Revolution Medicines, Inc. to Acquire EQRx, Inc. in All-Stock Transaction to Gain More Than $1 Billion in Additional Capital

On August 1, 2023 Revolution Medicines, Inc. ("Revolution Medicines" or the "Company") (Nasdaq: RVMD), a clinical-stage oncology company developing targeted therapies for RAS-addicted cancers, and EQRx, Inc. ("EQRx") (Nasdaq: EQRX) reported a definitive agreement through which Revolution Medicines plans to acquire EQRx in an all-stock transaction intended to add more than $1 billion in net cash to Revolution Medicines’ balance sheet (Press release, Revolution Medicines, AUG 1, 2023, View Source [SID1234633596]). The total number of shares of Revolution Medicines common stock to be issued to EQRx security holders will be determined in close proximity to the closing of the stockholder votes on the transaction based on the formula described below (see Transaction Details section). The deal, which was overseen by independent committees of Revolution Medicines’ and EQRx’s respective boards of directors, has been approved by the directors of each company. The transaction, which is subject to customary closing conditions, will enhance Revolution Medicines’ efforts to fulfill its vision to discover, develop and deliver pioneering RAS(ON) Inhibitor drugs on behalf of patients with RAS-addicted cancers.

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This proposed transaction is intended to reinforce and sustain Revolution Medicines’ parallel development approach for its extensive RAS(ON) Inhibitor pipeline in multiple RAS-driven cancers by enhancing its balance sheet, increasing financial certainty in a challenging macroenvironment. With encouraging data trends thus far for its RASMULTI(ON) Inhibitor RMC-6236, planning is underway for one or more single agent pivotal clinical trials potentially to begin in 2024. Likewise, with encouraging initial clinical experience with its KRASG12C(ON) Inhibitor RMC-6291, planning is underway for a Phase 1/1b clinical trial to evaluate the combination of RMC-6236 and RMC-6291 potentially to begin in early 2024, while continuing single agent evaluation of RMC-6291. Revolution Medicines’ acquisition of EQRx reflects both companies’ confidence in Revolution Medicines’ ability to deploy this amount of capital effectively. With the additional capital, Revolution Medicines will be positioned to maximize the potential clinical impact of its targeted drug pipeline across multiple oncology indications, and thereby offers the potential for shareholder value creation while retaining strategic control of its RAS(ON) Inhibitor pipeline.

"This deal marks a decisive step toward advancing Revolution Medicines’ vision as a self-sufficient organization that discovers and develops highly innovative drug candidates with the goal of delivering high-impact targeted medicines into oncology practice on behalf of patients with RAS-addicted cancers," said Mark A. Goldsmith, M.D., Ph.D., chief executive officer and chairman of Revolution Medicines. "This singular acquisition of a sizable quantum of capital signifies the growing confidence we have in our RAS-focused drug candidate pipeline, and substantially increases our capacity to continue advancing high-performing oncology assets, particularly our priority clinical-stage RAS(ON) Inhibitors, RMC-6236, RMC-6291 and RMC-9805, with the potential to create significant long-term value for our shareholders."

"Today’s announcement is a result of a rigorous process run by an independent committee of directors of the EQRx board that thoroughly explored and considered strategic alternatives to maximize value to EQRx stockholders," said Melanie Nallicheri, president and chief executive officer of EQRx. "With its pioneering portfolio of RAS(ON) inhibitors, designed to defeat RAS-addicted cancers which represent 30% of all human cancers, Revolution Medicines has the opportunity to address one of the largest areas of unmet need in oncology. Deploying our significant capital not only enhances this important vision, it also provides a compelling opportunity for our stockholders to participate in the upside potential of both near-term and long-term value catalysts."

Transaction Details

Under the terms of the merger agreement, Revolution Medicines will acquire EQRx in an all-stock transaction. The stock exchange ratio formula in the merger agreement uses a blended average to account for developments in Revolution Medicines’ ongoing business and potential movement in its stock price. Approximately 80% of the stock exchange ratio is based on Revolution Medicines’ public market stock price measured in close proximity to the EQRx stockholder vote and the remaining 20% of the exchange ratio is a determined price per share of Revolution Medicines’ stock as of the signing of the merger agreement. Specifically, at closing, EQRx stockholders will receive the number of shares of Revolution Medicines common stock equal to the sum of 7,692,308 Revolution Medicines shares (determined as $200 million divided by $26.00 per share) plus a number of shares equal to $870 million divided by a price that is a 6% discount to the 5-day volume-weighted average Revolution Medicines share price measured in close proximity to the stockholder vote.

Certain EQRx stockholders, representing more than 40% of voting shares of EQRx, have entered into support and voting agreements to vote their shares in favor of the transaction. At the close of the transaction, one EQRx director will be designated by Revolution Medicines to serve on its board of directors.

The transaction is expected to close in November 2023, subject to satisfaction of customary closing conditions, including regulatory review, and approval by Revolution Medicines’ and EQRx’s stockholders. Upon completion of the transaction, EQRx shares will cease trading on the Nasdaq Global Market.

Updates on Clinical-Stage RAS(ON) Inhibitors

Revolution Medicines announces today that an update on the clinical antitumor activity of RMC-6236 (RASMULTI) in patients with non-small cell lung cancer (NSCLC) or pancreatic cancer will be presented as a Proffered Paper (oral presentation) during the Developmental Therapeutics session on Sunday, October 22 at the 2023 European Society for Medical Oncology Congress (ESMO) (Free ESMO Whitepaper), and supporting clinical data will be presented at the 2023 AACR (Free AACR Whitepaper)-NCI-EORTC AACR-NCI-EORTC (Free AACR-NCI-EORTC Whitepaper) International Conference on Molecular Targets and Cancer Therapeutics (EORTC-NCI-AACR) (Free ASGCT Whitepaper) (Free EORTC-NCI-AACR Whitepaper) ("Triple Meeting") in October. Revolution Medicines is an invited speaker in a plenary session at the Triple Meeting delivering a presentation entitled "Targeting RAS-addicted Cancers with Investigational RAS(ON) Inhibitors". Furthermore, a first report on initial clinical findings with RMC-6291 (KRASG12C), including preliminary evidence of differentiation from RAS(OFF) inhibitors, will be presented at the Triple Meeting. Additional details on the above presentations will be provided when available. The company also announces that study site activation is ongoing under an investigational new drug (IND) application for a Phase 1/1b trial of RMC-9805 (KRASG12D).

Pipeline Focus and Disposition of Other Assets

To maximize the likelihood of success and the breadth of potential impact for Revolution Medicines’ most promising R&D assets, the company has made the strategic decision to concentrate its post-merger financial and human capital on its three priority RAS-focused assets (RMC-6236, RMC-6291 and RMC-9805), as well as its deep pipeline of mutant-selective RAS(ON) Inhibitors.

In line with Revolution Medicines’ continued prioritization and focus of its resources on novel drug mechanisms of action targeting RAS-addicted cancers, Revolution Medicines does not intend to advance EQRx’s research and development portfolio following closing of the transaction. EQRx will commence a process to wind down these programs and return the associated intellectual property to its partners, which would have the opportunity to independently decide the next steps on development.

Advisors

Guggenheim Securities, LLC is acting as Revolution Medicines’ financial advisor and Latham & Watkins LLP is serving as legal counsel. Goldman Sachs & Co. LLC is acting as lead financial advisor to EQRx. MTS Health Partners, L.P. is also acting as financial advisor to EQRx. Goodwin Procter LLP is acting as legal counsel for EQRx.

Webcast

Revolution Medicines will host an Investor Call today, Tuesday, August 1, at 8:30 a.m. Eastern Time (5:30 a.m. Pacific Time) to discuss the proposed transaction and the other business updates noted above. Participants may register for the conference call here View Source A live webcast of the call will also be available on the Investors section of Revolution Medicines’ website at View Source Following the live webcast, a replay will be available on the company’s website for at least 14 days.

