PharmiWeb.com - Global Pharma News & Resources
04-Feb-2021

Merck Announces Fourth-Quarter and Full-Year 2020 Financial Results

  • Fourth-Quarter 2020 Worldwide Sales Were $12.5 Billion, an Increase of 5%
  • Fourth-Quarter 2020 GAAP Loss per Share Was $0.83, Reflecting Charges Related to Acquisitions and Intangible Asset Impairments; Fourth-Quarter Non-GAAP EPS Was $1.32
  • Full-Year 2020 Worldwide Sales Were $48.0 Billion, an Increase of 2%; Excluding the Impact from Foreign Exchange, Sales Grew 4%
    • KEYTRUDA 2020 Worldwide Sales Grew 30% to $14.4 Billion
    • BRIDION 2020 Worldwide Sales Grew 6% to $1.2 Billion; Excluding the Impact from Foreign Exchange, Sales Grew 7%
    • Animal Health 2020 Worldwide Sales Grew 7% to $4.7 Billion; Excluding the Impact from Foreign Exchange, Sales Grew 10%
  • Full-Year 2020 GAAP EPS Was $2.78, Reflecting Charges Related to Acquisitions, Collaborations and Intangible Asset Impairments; Full-Year Non-GAAP EPS Was $5.94
  • 2021 Financial Outlook
    • Anticipates Full-Year 2021 Worldwide Sales to Be Between $51.8 Billion and $53.8 Billion, Including a Positive Impact from Foreign Exchange of Approximately 2%
    • Expects Full-Year 2021 GAAP EPS to Be Between $5.52 and $5.72; Expects Non-GAAP EPS to Be Between $6.48 and $6.68, Including a Positive Impact from Foreign Exchange of Approximately 3%
      • Changes to the Treatment of Certain Items for Purposes of Non-GAAP Reporting to Begin in 2021
  • Expects Organon & Co. Spinoff in Late Second-Quarter 2021

 



KENILWORTH, N.J.--(BUSINESS WIRE)--$MRK #MRK--Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2020.

“Despite extraordinary challenges brought on by the COVID-19 pandemic, Merck achieved solid growth and made meaningful progress in our pipeline in 2020. We remain focused on our science-led strategy and are confident that this approach will continue to deliver value to patients and shareholders,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “Our scientists continue to advance our internal pipeline of promising medicines and vaccines, including in oncology, HIV, and pneumococcal disease, and, more recently, therapeutics for COVID-19. These pipeline developments provide us with increasing line-of-sight to significant potential growth drivers later this decade and into the next.”

Financial Summary

$ in millions, except EPS amounts

Fourth Quarter

Year Ended

2020

 

 

2019

 

 

Change

 

 

Change
Ex-
Exchange

 

 

Dec. 31,
2020

 

 

Dec. 31,
2019

 

 

Change

 

 

Change
Ex-
Exchange

Sales

$12,514

 

 

$11,868

 

 

5%

 

 

5%

 

 

$47,994

 

 

$46,840

 

 

2%

 

 

4%

GAAP net (loss) income1

(2,094)

 

 

2,357

 

 

*

 

 

*

 

 

7,067

 

 

9,843

 

 

-28%

 

 

-25%

Non-GAAP net income that excludes certain items1,2**

3,350

 

 

2,978

 

 

12%

 

 

16%

 

 

15,082

 

 

13,382

 

 

13%

 

 

16%

GAAP EPS

(0.83)

 

 

0.92

 

 

*

 

 

*

 

 

2.78

 

 

3.81

 

 

-27%

 

 

-24%

Non-GAAP EPS that excludes certain items2**

1.32

 

 

1.16

 

 

14%

 

 

17%

 

 

5.94

 

 

5.19

 

 

14%

 

 

17%

*Greater than 100%.

