Merck & Co., Inc. today announced financial results for the fourth
quarter and the full year of 2009 which include the results of legacy
Schering-Plough operations from the close of the merger on Nov. 3, 2009
through Dec. 31, 2009. The company reported non-GAAP (generally accepted
accounting principles) earnings per share (EPS) for the fourth quarter
of $0.79, which excludes certain impacts of the merger, including a $7.5
billion pretax gain associated with obtaining the controlling interest
in the Merck/Schering-Plough partnership, purchase accounting
adjustments, merger-related expenses as well as all restructuring costs.
Fourth-quarter GAAP EPS was $2.35. Merck also announced full-year 2009
non-GAAP EPS of $3.25, excluding certain items, and full-year GAAP EPS
“The new Merck is off to an excellent start”
Worldwide sales for the fourth quarter of 2009 were $10.1 billion. Net
income available to common shareholders for the fourth quarter was
$6,494 million. For the full year of 2009, worldwide sales were $27.4
billion and net income available to common shareholders was
$12,899 million. Foreign exchange for the quarter favorably affected
global sales performance by 1 percent, while the full year of 2009 was
negatively affected by 2 percent.
A reconciliation of EPS as reported in accordance with GAAP to EPS,
excluding certain items, is provided in the table that follows.
"The new Merck is off to an excellent start," said Richard T. Clark,
chairman, president and chief executive officer. "Our performance last
quarter was characterized by strong growth in key brands and continued
investment in our newest products and promising late-stage pipeline.
"We're building momentum in our business while making great progress on
integration," Mr. Clark added. "Each of our top 10 selling brands from
an expanded product portfolio exceeded $1 billion in annual sales. At
the same time, we have a number of product launches underway in major
global markets with more to come this year.
"We stand firmly behind the financial targets we provided at the time of
our initial merger announcement," said Mr. Clark. "The real value
drivers of our merger will be science and innovation because Merck's
long-term strength will come from our ability to develop critical
medicines and vaccines. But what will set this merger apart is not just
the 'what' but the 'how' ― the clarity of our vision, our ability to hit
the ground running, and the thoughtfulness with which we are managing
the integration of our businesses, our operations and our people."
Select Business Highlights
Launches underway for SIMPONI, SAPHRIS, SAFLUTAN, TREDAPTIVE and
BRIDION in major markets around the world; BRIDION recently approved
for use in Japan and ELONVA now approved in the European Union (EU);
four products with filings under review in the EU and/or the United
States; nearly 20 promising research programs in late-stage
Strong business development activity continues with acquisition of
Avecia Biologics, expanding Merck's existing biologics expertise and
manufacturing capacity, and 50 other licensing and alliance agreements
signed during 2009 that complement the company's substantial internal
Well-respected leaders expand the capabilities and strength of the new
Merck's senior leadership team including Dr. Julie Gerberding, leader
of the vaccine business, who previously served as Centers for Disease
Control (CDC) director; Michael Kamarck to lead vaccine and biologics
manufacturing as well as Merck BioVentures from Wyeth; Dr. Michael
Rosenblatt, chief medical officer, who was previously Dean of Tufts
School of Medicine; and Bridgette P. Heller, leader of the Consumer
Health Care business, who was formerly with Johnson & Johnson.
Fourth-Quarter and Full-Year 2009 Financial Results
The company's financial performance for the fourth quarter and the full
year of 2009 discussed below reflects legacy Schering-Plough results as
of the merger date through Dec. 31, 2009 plus legacy Merck's results for
the quarter and the full year. The increases noted are largely due to
the addition of legacy Schering-Plough.
The following supplemental combined non-GAAP sales are adjusted to
reflect a full quarter and full year of Merck and Schering-Plough
combined results as if the merger closed as of Jan. 1, 2009. This
supplemental information is provided to enhance investors' understanding
of the company's products and overall business performance and should be
considered in addition to, but not in lieu of, sales recorded in
accordance with GAAP.
Materials and production costs were $4.9 billion for the quarter and
$9.0 billion for the full year of 2009. In 2008, these costs were $1.5
billion for the quarter and $5.6 billion for the full year. The fourth
quarter and full year of 2009 include $2.3 billion of additional costs
related to purchase accounting adjustments. Additionally, the fourth
quarter of 2009 and 2008 include costs associated with restructuring
programs of $19 million and $33 million, respectively. For the full-year
of 2009 and 2008, materials and production include $115 million and $123
million, respectively, of costs associated with the restructuring
programs. The gross margin was 51.4 percent for the fourth quarter of
2009 and 67.1 percent for the full year of 2009, reflecting 22.9 and 8.8
percentage point unfavorable impacts, respectively, from the purchase
accounting adjustments and restructuring costs noted above. In 2008,
gross margin was 75.6 percent for the fourth quarter and 76.6 percent
for the full year, reflecting 0.6 and 0.5 percentage point unfavorable
impacts, respectively, due to restructuring costs.