Replimune to Present at Two Upcoming Investor Conferences

On August 1, 2023 Replimune Group, Inc. (NASDAQ: REPL), a clinical stage biotechnology company pioneering the development of a novel portfolio of tumor-directed oncolytic immunotherapies, reported that members from the Replimune management team will present and host investor meetings at the following two conferences (Press release, Replimune, AUG 1, 2023, View Source [SID1234633595]):

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BTIG Virtual Biotechnology Conference 2023
Date: Tuesday, August 8, 2023
Fireside Chat Time: 1:30 pm EDT

2023 Wedbush PacGrow Healthcare Conference
Date: Wednesday, August 9, 2023
Location: Lotte Palace Hotel, New York, NY
In-person 1×1 investor meetings only

Pfizer Reports Second-Quarter 2023 Results

On August 1, 2023 Pfizer Inc. (NYSE: PFE) reported financial results for the second quarter of 2023 (Press release, Pfizer, AUG 1, 2023, View Source [SID1234633593]). The company narrowed its 2023 revenue guidance(4) range to $67 to $70 billion, while maintaining its outlook for Adjusted diluted EPS(3) of $3.25 to $3.45.

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The second-quarter 2023 earnings presentation and accompanying prepared remarks from management as well as the quarterly update to Pfizer’s R&D pipeline can be found at www.pfizer.com.

EXECUTIVE COMMENTARY

Dr. Albert Bourla, Chairman and Chief Executive Officer, stated: "Pfizer has made significant progress toward our goal to launch 19 new products and indications in an 18-month span, having executed eleven launches thus far. We continue to build momentum in 2023, recently attaining key milestones for several products, including the U.S. launches of Prevnar 20 in pediatric patients and Zavzpret; U.S. approvals and launches for Abrysvo in older adults, Litfulo and the Talzenna plus Xtandi combination; U.S. approvals for Ngenla (expected to be available for prescribing this month) and Paxlovid; and U.S. regulatory filing acceptance for fidanacogene elaparvovec (Hemophilia B Gene Therapy).

Supporting our expectation to deliver robust operational growth in 2025 and beyond, we also reported data from several exciting pipeline candidates we believe have the potential to be significant future value-drivers, including Phase 3 data from marstacimab, Pfizer’s novel, investigational anti-TFPI antibody being studied for the treatment of hemophilia A or B; further data from elranatamab, Pfizer’s investigational BCMA CD3-targeted bispecific antibody currently being investigated in multiple myeloma; and first-in-human data from our pipeline of potential next-generation breast cancer treatments, including our novel CDK4, CDK2, and KAT6 inhibitors.
Finally, we continue to make progress toward our proposed acquisition of Seagen, a global biotechnology company that discovers, develops and commercializes transformative oncology medicines. In addition to receiving approval of the transaction from Seagen shareholders and planning for the potential integration of the two companies, we continue to work closely with regulators, including the Federal Trade Commission (FTC) and the European Commission (EC), and are working diligently to fulfill requests for further information from the FTC.
We look forward to continuing our progress in the second half of 2023, driven by commercial execution, scientific innovation and our never-ending commitment to delivering breakthroughs for patients."
David Denton, Chief Financial Officer and Executive Vice President, stated: "The second quarter of 2023 delivered solid 5% operational revenue growth, excluding our COVID-19 products, and our year-to-date results are in line with our expectations. Despite a few near-term individual product revenue challenges, we believe the company is well positioned for accelerated growth of our non-COVID products in the second half of 2023. The COVID environment continues to evolve rapidly and remains highly unpredictable. In spite of this uncertainty, the company is maintaining its focus on ensuring successful fall vaccinations during the respiratory infection season.
During the second quarter we successfully closed a $31 billion debt offering, the net proceeds of which we intend to use as part of the financing for Pfizer’s proposed acquisition of Seagen. We continue to expect the transaction to close in late 2023 or early 2024, subject to the satisfaction of customary closing conditions. As we de-lever our capital structure after the close, we expect our strong balance sheet will continue to provide the flexibility for future dividend increases and share repurchases, as well as additional business development activity."
Results for the second quarter of 2023 and 2022(5) are summarized below.
OVERALL RESULTS
($ in millions, except
per share amounts) Second-Quarter Six Months
2023 2022 Change 2023 2022 Change
Revenues $ 12,734 $ 27,742 (54%) $ 31,015 $ 53,402 (42%)
Reported Net Income(2)
2,327 9,906 (77%) 7,870 17,769 (56%)
Reported Diluted EPS(2)
0.41 1.73 (77%) 1.38 3.10 (56%)
Adjusted(3) Income
3,839 11,656 (67%) 10,876 20,993 (48%)
Adjusted(3) Diluted EPS
0.67 2.04 (67%) 1.90 3.66 (48%)

– 2 –

REVENUES
($ in millions) Second-Quarter Six Months
2023 2022 % Change 2023 2022 % Change
Total Oper. Total Oper.
Global Biopharmaceuticals Business (Biopharma)(6)
$ 12,418 $ 27,425 (55%) (54%) $ 30,389 $ 52,748 (42%) (40%)
Primary Care(6)
5,810 20,979 (72%) (72%) 17,315 39,830 (57%) (55%)
Specialty Care(6)
3,653 3,358 9% 12% 7,264 6,863 6% 10%
Oncology(6)
2,956 3,088 (4%) (3%) 5,811 6,055 (4%) (2%)
Business Innovation $ 316 $ 317 — — $ 626 $ 655 (4%) (3%)
TOTAL REVENUES $ 12,734 $ 27,742 (54%) (53%) $ 31,015 $ 53,402 (42%) (40%)

Beginning in the third quarter of 2022, Pfizer made several organizational changes to further transform its operations to better leverage its expertise in certain areas and in anticipation of potential future new product and indication launches. These changes included establishing a new commercial structure within Biopharma focused on three broad customer groups (primary care, specialty care and oncology)(6), optimizing Pfizer’s end-to-end R&D operations and further prioritizing its internal R&D portfolio, as well as realigning certain enabling and platform functions across the organization to ensure alignment with this new operating structure.
In addition, in the first quarter of 2023, Pfizer established an operating segment, Business Innovation, that includes Pfizer CentreOne (PC1), the company’s global contract development and manufacturing organization and a leading supplier of specialty active pharmaceutical ingredients; and Pfizer Ignite, a recently launched offering that provides strategic guidance and end-to-end R&D services to select innovative biotech companies that align with Pfizer’s R&D focus areas.
Prior period amounts have been revised to conform to the current period presentation for all changes discussed above.
Some amounts in this press release may not add due to rounding. All percentages have been calculated using unrounded amounts. References to operational variances pertain to period-over-period changes that exclude the impact of foreign exchange rates(7).

CAPITAL ALLOCATION

During the first six months of 2023, Pfizer deployed its capital in a variety of ways, which primarily include the following two categories:
▪Reinvesting capital into initiatives intended to enhance the future growth prospects of the company, including $5.2 billion invested in internal research and development projects, and
▪Returning capital directly to shareholders through $4.6 billion of cash dividends, or $0.82 per share of common stock.
No share repurchases have been completed to date in 2023. As of August 1, 2023, Pfizer’s remaining share repurchase authorization is $3.3 billion. Current financial guidance does not anticipate any share repurchases in 2023.
Second-quarter 2023 diluted weighted-average shares outstanding used to calculate Reported(2) and Adjusted(3) diluted EPS were 5,713 million shares.
2023 FINANCIAL GUIDANCE(4)
Pfizer narrowed its 2023 revenue guidance range to $67 to $70 billion, while maintaining its guidance for Adjusted diluted EPS(3). The Company’s updated guidance is presented below.
Revenues $67.0 to $70.0 billion
(previously $67.0 to $71.0 billion)
Adjusted(3) Cost of Sales as a Percentage of Revenues
28.0% to 30.0%
Adjusted(3) SI&A Expenses
$13.8 to $14.8 billion
Adjusted(3) R&D Expenses
$12.4 to $13.4 billion
Acquired IPR&D Expenses(4)
Approximately $0.1 billion
Adjusted(3) Other (Income)/Deductions
Approximately $1.5 billion of income
Effective Tax Rate on Adjusted(3) Income
Approximately 15.0%
Adjusted(3) Diluted EPS
$3.25 to $3.45

Changes in foreign exchange rates have had a minimal incremental impact since full-year 2023 guidance was issued. Please refer to Press Release Footnote (4) for additional information.

