Merck Announces Second-Quarter 2024 Financial Results

Rhea-AI Summary

Merck (NYSE: MRK) reported strong second-quarter 2024 financial results with total worldwide sales of $16.1 billion, a 7% increase year-over-year. Excluding foreign exchange impacts, growth was 11%. KEYTRUDA sales grew 16% to $7.3 billion. GAAP EPS was $2.14, while Non-GAAP EPS was $2.28. The company successfully launched WINREVAIR in the US and received a positive EU opinion for adults with PAH. Merck also achieved significant milestones with its vaccines and announced positive trial results for clesrovimab.

Merck completed acquisitions of EyeBio and Elanco’s Aqua Business and raised its full-year 2024 financial outlook to $63.4-$64.4 billion in sales and expects Non-GAAP EPS between $7.94 and $8.04. The outlook reflects a one-time charge of $1.3 billion for the EyeBio acquisition.

Quarterly results highlighted a 7% increase in pharmaceutical sales driven by oncology, cardiovascular, and vaccine growth, despite declines in diabetes and virology segments. Animal Health sales rose 2%, with notable increases in Livestock products. GAAP net income was $5.46 billion compared to a loss of $5.98 billion last year.

Positive

• Total sales increased by 7% to $16.1 billion.
• KEYTRUDA sales grew by 16% to $7.3 billion.
• GAAP EPS of $2.14 and Non-GAAP EPS of $2.28.
• Raised full-year 2024 sales outlook to $63.4-$64.4 billion.
• Successful launch of WINREVAIR in the US.

Negative

• Decline in diabetes and virology segment sales.
• Significant one-time charge of $1.3 billion for the EyeBio acquisition.

Insights

Financial Analyst

Merck's Q2 2024 results demonstrate strong performance and positive momentum. Key highlights include:

• Total sales of $16.1 billion, up 7% year-over-year (11% ex-FX)
• KEYTRUDA sales grew 16% to $7.3 billion
• GAAP EPS of $2.14 and non-GAAP EPS of $2.28
• Raised full-year 2024 sales guidance to $63.4-$64.4 billion

The results were driven by continued strength in oncology, particularly KEYTRUDA, which now has 40 approved indications in the U.S. The successful launch of WINREVAIR for PAH also contributed $70 million in initial sales.

However, there are some headwinds to note:

• JANUVIA/JANUMET sales declined 27% due to generic competition
• LAGEVRIO sales fell 46% on lower COVID-19 demand
• Animal Health growth was modest at 2% (6% ex-FX)

The full-year EPS guidance was lowered to $7.94-$8.04, reflecting a $1.3 billion charge for the EyeBio acquisition. While this impacts near-term profits, it expands Merck's pipeline in ophthalmology.

Overall, Merck's core business remains strong, with continued growth in key franchises offsetting patent losses. The robust pipeline and recent acquisitions position the company well for future growth, though integration costs may pressure margins in the near-term.

Oncology Specialist

Merck's oncology portfolio continues to be the cornerstone of its success, with KEYTRUDA leading the charge. The 16% growth in KEYTRUDA sales to $7.3 billion is impressive for a mature product, demonstrating its expanding utility across cancer types.

Several key developments bolster KEYTRUDA's outlook:

• FDA approval for endometrial carcinoma, marking its 40th indication in the U.S.
• Positive data in combination with chemotherapy for pleural mesothelioma
• Encouraging 3-year data for the mRNA-4157/V940 cancer vaccine combo in melanoma
• Meeting overall survival endpoint in early-stage TNBC and HER2+ gastric cancer trials

These expansions into earlier lines of therapy and novel combinations should help sustain KEYTRUDA's growth trajectory. The potential of the mRNA cancer vaccine, if successful, could be a game-changer in cancer treatment paradigms.

Beyond KEYTRUDA, Merck is advancing its broader oncology pipeline. The acquisition of EyeBio, while primarily focused on ophthalmology, also brings potential oncology assets. The collaboration with Kelun-Biotech on sacituzumab tirumotecan for TNBC adds to Merck's antibody-drug conjugate portfolio.

However, the setback with patritumab deruxtecan due to manufacturing issues highlights the challenges in bringing complex biologics to market. Merck will need to address these hurdles to diversify its oncology portfolio beyond KEYTRUDA in the coming years.

Medical Research Analyst

Merck's Q2 results highlight significant progress across its pipeline, particularly in vaccines and cardiometabolic disease. Key developments include:

• FDA approval of CAPVAXIVE, a novel pneumococcal vaccine for adults
• Positive Phase 2b/3 results for clesrovimab, an RSV antibody for infants
• Successful U.S. launch of WINREVAIR for PAH, with over 1,000 patients treated
• Positive CHMP opinion for WINREVAIR in Europe

The CAPVAXIVE approval is particularly noteworthy, as it's designed to address 85% of invasive pneumococcal disease cases in older adults. The unanimous ACIP recommendation should support rapid adoption.

