10-QPeriod: Q1 FY2021

Merck & Co., Inc. Quarterly Report for Q1 Ended Mar 31, 2021

Filed May 5, 2021For Securities:MRK

Summary

Merck & Co., Inc. reported relatively flat sales for the first quarter of 2021 compared to the same period in 2020, with total sales reaching $12.08 billion. The company experienced strong growth in its oncology franchise, particularly with Keytruda, and saw an increase in alliance revenue from collaborations like Lynparza. However, this was partially offset by decreased sales in vaccines, including Gardasil/Gardasil 9, and headwinds from generic competition for cardiovascular products like Zetia. Despite comparable sales, net income attributable to Merck & Co., Inc. saw a slight decrease to $3.179 billion from $3.219 billion in the prior year. Earnings per share (EPS) also experienced a minor dip. The company's operating expenses increased due to higher research and development spending, especially on COVID-19 related programs, and restructuring costs. Additionally, Merck announced significant organizational changes, including the upcoming CFO transition and plans to spin off its Organon business, which is expected to be completed in June 2021.

Financial Highlights

51 data points
Beta

Revenue

$10.63B

69.9% Gross Margin

Net Income

$3.18B

29.9% Net Margin

EPS (Diluted)

$1.25

Total Assets

$90.85B

Cash & Equivalents

$6.88B

Free Cash Flow

$1.79B

Financial Statements
Beta
Revenue$10.63B
Cost of Revenue$3.20B
Gross Profit$7.43B
R&D Expenses$2.41B
SG&A Expenses$2.19B
Operating Income$2.75B
Interest Expense$200.00M
Net Income$3.18B
EPS (Basic)$1.26
EPS (Diluted)$1.25
Shares Outstanding (Basic)2.53B
Shares Outstanding (Diluted)2.54B

Key Highlights

  • 1Total sales for Q1 2021 were $12.08 billion, largely flat compared to $12.057 billion in Q1 2020.
  • 2Net income attributable to Merck & Co., Inc. decreased slightly to $3.179 billion from $3.219 billion year-over-year.
  • 3Keytruda demonstrated strong growth with sales up 19% to $3.899 billion, driven by new indications and global uptake.
  • 4Vaccine sales, particularly Gardasil/Gardasil 9, declined by 16% due to purchasing patterns, COVID-19 impacts, and timing of shipments.
  • 5R&D expenses increased by 12% to $2.465 billion, reflecting investments in COVID-19 development programs.
  • 6Restructuring costs significantly increased to $298 million from $72 million, primarily related to optimizing manufacturing and supply networks.
  • 7The planned spin-off of the Organon business is on track for completion in June 2021, with associated debt offerings and acquisition plans mentioned.

Frequently Asked Questions

Merck's total sales for the first quarter of 2021 were $12.08 billion, which was largely comparable to the $12.057 billion reported in the same period of 2020. This flat performance was driven by strong growth in the oncology segment, particularly Keytruda, and increased alliance revenue, which offset declines in vaccine sales and the impact of generic competition on certain products.

Research and Development (R&D) expenses increased by 12% to $2.465 billion in Q1 2021. This increase was primarily attributed to higher clinical development spending, notably investments in COVID-19 development programs, and increased investment in discovery research and early drug development.

Merck is on track to complete the spin-off of its Organon business on June 2, 2021. The company has issued debt in connection with the spin-off and plans to acquire Alydia Health post-spin. The historical results of the women's health, biosimilars, and established brands businesses that will form Organon will be reflected as discontinued operations following the spin-off.

The COVID-19 pandemic had an estimated negative impact of approximately $600 million on Merck's Pharmaceutical sales in Q1 2021. Physician-administered products, including vaccines, were particularly affected due to social distancing measures and reduced healthcare provider access. While operating expenses showed a minor positive effect due to shifts in spending, the overall impact on sales was unfavorable, with the company anticipating a net unfavorable impact of approximately 3% on full-year sales.