10-QPeriod: Q3 FY2019

Merck & Co., Inc. Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 5, 2019For Securities:MRK

Summary

Merck & Co., Inc. reported strong financial results for the nine months ended September 30, 2019, with total sales increasing by 12% to $35.0 billion, driven significantly by the oncology franchise, particularly Keytruda, and solid growth in vaccines and animal health. Net income attributable to Merck & Co., Inc. saw a substantial increase of 68% to $7.5 billion for the first nine months of 2019, compared to $4.4 billion in the prior year period. This growth was bolstered by strategic acquisitions, including Antelliq and Peloton Therapeutics, and favorable tax adjustments. The company also continues to invest heavily in research and development, reflecting a commitment to future growth. Investors should note the company's ongoing restructuring efforts aimed at optimizing operations and realizing cost savings.

Financial Highlights

52 data points
Beta

Revenue

$12.40B

67.8% Gross Margin

Net Income

$1.90B

15.3% Net Margin

EPS (Diluted)

$0.74

Total Assets

$83.33B

Cash & Equivalents

$7.87B

Free Cash Flow

$4.23B

Financial Statements
Beta
Revenue$12.40B
Cost of Revenue$3.99B
Gross Profit$8.41B
R&D Expenses$3.20B
SG&A Expenses$2.59B
Interest Expense$231.00M
Net Income$1.90B
EPS (Basic)$0.74
EPS (Diluted)$0.74
Shares Outstanding (Basic)2.56B
Shares Outstanding (Diluted)2.57B

Key Highlights

  • 1Worldwide sales increased by 12% to $35.0 billion for the first nine months of 2019, driven by strong performance in oncology (Keytruda), vaccines (Gardasil/Gardasil 9), and animal health.
  • 2Net income attributable to Merck & Co., Inc. significantly increased by 68% to $7.5 billion for the first nine months of 2019, compared to $4.4 billion in the same period of 2018.
  • 3Keytruda sales grew by 59% to $8.0 billion for the first nine months of 2019, reflecting broad global adoption across multiple cancer indications.
  • 4Gardasil/Gardasil 9 vaccine sales increased by 31% to $3.0 billion for the first nine months of 2019, driven by demand in Asia Pacific and the U.S.
  • 5The company completed significant acquisitions, including Antelliq Corporation for digital animal identification and Peloton Therapeutics for cancer drug development, indicating a focus on strategic growth.
  • 6Research and Development (R&D) expenses were $7.3 billion for the first nine months of 2019, a slight decrease of 3%, impacted by a large R&D charge in the prior year related to collaborations.
  • 7Merck initiated a new global restructuring program expected to cost between $800 million and $1.2 billion, aiming for annual net cost savings of approximately $500 million by the end of 2023.

Frequently Asked Questions

Sales growth was primarily driven by the strong performance of Keytruda in the oncology franchise, increased alliance revenue from Lynparza and Lenvima, and higher sales of vaccines like Gardasil/Gardasil 9. The Animal Health segment also contributed positively, boosted by the acquisition of Antelliq.

Merck's net income attributable to Merck & Co., Inc. saw a substantial increase of 68% to $7.5 billion for the first nine months of 2019, compared to $4.4 billion in the same period of 2018. This improvement was supported by strong sales, strategic acquisitions, and a notable tax benefit related to the settlement of federal income tax matters.

Merck initiated a global restructuring program focused on optimizing its manufacturing and supply network and reducing its real estate footprint. While this program is estimated to cost between $800 million and $1.2 billion in pretax costs, it is expected to yield annual net cost savings of approximately $500 million by the end of 2023, contributing to improved operational efficiency.

Keytruda continues to be a major growth driver, with sales increasing by 59% to $8.0 billion in the first nine months of 2019. The drug received numerous regulatory approvals for new indications globally, including for various types of lung cancer, head and neck cancer, and renal cell carcinoma, underscoring its broad therapeutic application and market penetration.