Marketing and administrative expenses were $3.5 billion for the fourth
quarter of 2009 and $8.5 billion for the full year. Costs for the fourth
quarter and full year of 2009 include $265 million and $371 million,
respectively, of merger-related costs. Marketing and administrative
costs were $1.9 billion for the fourth quarter of 2008 and $7.4 billion
for the full year.
Research and development expenses were $2.0 billion for the quarter and
$5.8 billion for the year. The full year of 2009 includes $232 million
of costs associated with the company's 2008 global restructuring
program. Research and development costs for 2008 were $1.4 billion for
the quarter and $4.8 billion for the year which included $97 million and
$128 million, respectively, of costs for restructuring activities.
Restructuring costs, primarily related to employee separations, were
$1.5 billion for the fourth quarter of 2009, compared with $103 million
for the fourth quarter of 2008. The increase for the fourth quarter of
2009 is largely associated with the merger restructuring program
discussed below. Costs for the year were $1.6 billion, an increase of 58
percent from the full year of 2008.
Total overall costs associated with the company's global restructuring
programs included in materials and production, research and development,
and restructuring costs were $1.5 billion and $2.0 billion for the
fourth quarter and the full year of 2009, respectively, primarily
comprised of employee separations and accelerated depreciation.
Equity income from affiliates was $374 million in the fourth quarter of
2009, a decrease of 48 percent from the fourth quarter of 2008 primarily
as a result of a lower contribution from the Merck/Schering-Plough
partnership, which became wholly-owned by Merck as a result of the
merger and is no longer reflected in equity income from affiliates as of
the date of the merger. Fourth quarter was also affected by lower
contributions from AstraZeneca LP and from Merial due to the sale of
Merck's interest in this joint venture to sanofi-aventis in the third
quarter of 2009. Revenue from AstraZeneca LP recorded by Merck was $332
million in the fourth quarter. For the full year of 2009, equity income
from affiliates was $2.2 billion, a 13 percent decline from the full
year of 2008.
Other (income) expense, net, for the fourth quarter of 2009 was $7.8
billion of income primarily reflecting a $7.5 billion gain associated
with obtaining the controlling interest in the Merck/Schering-Plough
partnership. The fourth quarter also reflects $400 million of additional
gain on the divestiture of Merck's interest in Merial which had been
deferred. The full-year of 2009 included the $7.5 billion gain
associated with obtaining the controlling interest in the
Merck/Schering-Plough partnership, a $3.2 billion gain from the sale of
Merck's interest in Merial, $231 million of recognized net gains in the
company's investment portfolio as well as $173 million of merger-related
costs. Other (income) expense, net, for the full year of 2008 was $2.3
billion of income which included a $2.2 billion gain on a distribution
from AstraZeneca LP.
Merger Restructuring Program
Merck said it is committed to achieving its previously announced synergy
target of $3.5 billion in ongoing annual savings in 2012. Today, the
company announced the first phase of a new global Merger Restructuring
Program designed to integrate and optimize the organization and its cost
structure. Merck expects this first phase of its restructuring program
to yield annual savings in 2012 of approximately $2.6 billion to $3.0
billion ― a significant portion of the overall synergy target. The
company also expects additional savings towards the synergy target to be
generated in subsequent phases of its Merger Restructuring Program that
will be announced later this year. Also, other savings through
non-restructuring related activities, such as procurement savings
initiatives will contribute to the $3.5 billion synergy target.
As of Dec. 31, 2009, Merck had approximately 100,000 employees. As part
of the first phase of its Merger Restructuring Program, by the end of
2012, Merck expects to reduce its total workforce by approximately 15
percent across all areas of the combined company worldwide. The company
also plans to eliminate approximately 2,500 vacant positions as part of
the first phase of the program. The reductions will primarily come from
the elimination of duplicative positions in sales, administrative and
headquarters organizations, as well as from the consolidation of certain
manufacturing facilities and research and development operations.
Merck said that certain actions, such as the ongoing reevaluation of
manufacturing and research and development facilities worldwide, have
not yet been completed, but will be included later this year in other
phases of the Merger Restructuring Program. Merck also said it will
continue to hire new employees in strategic growth areas of the business
throughout this period.
