Pfizer Reports Strong Second-Quarter 2024 Results And Raises 2024 Guidance

On July 30, 2024 Pfizer Inc. (NYSE: PFE) reported financial results for the second quarter of 2024 and raised its full-year 2024 guidance(1) for both Revenues and Adjusted(2) diluted EPS (Press release, Pfizer, JUL 30, 2024, View Source [SID1234645167]).

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The second-quarter 2024 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: "We are driving progress toward our 2024 strategic priorities through solid execution across the company. I am pleased with the strong performance of our product portfolio in the second quarter led by several of our acquired products, key in-line brands and recent commercial launches. Notably, we achieved exceptional growth in our Oncology portfolio, with strong revenue contribution from our legacy-Seagen products.

"Overall, I am encouraged by our performance in the first half of 2024 and we remain focused on making a difference in the lives of patients as we continue to advance and strengthen our company."
David Denton, Chief Financial Officer and Executive Vice President, stated: "This was Pfizer’s first quarter of topline revenue growth, on a year-over-year basis, since the fourth quarter of 2022 when our COVID revenues peaked. Importantly, the strong 14% operational revenue growth of our non-COVID products in the second quarter demonstrates our continued focus on commercial execution. In support of our stated strategic priority to realign our cost base, we continue to progress our cost realignment program. Additionally, with our more recent announcement of the first phase of our Manufacturing Optimization Program, we believe we are setting the foundation for future margin expansion."

OVERALL RESULTS

In the first quarter of 2024, Pfizer reclassified royalty income (substantially all of which is related to our Biopharma segment) from Other (income)/deductions––net to revenues and began presenting Royalty revenues as a separate line item within Total revenues in our consolidated statements of operations. Prior-period amounts have been recast to conform to the current presentation.
At the beginning of 2024, Pfizer made changes in our commercial organization to incorporate Seagen Inc. (Seagen) and improve focus, speed and execution. Specifically, within our Biopharma reportable segment Pfizer created the Pfizer Oncology Division, the Pfizer U.S. Commercial Division, and the Pfizer International Commercial Division. See the Item 1. Business––Commercial Operations section of Pfizer’s 2023 Annual Report on Form 10-K (available at www.pfizer.com).
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).
Results for the second quarter and first six months of 2024 and 2023(8) are summarized below.
($ in millions, except
per share amounts) Second-Quarter Six Months
2024 2023 Change 2024 2023 Change
Revenues $ 13,283 $ 13,007 2% $ 28,162 $ 31,492 (11%)
Reported(4) Net Income
41 2,327 (98%) 3,156 7,870 (60%)
Reported(4) Diluted EPS
0.01 0.41 (98%) 0.55 1.38 (60%)
Adjusted(2) Income
3,400 3,839 (11%) 8,074 10,876 (26%)
Adjusted(2) Diluted EPS
0.60 0.67 (11%) 1.42 1.90 (25%)

REVENUES
($ in millions) Second-Quarter Six Months
2024 2023 % Change 2024 2023 % Change
Total Oper. Total Oper.
Global Biopharmaceuticals Business (Biopharma) $ 12,991 $ 12,690 2% 4% $ 27,595 $ 30,863 (11%) (10%)
Pfizer CentreOne (PC1)
278 307 (10%) (9%) 535 615 (13%) (13%)
Pfizer Ignite
15 10 47% 47% 32 14 * *
TOTAL REVENUES $ 13,283 $ 13,007 2% 3% $ 28,162 $ 31,492 (11%) (10%)
* Indicates calculation not meaningful.

2024 FINANCIAL GUIDANCE(1)
Pfizer raises full-year 2024 revenue guidance by $1 billion at the midpoint to a range of $59.5 to $62.5 billion and raises Adjusted(2) diluted EPS guidance by $0.30 at the midpoint to $2.45 to $2.65. The company’s updated guidance for revenue includes approximately $8.5 billion in anticipated revenues for Comirnaty(3) and Paxlovid, approximately $5 billion and $3.5 billion, respectively. Including the contribution from Seagen and excluding revenues from Comirnaty(3) and Paxlovid, Pfizer now expects to achieve full-year 2024 operational revenue growth of 9% to 11% compared to 2023 revenues, up from 8% to 10% provided on January 30, 2024.
The updated 2024 Adjusted(2) diluted EPS guidance takes into consideration our strong first half performance as well as our continued confidence in the underlying strength of our business.
Pfizer’s updated financial guidance(1) is presented below.
Revenues
$59.5 to $62.5 billion
(previously $58.5 to $61.5 billion)
Adjusted(2) SI&A Expenses
$13.8 to $14.8 billion
Adjusted(2) R&D Expenses
$11.0 to $12.0 billion
Effective Tax Rate on Adjusted(2) Income
Approximately 13.0%
(previously approximately 15.0%)
Adjusted(2) Diluted EPS
$2.45 to $2.65
(previously $2.15 to $2.35)

Changes in foreign exchange rates have had a minimal incremental impact since full-year 2024 guidance was updated on May 1, 2024. Please refer to Press Release Footnote (1) for additional information.

CAPITAL ALLOCATION
During the first six months of 2024, 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
•Approximately $200 million invested in business development transactions.
▪Returning capital directly to shareholders through $4.8 billion of cash dividends, or $0.84 per share of common stock.
No share repurchases were completed to date in 2024. As of July 30, 2024, Pfizer’s remaining share repurchase authorization is $3.3 billion. Current financial guidance does not anticipate any share repurchases in 2024.
Second-quarter 2024 diluted weighted-average shares outstanding used to calculate Reported(4) and Adjusted(2) diluted EPS were 5,696 million shares.
QUARTERLY FINANCIAL HIGHLIGHTS (Second-Quarter 2024 vs. Second-Quarter 2023)
Second-quarter 2024 revenues totaled $13.3 billion, an increase of $277 million, or 2%, compared to the prior-year quarter, reflecting an operational increase of $447 million, or 3%, primarily due to growth contributions from several of our acquired products, key in-line products, and recent commercial launches, which more than offset both an expected decline in Comirnaty(3) revenues globally and an unfavorable impact of foreign exchange of $170 million, or 1%. Excluding contributions from Comirnaty(3) and Paxlovid, revenues totaled $12.8 billion, an increase of $1.6 billion, or 14%, operationally compared with the prior-year quarter.
Second-quarter 2024 Comirnaty(3) revenues of $195 million declined $1.3 billion, or 87%, operationally compared with the prior-year quarter, driven largely by lower contractual deliveries and demand in international markets, reflecting the anticipated seasonality of demand for vaccinations and as certain markets, including the U.S., transition to traditional commercial market sales.
Second-quarter 2024 Paxlovid revenues of $251 million increased $112 million, or 79%, operationally compared with the prior-year quarter, driven primarily by no second quarter 2023 U.S. sales in anticipation of transition to commercial markets in the second half of 2023, as well as increases in infections and demand in certain international markets in the second quarter of 2024.

Excluding contributions from Comirnaty(3) and Paxlovid, second-quarter 2024 operational revenue growth was driven primarily by:
▪Global revenues of $845 million from legacy Seagen, which was acquired in December of 2023;
▪Vyndaqel family (Vyndaqel, Vyndamax, Vynmac) globally, up 71% operationally, driven largely by continued strong demand, primarily in the U.S. and international developed markets;
▪Eliquis globally, up 8% operationally, driven primarily by continued oral anti-coagulant adoption and market share gains in the non-valvular atrial fibrillation indication in the U.S. and certain markets in Europe, partially offset by declines due to loss of patent-based exclusivity and generic competition in certain international markets; and
▪Nurtec ODT/Vydura globally, up 44% operationally, driven primarily by strong demand in the U.S. as well as recent launches in international markets;
partially offset primarily by lower revenues for:
▪Xeljanz globally, down 34% operationally, driven primarily by decreased prescription volumes globally resulting from ongoing shifts in prescribing patterns related to label changes, as well as lower net price in the U.S. due to unfavorable changes in channel mix and the impact of regulatory exclusivity expiry in Canada; and
▪Ibrance globally, down 8% operationally, driven primarily by lower demand due to competitive pressure globally and price decreases in certain international developed markets, partially offset by increased clinical trial supply orders in certain international developed markets versus prior year.