The midpoint of the guidance range for revenues reflects a 31% operational decrease compared to 2022 revenues. Company revenues are anticipated to be lower in 2023 than in 2022 due to expected revenue declines for Pfizer’s COVID-19 products, partially offset by expected operational growth from our non-COVID-19 in-line portfolio, anticipated new product and indication launches and recently acquired products.
Excluding COVID-19 products, Pfizer is now expecting 6% to 8% operational revenue growth in 2023. This reduction of the Company’s previously stated expectation of 7% to 9% non-COVID operational revenue growth reflects certain short-term headwinds, such as the U.S. approval for the Talzenna plus Xtandi combination for the treatment of adult patients with homologous recombination repair (HRR) gene-mutated metastatic castration-resistant prostate cancer (mCRPC), versus an approval in the all-comers population; a shared clinical decision-making recommendation for Abrysvo from the U.S. Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP), versus a routine recommendation; and recent tornado damage to Pfizer’s manufacturing facility in Rocky Mount, N.C. Over the longer term, the Company expects these short-term headwinds to be resolved, with its revenue outlook remaining intact versus its 2030 ambitions.
Revenue guidance for Pfizer’s COVID-19 products is as follows:
▪Comirnaty(1) revenues of approximately $13.5 billion, down 64% from 2022 results.
▪Paxlovid revenues of approximately $8 billion, down 58% from 2022 results.
▪In contrast to previous years, guidance for both products is no longer based primarily on expected deliveries under existing signed or committed supply contracts, but now also includes, among other things, an anticipated transition to traditional commercial markets in the U.S. in the second half of 2023.
The midpoint of the guidance range for Adjusted(3) diluted EPS reflects a 47% operational decrease compared to 2022, primarily driven by anticipated lower revenues from COVID-19 products, higher spending to support anticipated near-term launches and greater investment in certain late-stage pipeline projects.
Financial guidance for Adjusted(3) diluted EPS is calculated using approximately 5.72 billion weighted average shares outstanding, and assumes no share repurchases in 2023.
– 5 –

Pfizer’s 2023 financial guidance is based on estimates and assumptions that are subject to significant uncertainties, particularly with regard to the anticipated performance of Comirnaty(1) and Paxlovid. See the Overview of Our Performance, Operating Environment, Strategy and Outlook — Our 2022 Performance and — The Global Economic Environment sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in Pfizer’s 2022 Annual Report on Form 10-K; the Overview of Our Performance, Operating Environment, Strategy and Outlook — Our First Quarter Financial Performance and — The Global Economic Environment sections of MD&A in Pfizer’s Quarterly Report on Form 10-Q for the quarterly period ended April 2, 2023; and Pfizer’s fourth-quarter 2022 earnings press release (available at www.pfizer.com) for additional information.
QUARTERLY FINANCIAL HIGHLIGHTS (Second-Quarter 2023 vs. Second-Quarter 2022)
Second-quarter 2023 revenues totaled $12.7 billion, a decrease of $15.0 billion, or 54%, compared to the prior-year quarter, reflecting an operational decline of $14.7 billion, or 53%, primarily due to a decrease in Paxlovid and Comirnaty(1) revenues globally, as well as an unfavorable impact of foreign exchange of $283 million, or 1%. Excluding contributions from Comirnaty(1) and Paxlovid, company revenues grew $537 million, or 5%, operationally.
Second-quarter 2023 Paxlovid revenues declined $8.0 billion, or 98%, operationally compared with the prior-year quarter, primarily driven by no second quarter U.S. sales in anticipation of transition to traditional commercial markets in the second half of 2023, and lower contractual deliveries in most international markets.
Second-quarter 2023 Comirnaty(1) revenues declined $7.3 billion, or 82%, operationally compared with the prior-year quarter, largely driven by lower contracted deliveries and demand in international markets and lower U.S. government contracted deliveries, with anticipated transition to new variant vaccines globally and to traditional U.S. commercial market sales in the second half of 2023.
Excluding contributions from Comirnaty(1) and Paxlovid, second-quarter 2023 operational revenue growth was primarily driven by:
▪Recently acquired products, Nurtec ODT/Vydura and Oxbryta, which contributed $247 million and $77 million in global revenues, respectively; and
▪Vyndaqel family (Vyndaqel, Vyndamax, Vynmac) globally, up 43% operationally, largely driven by continued strong uptake of the transthyretin amyloid cardiomyopathy (ATTR-CM) indication, primarily in the U.S. and developed Europe;
partially offset primarily by lower revenues for:
▪Inflectra in the U.S., down 81%, primarily driven by lower net price as a result of unfavorable changes in channel mix; and
– 6 –

▪Ibrance, down 4% operationally, primarily driven by lower demand globally due to competitive pressure, lower clinical trial purchases internationally and planned price decreases in certain international developed markets.
GAAP Reported(2) Income Statement Highlights
SELECTED REPORTED COSTS AND EXPENSES(2)
($ in millions) Second-Quarter Six Months
2023 2022 % Change 2023 2022 % Change
Total Oper. Total Oper.
Cost of Sales(2)
$ 3,237 $ 8,648 (63%) (65%) $ 8,122 $ 18,632 (56%) (57%)
Percent of Revenues
25.4 % 31.2 % N/A N/A 26.2 % 34.9 % N/A N/A
SI&A Expenses(2)
3,497 3,048 15% 16% 6,914 5,642 23% 25%
R&D Expenses(2)
2,648 2,815 (6%) (5%) 5,153 5,116 1% 2%
Acquired IPR&D Expenses(2)
33 1 * * 55 356 (85%) (85%)
Other (Income)/Deductions––net(2)
(347) 772 * * (277) 1,122 * *
Effective Tax Rate on Reported Income(2)
(3.1 %) 13.7 % 7.5 % 13.4 %

Second-quarter 2023 Cost of Sales(2) as a percentage of revenues decreased by 5.8 percentage points compared with the prior-year quarter, primarily driven by favorable changes in sales mix, including lower sales of Comirnaty(1) and, to a much lesser extent, by lower write-offs for Comirnaty(1) inventory that exceeded or was expected to exceed its approved shelf life prior to being used; partially offset by lower sales of Paxlovid.
Second-quarter 2023 SI&A Expenses(2) increased 16% operationally compared with the prior-year quarter, primarily reflecting increased investments to support recently acquired and launched products and the expected Paxlovid commercial launch, as well as an increase in deferred compensation savings plan expenses, partially offset by a lower provision for U.S. healthcare reform fees associated with lower sales of Paxlovid and Comirnaty(1).
Second-quarter 2023 R&D Expenses(2) decreased 5% operationally compared with the prior-year quarter, primarily driven by lower spending on programs to prevent and treat COVID-19 and a decrease in the value of the portfolio performance share grants reflecting the decrease in the price of Pfizer’s common stock in the second quarter of 2023; partially offset by increased investments to develop recently acquired assets and certain vaccine programs, as well as activities to support upcoming product launches.
Pfizer recorded $347 million of other income––net(2) in the second quarter of 2023 compared with $772 million of other deductions––net(2) in the second quarter of 2022. The period-over-period change was primarily driven by:
▪net gains on equity securities in the second of quarter 2023 versus net losses on equity securities recognized in the prior-year quarter; and
– 7 –

▪net periodic benefit credits associated with pension and postretirement plans incurred in the second quarter of 2023 versus net periodic benefit costs recognized in the second quarter of 2022.
Pfizer’s effective tax rate on Reported income(2) for the second quarter of 2023 is negative primarily due to tax benefits in the second quarter of 2023 related to global income tax resolutions in multiple tax jurisdictions spanning multiple tax years and a favorable change in the jurisdictional mix of earnings.
Adjusted(3) Income Statement Highlights
SELECTED ADJUSTED(3) COSTS AND EXPENSES
($ in millions) Second-Quarter Six Months
2023 2022 % Change 2023 2022 % Change
Total Oper. Total Oper.
Adjusted(3) Cost of Sales
$ 3,072 $ 8,625 (64 %) (66 %) $ 7,818 $ 18,582 (58%) (58%)
Percent of Revenues 24.1 % 31.1 % N/A N/A 25.2 % 34.8 % N/A N/A
Adjusted(3) SI&A Expenses
3,419 2,900 18 % 20 % 6,769 5,396 25% 28%
Adjusted(3) R&D Expenses
2,627 2,811 (7 %) (6 %) 5,118 5,106 — 1%
Adjusted(3) Other (Income)/Deductions––net
(551) (377) 46 % 25 % (1,079) (783) 38% 24%
Effective Tax Rate on Adjusted(3) Income
6.8 % 15.4 % 11.6 % 15.1 %

