10-QPeriod: Q3 FY2017

Merck & Co., Inc. Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 7, 2017For Securities:MRK

Summary

Merck & Co., Inc. reported a net loss of $56 million for the third quarter of 2017, translating to a basic loss per share of $(0.02). This contrasts with a net income of $2.18 billion ($0.78 EPS) in the same period last year. The significant year-over-year decrease in profitability was largely driven by a substantial $2.35 billion charge related to the formation of an oncology collaboration with AstraZeneca, in addition to ongoing restructuring costs and other expenses. Despite the quarterly net loss, total sales for the third quarter remained relatively stable at $10.3 billion, a slight decrease of 2% year-over-year, impacted by generic competition for key products like Zetia and Vytorin, as well as the cyber-attack in June 2017. However, strong performance from Keytruda, Zepatier, Bridion, and Animal Health products, along with incremental vaccine sales following the termination of the SPMSD joint venture, provided some offset. The company remains focused on its strategic pipeline, particularly the growth of its oncology franchise.

Financial Highlights

51 data points
Beta

Revenue

$10.32B

68.3% Gross Margin

Net Income

-$56.00M

-0.5% Net Margin

EPS (Diluted)

$-0.02

Total Assets

$91.68B

Cash & Equivalents

$7.90B

Free Cash Flow

-$1.17B

Financial Statements
Beta
Revenue$10.32B
Cost of Revenue$3.27B
Gross Profit$7.05B
R&D Expenses$4.41B
SG&A Expenses$2.46B
Interest Expense$189.00M
Net Income-$56.00M
EPS (Basic)$-0.02
EPS (Diluted)$-0.02
Shares Outstanding (Basic)2.73B
Shares Outstanding (Diluted)2.73B

Key Highlights

  • 1Third-quarter net loss of $56 million ($0.02/share) compared to a net income of $2.18 billion ($0.78/share) in Q3 2016.
  • 2Total sales for Q3 2017 were $10.3 billion, a 2% decrease year-over-year, impacted by generic competition and a cyber-attack.
  • 3Keytruda sales showed significant growth, reaching $1.0 billion in Q3 2017.
  • 4A substantial charge of $2.35 billion for the formation of an oncology collaboration with AstraZeneca heavily impacted Q3 2017 results.
  • 5The company experienced a cyber-attack in June 2017, leading to approximately $135 million in lost sales and $175 million in related expenses.
  • 6Sales of key older products such as Zetia and Vytorin continued to decline due to generic competition.
  • 7The termination of the SPMSD joint venture led to incremental vaccine sales in 2017.

Frequently Asked Questions

The primary driver for the net loss in the third quarter of 2017 was a substantial charge of $2.35 billion related to the formation of an oncology collaboration with AstraZeneca. This, combined with ongoing restructuring costs and other expenses, resulted in a net loss, contrasting with a profit in the prior year's quarter.

The cyber-attack in June 2017 resulted in an estimated $135 million in lost sales and approximately $175 million in related expenses for manufacturing, remediation, marketing, and administrative costs. Merck anticipates a similar impact in the fourth quarter of 2017 and for the full year of 2018.

Keytruda continues to be a significant growth driver, with sales reaching $1.0 billion in the third quarter of 2017, a substantial increase compared to the prior year. The company is expanding its indications globally, with numerous clinical trials underway, indicating a strong positive outlook for this oncology product.

Generic competition continues to significantly impact sales of established products like Zetia and Vytorin, which experienced substantial declines due to U.S. market exclusivity expirations. Similar pressures are seen with Cubicin and Remicade, leading to expected continued sales declines for these products.