GAAP Reported(4) Statement of Operations Highlights
SELECTED REPORTED(4) COSTS AND EXPENSES
($ in millions) Second-Quarter Six Months
2024 2023 % Change 2024 2023 % Change
Total Oper. Total Oper.
Cost of Sales(4)
$ 3,300 $ 3,237 2% 5% $ 6,679 $ 8,122 (18%) (15%)
Percent of Revenues
24.8 % 24.9 % N/A N/A 23.7 % 25.8 % N/A N/A
SI&A Expenses(4)
3,717 3,497 6% 7% 7,212 6,914 4% 5%
R&D Expenses(4)
2,696 2,648 2% 2% 5,189 5,153 1% 1%
Acquired IPR&D Expenses(4)
6 33 (81%) (81%) 6 55 (88%) (88%)
Other (Income)/Deductions—net(4)
1,107 (75) * * 1,787 200 * *
Effective Tax Rate on Reported(4) Income
130.2 % (3.1 %) 4.8 % 7.5 %

* Indicates calculation not meaningful.
Second-quarter 2024 Cost of Sales(4) as a percentage of revenues was relatively flat compared with the prior-year quarter, and reflects favorable changes in sales mix, primarily driven by lower sales of Comirnaty(3), which resulted in a lower related charge for the 50% gross profit split with BioNTech and applicable royalty expenses in the quarter; offset by the amortization of the fair value step-up of inventory related to the Seagen acquisition.
Second-quarter 2024 SI&A Expenses(4) increased 7% operationally compared with the prior-year quarter, driven primarily by an increase in marketing and promotional expenses for recently launched and acquired products.
Second-quarter 2024 R&D Expenses(4) increased 2% operationally compared with the prior-year quarter, primarily due to increased spending to develop certain medicines acquired from Seagen, partially offset by lower spending primarily as a result of our cost realignment program.
The unfavorable period-over-period change in Other deductions—net(4) of $1.2 billion for the second quarter of 2024, compared with the prior-year quarter, was driven primarily by net losses on equity securities in the second quarter of 2024 versus net gains on equity securities recognized in the prior-year quarter, higher net interest expense and intangible asset impairment charges in the second quarter of 2024.
Pfizer’s effective tax rate on Reported(4) income for the second quarter of 2024 increased compared to the prior-year quarter primarily due to the non-recurrence of tax benefits related to global income tax resolutions in multiple tax jurisdictions spanning multiple tax years in the second quarter of 2023, partially offset by a favorable change in the jurisdictional mix of earnings in the second quarter of 2024.

Adjusted(2) Statement of Operations Highlights
SELECTED ADJUSTED(2) COSTS AND EXPENSES
($ in millions) Second-Quarter Six Months
2024 2023 % Change 2024 2023 % Change
Total Oper. Total Oper.
Adjusted(2) Cost of Sales
$ 2,768 $ 3,072 (10 %) (6 %) $ 5,804 $ 7,818 (26%) (23%)
Percent of Revenues 20.8 % 23.6 % N/A N/A 20.6 % 24.8 % N/A N/A
Adjusted(2) SI&A Expenses
3,669 3,419 7 % 8 % 7,123 6,769 5% 6%
Adjusted(2) R&D Expenses
2,671 2,627 2 % 2 % 5,147 5,118 1% 1%
Adjusted(2) Other (Income)/Deductions—net
258 (278) * * 555 (601) * *
Effective Tax Rate on Adjusted(2) Income
12.9%
6.8 % 15.1 % 11.6 %
* Indicates calculation not meaningful.

See the reconciliations of certain Reported(4) to non-GAAP Adjusted(2) financial measures and associated footnotes in the financial tables section of this press release.
RECENT NOTABLE DEVELOPMENTS (Since May 1, 2024)
Product Developments
Product/Project
Recent Development
Link
Adcetris
(brentuximab vedotin)
July 2024. Pfizer’s supplemental Biologics License Application (sBLA) for Adcetris in combination with lenalidomide and rituximab for patients with relapsed/refractory large B-cell lymphoma was accepted for review by the U.S. Food and Drug Administration (FDA). The FDA has set a Prescription Drug User Fee Act (PDUFA) action date of March 2025. If approved, this would be the eighth FDA-approved indication for Adcetris.
N/A
June 2024. Presented detailed overall survival (OS) results from the investigational Phase 3 ECHELON-3 study of Adcetris in combination with lenalidomide and rituximab for the treatment of patients with relapsed/refractory diffuse large B-cell lymphoma (DLBCL) at the 2024 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting. Detailed data from the study demonstrated the investigational Adcetris regimen reduced risk of death by 37 percent compared to chemotherapy alone, resulting in median OS of 13.8 months versus 8.5 months. The most frequently reported treatment-emergent adverse events Grade 3 or higher for the Adcetris versus placebo arms were neutropenia, thrombocytopenia and anemia.
Full Release
June 2024. Takeda and Pfizer announced positive results from the Phase 3 HD21 trial evaluating Adcetris in combination with intensive chemotherapy. The four-year analysis conducted and presented by the German Hodgkin Study Group (GHSG) at the 2024 ASCO (Free ASCO Whitepaper) Annual Meeting and at the European Hematology Association (EHA) (Free EHA Whitepaper) Annual Meeting showed superior progression-free survival (PFS) and improved tolerability for patients with newly diagnosed Stage IIb/III/IV classical Hodgkin Lymphoma compared to escalated doses of bleomycin, etoposide, doxorubicin, cyclophosphamide, vincristine, procarbazine, prednisone (eBEACOPP), a current standard of care regimen predominantly used in Europe in this setting.

Product/Project
Recent Development
Link
Comirnaty(3)
(COVID-19 Vaccine, mRNA)
June 2024. Announced the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) recommended marketing authorization for Pfizer and BioNTech’s Omicron JN.1-adapted monovalent COVID-19 vaccine (Comirnaty JN.1) for active immunization to prevent COVID-19 caused by SARS-CoV-2 in individuals 6 months of age and older. Subsequently, the European Commission (EC) authorized the vaccine on July 3, 2024.
Full Release
Durveqtix (fidanacogene elaparvovec)
July 2024. Announced the EC granted conditional marketing authorization for Durveqtix, a gene therapy for the treatment of severe and moderately severe hemophilia B (congenital factor IX deficiency) in adult patients without a history of factor IX inhibitors and without detectable antibodies to variant AAV serotype Rh74. This follows the EMA’s CHMP positive opinion adopted in May. Durveqtix has shown the potential to offer long-term bleed protection in a one-time dose, reducing or eliminating bleeds for appropriate patients with hemophilia B. The EC approval follows recent regulatory approvals by the FDA and Health Canada, where it is marketed as Beqvez.
Full Release
Elrexfio
(elranatamab-bcmm)
June 2024. Presented detailed OS results from the Phase 2 MagnetisMM-3 study of Elrexfio in patients with heavily pretreated relapsed or refractory multiple myeloma (RRMM) who had not received prior B-cell maturation antigen (BCMA)-directed therapy (i.e., BCMA-naïve; Cohort A; n=123) at EHA (Free EHA Whitepaper) 2024. With a median follow-up of 28.4 months (estimated by the reverse-Kaplan-Meier method), the study demonstrated a median OS of 24.6 months, with median PFS of 17.2 months for the full intent-to-treat cohort. The safety and tolerability of Elrexfio in MagnetisMM-3 were consistent with what have been previously observed.
Full Release
Lorbrena
(lorlatinib)
May 2024. Presented longer-term follow-up results from the Phase 3 CROWN trial evaluating Lorbrena versus Xalkori (crizotinib) in people with previously untreated, anaplastic lymphoma kinase (ALK)-positive advanced non-small cell lung cancer (NSCLC) at the ASCO (Free ASCO Whitepaper) Annual Meeting that were simultaneously published in the Journal of Clinical Oncology. Updated results showed an unprecedented 60% of patients remain alive without disease progression after five years, along with continued 81% reduction in risk of progression or death and 94% reduction in progression of brain metastases compared to Xalkori. The safety profiles of Lorbrena and Xalkori in the five-year follow-up were consistent with previous findings, with no new safety signals reported for Lorbrena.
Full Release