Reconciliations of certain Reported(2) to non-GAAP Adjusted(3) financial measures and associated footnotes can be found in the financial tables section of this press release.
RECENT NOTABLE DEVELOPMENTS (Since May 2, 2023)
Product Developments
▪Abrysvo (Respiratory Syncytial Virus Vaccine) – Older Adults
•In May 2023, Pfizer announced the U.S. Food and Drug Administration (FDA) approved Abrysvo, the company’s bivalent respiratory syncytial virus (RSV) prefusion F (RSVpreF) vaccine, for the prevention of lower respiratory tract disease caused by RSV in individuals 60 years and older. The CDC’s ACIP subsequently recommended Abrysvo for use in adults 60 years of age and older, using shared clinical decision making. This recommendation was published in the CDC’s Morbidity and Mortality Weekly Report (MMWR) in July 2023, triggering the initiation of Medicare and Commercial coverage.
•In July 2023, Pfizer announced that the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a positive opinion, recommending the granting of a marketing authorization for RSVpreF for older adults. The CHMP’s positive opinion will now be reviewed by the EC. The EC will take the CHMP’s recommendation under advisement to decide whether to approve RSVpreF, whose trade name in the European Union (EU) will be Abrysvo. The EC’s final decision is expected in the coming weeks.
•In June 2023, Pfizer presented for the first time an analysis of initial vaccine efficacy data for mid-RSV season two in the Northern Hemisphere from the ongoing pivotal Phase 3 trial in older adults, as well as presented positive top-line results from a Phase 3 study that support the coadministration of Abrysvo with flu vaccine in older adults at the CDC’s ACIP June meeting.
▪Abrysvo (Respiratory Syncytial Virus Vaccine) – Maternal Immunization for Infants
•In July 2023, Pfizer announced that the CHMP of the EMA adopted a positive opinion, recommending the granting of a marketing authorization for RSVpreF for maternal immunization to help protect infants. The CHMP’s positive opinion will now be reviewed by the EC. The EC will take the CHMP’s recommendation under advisement to decide whether to approve RSVpreF, whose trade name in the EU will be Abrysvo. The EC’s final decision is expected in the coming weeks.
•In May 2023, Pfizer announced that the FDA’s Vaccines and Related Biological Products Advisory Committee (VRBPAC) voted that available data are adequate to support the efficacy and safety of its RSVpreF vaccine candidate for pregnant individuals to help prevent RSV disease in infants. The vaccine is currently under FDA review for the prevention of medically attended lower respiratory tract disease (MA-LRTD) and severe MA-LRTD caused by RSV in infants from birth up to six months of age by active immunization of pregnant individuals. The role of the VRBPAC is to provide recommendations to the FDA; however, these recommendations are not binding. The Prescription Drug User Fee Act (PDUFA) goal date for a decision by the FDA is in August 2023, followed by discussion at a meeting of the ACIP.
▪Braftovi (encorafenib) and Mektovi (binimetinib) – In June 2023, Pfizer announced the first detailed results from the Phase 2 PHAROS study, which is evaluating the efficacy and safety of Braftovi given in combination with Mektovi to patients with BRAF V600E-mutant metastatic non-small cell lung cancer (NSCLC). The results were presented at the 2023 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting and simultaneously published in the Journal of Clinical Oncology. The FDA is reviewing the company’s Supplemental New Drug Applications (sNDAs) for Braftovi + Mektovi for patients with metastatic NSCLC with a BRAF V600E mutation based on the results from the PHAROS trial with a PDUFA goal date for a decision by the FDA in fourth quarter 2023.
▪Comirnaty (COVID-19 vaccine, mRNA)(8)
•In June 2023, Pfizer and BioNTech SE (BioNTech) announced the companies have submitted
regulatory applications to the FDA and EMA for their Omicron XBB.1.5-adapted monovalent COVID-19 vaccine for the 2023-2024 fall and winter season. These filings follow guidance from the FDA’s VRBPAC, EMA and other health authorities that updated vaccines targeting Omicron XBB.1 sublineages may help to protect against COVID-19 during the upcoming fall and winter season. The companies expect to be ready to ship the adapted vaccines immediately upon regulatory authorization/approval.
•In May 2023, Pfizer and BioNTech announced they have reached an agreement with the EC to amend their existing contract to deliver COVID-19 vaccines to the EU. The amended agreement includes rephasing of delivery of doses annually through 2026 and an aggregate volume reduction, providing additional flexibility for EU Member States. The EC will maintain access to future adapted COVID-19 vaccines and the ability to donate doses, in alignment with the original agreement.
▪Litfulo (ritlecitinib)
•In July 2023, Pfizer announced that the CHMP of the EMA adopted a positive opinion for Litfulo—a kinase inhibitor that inhibits Janus kinase 3 (JAK3) and the tyrosine kinase expressed in hepatocellular carcinoma (TEC) family of kinases—recommending marketing authorization of once-daily 50 mg for individuals 12 years of age and older with severe alopecia areata. The EC will review the CHMP recommendation and is expected to make a final decision in the coming months.
•In June 2023, Pfizer announced the FDA approved Litfulo, a once-daily oral treatment, for individuals 12 years of age and older with severe alopecia areata. Litfulo is the first and only treatment approved by the FDA for adolescents (12+) with severe alopecia areata.
▪Ngenla (somatrogon-ghla) – In June 2023, Pfizer and OPKO Health Inc. announced the FDA approved Ngenla, a once-weekly, human growth hormone analog for the treatment of pediatric patients aged three years and older who have growth failure due to inadequate secretion of endogenous growth hormone. Ngenla is approved for the treatment of pediatric growth hormone deficiency in more than 40 markets including Canada, Australia, Japan, and EU Member States.
▪Paxlovid (nirmatrelvir tablets and ritonavir tablets)(8) – In May 2023, Pfizer announced the FDA approved Paxlovid for the treatment of mild-to-moderate COVID-19 in adults who are at high risk for progression to severe COVID-19, including hospitalization or death. Paxlovid has been available in the U.S. since December 2021 under Emergency Use Authorization (EUA), and the overall benefit/risk profile and indication for use in eligible adults remain consistent with the EUA. At this time, the U.S. government will continue to oversee the distribution of Paxlovid, but Pfizer expects a transition to traditional commercial markets in the second half of the year.
– 10 –

▪Prevnar 20 (20-valent pneumococcal conjugate vaccine) – In June 2023, Pfizer announced the CDC’s ACIP unanimously voted to recommend Prevnar 20 for routine vaccination for all children under two years of age, for eligible children aged 2-18 years with certain underlying medical conditions, and a catch-up dose for children with an incomplete pneumococcal conjugate vaccine vaccination status.

▪Talzenna (talazoparib) – In June 2023, Pfizer announced the FDA approved Talzenna, an oral poly ADP-ribose polymerase (PARP) inhibitor, in combination with Xtandi (enzalutamide), for the treatment of adult patients with homologous recombination repair (HRR) gene-mutated metastatic castration-resistant prostate cancer (mCRPC). The approval was based on the statistically significant and clinically meaningful radiographic progression-free survival (rPFS) data from the Phase 3 TALAPRO-2 trial. A Marketing Authorization Application (MAA) for the Talzenna and Xtandi combination has been accepted for review by the EMA, and Pfizer has shared data with additional regulatory agencies to support regulatory filings.

Pipeline Developments

A comprehensive update of Pfizer’s development pipeline was published today and is now available at www.pfizer.com/science/drug-product-pipeline. It includes an overview of Pfizer’s research and a list of compounds in development with targeted indication and phase of development, as well as mechanism of action for some candidates in Phase 1 and all candidates from Phase 2 through registration.
▪Aztreonam-avibactam (PF-06947387) – In June 2023, Pfizer announced positive results from the Phase 3 program comprising the REVISIT (NCT03329092) and ASSEMBLE (NCT03580044) studies evaluating the efficacy, safety and tolerability of the novel investigational antibiotic combination aztreonam-avibactam (ATM-AVI) in treating serious bacterial infections due to Gram-negative bacteria, including metallo-β-lactamase (MBL)-producing multidrug-resistant pathogens for which there are limited or no treatment options. Data support that ATM-AVI is effective and well-tolerated, with no new safety findings and a similar safety profile to aztreonam alone. Data from the REVISIT and ASSEMBLE studies are expected to form the basis for planned regulatory filings in the EU, United Kingdom, China and the U.S. in the second half of 2023. Pfizer holds the global rights to commercialize ATM-AVI outside of the U.S. and Canada, where the rights are held by its development partner, AbbVie.

