On February 1, 2024 Merck (NYSE: MRK), known as MSD outside the United States and Canada, reported financial results for the fourth quarter and full year of 2023 (Press release, Merck & Co, FEB 1, 2024, View Source [SID1234639781]).
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"2023 was another very strong year for Merck. I am extremely pleased by the progress we’ve made to develop and deliver transformative therapies and vaccines that will help save and improve lives around the world. We reached more than 500 million people with our medicines last year alone, over half of which were donations, including through our program to treat river blindness," said Robert M. Davis, chairman and chief executive officer, Merck. "We also made investments of approximately $30 billion in research and development in our ongoing effort to discover, develop and collaborate to propel the next generation of impactful innovations. As we move forward, I’m confident that our strong momentum will continue, underpinned by the unwavering dedication of our talented global team."
Financial Summary
$ in millions, except EPS amounts
Fourth Quarter
Year Ended
2023
2022
Change
Change Ex-Exchange
Dec. 31, 2023
Dec. 31, 2022
Change
Change Ex-Exchange
Sales
$14,630
$13,830
6%
7%
$60,115
$59,283
1%
4%
GAAP net (loss) income1
(1,226)
3,017
N/M
N/M
365
14,519
-97%
-95%
Non-GAAP net income that excludes certain items1,2*
66
4,129
-98%
N/M
3,837
19,005
-80%
-75%
GAAP EPS
(0.48)
1.18
N/M
N/M
0.14
5.71
-98%
-95%
Non-GAAP EPS that excludes certain items2*
0.03
1.62
-98%
N/M
1.51
7.48
-80%
-75%
*Refer to table on page 9.
N/M – Not meaningful
Generally Accepted Accounting Principles (GAAP) loss/earnings per share (EPS) assuming dilution was a loss per share of $0.48 for the fourth quarter and EPS of $0.14 for the full year of 2023. Non-GAAP EPS was $0.03 for the fourth quarter and $1.51 for the full year of 2023. GAAP loss per share and non-GAAP EPS in the fourth quarter of 2023 include a charge of $1.69 per share related to the collaboration with Daiichi Sankyo. GAAP and non-GAAP EPS for the full years of 2023 and 2022 include charges of $6.21 and $0.22 per share, respectively, related to certain collaborations, licensing agreements and asset acquisitions.
Non-GAAP EPS excludes acquisition- and divestiture-related costs, including pretax intangible asset impairment research and development (R&D) charges of $779 million in the fourth quarter and full year of 2023 related to gefapixant, and $780 million and $1.7 billion in the fourth quarter and full year of 2022, respectively, primarily related to nemtabrutinib. Non-GAAP EPS also excludes restructuring costs, including costs for the recently approved 2024 Restructuring Program, as well as income and losses from investments in equity securities.
Fourth-Quarter Sales Performance
The following table reflects sales of the company’s top products and significant performance drivers.
Fourth Quarter
$ in millions
2023
2022
Change
Change Ex-Exchange
Commentary
Total Sales
$14,630
$13,830
6%
7%
Pharmaceutical
13,141
12,180
8%
8%
Increase driven by growth in oncology, vaccines and hospital acute care, partially offset by a decline in virology, due to LAGEVRIO, and diabetes. Excluding LAGEVRIO and impact of foreign exchange, growth of 14%.
KEYTRUDA
6,608
5,450
21%
22%
Growth driven by increased global uptake in earlier-stage indications, including triple-negative breast cancer and renal cell carcinoma (RCC), and continued strong global demand from metastatic indications.
GARDASIL/GARDASIL 9
1,871
1,470
27%
27%
Growth due to strong global demand, particularly in China, and public-sector buying patterns in the U.S.
JANUVIA/JANUMET
787
913
-14%
-13%
Decline primarily due to generic competition in several international markets, particularly in Europe, and lower demand in the U.S.
PROQUAD, M-M-R II and VARIVAX
545
526
4%
3%
Growth largely due to higher pricing in the U.S.
