Merck Announces Third-Quarter 2021 Financial Results

Rhea-AI Summary

Merck (MRK) reported strong third-quarter 2021 sales of $13.2 billion, a 20% increase year-over-year. Key drivers included KEYTRUDA sales, up 22% to $4.5 billion, and GARDASIL, with sales surging 68% to $2 billion. The company achieved a GAAP EPS of $1.80 and non-GAAP EPS of $1.75. Merck raised its 2021 revenue outlook to $47.4-$47.9 billion, reflecting a 14-15% growth. The acquisition of Acceleron Pharma aims to enhance Merck's cardiovascular pipeline. Multiple regulatory approvals for cancer treatments and COVID-19 antiviral molnupiravir highlight ongoing innovation.

Positive

• Third-quarter 2021 sales increased by 20% to $13.2 billion.
• KEYTRUDA sales grew 22% to $4.5 billion.
• GARDASIL/GARDASIL 9 sales increased 68% to $2.0 billion.
• Raised 2021 revenue outlook to $47.4 - $47.9 billion, expecting 14-15% growth.
• GAAP EPS was $1.80, up from $0.92 in Q3 2020; non-GAAP EPS was $1.75, up from $1.37.

Negative

• PNEUMOVAX 23 sales declined 26% to $277 million due to lower demand.
• Anticipated net unfavorable impact of COVID-19 on 2021 revenues estimated at less than 3%.

• Results Demonstrate Strong Momentum Across Business
• Third-Quarter 2021 Worldwide Sales Were $13.2 Billion, 20% Above Third-Quarter 2020; Excluding the Impact from Foreign Exchange, Sales Grew 19% Reflecting Strong Demand for the Company’s Robust Portfolio:
  • KEYTRUDA Sales Grew 22% to $4.5 Billion; Excluding the Impact from Foreign Exchange, Sales Grew 21%
  • GARDASIL/GARDASIL 9 Sales Grew 68% to $2.0 Billion; Excluding the Impact from Foreign Exchange, Sales Grew 63%
  • Animal Health Sales Grew 16% to $1.4 Billion; Excluding the Impact from Foreign Exchange, Sales Grew 14%
• Third-Quarter 2021 GAAP EPS from Continuing Operations Was $1.80; Third-Quarter 2021 Non-GAAP EPS from Continuing Operations Was $1.75
• Bolstered Innovation with Agreement to Acquire Acceleron Pharma, Complementing and Expanding Merck’s Cardiovascular Pipeline
• Progressed Regulatory Applications, Secured Multiple Regulatory Approvals, and Saw Advancement of Key Government Recommendations, Including:
  • Submission of Emergency Use Authorization Application to FDA for Molnupiravir, an Investigational Oral Antiviral Medicine for the Treatment of At-Risk Patients with Mild-to-Moderate COVID-19
  • FDA Approval of WELIREG for the Treatment of Adult Patients with Certain Types of Von Hippel-Lindau Disease-Associated Tumors
  • FDA Approval of KEYTRUDA in Combination with Lenvima for the First-Line Treatment of Adult Patients with Advanced Renal Cell Carcinoma
  • FDA Approval of KEYTRUDA in Combination with Chemotherapy, with or Without Bevacizumab, for the Treatment of Certain Patients with Persistent, Recurrent or Metastatic Cervical Cancer
  • U.S. CDC’s Advisory Committee on Immunization Practices Vote to Provisionally Recommend Vaccination with a Sequential Regimen of VAXNEUVANCE Followed by PNEUMOVAX 23 as an Option both for Adults 65 Years and Older and for Adults Ages 19 to 64 with Certain Underlying Medical Conditions
• 2021 Financial Outlook:
  • Raises and Narrows Estimated Full-Year 2021 Revenue Range to Be Between $47.4 Billion and $47.9 Billion, Including a Positive Impact from Foreign Exchange of Approximately 1.5%; Now Expects Full-Year 2021 Sales Growth of 14% to 15%
  • Raises and Narrows Full-Year 2021 GAAP EPS to be Between $4.71 and $4.76; Raises and Narrows Full-Year 2021 Non-GAAP EPS to be Between $5.65 and $5.70, Including a Positive Impact from Foreign Exchange of Approximately 2%

KENILWORTH, N.J.--(BUSINESS WIRE)-- Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the third quarter of 2021.