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.
Product/Project Recent Development Link
danuglipron
July 2024. Announced advancement of development of once-daily formulation of oral glucagon-like peptide-1 (GLP-1) receptor agonist, danuglipron. Based on results from the ongoing pharmacokinetic study (NCT06153758), the company has selected its preferred once-daily modified release formulation for danuglipron. With these results, and following a thorough analysis of previous Phase 2b data and trial design, Pfizer plans to conduct dose optimization studies in the second half of 2024 evaluating multiple doses of the preferred modified release formulation to inform the registration enabling studies.
Product/Project Recent Development Link
fordadistrogene movaparvovec
June 2024. Announced CIFFREO, a Phase 3 global, multicenter, randomized, double-blind, placebo-controlled study evaluating the investigational mini-dystrophin gene therapy, fordadistrogene movaparvovec, in ambulatory patients with Duchenne muscular dystrophy (DMD) did not meet its primary endpoint of improvement in motor function among boys 4 to 7 years of age treated with the gene therapy compared to placebo. Key secondary endpoints also did not show a significant difference between participants treated with fordadistrogene movaparvovec and placebo.
Full Release
giroctocogene fitelparvovec
July 2024. Announced positive topline results from the Phase 3 AFFINE study (NCT04370054) evaluating giroctocogene fitelparvovec, an investigational gene therapy for the treatment of adults with moderately severe to severe hemophilia A. The AFFINE study achieved its primary objective of non-inferiority, as well as superiority, of total annualized bleeding rate (ABR) from Week 12 through at least 15 months of follow up post-infusion compared with routine Factor VIII (FVIII) replacement prophylaxis treatment. Key secondary endpoints as defined by the trial protocol were met and also demonstrated superiority compared to prophylaxis. Giroctocogene fitelparvovec was generally well tolerated in the study. Pfizer will discuss these data with regulatory authorities in the coming months.
Full Release
Pandemic Influenza Vaccine Candidate
May 2024. Announced that preliminary results from a subset of patients randomized in a Phase 1 study (NCT06179446) evaluating the safety, tolerability, and immunogenicity of multiple doses of a nucleoside-modified mRNA (modRNA) based pandemic influenza vaccine candidate illustrated notable increases in antibody responses against the avian strain [H5, Clade 2.3.4.4b] of H5 influenza virus. Pfizer continues to monitor all developments regarding the circulation and outbreaks of the A/H5N1 virus. If a vaccine is needed in an emergency pandemic situation, Pfizer anticipates that the modRNA vaccine platform could be leveraged to rapidly provide a vaccine candidate targeting the specific pandemic influenza strain.
Full Release

Corporate Developments
Topic Recent Development Link
Board Election
July 2024. Announced Cyrus Taraporevala was elected to Pfizer’s Board of Directors. Mr. Taraporevala was also appointed to and will join the Audit Committee and Compensation Committee of Pfizer’s Board.

Executive Leadership
July 2024. Announced the launch of a process to identify a successor for Dr. Mikael Dolsten, Chief Scientific Officer and President, Pfizer R&D, who will depart the company after a 15+ year stellar career. Dr. Dolsten will assist in the external search for a new Chief Scientific Officer and continue to serve in his current position until his successor is in place and any necessary transition is complete.

May 2024. Announced Andrew Baum, M.D., would join the company as Chief Strategy and Innovation Officer, Executive Vice President, effective June 3, 2024, and will become a member of Pfizer’s Executive Leadership Team reporting to Chairman and Chief Executive Officer, Dr. Albert Bourla. In his role, Dr. Baum will be responsible for Pfizer’s long-term corporate strategic plan, and Pfizer’s portfolio analysis and prioritization functions, business development activities, strengthening of partnerships with the biotech ecosystem, and the commercial evaluation of the company’s research pipeline.

Topic Recent Development Link
Manufacturing Optimization Program
May 2024. Announced the launch of the first phase of a multi-year, multi-phase cost reduction program (the "Manufacturing Optimization Program" or "the program") to reduce our cost of goods sold. The program is expected to include operational efficiencies, network structure changes, and product portfolio enhancements. The first phase of the program is focused on operational efficiencies and is expected to deliver savings of approximately $1.5 billion by the end of 2027, some of which is expected to begin being realized in 2025. The one-time costs to achieve the savings associated with the first phase of the program are expected to be approximately $1.7 billion and primarily include severance and implementation costs. These costs will be recorded primarily in 2024, with cash outlays expected primarily in 2025 and 2026.

For additional details, see the attached financial schedules, product revenue tables and disclosure notice.
(1)Pfizer does not provide guidance for GAAP Reported financial measures (other than revenues) 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 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 2024 reflects the following:
▪Does not assume the completion of any business development transactions not completed as of June 30, 2024.
▪An anticipated immaterial impact in fiscal-year 2024 of recent and expected generic and biosimilar competition for certain products that have recently lost patent or regulatory protection or that are anticipated to lose patent or regulatory protection.
▪Exchange rates assumed are a blend of actual rates in effect through second-quarter 2024 and mid-July 2024 rates for the remainder of the year. Financial guidance reflects the anticipated unfavorable impact of approximately $0.6 billion on revenues and the anticipated unfavorable impact of approximately $0.04 on Adjusted(2) diluted EPS as a result of changes in foreign exchange rates relative to the U.S. dollar compared to foreign exchange rates from 2023.
▪Guidance for Adjusted(2) diluted EPS assumes diluted weighted-average shares outstanding of approximately 5.7 billion shares, and assumes no share repurchases in 2024.
▪Guidance assumes the seasonal cadence of certain products in our portfolio, and that Paxlovid results trend with infection rates.
(2)Adjusted income and Adjusted diluted EPS are defined as U.S. GAAP net income attributable to Pfizer Inc. common shareholders and U.S. GAAP 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 2024 and 2023. 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(4). 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 2023 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.
(3)As used in this document, "Comirnaty" refers to, as applicable, and as authorized or approved, the Pfizer-BioNTech COVID-19 Vaccine; Comirnaty (COVID-19 Vaccine, mRNA) original monovalent formula; the Pfizer-BioNTech COVID-19 Vaccine, Bivalent (Original and Omicron BA.4/BA.5); the Pfizer-BioNTech COVID-19 Vaccine (2023-2024 Formula); Comirnaty (COVID-19 Vaccine, mRNA) 2023-2024 Formula; Comirnaty Original/Omicron BA.1; Comirnaty Original/Omicron BA.4/BA.5; Comirnaty Omicron XBB.1.5; and Comirnaty JN.1. "Comirnaty" includes product revenues and alliance revenues related to sales of the above-mentioned vaccines.
(4)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.
(5)Second-quarter 2024 Reported(4) diluted EPS was unfavorably impacted by $0.18 resulting from a $1.3 billion one-time restructuring charge related to the Manufacturing Optimization Program.
(6)The targeted $4 billion in net cost savings is calculated versus the midpoint of Pfizer’s 2023 SI&A and R&D expense guidance provided on August 1, 2023. As an additional reference, see the ‘2024 Financial Guidance’ section of Pfizer’s fourth-quarter 2023 earnings release.
(7)References to operational variances in this press release pertain to period-over-period changes that exclude the impact of foreign exchange rates. Although foreign 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)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 June 30, 2024 and July 2, 2023, 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 26, 2024 and May 28, 2023.