BRIDION
429
441
-3%
-3%
Decline primarily due to generic competition in certain ex-U.S. markets, particularly in Europe, partially offset by higher demand in the U.S.
Lynparza*
315
292
8%
8%
Growth driven primarily by higher pricing in the U.S.
Lenvima*
226
216
5%
5%
Growth primarily due to higher demand in the U.S., partially offset by timing of shipments in China.
LAGEVRIO
193
825
-77%
-76%
Decline due to nonrecurrence of sales in the U.K. and lower demand in Japan and Australia.
ROTATEQ
185
139
34%
33%
Growth primarily due to public-sector buying patterns in the U.S. and timing of shipments in China.
VAXNEUVANCE
176
138
28%
26%
Growth largely driven by launches in Europe and continued uptake for the pediatric indication in the U.S. Prior-year quarter benefited from inventory stocking in the U.S. in preparation for pediatric launch.
Animal Health
1,278
1,230
4%
4%
Growth primarily driven by higher demand for Companion Animal products.
Livestock
808
814
-1%
0%
Decline primarily due to timing of shipments for ruminant products, largely offset by higher pricing across the product portfolio and higher demand for swine products.
Companion Animal
470
416
13%
12%
Growth primarily due to higher demand and timing of shipments for BRAVECTO line of products, as well as higher pricing. Sales of BRAVECTO were $197 million and $168 million in the current and prior-year quarters, respectively, which represented growth of 18%, or 19% excluding the impact of foreign exchange.
Other Revenues**
211
420
-50%
-1%
Decline primarily due to impact of revenue hedging activities.
*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.
Full-Year Revenue Performance
The following table reflects sales of the company’s top pharmaceutical products, as well as sales of Animal Health products.
Year Ended
$ in millions
Dec. 31, 2023
Dec. 31, 2022
Change
Change Ex-Exchange
Total Sales
$60,115
$59,283
1%
4%
Pharmaceutical
53,583
52,005
3%
5%
KEYTRUDA
25,011
20,937
19%
21%
GARDASIL/GARDASIL 9
8,886
6,897
29%
33%
JANUVIA/JANUMET
3,366
4,513
-25%
-23%
PROQUAD, M-M-R II and VARIVAX
2,368
2,241
6%
6%
BRIDION
1,842
1,685
9%
11%
LAGEVRIO
1,428
5,684
-75%
-74%
Lynparza*
1,199
1,116
7%
9%
Lenvima*
960
876
10%
11%
ROTATEQ
769
783
-2%
-1%
VAXNEUVANCE
665
170
N/M
N/M
Animal Health
5,625
5,550
1%
3%
Livestock
3,337
3,300
1%
4%
Companion Animal
2,288
2,250
2%
3%
Other Revenues**
907
1,728
-48%
-15%
*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.
N/M – Not meaningful
Full-year 2023 pharmaceutical sales grew 3% to $53.6 billion. Pharmaceutical sales growth was primarily driven by higher sales in oncology, particularly KEYTRUDA, higher sales of vaccines, reflecting strong growth of combined sales of GARDASIL/GARDASIL 9 and VAXNEUVANCE, as well as growth in hospital acute care products, including PREVYMIS and BRIDION. Pharmaceutical sales growth in 2023 was partially offset by lower sales of the COVID-19 medication LAGEVRIO, as well as lower sales of JANUVIA and JANUMET, primarily reflecting generic competition in many ex-U.S. markets and lower demand in the U.S., and lower sales of PNEUMOVAX 23 as the market continues to shift toward newer adult pneumococcal conjugate vaccines. Pharmaceutical sales growth for the full year of 2023 was 14% excluding LAGEVRIO and the unfavorable impact of foreign exchange.
Full-year 2023 Animal Health sales grew 1% to $5.6 billion. Excluding the unfavorable impact of foreign exchange, Animal Health sales grew 3%, primarily due to higher pricing. Full-year sales growth was also driven by higher demand for livestock products, led by poultry and swine products, partially offset by lower demand for ruminant products. Sales of BRAVECTO were $1.1 billion in 2023, which represented growth of 4%, or 5% excluding the impact of foreign exchange, primarily reflecting higher pricing.
