Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2012.
Non-GAAP (generally accepted accounting principles) earnings per share (EPS) for the fourth quarter of $0.83 and $3.82 for the full year of 2012 exclude acquisition-related costs and restructuring costs.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow.
"Merck overcame significant challenges last year and delivered strong results in 2012 by successfully growing our businesses, expanding geographically and reducing our expenses. As we begin 2013, we are well-positioned to further execute on our business strategy," said Kenneth C. Frazier, chairman and chief executive officer of Merck. "We remain committed to investing for future growth and innovation to deliver value over the long term. Merck is rapidly advancing many compounds that are potentially first-in-class or best-in-class. Additionally, we will continue to pursue external opportunities that have the potential to deliver value to the company and its shareholders."
Select Revenue Highlights
Full-year 2012 worldwide sales were $47.3 billion, a decrease of 2 percent, which includes a 3 percent negative impact from foreign exchange, compared to full-year 2011. Worldwide sales were $11.7 billion for the fourth quarter of 2012, a decrease of 5 percent, which includes a 2 percent negative impact from foreign exchange compared with the fourth quarter of 2011. Strong sales growth of key products helped offset the impact of the August 2012 loss of market exclusivity for SINGULAIR (montelukast sodium) in the United States.
The following table reflects sales of the company's top pharmaceutical products, as well as total sales of animal health and consumer care products.
Pharmaceutical Revenue Performance
Fourth-quarter pharmaceutical sales declined 6 percent to $10.1 billion, including a 1 percent negative impact due to foreign exchange. Strong sales growth for JANUVIA (sitagliptin), GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant], ZOSTAVAX (zoster vaccine live) and JANUMET (sitagliptin/metformin hydrochloride) partially offset the expected declines in sales of SINGULAIR, COZAAR (losartan potassium) and HYZAAR (losartan potassium and hydrochlorothiazide).
Full-year pharmaceutical sales declined 2 percent to $40.6 billion, including a 3 percent negative impact due to foreign exchange.
Sales from emerging markets grew 9 percent and accounted for approximately 20 percent of pharmaceutical sales in the fourth quarter. Sales growth in the emerging markets is being driven by vaccines, primary care, women's health and diversified brands. China continues to be a key driver with 35 percent growth for the fourth quarter, including a 3 percent benefit from foreign exchange.
Worldwide sales of the combined diabetes franchise of JANUVIA/JANUMET, medicines that help lower blood sugar levels in adults with type 2 diabetes, grew 18 percent to $1.6 billion in the fourth quarter of 2012 primarily driven by growth in the United States and Japan. The combined franchise had sales of $5.7 billion for the full year of 2012, an increase of 23 percent.
Worldwide sales of SINGULAIR, a once-a-day oral medicine for the chronic treatment of asthma and the relief of symptoms of allergic rhinitis, declined 67 percent to $480 million in the fourth quarter. SINGULAIR sales declined $932 million, or 97 percent, in the United States in the fourth quarter. Full-year 2012 worldwide sales for SINGULAIR were $3.9 billion, a 30 percent decrease compared to the prior year. The patent for SINGULAIR expired in the United States on Aug. 3, 2012, and will expire in major European markets later this month. The company continues to experience a significant and rapid reduction in sales in the United States and expects a similar decline in Europe following patent expiry there. SINGULAIR will retain marketing exclusivity in Japan until 2016.
Sales of ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), medicines for lowering LDL cholesterol, were $1.1 billion in the fourth quarter, comparable to the prior year, driven by global growth of ZETIA that was offset by lower sales of VYTORIN. The combined ZETIA/VYTORIN franchise had sales of $4.3 billion for the full year of 2012, comparable to the prior year.
Combined sales of REMICADE (infliximab) and SIMPONI (golimumab), treatments for inflammatory diseases, increased 13 percent to $645 million for the fourth quarter of 2012. The combined sales grew 18 percent excluding foreign exchange. Global combined sales for the full year decreased 18 percent over the prior year. In Europe, Russia and Turkey, where Merck retained exclusive marketing rights, the combined sales of REMICADE and SIMPONI increased 2 percent for the full year of 2012 or 10 percent excluding foreign exchange. In July 2011, the company transferred exclusive marketing rights for REMICADE and SIMPONI to Johnson & Johnson in Canada, Central and South America, the Middle East, Africa and Asia Pacific.