**Refer to table on page 12.

GAAP (generally accepted accounting principles) (loss) earnings per share assuming dilution (EPS) was $(0.83) for the fourth quarter and $2.78 for the full year of 2020. Non-GAAP EPS was $1.32 for the fourth quarter and $5.94 for the full year of 2020. GAAP EPS for the fourth quarter and full year of 2020 reflect a $2.7 billion charge for the acquisition of VelosBio Inc. (VelosBio). The fourth quarter and full year of 2020 also include a $1.6 billion pretax intangible asset impairment charge related to ZERBAXA (ceftolozane and tazobactam), resulting from a recall in December 2020 and a temporary suspension of sales which reduced expected future cash flows of this product. In addition, the full year of 2020 reflects pretax charges of $1.1 billion related to certain license and collaboration agreements. Non-GAAP EPS excludes the charges noted above, other acquisition- and divestiture-related costs, restructuring costs and certain other items. Refer to the GAAP to non-GAAP reconciliation table on page 12 for further details.

COVID-19 Research Highlights

Building on the company’s experience with antivirals, Merck advanced its scientific programs in an effort to help combat SARS-CoV-2, specifically:

  • Molnupiravir (also known as MK-4482) – Merck continued the clinical development of molnupiravir, an orally available antiviral candidate for the treatment of COVID-19, in collaboration with Ridgeback Biotherapeutics LP. It is currently being evaluated in Phase 2/3 clinical trials in both the hospital and outpatient settings. The primary completion date for the Phase 2/3 studies is May 2021. The company anticipates interim efficacy data in the first quarter of 2021.
  • MK-7110 (also known as CD24Fc) – In December 2020, Merck acquired OncoImmune, a privately held, clinical-stage biopharmaceutical company, to accelerate the development of MK-7110, a therapeutic candidate for the treatment of patients with severe and critical COVID-19.
    • In December 2020, Merck entered into a supply agreement with the U.S. government to support the development, manufacture and initial distribution of MK-7110 upon approval or Emergency Use Authorization from the U.S. Food and Drug Administration (FDA).
    • Topline results from a pre-planned interim efficacy analysis from a Phase 3 study of MK-7110 were released in Sept. 2020. Full study results are expected in the first quarter of 2021.

Oncology Pipeline Highlights

Merck continued to advance 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 Co., Ltd. (Eisai).