Fourth-Quarter and Full-Year 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
Fourth Quarter 2023
Cost of sales
$3,911
$454
$117
$-
$3,340
Selling, general and administrative
2,804
24
29
–
2,751
Research and development
9,628
790
–
–
8,838
Restructuring costs
255
–
255
–
–
Other (income) expense, net
78
(35)
–
(61)
174
Fourth Quarter 2022
Cost of sales
$3,881
$482
$38
$-
$3,361
Selling, general and administrative
2,687
39
20
–
2,628
Research and development
3,775
740
–
–
3,035
Restructuring costs
49
–
49
–
–
Other (income) expense, net
(75)
(69)
–
80
(86)
$ in millions
GAAP
Acquisition-
and
Divestiture-
Related Costs3
Restructuring
Costs
(Income)
Loss From
Investments
in Equity
Securities
Certain Other Items
Non-
GAAP2
Year Ended Dec. 31, 2023
Cost of sales
$16,126
$2,018
$211
$-
$-
$13,897
Selling, general and administrative
10,504
86
122
–
–
10,296
Research and development
30,531
819
1
–
–
29,711
Restructuring costs
599
–
599
–
–
–
Other (income) expense, net
466
(47)
–
(279)
573
219
Year Ended Dec. 31, 2022
Cost of sales
$17,411
$2,059
$205
$-
$-
$15,147
Selling, general and administrative
10,042
176
94
–
–
9,772
Research and development
13,548
1,676
30
–
–
11,842
Restructuring costs
337
–
337
–
–
–
Other (income) expense, net
1,501
(207)
–
1,348
–
360
GAAP Expense, EPS and Related Information
Gross margin was 73.3% for the fourth quarter of 2023 compared with 71.9% for the fourth quarter of 2022. The increase was primarily due to the favorable impacts of lower LAGEVRIO sales, which have a low gross margin, lower manufacturing facilities costs and product mix, partially offset by the unfavorable impacts of foreign exchange and higher restructuring costs. Gross margin was 73.2% for the full year of 2023 compared with 70.6% for the full year of 2022. The increase was primarily due to the favorable impacts of lower LAGEVRIO sales, product mix, lower manufacturing facilities costs, and lower revenue from third-party manufacturing arrangements, partially offset by the unfavorable impact of foreign exchange.
Selling, general and administrative (SG&A) expenses were $2.8 billion in the fourth quarter of 2023, an increase of 4% compared with the fourth quarter of 2022. The increase was primarily due to higher administrative costs, including higher compensation and benefit costs, partially offset by lower promotional spending. Full-year 2023 SG&A expenses were $10.5 billion, an increase of 5% compared with the full year 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 and lower acquisition- and divestiture-related costs.
R&D expenses were $9.6 billion in the fourth quarter of 2023 compared with $3.8 billion in the fourth quarter of 2022. R&D expenses were $30.5 billion for the full year of 2023 compared with $13.5 billion for the full year of 2022. The increase in the fourth quarter and full year of 2023 reflects a $5.5 billion charge for the collaboration with Daiichi Sankyo, and higher development costs due to spending on clinical programs, including newly acquired programs, as well as higher compensation and benefit costs (reflecting in part increased headcount). The increase in R&D expenses for the full year was also due to charges of $11.4 billion in the aggregate for the acquisitions of Prometheus Biosciences, Inc. (Prometheus) and Imago BioSciences, Inc. (Imago). The increase in R&D expenses for the full year was partially offset by lower intangible asset impairment charges in 2023 and charges of $690 million in the aggregate in 2022 for collaboration and licensing agreements with Moderna, Inc. (Moderna), Orna Therapeutics (Orna) and Orion Corporation (Orion).