Outlook Therapeutics® to Present at the BTIG Virtual Biotechnology Conference 2024

On July 30, 2024 Outlook Therapeutics, Inc. (Nasdaq: OTLK), a biopharmaceutical company focused on development and commercialization of ONS-5010/LYTENAVA (bevacizumab-vikg; bevacizumab gamma) for the treatment of retina diseases, reported that Russell Trenary, President and Chief Executive Officer of Outlook Therapeutics will participate in a fireside chat at the BTIG Virtual Biotechnology Conference 2024 on Monday, August 5, 2024 at 8:00 AM ET (Press release, Outlook Therapeutics, JUL 30, 2024, View Source [SID1234645166]).

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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. If you are interested in scheduling a meeting with Outlook Therapeutics during the conference, please reach out to your BTIG representative.

Merck Announces Second-Quarter 2024 Financial Results

On July 30, 2024 Merck (NYSE: MRK), known as MSD outside the United States and Canada, reported financial results for the second quarter of 2024 (Press release, Merck & Co, JUL 30, 2024, View Source [SID1234645165]).

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"Our business is demonstrating strong momentum as we exit the first half of the year," said Robert M. Davis, chairman and chief executive officer, Merck. "Through excellent scientific, commercial and operational execution, we’re achieving significant milestones for our company and for patients, including the launch of WINREVAIR. I am proud of our dedicated teams around the world that are working tirelessly to advance our deep pipeline as we continue delivering innovation that solves unmet medical needs."

Financial Summary

Second Quarter
$ in millions, except EPS amounts 2024 2023 Change Change Ex-
Exchange
Sales $ 16,112 $ 15,035 7 % 11 %
GAAP net income (loss)1 5,455 (5,975 ) N/M N/M
Non-GAAP net income (loss) that excludes certain items1,2* 5,809 (5,220 ) N/M N/M
GAAP EPS 2.14 (2.35 ) N/M N/M
Non-GAAP EPS that excludes certain items2* 2.28 (2.06 ) N/M N/M

*Refer to table on page 7.

N/M – Not meaningful

For the second quarter of 2024, Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) assuming dilution was $2.14 and non-GAAP EPS was $2.28. GAAP and non-GAAP loss per share for the second quarter of 2023 include a charge of $4.02 per share for the acquisition of Prometheus Biosciences, Inc. (Prometheus). Non-GAAP EPS in both periods excludes acquisition- and divestiture-related costs, costs related to restructuring programs, as well as income and losses from investments in equity securities. Non-GAAP EPS in the second quarter of 2024 also excludes a tax benefit due to a reduction in reserves for unrecognized income tax benefits, resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year.

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

1 Net income (loss) attributable to Merck & Co., Inc.

2 Merck is providing certain 2024 and 2023 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results because management uses non-GAAP results to assess performance. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, annual employee compensation, including senior management’s compensation, is derived in part using a non-GAAP pretax income metric. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the non-GAAP adjustments, see Table 2a attached to this release.

Second-Quarter Sales Performance

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

Second Quarter
$ in millions 2024 2023 Change Change
Ex-
Exchange Commentary
Total Sales $ 16,112 $ 15,035 7 % 11 % Approximately 2 percentage points of the negative impact of foreign exchange was due to devaluation of Argentine peso, which was largely offset by inflation-related price increases, consistent with practice in that market.
Pharmaceutical 14,408 13,457 7 % 11 % Increase driven by growth in oncology, cardiovascular and vaccines, partially offset by declines in diabetes and virology.
KEYTRUDA 7,270 6,271 16 % 21 % Growth driven by increased global uptake in earlier-stage indications, including triple-negative breast cancer (TNBC) and renal cell carcinoma, as well as non-small cell lung cancer in the U.S., and continued strong global demand from metastatic indications. Approximately 4 percentage points of the negative impact of foreign exchange was due to devaluation of Argentine peso, which was largely offset by inflation-related price increases.
GARDASIL/GARDASIL 9 2,478 2,458 1 % 4 % Growth primarily due to higher sales in the U.S. driven by higher pricing, demand and public-sector buying patterns, as well as higher demand in certain ex-U.S. markets. Growth was largely offset by lower sales in China due to timing of shipments compared with prior year.
JANUVIA/JANUMET 629 864 -27 % -23 % Decline primarily due to lower pricing and demand in the U.S., as well as ongoing generic competition in many international markets, particularly in Europe and the Asia Pacific region.
PROQUAD, M-M-R II and VARIVAX 617 582 6 % 7 % Growth largely from higher pricing and demand in the U.S.
BRIDION 455 502 -9 % -8 % Decline primarily due to generic competition in certain ex-U.S. markets, particularly in Europe and the Asia Pacific region, partially offset by higher demand in the U.S.
Lynparza* 317 310 2 % 4 % Growth due to higher demand in the U.S. and certain international markets, particularly in China and Europe.
Lenvima* 249 242 3 % 4 % Growth primarily from higher demand in the U.S.
VAXNEUVANCE 189 168 13 % 16 % Growth largely driven by continued uptake from launches in Japan and Europe, partially offset by lower demand and public-sector buying patterns in the U.S.
PREVYMIS 188 143 31 % 35 % Growth primarily due to higher global demand, particularly in the U.S., China and Europe.

ROTATEQ 163 131 25 % 26 % Growth primarily due to timing of shipments to China and public-sector buying patterns in the U.S., partially offset by lower demand in the U.S.
WELIREG 126 50 150 % 150 % Growth primarily driven by higher demand in the U.S., largely attributable to launch of a new indication.
LAGEVRIO 110 203 -46 % -42 % Decline due to lower demand and pricing in certain markets in the Asia Pacific region, partially offset by higher demand in Japan and the U.S.
WINREVAIR 70 - - - Represents sales in the U.S. following approval in March 2024. About 40% of sales were attributable to doses administered to patients and remainder was due to distributors building inventory in support of increasing demand.
Animal Health 1,482 1,456 2 % 6 % Growth primarily driven by higher pricing in both Livestock and Companion Animal product portfolios, as well as higher demand for Livestock products, partially offset by a decline in Companion Animal distributor inventory. Approximately 3 percentage points of the negative impact of foreign exchange was due to devaluation of Argentine peso, which was largely offset by inflation-related price increases.
Livestock 837 807 4 % 11 % Growth primarily driven by higher demand for ruminant and poultry products, as well as higher pricing across product portfolio.
Companion Animal 645 649 -1 % 1 % Sales were relatively flat compared with prior year reflecting lower distributor inventory, largely offset by higher pricing across product portfolio. Sales of BRAVECTO were $331 million and $326 million in current and prior-year quarters, respectively, which represented growth of 2%, or 3% excluding impact of foreign exchange.
Other Revenues** 222 122 82 % 53 % Growth primarily due to higher royalty income and favorable 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.

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 2024
Cost of sales $ 3,745 $ 606 $ 66 $ - $ 3,073
Selling, general and administrative 2,739 24 31 - 2,684
Research and development 3,500 20 - - 3,480
Restructuring costs 80 - 80 - -
Other (income) expense, net 42 (17 ) - (49 ) 108

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 )

GAAP Expense, EPS and Related Information

Gross margin was 76.8% for the second quarter of 2024 compared with 73.2% for the second quarter of 2023. The increase was primarily due to the favorable impact of product mix (including lower royalty rates related to KEYTRUDA and GARDASIL/GARDASIL 9), partially offset by higher amortization of intangible assets.

Selling, general and administrative (SG&A) expenses were $2.7 billion in the second quarter of 2024, an increase of 1% compared with the second quarter of 2023. The increase was primarily due to higher administrative and promotional costs, largely offset by the favorable impact of foreign exchange and lower restructuring costs.

Research and development (R&D) expenses were $3.5 billion in the second quarter of 2024 compared with $13.3 billion in the second quarter of 2023. The decrease was primarily due to a $10.2 billion charge in the second quarter of 2023 for the acquisition of Prometheus, partially offset by higher clinical development spending and increased compensation and benefit costs.

