10-QPeriod: Q3 FY2009

Merck & Co., Inc. Quarterly Report for Q3 Ended Sep 30, 2009

Filed October 29, 2009For Securities:MRK

Summary

Schering-Plough Corporation reported its third quarter and nine-month results for the period ending September 30, 2009. For the nine months, net sales decreased by 4% to $13.5 billion compared to the prior year, impacted by a 6% unfavorable foreign exchange rate. Net income available to common shareholders was $1.9 billion. The company's cholesterol franchise, VYTORIN and ZETIA, saw a 12% decline in global sales year-to-date, with a significant drop in the U.S. market, highlighting a persistent challenge for the company. Financially, Schering-Plough maintained a strong operating cash flow, providing $2.6 billion for the nine months. The company ended the period with substantial cash and cash equivalents of $4.3 billion. A major event shaping the company's future is the pending merger with Merck & Co., Inc., which was approved by shareholders and received regulatory clearance from the European Commission, with an expected completion in the fourth quarter of 2009.

Financial Highlights

50 data points
Beta

Revenue

$6.05B

76.4% Gross Margin

Net Income

$3.42B

56.6% Net Margin

EPS (Diluted)

$1.61

Total Assets

$30.55B

Cash & Equivalents

$21.82B

Free Cash Flow

-$312.10M

Financial Statements
Beta
Revenue$6.05B
Cost of Revenue$1.43B
Gross Profit$4.62B
R&D Expenses$1.25B
SG&A Expenses$1.73B
Interest Expense$130.70M
Net Income$3.42B
EPS (Basic)$1.62
EPS (Diluted)$1.61
Shares Outstanding (Basic)2.11B
Shares Outstanding (Diluted)2.11B

Key Highlights

  • 1Net sales for the nine months ended September 30, 2009, were $13.5 billion, a 4% decrease year-over-year, impacted by a 6% unfavorable foreign exchange rate.
  • 2Net income available to common shareholders for the nine months was $1.9 billion, leading to diluted earnings per share of $1.13.
  • 3Global sales of the cholesterol franchise (VYTORIN and ZETIA) declined 12% year-to-date, with U.S. sales down 18%, indicating ongoing market challenges.
  • 4Operating cash flow remained strong, generating $2.6 billion for the nine months ended September 30, 2009.
  • 5The company ended the period with a healthy cash position of $4.3 billion.
  • 6Significant progress was made towards the planned merger with Merck & Co., Inc., with expected completion in the fourth quarter of 2009.
  • 7The Productivity Transformation Program (PTP) is on track, aiming for $1.5 billion in annualized savings by 2012, with cost reductions evident in SG&A expenses.

Frequently Asked Questions

Global sales of VYTORIN and ZETIA declined 12% for the first nine months of 2009 compared to the same period in 2008, reflecting a 7% operational decrease and a 5% unfavorable impact from foreign exchange. U.S. sales were down 18%, while international sales declined 1% operationally. This segment's performance remains a key concern.

The merger agreement has been approved by shareholders of both Merck and Schering-Plough. Regulatory clearance has been received from the European Commission, and the transaction is expected to be completed in the fourth quarter of 2009. This merger is a significant event for the future of the combined entity.

Schering-Plough generated $2.6 billion in cash flow from operating activities for the nine months ended September 30, 2009. The company ended the period with a strong liquidity position, holding $4.3 billion in cash and cash equivalents.

Schering-Plough is involved in various legal proceedings, including those related to the Merck/Schering-Plough Cholesterol Joint Venture (ENHANCE trial), securities litigation, and regulatory investigations. Settlements have been reached in some of these matters, such as the $41.5 million settlement for civil class action litigation related to VYTORIN and ZETIA, and a $5.4 million reimbursement for investigative costs with a multistate group of Attorneys General. The company continues to cooperate with ongoing investigations.