Sales recorded by Merck for GARDASIL, a vaccine to help prevent certain diseases caused by four types of human papillomavirus (HPV), increased 61 percent to $442 million for the fourth quarter driven by higher sales in the United States, reflecting continued strong uptake in males and higher public sector purchases, as well as favorable performance in Japan and the emerging markets. Worldwide sales of GARDASIL recorded by Merck for the year were $1.6 billion, a 35 percent increase compared to the prior year.
ISENTRESS (raltegravir), an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, decreased 2 percent to $381 million in the fourth quarter. ISENTRESS sales in the United States grew 11 percent in the fourth quarter. Global sales of ISENTRESS for the full year of 2012 were $1.5 billion, an 11 percent increase compared to 2011.
Global sales of Merck's antihypertensive medicines COZAAR and HYZAAR declined 26 percent to $315 million in the fourth quarter and 23 percent to $1.3 billion for the full year of 2012 due to the loss of market exclusivity in major markets in prior years.
Sales of ZOSTAVAX, a vaccine for the prevention of herpes zoster, grew to $225 million in the fourth quarter compared to $78 million in the prior year, driven by a positive response to supply availability and increased promotional efforts in the United States. Global sales for the full year of 2012 were $651 million.
Sales of VICTRELIS (boceprevir), the company's oral hepatitis C virus protease inhibitor, grew to $115 million in the quarter versus $87 million last year as the product continues to launch. Global sales for the full year of 2012 were $502 million. VICTRELIS is approved in 69 countries and has launched in 34 of those markets.
Animal Health Revenue Performance
Merck Animal Health sales totaled $898 million for the fourth quarter of 2012, a 3 percent increase compared with the same period last year, including a 3 percent negative impact due to foreign exchange. Growth was seen across major species, particularly cattle and poultry.
Animal Health global sales for the full year of 2012 were $3.4 billion, a 4 percent increase compared with the prior year, including a 5 percent negative impact due to foreign exchange.
Consumer Care Revenue Performance
Fourth-quarter global sales of Consumer Care were $395 million, an increase of 9 percent compared to the fourth quarter of 2011. This increase was primarily driven by CLARITIN, COPPERTONE and the DR. SCHOLL'S footcare line. Full-year 2012 global sales were $2.0 billion, a 6 percent increase compared to full-year 2011, including a 1 percent negative impact due to foreign exchange.
Last week, the U.S. Food and Drug Administration (FDA) approved OXYTROL FOR WOMEN (oxybutynin transdermal system), the first and only over-the-counter treatment for overactive bladder in women. Merck anticipates that OXYTROL FOR WOMEN will be available to customers in fall 2013.
Other Revenue Performance
Other revenues - primarily comprised of alliance revenue, miscellaneous corporate revenues and third-party manufacturing sales - increased 16 percent to $360 million in the fourth quarter and decreased 21 percent to $1.3 billion for the full year of 2012. The full-year decline was driven largely by lower revenue from AstraZeneca LP (AZLP) recorded by Merck, which declined 23 percent to $915 million, as well as by lower third-party manufacturing sales.
Fourth-Quarter and Full-Year Expense and Other Information
The costs detailed below totaled $10.0 billion on a GAAP basis during the fourth quarter of 2012 and include $1.6 billion of acquisition-related costs and restructuring costs.
The costs detailed below totaled $38.1 billion on a GAAP basis for full-year 2012 and include $6.3 billion of acquisition-related costs and restructuring costs.
The gross margin was 64.6 percent for the fourth quarter of 2012 and 66.0 percent for the fourth quarter of 2011, reflecting 10.4 and 10.5 percentage point unfavorable impacts, respectively, from the acquisition-related costs and restructuring costs noted above. The non-GAAP gross margin decline primarily reflects the impact of the SINGULAIR patent expiry in the United States.