10-KPeriod: FY2020

Merck & Co., Inc. Annual Report, Year Ended Dec 31, 2020

Filed February 25, 2021For Securities:MRK

Summary

Merck & Co., Inc. reported total sales of $47.994 billion for the fiscal year ending December 30, 2020, representing a 2% increase over the previous year, or 4% excluding foreign exchange impacts. This growth was primarily driven by strong performance in the oncology franchise, particularly with Keytruda, and increased sales in certain hospital acute care products and the animal health division. Despite facing headwinds from the COVID-19 pandemic, which negatively impacted sales of physician-administered products by an estimated $2.5 billion, Merck demonstrated resilience. The company advanced its strategic priorities, including completing significant business development transactions and investing in its pipeline. A key strategic move was the announcement of the planned spin-off of its Women's Health, Biosimilars, and Established Brands businesses into a new entity, Organon & Co., expected in the latter half of 2021. This spin-off aims to create two focused companies, allowing each to better pursue its respective market opportunities and strategies.

Financial Highlights

55 data points
Beta

Revenue

$41.52B

67.2% Gross Margin

Net Income

$7.07B

17.0% Net Margin

EPS (Diluted)

$2.78

Total Assets

$91.59B

Cash & Equivalents

$8.15B

Free Cash Flow

$10.25B

Financial Statements
Beta
Revenue$41.52B
Cost of Revenue$13.62B
Gross Profit$27.90B
R&D Expenses$13.40B
SG&A Expenses$8.96B
Operating Income$4.52B
Interest Expense$831.00M
Net Income$7.07B
EPS (Basic)$2.79
EPS (Diluted)$2.78
Shares Outstanding (Basic)2.53B
Shares Outstanding (Diluted)2.54B

Key Highlights

  • 1Total sales reached $47.994 billion, a 2% increase year-over-year (4% excluding foreign exchange).
  • 2The oncology franchise, led by Keytruda, was a primary growth driver, with Keytruda sales increasing by 30% to $14.38 billion.
  • 3Merck announced plans to spin off its Women's Health, Biosimilars, and Established Brands businesses into a new company, Organon & Co., expected in the second quarter of 2021.
  • 4The company made strategic acquisitions and collaborations in 2020 to bolster its pipeline, including ArQule, VelosBio, and partnerships for oncology and COVID-19 treatments.
  • 5The COVID-19 pandemic had an estimated $2.5 billion negative impact on sales, primarily affecting physician-administered products and vaccines.
  • 6Despite pandemic-related challenges, research and development expenses increased by 37% to $13.6 billion, reflecting investments in business development and pipeline advancement.
  • 7Merck announced an increase in its quarterly dividend to $0.65 per share.

Frequently Asked Questions

Merck reported total sales of $47.994 billion in 2020, a 2% increase from 2019, or 4% excluding foreign exchange impacts. This growth was mainly driven by oncology products like Keytruda, as well as improvements in certain hospital acute care products and the animal health segment. However, the COVID-19 pandemic negatively impacted sales, with an estimated $2.5 billion reduction, primarily in the Pharmaceutical segment.

Merck's key growth drivers include its oncology franchise, particularly the anti-PD-1 therapy Keytruda, which saw a 30% increase in sales to $14.38 billion. Other significant contributors to growth were certain vaccines, such as Gardasil/Gardasil 9 and Pneumovax 23, and hospital acute care products like Bridion and Prevymis. The Animal Health segment also showed positive sales growth.

Merck announced its intention to spin off its Women's Health, Biosimilars, and Established Brands businesses into a new, independent company named Organon & Co. This strategic move is expected to be completed in the latter half of 2021 and aims to create two focused companies, allowing each to concentrate on its specific strengths and market opportunities, thereby enhancing strategic flexibility and value creation.

The COVID-19 pandemic had a notable negative impact on Merck's 2020 performance, primarily affecting its Pharmaceutical segment. Sales were reduced by an estimated $2.5 billion due to factors such as reduced patient access to healthcare providers, fewer well visits, and delays in elective surgeries, which particularly impacted physician-administered products and vaccines. However, Merck stated that global health systems and patients have largely adapted, and ongoing residual negative impacts were expected to persist into 2021, particularly impacting vaccine sales.