Other (income) expense, net, was $42 million of expense in the second quarter of 2024 compared with $172 million of expense in the second quarter of 2023. The decrease was primarily due to income from investments in equity securities in 2024 compared with losses in 2023, partially offset by higher net interest expense in 2024.

3 Reflects expenses related to acquisitions of businesses, including the amortization of intangible assets, intangible asset impairment charges and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also includes integration, transaction and certain other costs associated with acquisitions and divestitures, as well as amortization of intangible assets related to collaborations and licensing arrangements.

The effective tax rate of 9.1% for the second quarter of 2024 includes a 4.3 percentage point favorable impact due to a reduction in reserves for unrecognized income tax benefits, resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year.

GAAP EPS was $2.14 for the second quarter of 2024 compared with GAAP loss per share of $2.35 for the second quarter of 2023. GAAP loss per share in the second quarter of 2023 includes a charge of $4.02 per share for the acquisition of Prometheus.

Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 80.9% for the second quarter of 2024 compared with 76.6% for the second quarter of 2023. The increase was primarily due to the favorable impact of product mix (including lower royalty rates related to KEYTRUDA and GARDASIL/GARDASIL 9).

Non-GAAP SG&A expenses were $2.7 billion in the second quarter of 2024, an increase of 2% compared with the second quarter of 2023. The increase was primarily due to higher administrative and promotional costs, largely offset by the favorable impact of foreign exchange.

Non-GAAP R&D expenses were $3.5 billion in the second quarter of 2024 compared with $13.3 billion in the second quarter of 2023. The decrease was primarily due to a $10.2 billion charge in the second quarter of 2023 for the acquisition of Prometheus, partially offset by higher clinical development spending and increased compensation and benefit costs.

Non-GAAP other (income) expense, net, was $108 million of expense in the second quarter of 2024 compared with $19 million of income in the second quarter of 2023, primarily due to higher net interest expense.

The non-GAAP effective tax rate was 14.1% for the second quarter of 2024.

Non-GAAP EPS was $2.28 for the second quarter of 2024 compared with non-GAAP loss per share of $2.06 for the second quarter of 2023. Non-GAAP loss per share in the second quarter of 2023 includes a charge of $4.02 per share for the acquisition of Prometheus.

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

Second Quarter
$ in millions, except EPS amounts 2024 2023
EPS
GAAP EPS $ 2.14 $ (2.35 )
Difference 0.14 0.29
Non-GAAP EPS that excludes items listed below2 $ 2.28 $ (2.06 )

Net Income (Loss)
GAAP net income (loss)1 $ 5,455 $ (5,975 )
Difference 354 755
Non-GAAP net income (loss) that excludes items listed below1,2 $ 5,809 $ (5,220 )

Excluded Items:
Acquisition- and divestiture-related costs3 $ 633 $ 498
Restructuring costs 177 236
(Income) loss from investments in equity securities (49 ) 194
Decrease to net income/increase to net loss before taxes 761 928
Income tax (benefit) expense4 (407 ) (173 )
Decrease to net income/increase to net loss $ 354 $ 755

Pipeline and Portfolio Highlights

In the second quarter, Merck demonstrated further progress in its strong and diverse pipeline, achieving multiple regulatory and clinical milestones.

In vaccines, Merck recently received approval from the U.S. Food and Drug Administration (FDA) for CAPVAXIVE, now the first pneumococcal conjugate vaccine specifically designed to address the serotypes responsible for approximately 85% of invasive pneumococcal disease cases in adults age 65 and older, based on the U.S. Centers for Disease Control and Prevention (CDC) data from 2018-2021. The CDC’s Advisory Committee on Immunization Practices (ACIP) unanimously voted to recommend CAPVAXIVE for adults age 65 and older who have not received a pneumococcal conjugate vaccine or whose vaccination history is unknown, for adults 19 to 64 with certain risk conditions, and for adults 19 and older who have started their pneumococcal vaccine series with PCV13. Additionally, shared clinical decision-making is recommended for a supplemental dose of CAPVAXIVE for adults over 65 who completed their vaccine series with both PCV13 and PPSV23.

The company also recently announced positive topline results from its Phase 2b/3 trial of clesrovimab (MK-1654), an investigational respiratory syncytial virus (RSV) preventative monoclonal antibody for infants, which met all primary safety and efficacy endpoints.

In cardiometabolic disease, Merck continued to make progress in its launch of WINREVAIR in the U.S. As of the end of June, more than 1,000 patients have received WINREVAIR. The company also announced that the European Union’s (EU) Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion for WINREVAIR. If approved by the European Commission, WINREVAIR will be the first activin signaling inhibitor therapy for pulmonary arterial hypertension (PAH, World Health Organization [WHO] Group 1) to be approved in Europe, offering a new treatment option for certain adults with this rare, progressive disease. Additional worldwide regulatory filings for WINREVAIR are underway.

4 Represents the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments, as well as a $259 million benefit in the second quarter of 2024, due to a reduction in reserves for unrecognized income tax benefits resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year.

In oncology, Merck received FDA approval for KEYTRUDA in combination with chemotherapy, followed by KEYTRUDA as a single agent, for the treatment of certain patients with endometrial carcinoma. This marks the 40th indication for KEYTRUDA in the U.S., reinforcing its importance as a foundational therapy for certain types of cancer.

At the 2024 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting, new data were presented on four approved oncology medicines and four pipeline candidates in more than 25 types of cancer. In collaboration with Moderna, Inc., Merck announced encouraging three-year follow-up data for V940 (mRNA-4157) in combination with KEYTRUDA for the adjuvant treatment of patients with high-risk stage III and IV melanoma following complete resection. In addition, new Phase 3 data from a study conducted in China and independently led by Kelun-Biotech evaluating sacituzumab tirumotecan (MK-2870/SKB264), an investigational anti-TROP2 antibody-drug conjugate being developed by Merck in collaboration with Kelun-Biotech, were presented in previously treated patients with locally recurrent or metastatic TNBC.

Merck Animal Health launched the 12-month injectable formulation of BRAVECTO for use in dogs in a number of markets in Europe for the treatment and persistent killing of fleas (Ctenocephalides felis and Ctenocephalides canis) and ticks (Rhipicephalus sanguineus, Ixodes ricinus, Ixodes hexagonus, and Dermacentor reticulatus). In addition, in July 2024, Merck completed the acquisition of the aqua business of Elanco Animal Health Incorporated.

In July 2024, Merck also completed the acquisition of Eyebiotech Limited (EyeBio), which includes the lead candidate Restoret/MK-3000 that is being evaluated for the treatment of patients with certain retinal diseases, including diabetic macular edema and neovascular age-related macular degeneration, as well as preclinical candidates. And, Merck and Orion Corporation announced the mutual exercise of an option to convert the companies’ ongoing co-development and co-commercialization agreement for opevesostat (MK-5684/ODM-208), an investigational CYP11A1 inhibitor, and other candidates, into an exclusive global license for Merck.

