10-QPeriod: Q3 FY2024

Merck & Co., Inc. Quarterly Report for Q3 Ended Sep 30, 2024

Filed November 6, 2024For Securities:MRK

Summary

Merck & Co., Inc. reported solid financial results for the third quarter and the first nine months of 2024. Total sales increased by 4% year-over-year to $16.7 billion in the third quarter and by 7% to $48.5 billion for the nine-month period. This growth was primarily driven by strong performance in the oncology franchise, notably Keytruda, and contributions from the cardiovascular and animal health segments. Despite overall sales growth, the company faced some headwinds, including a decline in vaccine sales, particularly Gardasil/Gardasil 9 due to lower demand in China. Additionally, sales of key diabetes medications like Januvia and Janumet continued to decline due to loss of exclusivity and pricing pressures. Research and Development expenses saw a significant increase, largely due to substantial charges from recent acquisitions, including EyeBio and MK-1045, impacting reported profitability. However, non-GAAP income remained strong, reflecting operational performance excluding these acquisition-related costs.

Financial Highlights

55 data points
Beta

Revenue

$16.66B

75.5% Gross Margin

Net Income

$3.16B

19.0% Net Margin

EPS (Diluted)

$1.24

Total Assets

$117.53B

Cash & Equivalents

$14.69B

Free Cash Flow

$8.51B

Financial Statements
Beta
Revenue$16.66B
Cost of Revenue$4.08B
Gross Profit$12.58B
R&D Expenses$5.86B
SG&A Expenses$2.73B
Net Income$3.16B
EPS (Basic)$1.25
EPS (Diluted)$1.24
Shares Outstanding (Basic)2.53B
Shares Outstanding (Diluted)2.54B

Key Highlights

  • 1Total sales grew 4% to $16.7 billion in Q3 2024 and 7% to $48.5 billion in the first nine months of 2024, excluding foreign exchange impacts.
  • 2Keytruda demonstrated robust growth, with sales up 17% in Q3 and 18% year-to-date, driven by new indications and broader market uptake.
  • 3Significant R&D expenses were incurred due to acquisitions, notably EyeBio ($1.35B charge) and MK-1045 ($750M charge), impacting reported net income.
  • 4Gardasil/Gardasil 9 sales declined 11% in Q3, primarily due to reduced demand in China from inventory issues with their partner, Zhifei.
  • 5Januvia/Janumet sales continued their downward trend, declining 42% in Q3, due to loss of exclusivity, pricing pressures, and government rebate cap changes.
  • 6The Animal Health segment showed positive growth, with sales up 6% in Q3, boosted by new product launches and the acquisition of Elanco's aqua business.
  • 7Merck announced a new restructuring program (2024 Restructuring Program) expected to cost approximately $4.0 billion over several years to optimize manufacturing networks.

Frequently Asked Questions

The primary driver of Merck's sales growth in the third quarter of 2024 was the strong performance of its oncology franchise, particularly Keytruda, which saw a 17% increase in sales. Growth was also supported by new product launches in the cardiovascular franchise (Winrevair) and increased sales in the animal health segment.

Research and Development expenses increased significantly in the third quarter of 2024 due primarily to substantial charges related to recent business development transactions. These included charges of $1.35 billion for the acquisition of EyeBio and $100 million for a related milestone, as well as $750 million for the acquisition of MK-1045. These acquisition-related costs heavily impacted reported R&D expenses.

Sales of Gardasil/Gardasil 9 declined in Q3 2024, primarily driven by lower demand in China. This was due to a significant decline in shipments from their distribution partner, Zhifei, to public health institutions, resulting in elevated inventory levels. Merck expects this trend to continue impacting sales in China into 2025.

Sales of Januvia and Janumet continue to decline significantly, with a 42% drop in Q3 2024. This is attributed to loss of market exclusivity in major regions, increased pricing pressure, competitive landscape, and changes in US Medicaid rebate policies. While patent protection extends to May 2026 in the US for certain forms, significant volume and pricing declines are anticipated to continue.