  • Merck announced the following regulatory milestones for KEYTRUDA:
    • Approval in the United States by the FDA in combination with chemotherapy for the treatment of patients with locally recurrent unresectable or metastatic triple-negative breast cancer whose tumors express PD-L1 (Combined Positive Score [CPS]≥10), based on results from the KEYNOTE-355 study;
    • Approval in the United States by the FDA of an expanded indication as monotherapy for the treatment of adult patients with relapsed or refractory classical Hodgkin lymphoma (cHL) based on the Phase 3 KEYNOTE-204 trial; and an updated pediatric indication for the treatment of pediatric patients with refractory cHL or cHL that has relapsed after two or more lines of therapy, both of which were previously approved under the FDA’s accelerated approval process;
    • Filing acceptance with priority review by the FDA for a supplemental Biologics License Application (sBLA) for KEYTRUDA plus chemotherapy as first-line treatment for locally advanced unresectable or metastatic esophageal and gastroesophageal junction cancer based on results from the KEYNOTE-590 study. A Prescription Drug User Fee Act (PDUFA) date is set for April 18, 2021;
    • Filing acceptance in January 2021 by the FDA for an sBLA seeking use of KEYTRUDA for the treatment of patients with locally advanced cutaneous squamous cell carcinoma (cSCC) that is not curable by surgery or radiation based on the results of the KEYNOTE-629 trial. The FDA has set a PDUFA date of Sept. 9, 2021; and
    • Approval in January 2021 in the European Union for KEYTRUDA as first-line treatment in adult patients with metastatic microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) colorectal cancer based on results from the KEYNOTE-177 study.
  • Merck announced that the FDA’s Oncologic Drugs Advisory Committee will discuss Merck’s application for KEYTRUDA for the treatment of patients with high-risk, early-stage triple-negative breast cancer based on the results from the Phase 3 KEYNOTE-522 study. The meeting will be held on Feb. 9, 2021.
  • Merck’s Phase 3 KEYNOTE-122 trial evaluating KEYTRUDA versus standard of care (capecitabine, gemcitabine, or docetaxel) for the treatment of recurrent or metastatic nasopharyngeal cancer (NPC) did not meet its primary endpoint of overall survival (OS). Full results will be presented at a future medical meeting.
  • Merck and Eisai announced the Phase 3 KEYNOTE-581/CLEAR trial (Study 307) met its primary endpoint of progression free survival (PFS) and its key secondary endpoints of OS and objective response rate (ORR) for KEYTRUDA plus Lenvima as a first-line treatment for patients with advanced renal cell carcinoma (RCC). In a second arm of the trial, Lenvima plus everolimus also met the trial’s primary endpoint of OS and the key secondary endpoint of ORR as a first-line treatment for patients with advanced RCC. Full results from the trial will be presented at the 2021 Genitourinary Cancers Symposium (ASCO GU) on Feb. 13, 2021.
  • Merck and Eisai announced the Phase 3 KEYNOTE-775/Study 309 trial evaluating the investigational use of KEYTRUDA and Lenvima met its dual primary endpoints of OS and PFS and its secondary endpoint of ORR in patients with advanced endometrial cancer following at least one prior platinum-based regimen.
  • Merck and AstraZeneca announced two European Union approvals of Lynparza:
    • As monotherapy for the treatment of adult patients with metastatic castration-resistant prostate cancer and BRCA1/2 mutations (germline and/or somatic) who have progressed following a prior therapy that included a new hormonal agent; and
    • As first-line maintenance treatment in combination with bevacizumab for adult patients with advanced (FIGO stages III and IV) high-grade epithelial ovarian, fallopian tube or primary peritoneal cancer who are in response (complete or partial) following completion of first-line platinum-based chemotherapy in combination with bevacizumab and whose cancer is associated with homologous recombination deficiency (HRD)-positive status defined by either a breast susceptibility gene 1/2 (BRCA1/2) mutation and/or genomic instability.
  • Merck and AstraZeneca announced three approvals of Lynparza in Japan for:
    • Maintenance treatment after first-line chemotherapy containing bevacizumab (genetical recombination) in patients with HRD ovarian cancer;
    • Treatment of patients with BRCA gene-mutated (BRCAm) castration-resistant prostate cancer with distant metastasis; and
    • Maintenance treatment after platinum-based chemotherapy for patients with BRCAm curatively unresectable pancreas cancer.