In the cardiometabolic space, WINREVAIR's launch appears promising. As the first activin signaling inhibitor for PAH, it represents a novel mechanism of action in a disease with high unmet need. The $70 million in initial sales and positive regulatory progress in Europe bode well for its future potential.

The acquisition of EyeBio expands Merck's presence in ophthalmology, a growing area with significant unmet needs. The lead candidate, Restoret/MK-3000, could address major retinal diseases if successful.

While oncology remains Merck's primary focus, these developments demonstrate the company's commitment to diversifying its portfolio and pipeline. The progress in vaccines and rare diseases provides potential new growth drivers as KEYTRUDA eventually faces biosimilar competition.

• Total Worldwide Sales Were $16.1 Billion, an Increase of 7% From Second Quarter 2023; Excluding the Impact of Foreign Exchange, Growth Was 11%
• KEYTRUDA Sales Grew 16% to $7.3 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 21%
• GAAP EPS Was $2.14; Non-GAAP EPS Was $2.28
• Successful Initial Launch of WINREVAIR in the U.S.; Received Positive EU CHMP Opinion for Adults With PAH
• Achieved Key Milestones in Vaccine Programs
  • Following FDA Approval, CAPVAXIVE Unanimously Recommended by the CDC’s ACIP for Pneumococcal Vaccination for Certain Adults
  • Announced Positive Results From Phase 2b/3 Trial of Clesrovimab (MK-1654), an Investigational RSV Preventative Monoclonal Antibody for Infants
• Completed Acquisitions of EyeBio and Elanco’s Aqua Business in July 2024
• Full-Year 2024 Financial Outlook
  • Raises and Narrows Expected Worldwide Sales Range To Be Between $63.4 Billion and $64.4 Billion
  • Now Expects Non-GAAP EPS To Be Between $7.94 and $8.04; Outlook Reflects Negative Impact From One-Time Charge of Approximately $1.3 Billion, or $0.51 per Share, for the Acquisition of EyeBio

RAHWAY, N.J.--(BUSINESS WIRE)-- Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the second quarter of 2024.

“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 40^th 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 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.

About Merck

At Merck, known as MSD outside of the United States and Canada, we are unified around our purpose: We use the power of leading-edge science to save and improve lives around the world. For more than 130 years, we have brought hope to humanity through the development of important medicines and vaccines. We aspire to be the premier research-intensive biopharmaceutical company in the world – and today, we are at the forefront of research to deliver innovative health solutions that advance the prevention and treatment of diseases in people and animals. We foster a diverse and inclusive global workforce and operate responsibly every day to enable a safe, sustainable and healthy future for all people and communities. For more information, visit www.merck.com and connect with us on X (formerly Twitter), Facebook, Instagram, YouTube and LinkedIn.

Forward-Looking Statement of Merck & Co., Inc., Rahway, N.J., USA

This news release of Merck & Co., Inc., Rahway, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline candidates that the candidates will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2023 and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

Appendix

Generic product names are provided below.

Pharmaceutical
BRIDION (sugammadex)
CAPVAXIVE (Pneumococcal 21-valent Conjugate Vaccine)
GARDASIL (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant)
GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant)
JANUMET (sitagliptin and metformin HCl)
JANUVIA (sitagliptin)
KEYTRUDA (pembrolizumab)
LAGEVRIO (molnupiravir)
Lenvima (lenvatinib)
Lynparza (olaparib)
M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live)
PREVYMIS (letermovir)
PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live)
ROTATEQ (Rotavirus Vaccine, Live, Oral, Pentavalent)
VARIVAX (Varicella Virus Vaccine Live)
VAXNEUVANCE (Pneumococcal 15-valent Conjugate Vaccine)
WELIREG (belzutifan)
WINREVAIR (sotatercept-csrk)

Animal Health
BRAVECTO (fluralaner)

_________________________
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.
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.
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.

