10-QPeriod: Q2 FY2021

Merck & Co., Inc. Quarterly Report for Q2 Ended Jun 30, 2021

Filed August 9, 2021For Securities:MRK

Summary

Merck & Co., Inc. (MRK) reported strong revenue growth in the second quarter of 2021, with total sales increasing by 22% year-over-year to $11.4 billion. This growth was primarily driven by robust performance in the Pharmaceutical segment, particularly from Keytruda in oncology, as well as strong sales of vaccines like Gardasil 9. The Animal Health segment also contributed positively with increased sales in both livestock and companion animal products. The company completed the significant spin-off of Organon & Co. in June 2021, which has been reflected as discontinued operations. Despite overall positive sales trends, research and development expenses significantly increased due to the acquisition of Pandion Therapeutics for $1.9 billion, alongside ongoing clinical development spending. The company also provided an update on its COVID-19 efforts, including the development of molnupiravir, an antiviral therapy for COVID-19, and manufacturing support for other vaccines. Merck continues to manage global pricing pressures and adapt to the evolving COVID-19 landscape.

Financial Highlights

52 data points
Beta

Revenue

$11.40B

72.8% Gross Margin

Net Income

$1.54B

13.6% Net Margin

EPS (Diluted)

$0.61

Total Assets

$90.69B

Cash & Equivalents

$8.63B

Free Cash Flow

$1.44B

Financial Statements
Beta
Revenue$11.40B
Cost of Revenue$3.10B
Gross Profit$8.30B
R&D Expenses$4.32B
SG&A Expenses$2.28B
Operating Income$3.96B
Interest Expense$202.00M
Net Income$1.54B
EPS (Basic)$0.61
EPS (Diluted)$0.61
Shares Outstanding (Basic)2.53B
Shares Outstanding (Diluted)2.54B

Key Highlights

  • 1Total sales for Q2 2021 increased 22% year-over-year to $11.4 billion, driven by strong Pharmaceutical and Animal Health segment performance.
  • 2Keytruda (pembrolizumab) sales continued robust growth, up 23% in Q2 2021, supported by new indications and strong demand.
  • 3Gardasil/Gardasil 9 vaccine sales surged by 88% in Q2 2021, reflecting recovery from COVID-19 impacts and strong demand.
  • 4Merck completed the spin-off of its Organon & Co. business on June 2, 2021, with historical results now reflected as discontinued operations.
  • 5Research and Development expenses more than doubled in Q2 2021 to $4.3 billion, largely due to the $1.9 billion acquisition of Pandion Therapeutics.
  • 6The company is actively developing molnupiravir, an oral antiviral therapy for COVID-19, and has entered into a procurement agreement with the U.S. government.
  • 7Ongoing pricing pressures in global healthcare markets continue to impact sales performance, particularly for diabetes products like Januvia and Janumet.

Frequently Asked Questions

Merck's revenue growth in the second quarter of 2021 was primarily driven by strong sales in its Pharmaceutical segment, particularly from its oncology product Keytruda and vaccines like Gardasil 9. The Animal Health segment also saw increased sales.

The spin-off of Organon & Co. on June 2, 2021, resulted in the historical results of the divested businesses being reflected as discontinued operations in Merck's consolidated financial statements through the spin-off date. Merck received a $9.0 billion cash distribution from Organon as part of the transaction.

Research and Development expenses increased substantially due to the acquisition of Pandion Therapeutics for $1.9 billion in April 2021. Higher clinical development spending and investments in early drug development also contributed to the increase.

Merck anticipates a net unfavorable impact to sales of less than 3% for the full year 2021, primarily in the Pharmaceutical segment. While certain negative impacts will persist, the company believes global health systems and patients have largely adapted, and the trend is expected to improve. R&D spending on its COVID-19 antiviral program is expected to offset lower spending in other areas.