Other Pipeline Highlights

  • In January 2021, Merck announced approval in the United States by the FDA of Verquvo (vericiguat), a soluble guanylate cyclase (sGC) stimulator, to reduce the risk of cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous (IV) diuretics in adults with symptomatic chronic heart failure and ejection fraction less than 45%, based on the results of the Phase 3 VICTORIA trial. Verquvo is being jointly developed with Bayer AG.
  • In January 2021, Merck announced filing acceptance with priority review by the FDA of a Biologics License Application (BLA) for V114, Merck’s investigational 15-valent pneumococcal conjugate vaccine for use in adults 18 years of age and older. A PDUFA date is set for July 18, 2021. Previously, Merck also announced the submission of an application for V114 to the European Medicines Agency.
  • Merck announced that two Phase 3 adult studies (the PNEU-PATH [V114-016] and PNEU-DAY [V114-017] trials), evaluating the safety, tolerability and immunogenicity of V114, each met their primary immunogenicity objectives.
  • Merck presented Week 96 data from the Phase 2b trial (NCT03272347) that showed islatravir, the company’s investigational oral nucleoside reverse transcriptase translocation inhibitor (NRTTI), in combination with doravirine (PIFELTRO), maintained viral suppression in treatment-naïve adults with HIV-1 infection.
  • Merck announced a collaboration with the Bill & Melinda Gates Foundation where the foundation will provide funding to support the Phase 3 IMPOWER 22 trial evaluating the safety and efficacy of investigational islatravir for both treatment and prevention in women and adolescent girls at high-risk for acquiring HIV-1 infection in sub-Saharan Africa.
  • Merck also announced plans to conduct additional studies in HIV prevention with investigational islatravir including IMPOWER 24, a global Phase 3 clinical trial to evaluate islatravir as a once-monthly oral agent for pre-exposure prophylaxis (PrEP) at sites across the world and among other key populations impacted by the epidemic, including men who have sex with men and transgender women.
  • In January 2021, Merck announced interim data from the Phase 2a trial (NCT04003103) in adults evaluating the safety, tolerability and pharmacokinetics (PK) of the investigational once-monthly oral islatravir tablet for PrEP. Interim findings demonstrated that once-monthly oral islatravir achieved the pre-specified efficacy PK threshold for PrEP at both of the two doses studied (60 mg and 120 mg).
  • Merck continued to advance MK-8507, the company’s investigational once-weekly oral non-nucleoside reverse transcriptase inhibitor (NNRTI). The company presented results from Phase 1/1b studies that supported further investigation for once-weekly oral administration as part of combination antiretroviral therapy. Enrollment in a Phase 2 trial evaluating a switch to islatravir and MK-8507 once weekly in adult participants with HIV-1 who have been virologically suppressed for ≥6 months on bictegravir/emtricitabine/tenofovir alafenamide (BIC/FTC/TAF) once-daily, is currently ongoing.

Business Development

  • In December 2020, Merck acquired VelosBio, a privately held, clinical-stage biopharmaceutical company, to strengthen Merck’s oncology pipeline with MK-2140 (formerly known as VLS-101), an investigational antibody-drug conjugate to treat hematological malignancies and solid tumors.

Fourth-Quarter and Full-Year Financial Impact of COVID-19

In the fourth quarter, the estimated negative impact of the COVID-19 pandemic to Merck’s pharmaceutical revenue was approximately $400 million. As expected, within the company’s human health business, revenue was negatively impacted by reduced access to health care providers given social distancing measures, which negatively affected vaccine sales in particular.

Operating expenses were positively impacted in the fourth quarter by approximately $50 million, primarily driven by lower promotional and selling costs, partially offset by higher research and development (R&D) expenses, net of investments in COVID-19-related antiviral and vaccine research programs.

The estimated overall negative impact of the COVID-19 pandemic to Merck’s revenue for the full year 2020 was approximately $2.5 billion, largely attributable to the human health business but including approximately $50 million attributable to Animal Health.

Operating expenses for the full year were positively impacted by approximately $600 million, primarily driven by lower promotional and selling costs, as well as lower R&D expenses, net of investments in COVID-19-related antiviral and vaccine research programs.

Fourth-Quarter and Full-Year Revenue Performance

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

$ in millions

Fourth Quarter

Year Ended

 

2020

 

 

 

2019

 

 

 

Change

 

 

 

Change Ex-
Exchange

 

 

 

Dec. 31,
2020

 

 

 

Dec. 31,
2019

 

 

 

Change

 

 

 