“Merck delivered another strong quarter with positive momentum across our business and meaningful progress across our pipeline. Our teams continued to excel as we focus on evolving our operations, while driving innovations in our labs that exemplify the best of Merck science,” said Robert M. Davis, chief executive officer and president, Merck. “We achieved notable clinical milestones in the key areas of oncology and COVID-19, including positive Phase 3 results for molnupiravir. We recently announced our proposed acquisition of Acceleron, which will strengthen our cardiovascular portfolio with complementary, cutting-edge science and an exciting late-stage candidate. Looking ahead, we remain focused on building more momentum, delivering on our mission of saving and improving lives and continuing to expand our portfolio and pipeline for long-term success and sustainable value creation.”

Financial Summary – Continuing Operations

Financial information presented in this release reflects Merck’s results on a continuing operations basis, which excludes Organon & Co., that was spun-off on June 2, 2021.

	$ in millions, except EPS amounts			Third Quarter
				2021			2020			Change			Change Ex- Exchange
	Sales			$13,154			$10,929			20%			19%
	GAAP net income from continuing operations1			4,567			2,324			97%			94%
	Non-GAAP net income that excludes certain items1,2*			4,439			3,486			27%			26%
	GAAP EPS from continuing operations			1.80			0.92			96%			93%
	Non-GAAP EPS that excludes certain items2*			1.75			1.37			28%			26%
									*Refer to table on page 13.

GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) was $1.80 for the third quarter of 2021. Non-GAAP EPS of $1.75 for the third quarter of 2021 excludes acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities and certain other items. Year-to-date results can be found in the attached tables.

Strong Performance Across the Business

Merck achieved strong performance across its key pillars of Oncology, Vaccines, and Animal Health, led by highly innovative products, including KEYTRUDA (pembrolizumab), Lynparza (olaparib), Lenvima (lenvatinib), GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16, and 18) Vaccine, Recombinant], GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) and the BRAVECTO (fluralaner) line of products. In addition, BRIDION (sugammadex) injection 100 mg/mL saw strong growth in the quarter. The company continues to benefit from strong underlying demand for its products, as well as broad commercial scale and improved patient access to its innovative medicines across the globe.

Merck Reported Positive Phase 3 Results for Molnupiravir, an Investigational Oral Antiviral COVID-19 Treatment

Merck and Ridgeback Biotherapeutics announced positive results from the interim analysis of the Phase 3 MOVe-OUT trial of investigational oral antiviral therapeutic molnupiravir (MK-4482/EIDD-2801) in at-risk, non-hospitalized adult patients with mild-to-moderate COVID-19. The company announced on Oct. 11, 2021, the submission of an application for Emergency Use Authorization (EUA) to the U.S. Food and Drug Administration (FDA) based on these findings and plans to submit marketing applications to other regulatory bodies worldwide. If authorized or approved, Merck anticipates that molnupiravir can become an important treatment as part of the global effort to fight the COVID-19 pandemic. On Oct. 14, 2021, the FDA announced a Nov. 30, 2021, meeting of its Antimicrobial Drugs Advisory Committee to discuss the available data supporting the use of molnupiravir to treat at-risk adults with mild-to-moderate COVID-19. On Oct. 25, 2021, the European Medicines Agency (EMA) initiated a rolling review for molnupiravir for the treatment of COVID-19 in adults. Merck plans to work with the EMA’s Committee for Medicinal Products for Human Use (CHMP) to complete the rolling review process to facilitate initiating the formal review of the Marketing Authorization Application.

Merck is committed to providing timely access to molnupiravir globally, if it is authorized or approved, and plans to implement a tiered pricing approach based on World Bank country income criteria to reflect countries’ relative ability to finance their pandemic response and health systems. Merck has entered into non-exclusive voluntary licensing agreements with established generic manufacturers in India for molnupiravir. Additionally, Merck and the Medicines Patent Pool (MPP) jointly announced the signing of a voluntary licensing agreement to facilitate access to generic molnupiravir, upon local regulatory authorization. These agreements will help expand access to molnupiravir in more than 100 low- and middle-income countries.

Merck has entered into supply and purchase commitments for molnupiravir with several governments worldwide, including Australia, New Zealand, South Korea, the U.K. and the U.S., pending regulatory authorization, and is currently in discussions with other governments. The company expects to produce 10 million courses of treatment by the end of 2021, with at least 20 million additional courses expected to be produced in 2022.