Other (income) expense, net, was $78 million of expense in the fourth quarter of 2023 compared with $75 million of income in the fourth quarter of 2022, primarily due to higher exchange losses and higher net interest expense, partially offset by net gains from investments in equity securities for the fourth quarter of 2023 compared with net losses from investments in equity securities for the fourth quarter of 2022, and lower pension settlement costs. Other (income) expense, net, was $466 million of expense in the full year of 2023 compared with $1.5 billion of expense in the full year of 2022, primarily due to net gains from investments in equity securities in 2023 compared with net losses from investments in equity securities in 2022, and lower pension settlement costs, partially offset by a $572.5 million charge in 2023 related to settlements with certain plaintiffs in the Zetia antitrust litigation.
The effective tax rate was 40.1% for the fourth quarter of 2023 compared with 14.1% in the fourth quarter of 2022. The effective tax rate for the fourth quarter of 2023 includes a 29.2 percentage point impact resulting from the charge for the Daiichi Sankyo collaboration. The effective tax rate was 80.0% for the full year of 2023 compared with 11.7% for the full year of 2022. The full-year 2023 effective tax rate reflects an aggregate 65.6 percentage point unfavorable impact, resulting from charges for asset acquisitions (for which no tax benefits were recognized) as well as the charge for the Daiichi Sankyo collaboration.
GAAP loss per share was $0.48 for the fourth quarter of 2023 compared with EPS of $1.18 for the fourth quarter of 2022, primarily driven by the charge in 2023 related to the collaboration with Daiichi Sankyo, the unfavorable impact of foreign exchange and higher restructuring costs, partially offset by a beneficial impact from the tax rate and operational strength in the business. GAAP EPS was $0.14 for the full year of 2023 compared with EPS of $5.71 for the full year of 2022. The EPS decline in 2023 was primarily due to higher charges for certain business development transactions, the unfavorable impact of foreign exchange and the tax rate, as well as a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation, partially offset by the beneficial impacts of operational strength in the business, better performance from equity investments and lower intangible asset impairment charges.
Non-GAAP Expense, EPS and Related Information
Non-GAAP gross margin was 77.2% for the fourth quarter of 2023 compared with 75.7% for the fourth quarter of 2022. Non-GAAP gross margin was 76.9% for the full year of 2023 compared with 74.4% for the full year of 2022. The non-GAAP gross margin improvement in the fourth quarter and full year of 2023 was primarily due to the favorable impacts of lower LAGEVRIO sales, which have a low gross margin, product mix, and lower manufacturing facilities costs. The increase in non-GAAP gross margin for the full year was also due to lower revenue from third-party manufacturing arrangements. The non-GAAP gross margin improvement in the fourth quarter and full year of 2023 was partially offset by the unfavorable impact of foreign exchange.
Non-GAAP SG&A expenses were $2.8 billion for the fourth quarter of 2023 compared with $2.6 billion for the fourth quarter of 2022. The increase was primarily due to higher administrative costs, including higher compensation and benefit costs, partially offset by lower promotional spending. Full-year 2023 non-GAAP SG&A expenses were $10.3 billion, an increase of 5% compared with the full year 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 $8.8 billion in the fourth quarter of 2023 compared with $3.0 billion in the fourth quarter of 2022. Non-GAAP R&D expenses were $29.7 billion for the full year of 2023 compared with $11.8 billion for the full year of 2022. The increase in the fourth quarter and full year of 2023 reflects a $5.5 billion charge for the collaboration with Daiichi Sankyo, and higher development costs due to spending on clinical programs, including newly acquired programs, as well as higher compensation and benefit costs (reflecting in part increased headcount). The increase in non-GAAP R&D expenses for the full year was also due to charges of $11.4 billion in the aggregate for the acquisitions of Prometheus and Imago. The increase in R&D expenses for the full year was partially offset by charges of $690 million in the aggregate in 2022 for collaboration and licensing agreements with Moderna, Orna and Orion.
Non-GAAP other (income) expense, net, was $174 million of expense in the fourth quarter of 2023 compared with $86 million of income in the fourth quarter of 2022, primarily due to higher exchange losses and higher net interest expense, partially offset by lower pension settlement costs. Non-GAAP other (income) expense, net, was $219 million of expense in the full year of 2023 compared with $360 million of expense in the full year of 2022, primarily due to lower pension settlement costs.