The first phase of the Merger Restructuring Program is expected to be
completed by the end of 2012 with total pretax costs estimated at $2.6
billion to $3.3 billion. Costs of $1.5 billion related to these actions,
which are primarily employee separation costs, were recorded in the
fourth quarter of 2009. The company estimates that approximately 85
percent of the cumulative pretax costs will result in future cash
outlays, primarily related to employee separation expense. Approximately
15 percent relate to the accelerated depreciation of facilities that
will be closed or divested and are non-cash.
The company noted that the Merger Restructuring Program savings are in
addition to the previously announced ongoing cost reduction initiatives
at both Merck and Schering-Plough, which were announced in 2008.
Long-Term Financial Targets
Merck continues to target a high single-digit non-GAAP EPS compound
annual growth rate for the combined company from 2009 to 2013 when
compared to Merck 2009 non-GAAP EPS. Given the fourth quarter 2009 close
of the merger with Schering-Plough, Merck expects to provide 2010
financial targets around the time of its first quarter 2010 sales and
earnings announcement in April.
Product Performance ― Human Health
The sales figures discussed below for legacy Schering-Plough products
are reported on a GAAP basis, which represents sales from the close of
the merger through Dec. 31, 2009.
Bone, Respiratory, Immunology and Dermatology
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 $1.3 billion for the fourth quarter
of 2009, representing a 12 percent increase compared with the fourth
quarter of 2008. Full-year worldwide sales for SINGULAIR were $4.7
billion, a 7 percent increase compared with the prior year.
Sales of REMICADE (infliximab) were $431 million for the post-merger
portion of the fourth quarter of 2009. REMICADE is a treatment for
inflammatory diseases which is marketed in countries outside the United
States (except in Japan and certain other Asian markets). In addition,
SIMPONI (golimumab), a once-monthly, subcutaneous treatment for certain
inflammatory diseases, has been launched in Canada, Germany and Denmark;
launches in other international markets are ongoing or planned.
Global sales of NASONEX (mometasone furoate monohydrate), nasal spray,
an inhaled nasal corticosteroid for the treatment of nasal allergy
symptoms, were $165 million for the post-merger portion of the fourth
quarter of 2009.
Global sales of CLARINEX (desloratadine), a nonsedating antihistamine,
were $101 million for the post-merger portion of the fourth quarter of
Global sales of ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin)
were $614 million and $577 million in the fourth quarter, respectively.
Annual worldwide sales for 2009 were $2.2 billion for ZETIA and $2.1
billion for VYTORIN. Prior to the completion of the merger, $3.5 billion
of those combined sales were recorded through the Merck/Schering-Plough
partnership and the results from the company's interest in the
partnership were recorded in equity income from affiliates. As a result
of the merger completion, the Merck/Schering-Plough partnership is now
wholly-owned by Merck. Accordingly, the post-merger $399 million and
$384 million in revenue from ZETIA and VYTORIN, respectively, are
reflected in fourth quarter sales.
Diabetes and Obesity
JANUVIA (sitagliptin), Merck's DPP-4 inhibitor for the treatment of type
2 diabetes, recorded worldwide sales of $558 million during the fourth
quarter of 2009, representing a 35 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 $202 million during the quarter, an increase of 69
percent compared with the fourth quarter 2008. The JANUVIA/JANUMET
combined franchise had sales of $760 million during the fourth quarter
of 2009, an increase of 43 percent compared to the same quarter in 2008.
JANUVIA reached $1.9 billion in worldwide sales in 2009, while JANUMET
achieved $658 million in global sales for the year.
ISENTRESS (raltegravir), an HIV integrase inhibitor for use in
combination with other antiretroviral agents for the treatment of HIV-1
infection, reported worldwide sales of $234 million for the fourth
quarter of 2009, an increase of 80 percent compared with the fourth
quarter of 2008. Global sales of ISENTRESS for the full year of 2009
were $752 million, a 108 percent increase compared with the prior year.
Worldwide sales of PEGINTRON (peginterferon alfa-2b) for chronic
hepatitis C were $149 million for the post-merger portion of the fourth
quarter of 2009.
Merck's mature brands are human health pharmaceutical products that are
approaching the expiration of their marketing exclusivity or are no
longer protected by patents in developed markets, but continue to be a
core part of the company's offering in other markets around the world.
