sBLA for KEYTRUDA to include data from the pivotal KEYNOTE-010 study in which KEYTRUDA showed superior overall survival compared to chemotherapy in patients with previously treated advanced NSCLC whose tumors express PD-L1. In accordance with the accelerated approval process, the data from KEYNOTE-010 was intended to serve as the confirmatory trial for receiving full approval, establishing the clinical benefit by demonstrating improved survival over standard chemotherapy.
    • The KEYTRUDA clinical development program includes patients with more than 30 tumor types in more than 250 clinical trials, including more than 100 trials that combine KEYTRUDA with other cancer treatments. Registration-enabling trials of KEYTRUDA are currently enrolling patients with melanoma, NSCLC, head and neck cancer, bladder cancer, gastric cancer, colorectal cancer, esophageal cancer, breast cancer, ovarian cancer, Hodgkin lymphoma, non-Hodgkin lymphoma, multiple myeloma, nasopharyngeal cancer, and other tumors, with further trials in planning for other cancers.
  • The FDA approved ZEPATIER (elbasvir and grazoprevir), a once-daily, fixed-dose combination tablet for the treatment of adult patients with chronic hepatitis C virus genotype (GT) 1 or GT4 infection, with or without ribavirin.
  • The FDA accepted for review the Biologics License Application (BLA) for MK-8237, the company’s investigational house dust mite sublingual allergy immunotherapy tablet.
  • The Antimicrobial Drugs Advisory Committee of the FDA has scheduled a meeting on June 9, 2016 to discuss the BLA for ZINPLAVA (bezlotoxumab), an investigational antitoxin for the prevention of Clostridium difficile (C. difficile) infection recurrence, which was accepted by the FDA for Priority Review with a PDUFA action date of July 23, 2016.

Pharmaceutical Revenue Performance

First-quarter pharmaceutical sales declined 2 percent to $8.1 billion, including a 4 percent negative impact from foreign exchange. Excluding the impact of exchange...


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