The non-GAAP effective tax rate was 114.2% for the fourth quarter of 2023 compared with 15.6% in the fourth quarter of 2022. The non-GAAP effective tax rate for the fourth quarter of 2023 includes a 101.1 percentage point unfavorable impact resulting from the charge for the Daiichi Sankyo collaboration. The non-GAAP effective tax rate was 35.8% for the full year of 2023 compared with 14.2% for the full year of 2022. The full-year 2023 non-GAAP effective tax rate reflects an aggregate 21.2 percentage point unfavorable impact, resulting from charges for asset acquisitions (for which no benefits were recognized) as well as the charge for the Daiichi Sankyo collaboration.
Non-GAAP EPS was $0.03 for the fourth quarter of 2023 compared with $1.62 for the fourth quarter of 2022. The non-GAAP EPS decline in the fourth quarter was primarily due to the charge in 2023 related to the collaboration with Daiichi Sankyo and the unfavorable impact of foreign exchange, partially offset by a beneficial impact from the tax rate and operational strength in the business. Non-GAAP EPS was $1.51 for the full year of 2023 compared with $7.48 for the full year of 2022. The non-GAAP EPS decline for the full year was primarily due to higher charges for certain business development transactions, the unfavorable impact of foreign exchange and the tax rate, partially offset by operational strength in the business.
A reconciliation of GAAP to non-GAAP net (loss) income and (loss) earnings per share is provided in the table that follows.
Fourth Quarter
Year Ended
$ in millions, except EPS amounts
2023
2022
Dec. 31, 2023
Dec. 31, 2022
EPS
GAAP EPS
$(0.48)
$1.18
$0.14
$5.71
Difference
0.51
0.44
1.37
1.77
Non-GAAP EPS that excludes items listed below2
$0.03
$1.62
$1.51
$7.48
Net (Loss) Income
GAAP net (loss) income1
$(1,226)
$3,017
$365
$14,519
Difference
1,292
1,112
3,472
4,486
Non-GAAP net income that excludes items listed below1,2
$66
$4,129
$3,837
$19,005
Excluded Items:
Acquisition- and divestiture-related costs3
$1,233
$1,192
$2,876
$3,704
Restructuring costs
401
107
933
666
(Income) loss from investments in equity securities
(61)
80
(279)
1,348
Charge for Zetia antitrust litigation settlements
–
–
573
–
Increase to net loss/decrease to net income before taxes
1,573
1,379
4,103
5,718
Estimated income tax (benefit) expense
(281)
(267)
(631)
(1,232)
Increase to net loss/decrease to net income
$1,292
$1,112
$3,472
$4,486
2024 Restructuring Program
Merck recently approved a new restructuring program (2024 Restructuring Program) intended to continue the optimization of the company’s Human Health global manufacturing network as the future pipeline shifts to new modalities, and also to optimize the Animal Health global manufacturing network to improve supply reliability and increase efficiency. The company recorded charges in its GAAP results of $190 million related to the 2024 Restructuring Program for the fourth quarter and full year of 2023.
Pipeline and Portfolio Highlights
In the fourth quarter, Merck continued to make significant progress advancing its broad portfolio and pipeline across key therapeutic areas, representing continued momentum toward addressing patient needs.
In oncology, Merck received multiple U.S. Food and Drug Administration (FDA) approvals, including KEYTRUDA plus Padcev for the first-line treatment of adult patients with locally advanced or metastatic urothelial cancer and WELIREG for the treatment of certain patients with previously treated advanced RCC, among other approvals. The FDA also accepted and granted Priority Review to Merck and Daiichi Sankyo’s Biologics License Application (BLA) for patritumab deruxtecan for the treatment of certain patients with previously treated locally advanced or metastatic EGFR-mutated non-small cell lung cancer (NSCLC). The FDA set a Prescription Drug User Fee Act (PDUFA), or target action, date of June 26, 2024. In addition, Merck showed meaningful progress in its robust oncology pipeline, initiating Phase 3 trials for four investigational medicines, including bomedemstat (LSD1 inhibitor), nemtabrutinib (BTK inhibitor), MK-2870 (anti-TROP2 antibody-drug conjugate) and MK-5684 (CYP11A1 inhibitor).