Global sales of Merck's antihypertensive medicines, COZAAR (losartan
potassium) and HYZAAR (losartan potassium and
hydrochlorothiazide), were $955 million for the fourth quarter of 2009,
representing an 8 percent increase compared with the fourth quarter of
2008. Full-year worldwide sales for COZAAR/HYZAAR were $3.6 billion,
comparable with the full year of 2008. The company anticipates a
significant decline in future COZAAR/HYZAAR sales since there are
multiple sources of generics expected for these medicines when both lose
marketing exclusivity in the United States in April and COZAAR loses
patent protection in major European markets during the first quarter.
Neuroscience and Ophthalmology
Global sales of MAXALT (rizatriptan benzoate), Merck's tablet for the
treatment of acute migraine, were $156 million for the fourth quarter of
2009, an 11 percent increase from the same quarter last year. MAXALT
reported global sales of $575 million for the full year of 2009, an
increase of 9 percent from the full year of 2008.
SAPHRIS (asenapine), Merck's sublingual tablet for acute treatment of
schizophrenia in adults and acute treatment of manic or mixed episodes
associated with bipolar I disorder, was approved for use in the United
States during the third quarter of 2009 and a full launch is under way.
The company has filed two supplemental New Drug Applications with the
U.S. Food & Drug Administration (FDA) for SAPHRIS as an adjunct to
therapy in patients with mania and for maintenance therapy in patients
with schizophrenia. The application for asenapine is also under review
in the EU.
The company's muscle relaxant reversal drug, BRIDION (sugammadex), is
currently approved in 44 countries, including Japan, and has been
launched in 28 countries around the world.
Sales of TEMODAR (temozolomide), a treatment for certain types of brain
tumors, were $188 million for the post-merger portion of the fourth
quarter of 2009. The U.S. District Court for the District of Delaware
recently ruled against the company in a patent infringement suit. Merck
has appealed the decision and filed a motion for preliminary injunction
with the District Court. TEMODAR lost patent protection in the EU during
Total sales as recorded by Merck of its cervical cancer vaccine,
GARDASIL (human papillomavirus (HPV) quadrivalent (types 6, 11, 16, 18)
vaccine, recombinant), were $277 million for the fourth quarter of 2009,
a 3 percent decline from the same quarter in 2008. Worldwide sales of
GARDASIL for the year were $1.1 billion, a 20 percent decrease compared
with the prior year. Included in those sales was approximately $70
million in revenue primarily as a result of a government purchase for
the CDC's Strategic National Stockpile.
ZOSTAVAX (zoster vaccine live), the company’s vaccine to help prevent
shingles (herpes zoster), recorded sales of $76 million in the United
States for the fourth quarter of 2009, compared with $162 million for
the fourth quarter of 2008. Sales in the fourth quarter of 2008
benefited from the fulfillment of a large number of backorders. Annual
sales were $277 million during 2009, an 11 percent decrease compared
with full-year 2008. While the company anticipates that ZOSTAVAX will be
available in 2010 in the US, customers may experience back orders of
ZOSTAVAX throughout this year. International launches of ZOSTAVAX will
be delayed until 2011.
Worldwide sales of Merck's other viral vaccines, which include VARIVAX
(varicella virus vaccine live), M-M-R II (measles, mumps and rubella
virus vaccine live) and PROQUAD (measles, mumps, rubella and varicella
virus vaccine live), as recorded by Merck, were $333 million for the
fourth quarter of 2009, an increase of 13 percent compared with the same
period a year earlier. In the fourth quarter of 2009, the company
recognized $64 million in revenue as a result of a government purchase
of VARIVAX for the CDC's Strategic National Stockpile. Sales of other
viral vaccines for the year were $1.4 billion, an increase of 8 percent
over full-year 2008.
Women's Health and Endocrine
Global sales of NUVARING (etonogestrel/ethinyl estradiol vaginal ring),
a contraceptive product, were $88 million for the post-merger portion of
the fourth quarter of 2009.
Sales of FOLLISTIM/PUREGON (follitropin beta injection), a fertility
treatment, were $96 million for the post-merger portion of the fourth
quarter of 2009.
Product Performance ― Animal Health
Animal Health sales totaled $494 million for the post-merger portion of
the fourth quarter of 2009, reflecting continued strong growth among
companion animal and poultry products. Animal Health includes
pharmaceutical and vaccine products for the prevention, treatment and
control of disease in all major farm and companion animal species.
Product Performance ― Consumer Health
Consumer Health Care sales were $149 million for the post-merger portion
of the fourth quarter of 2009, reflecting solid demand for OTC CLARITIN
and foot care products. In December, the FDA approved ZEGERID OTC
(omeprazole 20 mg/sodium bicarbonate 1100 mg capsules), for
over-the-counter treatment of frequent heartburn.