▪Danuglipron (PF-06882961) – In June 2023, Pfizer announced its decision to continue to advance its oral glucagon-like peptide-1 receptor agonist (GLP-1RA) candidate danuglipron toward late-stage development for the potential treatment of adults with obesity and Type 2 diabetes mellitus, subject to results from the ongoing Phase 2 trial; and to discontinue the clinical development of a second GLP-1RA candidate lotiglipron (PF-07081532). The company expects to finalize plans for the danuglipron late-stage program by the end of 2023 and also is developing a once-daily modified release version.
– 11 –

▪Elranatamab (PF-06863135) – In June 2023, Pfizer announced updated data from the MagnetisMM clinical development program for elranatamab, an investigational B-cell maturation antigen (BCMA) CD3-targeted bispecific antibody (BsAb) currently being investigated in multiple myeloma (MM). Data across 13 abstracts were shared at the 2023 ASCO (Free ASCO Whitepaper) Annual Meeting, including new data from the Phase 2 MagnetisMM-3 clinical trial in patients with relapsed or refractory multiple myeloma (RRMM) who were previously treated with BCMA-directed therapy, supporting the safety and efficacy of elranatamab regardless of prior BCMA-directed treatment history. Additional presentations included new 15-month data from BCMA-naïve patients, subgroup analyses among difficult-to-treat patient populations, real-world treatment patterns for triple-class refractory MM and indirect comparisons/comparative effectiveness between elranatamab and other therapies. Elranatamab is currently under review by regulatory agencies, including the FDA, which has granted priority review for the company’s Biologics License Application (BLA) in RRMM with a PDUFA date in August 2023.

▪Fidanacogene elaparvovec (Hemophilia B Gene Therapy) – In June 2023, Pfizer announced the FDA accepted for review the company’s BLA for fidanacogene elaparvovec for the treatment of adults with hemophilia B and that the European MAA for fidanacogene elaparvovec also has been accepted and is under review by the EMA. Fidanacogene elaparvovec is a novel investigational gene therapy that contains a bio-engineered adeno-associated virus capsid and a high-activity variant of human coagulation Factor IX gene. The FDA has set a PDUFA goal date in the second quarter of 2024.
▪GBS6 (PF-06760805, Group B Streptococcus Vaccine) – In July 2023, Pfizer announced data from a Phase 2 study investigating its hexavalent capsular polysaccharide (CPS) conjugate Group B Streptococcus (GBS) vaccine candidate, GBS6, being developed for maternal administration to protect infants against invasive GBS disease. In stage two of the three-part study, which enrolled 360 healthy pregnant individuals, GBS6 generated robust maternal antibody responses against the six GBS CPS serotypes included in the vaccine, and these antibodies were efficiently transferred to infants at ratios of ~0.4-1.3 depending on GBS6 group. Based on a parallel natural history study conducted in South Africa, the Phase 2 study immunogenicity data suggest that GBS6 may offer meaningful protection against invasive GBS disease in newborns and young infants. The results were published in The New England Journal of Medicine and will inform a planned Phase 3 clinical development program. GBS6 was granted PRIME designation by the EMA’s CHMP and has received Breakthrough Therapy Designation from the U.S. FDA.
▪Marstacimab (PF-06741086) – In May 2023, Pfizer announced that the pivotal Phase 3 BASIS clinical trial (NCT03938792) evaluating marstacimab met its primary endpoints, having demonstrated statistically significant and clinically meaningful effects. Marstacimab is a novel, investigational anti-tissue factor pathway inhibitor (anti-TFPI) being studied for the treatment of hemophilia A or B for people with and without inhibitors to Factor VIII or Factor IX. The BASIS trial demonstrated that prophylactic treatment with marstacimab resulted in a statistically significant and clinically relevant effect on annualized bleeding rate in people living with severe hemophilia A and moderately severe to severe hemophilia B without inhibitors. Analyses of the full Phase 3 dataset are ongoing, and results will be presented at an upcoming scientific conference. Pfizer will discuss these data with regulatory authorities, with the goal of initiating regulatory filings in the coming months. The inhibitor cohort of the BASIS trial is completing enrollment and is expected to read out as early as late 2024.

Corporate Developments

▪In July 2023, Pfizer announced changes to its executive leadership team to further advance its aspirations to discover and develop new medicines and vaccines, with an emphasis on oncology. Chris Boshoff, M.D., Ph.D., has joined Pfizer’s Executive Leadership Team as Chief Oncology Research and Development Officer and Executive Vice President reporting to Chairman and Chief Executive Officer, Albert Bourla. Under his leadership, Pfizer will continue to invest in its fight against cancer, and Dr. Boshoff will be the single point of accountability for the entire oncology pipeline—from discovery to early- and late-phase clinical development. Mikael Dolsten, M.D., Ph.D., Chief Scientific Officer, President, Pfizer Research & Development, has expanded his role to lead all discovery, early- and late-stage clinical development for all non-oncology therapeutic areas, including Vaccines, Inflammation and Immunology, Internal Medicine and Infectious Diseases as well as non-malignant hematology and rare neuromuscular diseases. As a result of these moves, William Pao, M.D., Ph.D., Chief Development Officer and Executive Vice President, will be leaving Pfizer to pursue new opportunities outside the company.
▪In July 2023, Pfizer and Flagship Pioneering, Inc. (Flagship) announced the companies have partnered to create a new pipeline of innovative medicines. Under the terms of the novel agreement, Flagship and Pfizer will each invest $50 million upfront to explore opportunities to develop 10 single-asset programs by leveraging Flagship’s ecosystem of more than 40 human health companies and multiple biotechnology platforms. Pfizer will fund and have an option to acquire each selected development program. Flagship and its bioplatform companies will be eligible to receive up to $700 million in milestones and royalties for each successfully commercialized program.
▪In May 2023, Pfizer completed a $31 billion debt offering consisting of eight tranches of notes (collectively, the "Notes"). The Notes were issued by Pfizer’s wholly-owned subsidiary, Pfizer Investment Enterprises Pte. Ltd., and are fully and unconditionally guaranteed on a senior unsecured basis by Pfizer. Pfizer intends to use the net proceeds of the offering as part of the financing for Pfizer’s proposed acquisition of Seagen Inc.
▪In May 2023, Pfizer and Thermo Fisher Scientific Inc. announced they have entered into a collaboration agreement to help increase local access for next-generation sequencing (NGS)-based testing for lung and breast cancer patients in more than 30 countries across Latin America, Africa, the Middle East and Asia where advanced genomic testing has previously been limited or unavailable. Under the agreement, Pfizer will explore ways to enable affordable patient access for NGS testing in these cancers and work to raise healthcare provider awareness regarding the benefits of advanced testing.

Additional Developments

▪In July 2023, Pfizer announced the company’s immediate efforts to provide relief and repair the damage caused to its manufacturing facility in Rocky Mount, N.C., after a tornado swept through the town. The facility is a key producer of sterile injectables and is responsible for manufacturing nearly 25 percent of all Pfizer’s sterile injectables—including anesthesia, analgesia, therapeutics, anti-infectives and neuromuscular blockers—which is nearly eight percent of all the sterile injectables used in U.S. hospitals. Most of the damage was caused to the warehouse facility, which stores raw materials, packaging supplies and finished medicines. The company is working diligently to move product to other nearby sites for storage and to identify sources to replace damaged raw materials and supplies. It also is exploring alternative manufacturing locations for production across its significant manufacturing presence in the U.S. and internationally and across its partner network. After an initial assessment, there does not appear to be major damage to the production areas, and Pfizer is committed to rapidly restoring full function to the site. Pfizer and the Pfizer Foundation also are providing financial support to help local communities affected by the natural disaster.
▪In June 2023, Pfizer announced it entered into a manufacturing capacity reservation agreement with the European Health and Digital Executive Agency of the EC, which provides the EU access to doses of an mRNA-based vaccine should one be developed to protect against a future pandemic-causing disease. The company will continue to pursue similar agreements with other countries and multi-lateral organizations, building on the reliability and partnerships forged during the COVID-19 pandemic response.