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1
		GAAP							% Change			GAAP							% Change
			2Q24			2Q23						June YTD 2024			June YTD 2023
Sales		$	16,112		$	15,035			7	%		$	31,887		$	29,522			8	%
Costs, Expenses and Other
Cost of sales			3,745			4,024			-7	%			7,285			7,951			-8	%
Selling, general and administrative			2,739			2,702			1	%			5,221			5,182			1	%
Research and development			3,500			13,321			-74	%			7,492			17,597			-57	%
Restructuring costs			80			151			-47	%			202			218			-7	%
Other (income) expense, net			42			172			-76	%			12			259			-95	%
Income (Loss) Before Taxes			6,006			(5,335	)		*				11,675			(1,685	)		*
Income Tax Provision			545			637							1,447			1,462
Net Income (Loss)			5,461			(5,972	)		*				10,228			(3,147	)		*
Less: Net Income Attributable to Noncontrolling Interests			6			3							11			7
Net Income (Loss) Attributable to Merck & Co., Inc.		$	5,455		$	(5,975	)		*			$	10,217		$	(3,154	)		*
Earnings (Loss) per Common Share Assuming Dilution (1)		$	2.14		$	(2.35	)		*			$	4.02		$	(1.24	)		*
Average Shares Outstanding Assuming Dilution (1)			2,544			2,539							2,544			2,539
Tax Rate			9.1	%		-11.9	%						12.4	%		-86.8	%
* 100% or greater
(1) Because the company recorded a net loss in the second quarter and first six months of 2023, no potential dilutive common shares were used in the computation of loss per common share assuming dilution as the effect would have been anti-dilutive.

MERCK & CO., INC.
THREE AND SIX MONTHS ENDED JUNE 30, 2024 GAAP TO NON-GAAP RECONCILIATION
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a
		GAAP				Acquisition and Divestiture-Related Costs (1)			Restructuring Costs (2)			(Income) Loss from Investments in Equity Securities			Certain Other Items			Adjustment Subtotal			Non-GAAP
Second Quarter
Cost of sales		$	3,745			606			66									672			$	3,073
Selling, general and administrative			2,739			24			31									55				2,684
Research and development			3,500			20												20				3,480
Restructuring costs			80						80									80				–
Other (income) expense, net			42			(17	)					(49	)					(66	)			108
Income Before Taxes			6,006			(633	)		(177	)		49						(761	)			6,767
Income Tax Provision (Benefit)			545			(129	)	(3)	(30	)	(3)	11		(3)	(259	)	(4)	(407	)			952
Net Income			5,461			(504	)		(147	)		38			259			(354	)			5,815
Net Income Attributable to Merck & Co., Inc.			5,455			(504	)		(147	)		38			259			(354	)			5,809
Earnings per Common Share Assuming Dilution		$	2.14			(0.20	)		(0.06	)		0.02			0.10			(0.14	)		$	2.28
Tax Rate			9.1	%																		14.1	%
June YTD
Cost of sales		$	7,285			1,069			182									1,251			$	6,034
Selling, general and administrative			5,221			45			36									81				5,140
Research and development			7,492			36			2									38				7,454
Restructuring costs			202						202									202				–
Other (income) expense, net			12			(21	)					(165	)					(186	)			198
Income Before Taxes			11,675			(1,129	)		(422	)		165						(1,386	)			13,061
Income Tax Provision (Benefit)			1,447			(221	)	(3)	(72	)	(3)	36		(3)	(259	)	(4)	(516	)			1,963
Net Income			10,228			(908	)		(350	)		129			259			(870	)			11,098
Net Income Attributable to Merck & Co., Inc.			10,217			(908	)		(350	)		129			259			(870	)			11,087
Earnings per Common Share Assuming Dilution		$	4.02			(0.35	)		(0.14	)		0.05			0.10			(0.34	)		$	4.36
Tax Rate			12.4	%																		15.0	%
Only the line items that are affected by non-GAAP adjustments are shown.
Merck is providing certain 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 non-GAAP information enhances investors’ understanding of the company’s results because management uses non-GAAP measures 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. The non-GAAP information presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.
(1) Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets. Amounts included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to acquisitions and divestitures. Amounts included in research and development expenses primarily reflect the amortization of intangible assets. Amounts included in other (income) expense, net, primarily reflect royalty income related to the prior termination of the Sanofi-Pasteur MSD joint venture.
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs.
(3) Represents the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.
(4) Represents a 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.

MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3
	2024				2023							2Q			June YTD
	1Q	2Q	June YTD		1Q	2Q	June YTD	3Q	4Q	Full Year		Nom %	Ex-Exch %		Nom %	Ex-Exch %
TOTAL SALES (1)	$15,775	$16,112	$31,887		$14,487	$15,035	$29,522	$15,962	$14,630	$60,115		7	11		8	11
PHARMACEUTICAL	14,006	14,408	28,415		12,721	13,457	26,179	14,263	13,141	53,583		7	11		9	12
Oncology
Keytruda	6,947	7,270	14,217		5,795	6,271	12,065	6,338	6,608	25,011		16	21		18	22
Alliance Revenue – Lynparza (2)	292	317	609		275	310	585	299	315	1,199		2	4		4	6
Alliance Revenue – Lenvima (2)	255	249	504		232	242	474	260	226	960		3	4		6	7
Welireg	85	126	211		42	50	92	54	72	218		150	150		128	128
Alliance Revenue – Reblozyl (3)	71	90	161		43	47	90	52	70	212		92	92		80	80
Vaccines (4)
Gardasil/Gardasil 9	2,249	2,478	4,727		1,972	2,458	4,430	2,585	1,871	8,886		1	4		7	10
ProQuad/M-M-R II/Varivax	570	617	1,187		528	582	1,109	713	545	2,368		6	7		7	7
Vaxneuvance	219	189	408		106	168	274	214	176	665		13	16		49	51
RotaTeq	216	163	379		297	131	428	156	185	769		25	26		-11	-10
Pneumovax 23	61	59	120		96	92	188	140	85	412		-36	-32		-36	-32
Hospital Acute Care
Bridion	440	455	895		487	502	989	424	429	1,842		-9	-8		-9	-8
Prevymis	174	188	362		129	143	273	157	175	605		31	35		33	37
Dificid	73	92	165		65	76	141	74	87	302		20	20		16	16
Zerbaxa	56	62	118		50	54	104	53	61	218		14	18		13	16
Noxafil	56	45	101		60	55	116	51	46	213		-20	-9		-13	-2
Cardiovascular
Alliance Revenue - Adempas/Verquvo (5)	98	106	203		99	68	167	92	108	367		56	56		22	22
Adempas (6)	70	72	142		59	65	125	65	66	255		11	15		14	17
Winrevair		70	70									-	-		-	-
Virology
Lagevrio	350	110	460		392	203	595	640	193	1,428		-46	-42		-23	-18
Isentress/Isentress HD	111	89	200		123	136	259	119	105	483		-35	-31		-23	-19
Delstrigo	56	60	116		44	50	94	54	54	201		19	23		23	26
Pifeltro	42	39	81		34	38	72	37	33	142		3	4		13	13
Neuroscience
Belsomra	46	53	99		56	63	119	58	54	231		-16	-8		-17	-10
Immunology
Simponi	184	172	356		180	180	359	179	171	710		-4	-2		-1	-1
Remicade	39	35	74		51	48	99	45	43	187		-27	-20		-25	-21
Diabetes (7)
Januvia	419	405	824		551	511	1,062	581	547	2,189		-21	-16		-22	-19
Janumet	251	224	475		329	354	683	255	240	1,177		-37	-32		-30	-26
Other Pharmaceutical (8)	576	573	1,151		626	560	1,187	568	576	2,333		2	6		-3	-1
ANIMAL HEALTH	1,511	1,482	2,993		1,491	1,456	2,947	1,400	1,278	5,625		2	6		2	5
Livestock	850	837	1,686		849	807	1,656	874	808	3,337		4	11		2	7
Companion Animal	661	645	1,307		642	649	1,291	526	470	2,288		-1	1		1	3
Other Revenues (9)	258	222	479		275	122	396	299	211	907		82	53		21	24
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
(1) Only select products are shown.
(2) Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.
(3) Alliance Revenue represents royalties.
(4) Total Vaccines sales were $3,424 million and $3,656 million in the first and second quarter of 2024, respectively, and $3,133 million and $3,557 million in the first and second quarter of 2023, respectively.
(5) Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs.
(6) Net product sales in Merck's marketing territories.
(7) Total Diabetes sales were $745 million and $715 million in the first and second quarter of 2024, respectively, and $950 million and $951 million in the first and second quarter of 2023, respectively.
(8) Includes Pharmaceutical products not individually shown above.
(9) Other Revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities. Other Revenues related to the receipt of upfront and milestone payments for out-licensed products were $61 million and $15 million in the first and second quarter of 2024, respectively, and $51 million and $3 million in the first and second quarter of 2023, respectively.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240730509685/en/

Media Contacts:

Robert Josephson

(203) 914-2372

robert.josephson@merck.com

Michael Levey

(215) 872-1462

michael.levey@merck.com

Investor Contacts:

Peter Dannenbaum

(732) 594-1579

peter.dannenbaum@merck.com

Steven Graziano

(732) 594-1583

steven.graziano@merck.com

Source: Merck & Co., Inc.

FAQ

What were Merck's sales for the second quarter of 2024?

Merck reported total worldwide sales of $16.1 billion for the second quarter of 2024, a 7% increase from the same period in 2023.

How much did KEYTRUDA sales grow in Q2 2024?

KEYTRUDA sales grew by 16% to $7.3 billion in the second quarter of 2024.

What were Merck's GAAP and Non-GAAP EPS for Q2 2024?

Merck's GAAP EPS was $2.14 and Non-GAAP EPS was $2.28 for the second quarter of 2024.

What is Merck's updated full-year 2024 financial outlook?

Merck has raised its full-year 2024 financial outlook, expecting sales between $63.4 billion and $64.4 billion, and Non-GAAP EPS between $7.94 and $8.04.

What were the significant product sales changes for Merck in Q2 2024?

Significant changes included a 16% increase in KEYTRUDA sales to $7.3 billion and declines in diabetes and virology segment sales.