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

Oncology FDA Approved KEYTRUDA Plus Carboplatin and Paclitaxel as Treatment for Adult Patients With Primary Advanced or Recurrent Endometrial Carcinoma, Based on Results From Phase 3 NRG-GY018/KEYNOTE-868 Trial (Read Announcement)
FDA Granted Priority Review to Merck’s Application for KEYTRUDA Plus Chemotherapy as First-Line Treatment of Patients With Unresectable Advanced or Metastatic Malignant Pleural Mesothelioma, Based on Results From Phase 3 KEYNOTE-483 Trial; FDA Set Prescription Drug User Fee Act (PDUFA) Date of Sept. 25, 2024 (Read Announcement)
Merck Received Positive EU CHMP Opinion for KEYTRUDA Plus Padcev as First-Line Treatment for Patients With Unresectable or Metastatic Urothelial Carcinoma, Based on Results From Phase 3 KEYNOTE-A39/EV-302 Trial (Read Announcement)
Moderna and Merck Announced Three-Year Data for mRNA-4157 (V940) in Combination With KEYTRUDA Demonstrated Sustained Improvement in Recurrence-Free Survival and Distant Metastasis-Free Survival Versus KEYTRUDA in Patients With High-Risk Stage III/IV Melanoma Following Complete Resection (Read Announcement)
Merck Announced Phase 3 KEYNOTE-522 Trial Met Its Overall Survival (OS) Endpoint in Patients With High-Risk Early-Stage TNBC (Read Announcement)
Merck Announced Phase 3 KEYNOTE-811 Trial Met Dual Primary Endpoint of OS as First-Line Treatment in Patients With HER2-Positive Advanced Gastric or Gastroesophageal Junction Adenocarcinoma (Read Announcement)
Patritumab Deruxtecan Biologics License Application Submission Received Complete Response Letter From FDA Due to Inspection Findings at Third-Party Manufacturer (Read Announcement)
Vaccines FDA Approved CAPVAXIVE for Prevention of Invasive Pneumococcal Disease and Pneumococcal Pneumonia in Adults, Based on Results From Four Phase 3 Trials (Read Announcement)
CDC’s ACIP Unanimously Recommended CAPVAXIVE for Pneumococcal Vaccination in Appropriate Adults (Read Announcement)
Merck Announced Topline Results From Phase 2b/3 Trial of Clesrovimab (MK-1654), an Investigational RSV Preventative Monoclonal Antibody for Infants, Met All Primary Safety and Efficacy Endpoints (Read Announcement)
Cardiometabolic Merck Received Positive EU CHMP Opinion for WINREVAIR (sotatercept) in PAH (Read Announcement)

Full-Year 2024 Financial Outlook

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

Full Year 2024
Updated Prior
Sales* $63.4 to $64.4 billion $63.1 to $64.3 billion
Non-GAAP Gross margin2 Approximately 81% Approximately 81%
Non-GAAP Operating expenses2** $26.8 to $27.6 billion $25.2 to $26.1 billion
Non-GAAP Other (income) expense, net2 Approximately $350 million expense Approximately $250 million expense
Non-GAAP Effective tax rate2 15.5% to 16.5% 14.5% to 15.5%
Non-GAAP EPS2*** $7.94 to $8.04 $8.53 to $8.65
Share count (assuming dilution) Approximately 2.54 billion Approximately 2.55 billion

*The company does not have any non-GAAP adjustments to sales.

**Includes one-time R&D charges of $656 million for Harpoon Therapeutics, Inc. (Harpoon) acquisition and $1.3 billion for EyeBio acquisition. Outlook does not assume any additional significant potential business development transactions.

***Includes one-time charges totaling $0.77 per share for the Harpoon and EyeBio acquisitions.

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 despite impacts related to the lower sell out of GARDASIL from Zhifei Biological Products Co., Ltd. (the company’s distributor and commercialization partner in China) into the points of vaccination in the market during the quarter, Merck is raising and narrowing its full-year sales outlook.

Merck now expects its full-year sales to be between $63.4 billion and $64.4 billion, including a negative impact of foreign exchange of approximately 3 percentage points, at mid-July 2024 exchange rates. Approximately 2 percentage points of the negative impact of foreign exchange is due to the devaluation of the Argentine peso, which the company expects will largely be offset by inflation-related price increases, consistent with practice in that market.

Merck now expects its full-year non-GAAP effective income tax rate to be between 15.5% and 16.5%, which includes an unfavorable impact related to the one-time charge for the acquisition of EyeBio, which is not tax deductible.

Merck now expects its full-year non-GAAP EPS to be between $7.94 and $8.04, including one-time charges of $0.26 and $0.51 per share for the acquisitions of Harpoon and EyeBio, respectively. The outlook includes a negative impact of foreign exchange of more than $0.30 per share. The negative impact of foreign exchange 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 practice in that market. This revised non-GAAP EPS range reflects the following items, which were not previously included in the outlook:

· A charge of $1.3 billion, or $0.51 per share, for the acquisition of EyeBio.

· Estimated 2024 expense of approximately $0.09 per share to be incurred to finance the EyeBio and Elanco aqua business acquisitions and to advance the acquired assets.

Consistent with past practice, the financial outlook does not assume additional significant potential business development transactions.

Non-GAAP EPS excludes acquisition- and divestiture-related costs, costs related to restructuring programs, income and losses from investments in equity securities, as well as a tax benefit in 2024 due to a reduction in reserves for unrecognized income tax benefits, resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Tuesday, July 30, at 9 a.m. ET via this weblink. A replay of the webcast, along with the sales and earnings news release, supplemental financial disclosures, and slides highlighting the results, will be available at www.merck.com.

All participants may join the call by dialing (800) 779-0641 (U.S. and Canada Toll-Free) or (517) 308-9147 and using the access code 4761229.

Merck Announces Second-Quarter 2024 Financial Results

On July 30, 2024 Merck (NYSE: MRK), known as MSD outside the United States and Canada, reported financial results for the second quarter of 2024 (Press release, Merck & Co, JUL 30, 2024, View Source [SID1234645164]).

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"Our business is demonstrating strong momentum as we exit the first half of the year," said Robert M. Davis, chairman and chief executive officer, Merck. "Through excellent scientific, commercial and operational execution, we’re achieving significant milestones for our company and for patients, including the launch of WINREVAIR. I am proud of our dedicated teams around the world that are working tirelessly to advance our deep pipeline as we continue delivering innovation that solves unmet medical needs."

Financial Summary

$ in millions, except EPS amounts

Second Quarter

2024

2023

Change

Change Ex-
Exchange

Sales

$16,112

$15,035

7%

11%

GAAP net income (loss)1

5,455

(5,975)

N/M

N/M

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

5,809

(5,220)

N/M

N/M

GAAP EPS

2.14

(2.35)

N/M

N/M

Non-GAAP EPS that excludes certain items2*

2.28

(2.06)

N/M

N/M

*Refer to table on page 7.

N/M – Not meaningful

For the second quarter of 2024, Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) assuming dilution was $2.14 and non-GAAP EPS was $2.28. GAAP and non-GAAP loss per share for the second quarter of 2023 include a charge of $4.02 per share for the acquisition of Prometheus Biosciences, Inc. (Prometheus). Non-GAAP EPS in both periods excludes acquisition- and divestiture-related costs, costs related to restructuring programs, as well as income and losses from investments in equity securities. Non-GAAP EPS in the second quarter of 2024 also excludes a tax benefit due to a reduction in reserves for unrecognized income tax benefits, resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year.

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

2024

2023

Change

Change Ex-Exchange

Commentary

Total Sales

$16,112

$15,035

7%

11%

Approximately 2 percentage points of the negative impact of foreign exchange was due to devaluation of Argentine peso, which was largely offset by inflation-related price increases, consistent with practice in that market.

Pharmaceutical

14,408

13,457

7%

11%

Increase driven by growth in oncology, cardiovascular and vaccines, partially offset by declines in diabetes and virology.

KEYTRUDA

7,270

6,271

16%

21%

Growth driven by increased global uptake in earlier-stage indications, including triple-negative breast cancer (TNBC) and renal cell carcinoma, as well as non-small cell lung cancer in the U.S., and continued strong global demand from metastatic indications. Approximately 4 percentage points of the negative impact of foreign exchange was due to devaluation of Argentine peso, which was largely offset by inflation-related price increases.

GARDASIL/GARDASIL 9

2,478

2,458

1%

4%

Growth primarily due to higher sales in the U.S. driven by higher pricing, demand and public-sector buying patterns, as well as higher demand in certain ex-U.S. markets. Growth was largely offset by lower sales in China due to timing of shipments compared with prior year.

JANUVIA/JANUMET

629

864

-27%

-23%

Decline primarily due to lower pricing and demand in the U.S., as well as ongoing generic competition in many international markets, particularly in Europe and the Asia Pacific region.

PROQUAD, M-M-R II and VARIVAX

617

582

6%

7%

Growth largely from higher pricing and demand in the U.S.