For additional details, see the attached financial schedules, product revenue tables and disclosure notice.
(1)As used in this document, "Comirnaty" refers to, as applicable, and as authorized or approved, the Pfizer-BioNTech COVID-19 Vaccine, the Pfizer-BioNTech COVID-19 Vaccine, Bivalent (Original and Omicron BA.4/BA.5), the Comirnaty Original/Omicron BA.1 Vaccine, and Comirnaty Original/Omicron BA.4/BA.5 Vaccine. In the U.S., the original monovalent mRNA COVID-19 vaccine is no longer emergency use authorized or CDC-recommended, although Comirnaty remains a licensed vaccine. "Comirnaty" includes direct sales and alliance revenues related to sales of the above-mentioned vaccines, which are recorded within Pfizer’s Primary Care customer group. It does not include revenues for certain Comirnaty-related manufacturing activities performed on behalf of BioNTech, which are included in the Pfizer CentreOne contract development and manufacturing organization. Revenues related to these manufacturing activities totaled $6 million and $10 million for the second quarter and the first six months of 2023, respectively, and $55 million and $101 million for the second quarter and the first six months of 2022, respectively.
(2)Revenues is defined as revenues in accordance with U.S. generally accepted accounting principles (GAAP). Reported net income and its components are defined as net income attributable to Pfizer Inc. common shareholders and its components in accordance with U.S. GAAP. Reported diluted earnings per share (EPS) is defined as diluted EPS attributable to Pfizer Inc. common shareholders in accordance with U.S. GAAP.
(3)Adjusted income and Adjusted diluted EPS are defined as U.S. GAAP net income attributable to Pfizer Inc. common shareholders and Reported diluted EPS attributable to Pfizer Inc. common shareholders before the impact of amortization of intangible assets, certain acquisition-related items, discontinued operations and certain significant items. See the accompanying reconciliations of certain GAAP Reported to Non-GAAP Adjusted information for the second quarter and the first six months of 2023 and 2022. Adjusted income and its components and Adjusted diluted EPS measures are not, and should not be viewed as, substitutes for U.S. GAAP net income and its components and diluted EPS(2). See the Non-GAAP Financial Measure: Adjusted Income section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in Pfizer’s 2022 Annual Report on Form 10-K and the accompanying Non-GAAP Financial Measure: Adjusted Income section of this press release for a definition of each component of Adjusted income as well as other relevant information.
(4)Pfizer does not provide guidance for GAAP Reported financial measures (other than revenues and acquired in-process R&D (IPR&D) expenses) or a reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP Reported financial measures on a forward-looking basis because it is unable to predict with reasonable certainty the ultimate outcome of unusual gains and losses, certain acquisition-related expenses, gains and losses from equity securities, actuarial gains and losses from pension and postretirement plan remeasurements, potential future asset impairments and pending
– 15 –

litigation without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP Reported results for the guidance period.
Financial guidance for full-year 2023 reflects the following:
▪Does not assume the completion of any business development transactions not completed as of July 2, 2023, except for signed transactions, if any, through mid-July 2023, which are expected to give rise to acquired IPR&D expenses during fiscal 2023.
▪Reflects an anticipated negative revenue impact of approximately $0.2 billion due to recent and expected generic and biosimilar competition for certain products that have recently lost patent protection or that are anticipated to lose patent protection during fiscal-year 2023.
▪Reflects expected impacts from certain short-term headwinds, such as the U.S. approval for the Talzenna plus Xtandi combination for the treatment of adult patients with HRR gene-mutated mCRPC, versus an approval in the all-comers population; a shared-clinical decision-making recommendation for Abrysvo from the CDC’s ACIP, versus a routine recommendation; and recent tornado damage to Pfizer’s facility in Rocky Mount, N.C.
▪Exchange rates assumed are a blend of actual rates in effect through the second quarter of 2023 and end of June 2023 rates for the remainder of the year. Financial guidance reflects the anticipated unfavorable impact of approximately $0.7 billion on revenues and approximately $0.16 on Adjusted(3) diluted EPS as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2022.
▪Guidance for Adjusted(3) diluted EPS assumes diluted weighted-average shares outstanding of approximately 5.72 billion shares, and assumes no share repurchases in 2023.
(5)Pfizer’s fiscal year-end for international subsidiaries is November 30 while Pfizer’s fiscal year-end for U.S. subsidiaries is December 31. Therefore, Pfizer’s second quarter and first six months for U.S. subsidiaries reflects the three and six months ended on July 2, 2023 and July 3, 2022, while Pfizer’s second quarter and first six months for subsidiaries operating outside the U.S. reflects the three and six months ended on May 28, 2023 and May 29, 2022.
(6)Beginning in the third quarter of 2022, Pfizer made several organizational changes to further transform its operations to better leverage its expertise in certain areas and in anticipation of potential future new product and indication launches. Biopharma, Pfizer’s innovative science-based biopharmaceutical business, is operating under a new commercial structure designed to better support and optimize performance across three broad customer groups:
– 16 –

▪Primary Care, consisting of the former Internal Medicine and Vaccines product portfolios, products for COVID-19 prevention and treatment, and potential future mRNA and antiviral products.
▪Specialty Care, consisting of the former Inflammation & Immunology, Rare Disease and Hospital (excluding Paxlovid) product portfolios.
▪Oncology, consisting of the former Oncology product portfolio.
(7)References to operational variances in this press release pertain to period-over-period changes that exclude the impact of foreign exchange rates. Although exchange rate changes are part of Pfizer’s business, they are not within Pfizer’s control, and because they can mask positive or negative trends in the business, Pfizer believes presenting operational variances excluding these foreign exchange changes provides useful information to evaluate Pfizer’s results.
(8)The Pfizer-BioNTech COVID-19 Vaccine, Bivalent (Original and Omicron BA.4/BA.5) and certain uses of Paxlovid have not been approved or licensed by the FDA. The Pfizer-BioNTech COVID-19 Vaccine, Bivalent has been authorized by the FDA under an EUA to prevent COVID-19 in individuals aged 6 months and older. Paxlovid has been authorized for emergency use by the FDA under an EUA for the treatment of mild-to-moderate COVID-19 in pediatric patients (12 years of age and older weighing at least 40 kg) who are at high risk for progression to severe COVID-19, including hospitalization or death. The emergency uses are only authorized for the duration of the declaration that circumstances exist justifying the authorization of emergency use of the medical product during the COVID-19 pandemic under Section 564(b)(1) of the FFDCA unless the declaration is terminated or authorization revoked sooner. Please see the EUA Fact Sheets at www.covid19oralrx.com and www.cvdvaccine-us.com.

Outlook Therapeutics® to Present at the BTIG Virtual Biotechnology Conference 2023

On August 1, 2023 Outlook Therapeutics, Inc. (Nasdaq: OTLK), a biopharmaceutical company working to achieve FDA approval for the first ophthalmic formulation of bevacizumab for the treatment of wet AMD, reported that Russell Trenary, President and Chief Executive Officer of Outlook Therapeutics will participate in a fireside chat at the BTIG Virtual Biotechnology Conference 2023 on Monday, August 7, 2023 at 1:00 PM ET (Press release, Outlook Therapeutics, AUG 1, 2023, View Source [SID1234633592]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

In addition to the fireside chat, management will be available to participate in virtual one-on-one meetings with qualified members of the investor community who are registered to attend the conference.

A live video webcast of the fireside chat will be accessible on the Events page in the Investors section of the Company’s website (outlooktherapeutics.com). The webcast replay will be archived for 90 days following the event.

Merck Announces Second-Quarter 2023 Financial Results

On August 1, 2023 Merck (NYSE: MRK), known as MSD outside the United States and Canada, reported financial results for the second quarter of 2023 (Press release, Merck & Co, AUG 1, 2023, View Source [SID1234633591]).

Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:

Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing

                  Schedule Your 30 min Free Demo!

"We continue to make great progress as we advance our broad and deep pipeline, raise the bar of innovation, and bring forward leading-edge science to save and improve lives around the world," said Robert M. Davis, chairman and chief executive officer, Merck. "We delivered robust underlying growth during the second quarter and are well positioned to achieve strong full-year results. I am proud of our talented, diverse and dedicated global team that continues to focus on creating value for patients and all our stakeholders now and well into the future."

Financial Summary

$ in millions, except EPS amounts

Second Quarter

2023

2022

Change

Change Ex-
Exchange

Sales

$15,035

$14,593

3%

7%

GAAP net (loss) income1

(5,975)

3,944

**N/M

N/M

Non-GAAP net (loss) income that excludes certain items1,2*

(5,220)

4,743

N/M

N/M

GAAP EPS

(2.35)

1.55

N/M

N/M

Non-GAAP EPS that excludes certain items2*

(2.06)

1.87

N/M

N/M

*Refer to table on page 6.