In vaccines, Merck received Priority Review from the FDA for a BLA for V116, the company’s investigational, 21-valent pneumococcal conjugate vaccine specifically designed to protect adults, based on results from multiple Phase 3 trials. The FDA set a PDUFA date of June 17, 2024. If approved, V116 would be the first pneumococcal conjugate vaccine to include serotypes responsible for approximately 83 percent of adult invasive pneumococcal disease in individuals 65 and older, according to U.S. Centers for Disease Control and Prevention data from 2018-2021.
In hospital acute care, the European Commission (EC) approved PREVYMIS for prevention of cytomegalovirus (CMV) disease in high-risk adult kidney transplant recipients and extended 200-day dosing in adult hematopoietic stem cell transplant (HSCT) recipients who are at high risk for late CMV infection and disease.
Merck continued to augment its pipeline through business development, and in January 2024, entered into a definitive agreement to acquire Harpoon Therapeutics, Inc. (Harpoon), for an approximate total equity value of $680 million, further diversifying its oncology pipeline.
Notable recent news releases on Merck’s pipeline and portfolio are provided in the table that follows.
Oncology
FDA Approved Expanded Indication for KEYTRUDA Plus Padcev as First-Line Treatment for Adult Patients With Locally Advanced or Metastatic Urothelial Cancer, Based on Results From Phase 3 KEYNOTE-A39 Trial
(Read Announcement)
FDA Approved Merck’s WELIREG as Treatment for Patients With Advanced RCC Following a PD-1 or PD-L1 Inhibitor and a VEGF-TKI, Based on Results From LITESPARK-005 Trial
(Read Announcement)
FDA Approved Merck’s KEYTRUDA Plus Chemoradiotherapy as Treatment for Patients With FIGO 2014 Stage III-IVA Cervical Cancer, Based on Results From Phase 3 KEYNOTE-A18 Trial
(Read Announcement)
FDA Approved Merck’s KEYTRUDA Plus Chemotherapy as First-Line Treatment for Locally Advanced Unresectable or Metastatic HER2-Negative Gastric or Gastroesophageal Junction (GEJ) Adenocarcinoma, Based on Results From Phase 3 KEYNOTE-859 Trial
(Read Announcement)
FDA Approved Merck’s KEYTRUDA Plus Gemcitabine and Cisplatin as Treatment for Patients With Locally Advanced Unresectable or Metastatic Biliary Tract Cancer, Based on Results From Phase 3 KEYNOTE-966 Trial
(Read Announcement)
EC Approved KEYTRUDA Plus Chemotherapy for New First-Line Indications in Advanced HER2-Negative Gastric or GEJ Adenocarcinoma in Tumors Expressing PD-L1 (CPS ≥1) and Advanced Biliary Tract Cancer, Based on Results From Phase 3 KEYNOTE-859 and KEYNOTE-966 Trials
(Read Announcement)
FDA Granted Priority Review to Merck and Daiichi Sankyo’s BLA for Patritumab Deruxtecan for the Treatment of Certain Patients With Previously Treated Locally Advanced or Metastatic EGFR-Mutated NSCLC, Based on Results From Phase 2 HERTHENA-Lung01 Trial; FDA Set PDUFA Date of June 26, 2024
(Read announcement)
Merck Announced Phase 3 Trial Initiations for Bomedemstat, Nemtabrutinib, MK-2870 and MK-5684, Four Investigational Candidates From Promising Hematology and Oncology Pipeline
(Read announcement)
Merck and Moderna Initiated INTerpath-002, a Phase 3 Study Evaluating V940 (mRNA-4157) in Combination With KEYTRUDA for Adjuvant Treatment of Patients With Certain Types of Resected NSCLC
(Read Announcement)
KEYTRUDA Reduced the Risk of Death by 38% Versus Placebo as Adjuvant Therapy for Patients With RCC at an Increased Risk of Recurrence Following Nephrectomy, Based on Results From Phase 3 KEYNOTE-564 Trial
(Read Announcement)
KEYTRUDA Significantly Improved Disease-Free Survival as Adjuvant Therapy Versus Observation in High-Risk Patients With Localized Muscle-Invasive and Locally Advanced Urothelial Carcinoma After Surgery, Based on Results From Phase 3 AMBASSADOR/KEYNOTE-123 Trial