BRIDION

455

502

-9%

-8%

Decline primarily due to generic competition in certain ex-U.S. markets, particularly in Europe and the Asia Pacific region, partially offset by higher demand in the U.S.

Lynparza*

317

310

2%

4%

Growth due to higher demand in the U.S. and certain international markets, particularly in China and Europe.

Lenvima*

249

242

3%

4%

Growth primarily from higher demand in the U.S.

VAXNEUVANCE

189

168

13%

16%

Growth largely driven by continued uptake from launches in Japan and Europe, partially offset by lower demand and public-sector buying patterns in the U.S.

PREVYMIS

188

143

31%

35%

Growth primarily due to higher global demand, particularly in the U.S., China and Europe.

ROTATEQ

163

131

25%

26%

Growth primarily due to timing of shipments to China and public-sector buying patterns in the U.S., partially offset by lower demand in the U.S.

WELIREG

126

50

150%

150%

Growth primarily driven by higher demand in the U.S., largely attributable to launch of a new indication.

LAGEVRIO

110

203

-46%

-42%

Decline due to lower demand and pricing in certain markets in the Asia Pacific region, partially offset by higher demand in Japan and the U.S.

WINREVAIR

70

Represents sales in the U.S. following approval in March 2024. About 40% of sales were attributable to doses administered to patients and remainder was due to distributors building inventory in support of increasing demand.

Animal Health

1,482

1,456

2%

6%

Growth primarily driven by higher pricing in both Livestock and Companion Animal product portfolios, as well as higher demand for Livestock products, partially offset by a decline in Companion Animal distributor inventory. Approximately 3 percentage points of the negative impact of foreign exchange was due to devaluation of Argentine peso, which was largely offset by inflation-related price increases.

Livestock

837

807

4%

11%

Growth primarily driven by higher demand for ruminant and poultry products, as well as higher pricing across product portfolio.

Companion Animal

645

649

-1%

1%

Sales were relatively flat compared with prior year reflecting lower distributor inventory, largely offset by higher pricing across product portfolio. Sales of BRAVECTO were $331 million and $326 million in current and prior-year quarters, respectively, which represented growth of 2%, or 3% excluding impact of foreign exchange.

Other Revenues**

222

122

82%

53%

Growth primarily due to higher royalty income and favorable 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.

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 2024

Cost of sales

$3,745

$606

$66

$-

$3,073

Selling, general and administrative

2,739

24

31

2,684

Research and development

3,500

20

3,480

Restructuring costs

80

80

Other (income) expense, net

42

(17)

(49)

108

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)

GAAP Expense, EPS and Related Information

Gross margin was 76.8% for the second quarter of 2024 compared with 73.2% for the second quarter of 2023. The increase was primarily due to the favorable impact of product mix (including lower royalty rates related to KEYTRUDA and GARDASIL/GARDASIL 9), partially offset by higher amortization of intangible assets.

Selling, general and administrative (SG&A) expenses were $2.7 billion in the second quarter of 2024, an increase of 1% compared with the second quarter of 2023. The increase was primarily due to higher administrative and promotional costs, largely offset by the favorable impact of foreign exchange and lower restructuring costs.

Research and development (R&D) expenses were $3.5 billion in the second quarter of 2024 compared with $13.3 billion in the second quarter of 2023. The decrease was primarily due to a $10.2 billion charge in the second quarter of 2023 for the acquisition of Prometheus, partially offset by higher clinical development spending and increased compensation and benefit costs.

Other (income) expense, net, was $42 million of expense in the second quarter of 2024 compared with $172 million of expense in the second quarter of 2023. The decrease was primarily due to income from investments in equity securities in 2024 compared with losses in 2023, partially offset by higher net interest expense in 2024.

The effective tax rate of 9.1% for the second quarter of 2024 includes a 4.3 percentage point favorable impact due to a reduction in reserves for unrecognized income tax benefits, resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year.

GAAP EPS was $2.14 for the second quarter of 2024 compared with GAAP loss per share of $2.35 for the second quarter of 2023. GAAP loss per share in the second quarter of 2023 includes a charge of $4.02 per share for the acquisition of Prometheus.

Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 80.9% for the second quarter of 2024 compared with 76.6% for the second quarter of 2023. The increase was primarily due to the favorable impact of product mix (including lower royalty rates related to KEYTRUDA and GARDASIL/GARDASIL 9).

Non-GAAP SG&A expenses were $2.7 billion in the second quarter of 2024, an increase of 2% compared with the second quarter of 2023. The increase was primarily due to higher administrative and promotional costs, largely offset by the favorable impact of foreign exchange.

Non-GAAP R&D expenses were $3.5 billion in the second quarter of 2024 compared with $13.3 billion in the second quarter of 2023. The decrease was primarily due to a $10.2 billion charge in the second quarter of 2023 for the acquisition of Prometheus, partially offset by higher clinical development spending and increased compensation and benefit costs.

Non-GAAP other (income) expense, net, was $108 million of expense in the second quarter of 2024 compared with $19 million of income in the second quarter of 2023, primarily due to higher net interest expense.

The non-GAAP effective tax rate was 14.1% for the second quarter of 2024.

Non-GAAP EPS was $2.28 for the second quarter of 2024 compared with non-GAAP loss per share of $2.06 for the second quarter of 2023. Non-GAAP loss per share in the second quarter of 2023 includes a charge of $4.02 per share for the acquisition of Prometheus.

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

Second Quarter

$ in millions, except EPS amounts

2024

2023

EPS

GAAP EPS

$2.14

$(2.35)

Difference

0.14

0.29

Non-GAAP EPS that excludes items listed below2

$2.28

$(2.06)

Net Income (Loss)

GAAP net income (loss)1

$5,455

$(5,975)

Difference

354

755

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

$5,809

$(5,220)

Excluded Items:

Acquisition- and divestiture-related costs3

$633

$498

Restructuring costs

177

236

(Income) loss from investments in equity securities

(49)

194

Decrease to net income/increase to net loss before taxes

761

928

Income tax (benefit) expense4

(407)

(173)

Decrease to net income/increase to net loss

$354

$755

Pipeline and Portfolio Highlights

In the second quarter, Merck demonstrated further progress in its strong and diverse pipeline, achieving multiple regulatory and clinical milestones.

In vaccines, Merck recently received approval from the U.S. Food and Drug Administration (FDA) for CAPVAXIVE, now the first pneumococcal conjugate vaccine specifically designed to address the serotypes responsible for approximately 85% of invasive pneumococcal disease cases in adults age 65 and older, based on the U.S. Centers for Disease Control and Prevention (CDC) data from 2018-2021. The CDC’s Advisory Committee on Immunization Practices (ACIP) unanimously voted to recommend CAPVAXIVE for adults age 65 and older who have not received a pneumococcal conjugate vaccine or whose vaccination history is unknown, for adults 19 to 64 with certain risk conditions, and for adults 19 and older who have started their pneumococcal vaccine series with PCV13. Additionally, shared clinical decision-making is recommended for a supplemental dose of CAPVAXIVE for adults over 65 who completed their vaccine series with both PCV13 and PPSV23.

The company also recently announced positive topline results from its Phase 2b/3 trial of clesrovimab (MK-1654), an investigational respiratory syncytial virus (RSV) preventative monoclonal antibody for infants, which met all primary safety and efficacy endpoints.

In cardiometabolic disease, Merck continued to make progress in its launch of WINREVAIR in the U.S. As of the end of June, more than 1,000 patients have received WINREVAIR. The company also announced that the European Union’s (EU) Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion for WINREVAIR. If approved by the European Commission, WINREVAIR will be the first activin signaling inhibitor therapy for pulmonary arterial hypertension (PAH, World Health Organization [WHO] Group 1) to be approved in Europe, offering a new treatment option for certain adults with this rare, progressive disease. Additional worldwide regulatory filings for WINREVAIR are underway.