**Not meaningful

Generally Accepted Accounting Principles (GAAP) loss / earnings per share (EPS) assuming dilution was a loss per share of $2.35 for the second quarter of 2023. Non-GAAP loss per share was $2.06 for the second quarter of 2023. Both GAAP and non-GAAP loss per share were due to a charge for the acquisition of Prometheus Biosciences, Inc. (Prometheus) of $4.02 per share. Additionally, both GAAP and non-GAAP loss per share in the second quarter of 2023 were unfavorably affected by lower sales of LAGEVRIO and the impact of foreign exchange compared with the second quarter of 2022.

Non-GAAP EPS excludes acquisition- and divestiture-related costs and costs related to restructuring programs, as well as income and losses from investments in equity securities.

Year-to-date results can be found in the attached tables.

Second-Quarter Sales Performance

The following table reflects sales of the company’s top products and significant performance drivers.

Second Quarter

$ in millions

2023

2022

Change

Change Ex-
Exchange

Commentary

Total Sales

$15,035

$14,593

3%

7%

Pharmaceutical

13,457

12,756

6%

8%

Increase driven by growth in oncology, vaccines and hospital acute care, partially offset by lower sales in virology due to LAGEVRIO, and in diabetes. Excluding LAGEVRIO, growth of 14%. Excluding LAGEVRIO and unfavorable impact of foreign exchange, growth of 17%.

KEYTRUDA

6,271

5,252

19%

21%

Growth from continued strong global momentum in metastatic indications, including certain types of non-small cell lung cancer (NSCLC), renal cell carcinoma (RCC), head and neck squamous cell carcinoma and triple-negative breast cancer (TNBC), and increased uptake across earlier-stage indications, including certain types of neoadjuvant/adjuvant TNBC in the U.S.

GARDASIL / GARDASIL 9

2,458

1,674

47%

53%

Growth largely due to strong global demand, particularly in China.

JANUVIA / JANUMET

864

1,233

-30%

-28%

Decline primarily due to generic competition in several international markets, particularly in Europe, and lower demand and pricing in the U.S.

PROQUAD, M-M-R II and VARIVAX

582

578

1%

1%

Relatively flat compared with prior year.

BRIDION

502

426

18%

19%

Growth primarily due to increased demand, particularly in the U.S., reflecting an increase in market share among neuromuscular blockade reversal agents.

Lynparza*

310

275

13%

15%

Growth driven primarily by increased demand in certain international markets.

Lenvima*

242

231

5%

6%

Growth primarily due to higher demand in the U.S., partially offset by lower demand in China.

LAGEVRIO

203

1,177

-83%

-82%

Decrease largely attributable to lower sales in Japan and nonrecurrence of sales in the U.K.

SIMPONI

180

181

-1%

-1%

Relatively flat compared with prior year.

VAXNEUVANCE

168

12

***N/M

N/M

Growth driven largely by continued uptake in pediatric indication following launch in the U.S.

Animal Health

1,456

1,467

-1%

2%

Excluding unfavorable impact of foreign exchange, growth primarily driven by higher pricing in both Livestock and Companion Animal product portfolios.

Livestock

807

826

-2%

2%

Excluding unfavorable impact of foreign exchange, growth due to higher pricing, as well as higher demand for swine and poultry products, partially offset by lower demand for ruminant products, due in part to reduced herd sizes.

Companion Animal

649

641

1%

2%

Growth driven by higher pricing, including for the BRAVECTO line of products, partially offset by supply challenges for certain companion animal vaccines. Sales of BRAVECTO were $326 million and $309 million in the current and prior quarters, respectively, which represented growth of 5% or 7% excluding unfavorable impact of foreign exchange.

Other Revenues**

122

370

-67%

-19%

Decline primarily due to impact of revenue hedging. Excluding unfavorable impact of foreign exchange, decline due to lower royalties and milestone payments received for out-licensing arrangements.

*Alliance revenue for this product represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

**Other revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities.

***Not meaningful

Second-Quarter Expense, EPS and Related Information

The table below presents selected expense information.

$ in millions

GAAP

Acquisition-
and
Divestiture-
Related Costs3

Restructuring
Costs

(Income)
Loss From
Investments
in Equity
Securities

Non-
GAAP2

Second Quarter 2023

Cost of sales

$4,024

$467

$32

$-

$3,525

Selling, general and administrative

2,702

25

52

2,625

Research and development

13,321

9

1

13,311

Restructuring costs

151

151

Other (income) expense, net

172

(3)

194

(19)

Second Quarter 2022

Cost of sales

$4,216

$451

$67

$-

$3,698

Selling, general and administrative

2,512

65

27

2,420

Research and development

2,798

12

22

2,764

Restructuring costs

142

142

Other (income) expense, net

438

2

234

202

GAAP Expense, EPS and Related Information

Gross margin was 73.2% for the second quarter of 2023 compared with 71.1% for the second quarter of 2022. The increase was primarily due to lower LAGEVRIO sales, which have a low gross margin, as well as the favorable impact of product mix. The gross margin increase was partially offset by the unfavorable impact of foreign exchange.

Selling, general and administrative (SG&A) expenses were $2.7 billion in the second quarter of 2023, an increase of 8% compared with the second quarter of 2022. The increase was primarily due to higher administrative costs, including higher compensation and benefit costs, and higher promotional spending, partially offset by lower acquisition- and divestiture- related costs and the favorable impact of foreign exchange.

Research and development (R&D) expenses were $13.3 billion in the second quarter of 2023 compared with $2.8 billion in the second quarter of 2022. The increase was primarily due to a $10.2 billion charge for the acquisition of Prometheus. The remaining increase was driven by higher compensation and benefit costs, reflecting in part increased headcount, higher investments in discovery research and early drug development, and higher clinical development spending.

Other (income) expense, net, was $172 million of expense in the second quarter of 2023 compared with $438 million of expense in the second quarter of 2022, primarily due to lower net losses from investments in equity securities and lower pension settlement costs.

The income tax provision for the second quarter of 2023 was $637 million on a pretax loss of $5.3 billion, resulting in an effective tax rate of (11.9)%. This effective tax rate includes a 25.1 percentage point unfavorable impact of the charge for the acquisition of Prometheus, for which no tax benefit was recorded.

GAAP loss per share was $2.35 for the second quarter of 2023 compared with earnings per share of $1.55 for the second quarter of 2022.

Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 76.6% for the second quarter of 2023 compared with 74.7% for the second quarter of 2022. The increase was primarily due to lower LAGEVRIO sales, which have a low gross margin, as well as the favorable impact of product mix. The gross margin increase was partially offset by the unfavorable impact of foreign exchange.

Non-GAAP SG&A expenses were $2.6 billion in the second quarter of 2023, an increase of 8% compared with the second quarter of 2022. The increase was primarily due to higher administrative costs, including higher compensation and benefit costs, and higher promotional spending, partially offset by the favorable impact of foreign exchange.

Non-GAAP R&D expenses were $13.3 billion in the second quarter of 2023 compared with $2.8 billion in the second quarter of 2022. The increase was primarily due to a $10.2 billion charge for the acquisition of Prometheus. The remaining increase was driven by higher compensation and benefit costs, reflecting in part increased headcount, higher investments in discovery research and early drug development, and higher clinical development spending.

Non-GAAP other (income) expense, net, was $19 million of income in the second quarter of 2023 compared with $202 million of expense in the second quarter of 2022, primarily due to lower pension settlement costs.

The non-GAAP income tax provision for the second quarter of 2023 was $810 million on a pretax loss of $4.4 billion, resulting in a non-GAAP effective tax rate of (18.4)%. This effective tax rate includes a 32.5 percentage point unfavorable impact of the charge for the acquisition of Prometheus, for which no tax benefit was recorded.

Non-GAAP loss per share was $2.06 for the second quarter of 2023 compared with earnings per share of $1.87 for the second quarter of 2022.

A reconciliation of GAAP to non-GAAP net (loss) income and EPS is provided in the table that follows.