Change Ex-
Exchange

Total Sales

$12,514

$11,868

5%

5%

$47,994

$46,840

2%

4%

Pharmaceutical

11,367

10,533

8%

6%

43,021

41,751

3%

4%

KEYTRUDA

3,993

3,111

28%

27%

14,380

11,084

30%

30%

JANUVIA / JANUMET

1,328

1,418

-6%

-7%

5,276

5,524

-4%

-4%

GARDASIL / GARDASIL 9

998

693

44%

41%

3,938

3,737

5%

6%

PROQUAD, M-M-R II and VARIVAX

488

481

2%

1%

1,878

2,275

-17%

-17%

BRIDION

355

313

13%

13%

1,198

1,131

6%

7%

PNEUMOVAX 23

339

334

1%

0%

1,087

926

17%

18%

SIMPONI

223

205

9%

4%

838

830

1%

1%

ISENTRESS / ISENTRESS HD

211

223

-5%

-6%

857

975

-12%

-11%

Lynparza*

206

132

56%

53%

725

444

63%

62%

ROTATEQ

196

227

-14%

-14%

797

791

1%

1%

IMPLANON / NEXPLANON

165

206

-20%

-20%

680

787

-14%

-13%

Lenvima*

158

124

28%

26%

580

404

44%

43%

Animal Health

1,168

1,122

4%

6%

4,703

4,393

7%

10%

Livestock

794

777

2%

4%

2,939

2,784

6%

9%

Companion Animals

374

345

8%

9%

1,764

1,609

10%

11%

Other Revenues**

(21)

213

-110%

-45%

270

696

-61%

-22%

*Alliance revenue for these products represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.
**Other revenues are comprised primarily of third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities. The revenue hedging activities resulted in negative revenue in the fourth quarter of 2020.

Pharmaceutical Revenue

Fourth-quarter pharmaceutical sales increased 8% to $11.4 billion. Excluding the favorable effect from foreign exchange, sales grew 6%. The increase was driven by growth in oncology, vaccines, reflecting the replenishment of GARDASIL 9 doses previously borrowed from the U.S. Centers for Disease Control and Prevention (CDC) Pediatric Vaccine Stockpile as discussed below, and hospital acute care, partially offset by the negative impact of the COVID-19 pandemic and the ongoing impacts of the loss of market exclusivity for several products.

Growth in oncology was largely driven by sales of KEYTRUDA, which were $4.0 billion for the quarter. Global sales growth of KEYTRUDA reflects continued strong momentum from the non-small-cell lung cancer indications as well as continued uptake in other indications, including adjuvant melanoma, RCC, bladder, head and neck squamous cell carcinoma (HNSCC) and MSI-H cancers, as well as uptake following the recent launch of the 400mg every 6 week adult dosing regimen in the U.S., partially offset by the negative impacts of the COVID-19 pandemic and pricing in Japan. Also contributing to growth in oncology was higher alliance revenue related to Lynparza and Lenvima reflecting continued uptake in approved indications in the U.S., Europe and China.

Growth in vaccines for the fourth quarter was driven by higher sales of GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant). Fourth-quarter 2020 GARDASIL 9 sales were increased by $120 million due to the replenishment of doses that were borrowed in the fourth quarter of 2019 from the CDC Pediatric Vaccine Stockpile. GARDASIL 9 sales in the fourth quarter of 2019 were decreased by $120 million due to the borrowing. GARDASIL/GARDASIL 9 sales growth also reflects higher demand in China. Growth was partially offset by the negative impact of the COVID-19 pandemic globally. Excluding the borrowing-related activity in both periods, GARDASIL/GARDASIL 9 sales grew 8% in the quarter, or 6% excluding the favorable impact from foreign exchange.

Growth in hospital acute care reflects higher demand globally for 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; and the continued uptake of PREVYMIS (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant.

Pharmaceutical sales in the quarter were negatively affected by the ongoing impacts from the loss of market exclusivity, including for NUVARING (etonogestrel/ethinyl estradiol vaginal ring), ZETIA (ezetimibe) and certain products in diversified brands. In addition, the decline in sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI) reflects continued pricing pressure in the United States, which more than offset higher demand in certain international markets.