In oncology, Merck received FDA approval for KEYTRUDA in combination with chemotherapy, followed by KEYTRUDA as a single agent, for the treatment of certain patients with endometrial carcinoma. This marks the 40th indication for KEYTRUDA in the U.S., reinforcing its importance as a foundational therapy for certain types of cancer.

At the 2024 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting, new data were presented on four approved oncology medicines and four pipeline candidates in more than 25 types of cancer. In collaboration with Moderna, Inc., Merck announced encouraging three-year follow-up data for V940 (mRNA-4157) in combination with KEYTRUDA for the adjuvant treatment of patients with high-risk stage III and IV melanoma following complete resection. In addition, new Phase 3 data from a study conducted in China and independently led by Kelun-Biotech evaluating sacituzumab tirumotecan (MK-2870/SKB264), an investigational anti-TROP2 antibody-drug conjugate being developed by Merck in collaboration with Kelun-Biotech, were presented in previously treated patients with locally recurrent or metastatic TNBC.

Merck Animal Health launched the 12-month injectable formulation of BRAVECTO for use in dogs in a number of markets in Europe for the treatment and persistent killing of fleas (Ctenocephalides felis and Ctenocephalides canis) and ticks (Rhipicephalus sanguineus, Ixodes ricinus, Ixodes hexagonus, and Dermacentor reticulatus). In addition, in July 2024, Merck completed the acquisition of the aqua business of Elanco Animal Health Incorporated.

In July 2024, Merck also completed the acquisition of Eyebiotech Limited (EyeBio), which includes the lead candidate Restoret/MK-3000 that is being evaluated for the treatment of patients with certain retinal diseases, including diabetic macular edema and neovascular age-related macular degeneration, as well as preclinical candidates. And, Merck and Orion Corporation announced the mutual exercise of an option to convert the companies’ ongoing co-development and co-commercialization agreement for opevesostat (MK-5684/ODM-208), an investigational CYP11A1 inhibitor, and other candidates, into an exclusive global license for Merck.

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

Oncology

FDA Approved KEYTRUDA Plus Carboplatin and Paclitaxel as Treatment for Adult Patients With Primary Advanced or Recurrent Endometrial Carcinoma, Based on Results From Phase 3 NRG-GY018/KEYNOTE-868 Trial

(Read Announcement)

FDA Granted Priority Review to Merck’s Application for KEYTRUDA Plus Chemotherapy as First-Line Treatment of Patients With Unresectable Advanced or Metastatic Malignant Pleural Mesothelioma, Based on Results From Phase 3 KEYNOTE-483 Trial; FDA Set Prescription Drug User Fee Act (PDUFA) Date of Sept. 25, 2024

(Read Announcement)

Merck Received Positive EU CHMP Opinion for KEYTRUDA Plus Padcev as First-Line Treatment for Patients With Unresectable or Metastatic Urothelial Carcinoma, Based on Results From Phase 3 KEYNOTE-A39/EV-302 Trial

(Read Announcement)

Moderna and Merck Announced Three-Year Data for mRNA-4157 (V940) in Combination With KEYTRUDA Demonstrated Sustained Improvement in Recurrence-Free Survival and Distant Metastasis-Free Survival Versus KEYTRUDA in Patients With High-Risk Stage III/IV Melanoma Following Complete Resection

(Read Announcement)

Merck Announced Phase 3 KEYNOTE-522 Trial Met Its Overall Survival (OS) Endpoint in Patients With High-Risk Early-Stage TNBC

(Read Announcement)

Merck Announced Phase 3 KEYNOTE-811 Trial Met Dual Primary Endpoint of OS as First-Line Treatment in Patients With HER2-Positive Advanced Gastric or Gastroesophageal Junction Adenocarcinoma

(Read Announcement)

Patritumab Deruxtecan Biologics License Application Submission Received Complete Response Letter From FDA Due to Inspection Findings at Third-Party Manufacturer

(Read Announcement)

Vaccines

FDA Approved CAPVAXIVE for Prevention of Invasive Pneumococcal Disease and Pneumococcal Pneumonia in Adults, Based on Results From Four Phase 3 Trials

(Read Announcement)

CDC’s ACIP Unanimously Recommended CAPVAXIVE for Pneumococcal Vaccination in Appropriate Adults

(Read Announcement)

Merck Announced Topline Results From Phase 2b/3 Trial of Clesrovimab (MK-1654), an Investigational RSV Preventative Monoclonal Antibody for Infants, Met All Primary Safety and Efficacy Endpoints

(Read Announcement)

Cardiometabolic

Merck Received Positive EU CHMP Opinion for WINREVAIR (sotatercept) in PAH

(Read Announcement)

Full-Year 2024 Financial Outlook

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

Full Year 2024

Updated

Prior

Sales*

$63.4 to $64.4 billion

$63.1 to $64.3 billion

Non-GAAP Gross margin2

Approximately 81%

Approximately 81%

Non-GAAP Operating expenses2**

$26.8 to $27.6 billion

$25.2 to $26.1 billion

Non-GAAP Other (income) expense, net2

Approximately $350 million expense

Approximately $250 million expense

Non-GAAP Effective tax rate2

15.5% to 16.5%

14.5% to 15.5%

Non-GAAP EPS2***

$7.94 to $8.04

$8.53 to $8.65

Share count (assuming dilution)

Approximately 2.54 billion

Approximately 2.55 billion

*The company does not have any non-GAAP adjustments to sales.

**Includes one-time R&D charges of $656 million for Harpoon Therapeutics, Inc. (Harpoon) acquisition and $1.3 billion for EyeBio acquisition. Outlook does not assume any additional significant potential business development transactions.

***Includes one-time charges totaling $0.77 per share for the Harpoon and EyeBio acquisitions.

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 despite impacts related to the lower sell out of GARDASIL from Zhifei Biological Products Co., Ltd. (the company’s distributor and commercialization partner in China) into the points of vaccination in the market during the quarter, Merck is raising and narrowing its full-year sales outlook.

Merck now expects its full-year sales to be between $63.4 billion and $64.4 billion, including a negative impact of foreign exchange of approximately 3 percentage points, at mid-July 2024 exchange rates. Approximately 2 percentage points of the negative impact of foreign exchange is due to the devaluation of the Argentine peso, which the company expects will largely be offset by inflation-related price increases, consistent with practice in that market.

Merck now expects its full-year non-GAAP effective income tax rate to be between 15.5% and 16.5%, which includes an unfavorable impact related to the one-time charge for the acquisition of EyeBio, which is not tax deductible.

Merck now expects its full-year non-GAAP EPS to be between $7.94 and $8.04, including one-time charges of $0.26 and $0.51 per share for the acquisitions of Harpoon and EyeBio, respectively. The outlook includes a negative impact of foreign exchange of more than $0.30 per share. The negative impact of foreign exchange 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 practice in that market. This revised non-GAAP EPS range reflects the following items, which were not previously included in the outlook:

A charge of $1.3 billion, or $0.51 per share, for the acquisition of EyeBio.
Estimated 2024 expense of approximately $0.09 per share to be incurred to finance the EyeBio and Elanco aqua business acquisitions and to advance the acquired assets.
Consistent with past practice, the financial outlook does not assume additional significant potential business development transactions.

Non-GAAP EPS excludes acquisition- and divestiture-related costs, costs related to restructuring programs, income and losses from investments in equity securities, as well as a tax benefit in 2024 due to a reduction in reserves for unrecognized income tax benefits, resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Tuesday, July 30, at 9 a.m. ET via this weblink. A replay of the webcast, along with the sales and earnings news release, supplemental financial disclosures, and slides highlighting the results, will be available at www.merck.com.

All participants may join the call by dialing (800) 779-0641 (U.S. and Canada Toll-Free) or (517) 308-9147 and using the access code 4761229.

Voruciclib: An oral CDK9 inhibitor for AML and other malignancies

On July 30, 2024 MEI Pharma presented its corporate presentation (Presentation, MEI Pharma, JUL 30, 2024, View Source [SID1234645163]).

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