Second Quarter

$ in millions, except EPS amounts

2023

2022

EPS

GAAP EPS

$(2.35)

$1.55

Difference

0.29

0.32

Non-GAAP EPS that excludes items listed below2

$(2.06)

$1.87

Net (Loss) Income

GAAP net (loss) income1

$(5,975)

$3,944

Difference

755

799

Non-GAAP net (loss) income that excludes items listed below1,2

$(5,220)

$4,743

Excluded Items:

Acquisition- and divestiture-related costs3

$498

$530

Restructuring costs

236

258

Loss from investments in equity securities

194

234

Increase to net loss / decrease to net income before taxes

928

1,022

Estimated income tax (benefit) expense

(173)

(223)

Increase to net loss / decrease to net income

$755

$799

Pipeline and Portfolio Highlights

Merck’s expansive research efforts resulted in continued progress across its broad pipeline and portfolio. In oncology, the company reached regulatory milestones across different stages of cancer and shared positive results from a range of clinical trials. Notably, Merck presented data on four approved medicines and two pipeline candidates in more than 25 types of cancer at the 2023 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting, including investigational data for KEYTRUDA that demonstrates its progress in earlier stages of disease.

Further, in vaccines, Merck announced positive topline results demonstrating that V116, an investigational 21-valent pneumococcal conjugate vaccine specifically designed for adults, met key immunogenicity and safety endpoints in two Phase 3 trials. In cardiovascular, Merck submitted a Biologics License Application to the U.S. Food and Drug Administration (FDA) for sotatercept, Merck’s novel investigational activin signaling inhibitor for the treatment of adults with pulmonary arterial hypertension (World Health Organization Group 1). In chronic cough, Merck received an acceptance from the FDA for the resubmission of the New Drug Application for gefapixant and assigned a target action date of Dec. 27, 2023.

Merck also completed the acquisition of Prometheus, which will accelerate the company’s growing presence in immunology and add diversity to its pipeline. Prometheus’ leading clinical candidate, MK-7240, formerly known as PRA-023, creates an opportunity for Merck to transform the treatment of immune-mediated diseases.

Notable recent news releases on Merck’s pipeline and portfolio are provided in the table that follows.

Oncology

FDA Approved Lynparza Plus Abiraterone and Prednisone or Prednisolone for Treatment of Adult Patients With BRCA-Mutated Metastatic Castration-Resistant Prostate Cancer

(Read Announcement)

FDA Accepted Application for Merck’s KEYTRUDA Plus Chemotherapy as Treatment for Advanced or Unresectable Biliary Tract Cancer

(Read Announcement)

Merck’s KEYTRUDA Plus Chemotherapy Before Surgery and Continued as a Single Agent After Surgery Reduced the Risk of Event-Free Survival Events by 42% Versus Pre-Operative Chemotherapy in Resectable Stage II, IIIA or IIIB NSCLC

(Read Announcement)

Merck and Moderna Initiated Phase 3 Study Evaluating V940 (mRNA-4157) In Combination With KEYTRUDA for Adjuvant Treatment of Patients With Resected High-Risk (Stage IIB-IV) Melanoma

(Read Announcement)

Merck and Moderna Announced mRNA-4157 (V940) in Combination With KEYTRUDA Demonstrated a Statistically Significant and Clinically Meaningful Improvement in Distant Metastasis-Free Survival in Patients With High-Risk Stage III/IV Melanoma Following Complete Resection Versus KEYTRUDA

(Read Announcement)

KEYTRUDA Plus Chemotherapy Significantly Improved Overall Survival Versus Chemotherapy Alone as First-Line Treatment for Unresectable Advanced Pleural Mesothelioma

(Read Announcement)

KEYTRUDA Plus Lenvima Demonstrated Long-Term, Durable Survival Benefit Versus Sunitinib as First-Line Treatment for Patients With Advanced RCC

(Read Announcement)

Merck Announced Phase 3 KEYNOTE-A18 Trial Met Primary Endpoint of Progression-Free Survival (PFS) in Patients With Newly Diagnosed High-Risk Locally Advanced Cervical Cancer

(Read Announcement)

KEYTRUDA Plus Trastuzumab and Chemotherapy Met Primary Endpoint of PFS as First-Line Treatment in Patients With HER2-Positive Advanced Gastric or Gastroesophageal Junction Adenocarcinoma

(Read Announcement)

Vaccines

Merck Announced V116, an Investigational, 21-Valent Pneumococcal Conjugate Vaccine Specifically Designed for Adults, Met Key Immunogenicity and Safety Endpoints in Two Phase 3 Trials

(Read Announcement)

Other Pipeline Updates

FDA Approved New Indication for Merck’s PREVYMIS for Prevention of Cytomegalovirus Disease in High-Risk Adult Kidney Transplant Recipients

(Read Announcement)

Merck Presented Phase 2a Data for Efinopegdutide (MK-6024), an Investigational GLP-1/Glucagon Receptor Co-agonist, in Patients With Nonalcoholic Fatty Liver Disease, at EASL 2023; Additionally, Efinopegdutide Was Granted Fast Track Designation by the FDA for the Treatment of Nonalcoholic Steatohepatitis (NASH)

(Read Announcement)

Merck Received Positive European Union Committee for Medicinal Products for Human Use (CHMP) Opinion for Gefapixant

(Read Announcement)

Full-Year 2023 Financial Outlook

The following table summarizes the company’s full-year financial outlook.

Sales*

$58.6 to $59.6 billion

Non-GAAP Gross margin2

Approximately 77%

Non-GAAP Operating expenses2**

$34.0 to $34.6 billion

Non-GAAP Other (income) expense, net2

Approximately $100 million

Non-GAAP Effective tax rate2***

30.5% to 31.5%

Non-GAAP EPS2****

$2.95 to $3.05

Share count (assuming dilution)

2.55 billion

*Includes approximately $1.0 billion of LAGEVRIO sales. The company does not have any non-GAAP adjustments to sales.

**Includes an aggregate $11.6 billion of R&D expenses related to the Prometheus and Imago BioSciences, Inc. (Imago) acquisitions and upfront payment for the license and collaboration agreement with Kelun-Biotech (a holding subsidiary of Sichuan Kelun Pharmaceutical Co., Ltd). Outlook does not assume any additional significant potential business development transactions.

***Includes a negative impact of 15 percentage points from the one-time charge for the acquisition of Prometheus.

****Includes $4.53 of one-time charges related to the Prometheus and Imago acquisitions and upfront payment to Kelun-Biotech.

Merck has not provided a reconciliation of forward-looking non-GAAP gross margin, non-GAAP operating expenses, non-GAAP other (income) expense, net, non-GAAP effective tax rate and non-GAAP EPS to the most directly comparable GAAP measures, given it cannot predict with reasonable certainty the amounts necessary for such a reconciliation, including intangible asset impairment charges, legal settlements, and gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds, without unreasonable effort. These items are inherently difficult to forecast and could have a significant impact on the company’s future GAAP results.

Merck continues to experience strong global demand for key growth products, particularly in oncology and vaccines. As a result, Merck is raising and narrowing its full-year sales outlook. Merck now expects full-year sales to be between $58.6 billion and $59.6 billion, including a negative impact of foreign exchange of approximately 2 percentage points, at mid-July 2023 exchange rates. This full-year outlook continues to include approximately $1.0 billion of LAGEVRIO sales.

Merck’s full-year non-GAAP effective income tax rate is expected to be between 30.5% and 31.5%, including an unfavorable impact of approximately 15 percentage points from the non-tax deductible one-time charge for the acquisition of Prometheus.

Merck now expects its full-year non-GAAP EPS to be between $2.95 and $3.05, including a negative impact of foreign exchange of approximately 5 percentage points, at mid-July 2023 exchange rates. This revised non-GAAP EPS range reflects the following, which were not previously included in the outlook:

Additional strength in the business of approximately $0.24 per share.
A charge of $10.2 billion, or $4.02 per share, for the acquisition of Prometheus.
Estimated 2023 expense of approximately $0.14 per share to be incurred to finance the Prometheus acquisition and to advance the acquired assets.
A less than 1%, or approximately $0.02 per share, incremental negative impact of foreign exchange.
The non-GAAP EPS range excludes acquisition- and divestiture-related costs and costs related to restructuring programs, as well as income and losses from investments in equity securities, and a previously disclosed charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Tuesday, Aug. 1, at 8 a.m. ET via this weblink. A replay of the webcast, along with the sales and earnings news release, supplemental financial disclosures, prepared remarks and slides highlighting the results, will be available at www.merck.com.

All participants may join the call by dialing (888) 769-8514 (U.S. and Canada Toll-Free) or (517) 308-9208 and using the access code 8206435.