Full-year 2020 pharmaceutical sales increased 3% to $43.0 billion; excluding the unfavorable effect from foreign exchange, sales grew 4%, primarily due to higher sales in oncology, reflecting strong growth in KEYTRUDA, higher sales of certain vaccines including PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, and higher sales of certain hospital acute care products, including PREVYMIS and BRIDION. As discussed above, the COVID-19 pandemic negatively affected sales in 2020. Also negatively affecting sales in 2020 was the ongoing impacts of the loss of market exclusivity for several products, lower sales of pediatric vaccines, as well as pricing pressure in diabetes.

Animal Health Revenue

Animal Health sales totaled $1.2 billion for the fourth quarter of 2020, an increase of 4% compared with the fourth quarter of 2019; excluding the unfavorable effect from foreign exchange, Animal Health sales grew 6%. Growth in the quarter reflects a net favorable impact of one-time items, including an additional month of sales in the current quarter related to the 2019 acquisition of Antelliq Corporation (Antelliq), partially offset by distributor purchasing patterns. Also contributing to growth were contributions from smaller acquisitions, as well as the underlying performance of the business driven by companion animal products, reflecting higher demand in companion animal vaccines and parasiticides.

Worldwide sales for the full year of 2020 were $4.7 billion, an increase of 7%; excluding the unfavorable effect from foreign exchange, sales grew 10%. Full-year sales growth was primarily driven by livestock sales which included an additional five months of sales in the year related to the 2019 acquisition of Antelliq, along with higher sales of companion animal products, primarily the BRAVECTO (fluralaner) line of products for parasitic control, and companion animal vaccines.

Fourth-Quarter and Full-Year Expense, EPS and Related Information

The tables below present selected expense information.

$ in millions

 

Fourth-Quarter 2020

 

 

GAAP

Acquisition- and
Divestiture-
Related Costs
3,4

 

Restructuring
Costs

 

Certain Other
Items

 

 

Non-GAAP2

Cost of sales

$5,532

$1,855

$44

$260

$3,373

Selling, general and administrative

3,086

287

10

2,789

Research and development

5,838

13

16

3,161

2,648

Restructuring costs

309

309

Other (income) expense, net

(258)

(2)

(3)

(253)

 

Fourth-Quarter 2019

 

 

 

 

 

Cost of sales

$3,669

$325

$90

$−

$3,254

Selling, general and administrative

2,888

44

1

2,843

Research and development

2,548

166

11

2,371

Restructuring costs

194

194

Other (income) expense, net

(223)

(37)

7

(193)

$ in millions

 

Year Ended Dec. 31, 2020

 

 

GAAP

Acquisition- and
Divestiture-
Related Costs
3,4

 

Restructuring
Costs

Certain Other
Items

 

 

Non-GAAP2

Cost of sales

$15,485

$2,718

$175

$260

$12,332

Selling, general and administrative

10,468

935

47

9,486

Research and development

13,558

1

83

4,243

9,231

Restructuring costs

578

578

Other (income) expense, net

(886)

50

(20)

(916)

 

Year Ended Dec. 31, 2019

 

 

 

 

 

Cost of sales

$14,112

$2,126

$251

$−

$11,735

Selling, general and administrative

10,615

126

34

10,455

Research and development

9,872

145

4

993

8,730

Restructuring costs

638

638

Other (income) expense, net

139

284

55

(200)

GAAP Expense, EPS and Related Information

Gross margin was 55.8% for the fourth quarter of 2020 compared to 69.1% for the fourth quarter of 2019. The decrease reflects higher acquisition- and divestiture-related costs, including an impairment charge related to ZERBAXA, a charge related to the discontinuation of COVID-19 vaccine development programs, higher inventory write-offs due to a recall of ZERBAXA, pricing pressure and foreign exchange, partially offset by the favorable effects of product mix and manufacturing variances.


Contacts

Media Contact:

Patrick Ryan
(973) 275-7075

Investor Contacts:

Peter Dannenbaum
(908) 740-1037

Michael DeCarbo
(908) 740-1807


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Last Updated: 04-Feb-2021