(Read Announcement)
Moderna and Merck Announced V940 (mRNA-4157) in Combination With KEYTRUDA Demonstrated Continued Improvement in Recurrence-Free Survival and Distant Metastasis-Free Survival in Patients With High-Risk Stage III/IV Melanoma Following Complete Resection Versus KEYTRUDA at Three Years, Based on Results From Phase 2b Randomized KEYNOTE-942/mRNA-4157-P201 Study
(Read Announcement)
Vaccines
FDA Granted Priority Review to Merck’s New BLA for V116, an Investigational, 21-valent Pneumococcal Conjugate Vaccine Specifically Designed to Protect Adults, Based on Results From Multiple Phase 3 Trials; FDA Set PDUFA Date of June 17, 2024
(Read Announcement)
Merck’s V116, an Investigational, 21-valent Pneumococcal Conjugate Vaccine Specifically Designed to Protect Adults, Demonstrated Superior Immunogenicity for 10 of 11 Unique Serotypes Compared to PCV20 in Adults 50 Years of Age and Older, Based on Results From Phase 3 STRIDE-3 Trial
(Read Announcement)
Full-Year 2024 Financial Outlook
The following table summarizes the company’s full-year financial outlook.
Full Year 2024
Sales*
$62.7 to $64.2 billion
Non-GAAP gross margin2
Approximately 80.5%
Non-GAAP operating expenses2**
$25.1 to $26.1 billion
Non-GAAP other (income) expense, net2
Approximately $200 million expense
Non-GAAP effective tax rate2
14.5% to 15.5%
Non-GAAP EPS2***
$8.44 to $8.59
Share count (assuming dilution)
Approximately 2.54 billion
*The company does not have any non-GAAP adjustments to sales.
**Includes approximately $650 million of R&D expense related to the recently announced Harpoon acquisition, which is expected to close in the first half of 2024. Outlook does not assume any additional significant potential business development transactions.
***Includes a one-time charge of approximately $0.26 per share related to the Harpoon acquisition.
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 income 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 anticipates full-year 2024 sales to be between $62.7 billion and $64.2 billion, including a negative impact of foreign exchange of approximately 2% at mid-January 2024 exchange rates. The negative impact is primarily due to the devaluation of the Argentine peso, which the company expects will largely be offset by inflation-related price increases, consistent with market practice.
The outlook for operating expenses reflects incremental R&D spending expected to be incurred to advance the development of promising programs related to the acquisitions of Prometheus, Imago and Harpoon, as well as the collaborations with Daiichi Sankyo and Kelun-Biotech.
Merck’s full-year non-GAAP effective income tax rate is expected to be between 14.5% and 15.5%.
Merck expects full-year 2024 non-GAAP EPS to be between $8.44 and $8.59, including a negative impact of foreign exchange of approximately $0.25 per share. In 2023, non-GAAP EPS of $1.51 was negatively impacted by charges of $6.21 per share related to certain acquisitions and collaboration agreements.
In early January 2024, Merck announced the acquisition of Harpoon, which is expected to close in the first half of 2024, and result in a non-tax deductible charge of approximately $650 million of R&D expense included in non-GAAP results. The impact of the transaction on expected full-year non-GAAP EPS is approximately $0.26 per share, which is included in the 2024 outlook.
Consistent with past practice, the financial outlook does not assume additional significant potential business development transactions.
Earnings Conference Call
Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Thursday, Feb. 1, at 9 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 (800) 779-6561 (U.S. and Canada Toll-Free) or (773) 756-4619 and using the access code 5958465.