Planned Acquisition of Acceleron Bolsters Innovation and Broadens Cardiovascular Pipeline

Merck announced a definitive agreement and tender offer to acquire Acceleron Pharma Inc. (Acceleron). The planned acquisition complements and strengthens Merck’s cardiovascular pipeline with Acceleron’s lead therapeutic candidate, sotatercept, a potentially first-in-class therapy in Phase 3 clinical trials for the treatment of pulmonary arterial hypertension. Merck commenced a tender offer on Oct. 12, 2021, and upon successful completion of the tender offer and receipt of necessary regulatory approvals, Merck, through a subsidiary, will acquire Acceleron for $180 per share in cash for an approximate total equity value of $11.5 billion. The transaction is expected to close in the fourth quarter of 2021.

Oncology Program Highlights

Merck continued to advance development programs across its oncology portfolio, anticipating more than 90 potential new indications by 2028, including notable progress for KEYTRUDA, the company’s anti-PD-1 therapy; Lynparza, an oral poly (ADP-ribose) polymerase (PARP) inhibitor being co-developed and co-commercialized with AstraZeneca; Lenvima, an orally available tyrosine kinase inhibitor (TKI) being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai); and WELIREG (belzutifan), an oral hypoxia-inducible factor-2 alpha inhibitor (HIF-2α).

• Merck announced the following regulatory milestones:
  • FDA approval of WELIREG for the treatment of adult patients with von Hippel-Lindau disease who require therapy for associated renal cell carcinoma (RCC), central nervous hemangioblastomas, or pancreatic neuroendocrine tumors, not requiring immediate surgery based on the open label Study 004 trial. WELIREG is the first HIF-2α inhibitor therapy approved in the U.S. and is currently being evaluated in three Phase 3 studies as monotherapy and in combination with other novel therapies.
  • FDA approval of KEYTRUDA in combination with Lenvima for the first-line treatment of adult patients with advanced RCC. The approval was based on results from the pivotal Phase 3 CLEAR study (KEYNOTE-581/Study 307).
  • FDA approval of KEYTRUDA in combination with chemotherapy, with or without bevacizumab, for the treatment of patients with persistent, recurrent or metastatic cervical cancer whose tumors express PD-L1 (Combined Positive Score [CPS] ≥1) as determined by an FDA-approved test, based on results from the Phase 3 KEYNOTE-826 trial.
  • FDA priority review for a new supplemental Biologics License Application (sBLA) for KEYTRUDA for the adjuvant treatment of patients with RCC at intermediate-high or high risk of recurrence following nephrectomy (surgical removal of a kidney), or following nephrectomy and resection of metastatic lesions. This sBLA was based on data that demonstrated a statistically significant and clinically meaningful improvement in disease-free survival compared to placebo from the pivotal Phase 3 KEYNOTE-564 trial. The Prescription Drug User Fee Act (PDUFA) date is Dec. 10, 2021.
  • FDA priority review for a new sBLA for KEYTRUDA for the adjuvant treatment of adult and pediatric patients (12 years and older) with STAGE IIB or IIC melanoma following complete resection, based on results from the Phase 3 KEYNOTE-716 trial that showed a statistically significant and clinically meaningful improvement in recurrence-free survival compared to placebo. The PDUFA date is Dec. 4, 2021.
  • FDA review of a new sBLA seeking approval for KEYTRUDA as a single agent for the treatment of patients with advanced endometrial carcinoma (EC) that is microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR), who have disease progression following prior systemic therapy in any setting and are not candidates for curative surgery or radiation. The application is based on overall response data from Cohorts D and K of the KEYNOTE-158 trial. The PDUFA date is March 28, 2022.
  • Positive opinion from the CHMP of the EMA for KEYTRUDA in combination with chemotherapy for the treatment of locally recurrent unresectable or metastatic triple-negative breast cancer (TNBC) in adults whose tumors express PD-L1 (CPS ≥10) and who have not received prior chemotherapy for metastatic disease. The positive opinion is based on progression-free survival and overall survival (OS) results from the Phase 3 KEYNOTE-355 trial.
  • European Commission approval of KEYTRUDA, in combination with chemotherapy, for the first-line treatment of locally recurrent unresectable or metastatic TNBC in adults whose tumors express PD-L1 (CPS ≥10) and who have not received prior chemotherapy for metastatic disease.
  • Positive opinions from the CHMP of the EMA recommending approval of the combination of KEYTRUDA plus Lenvima for two different indications: advanced RCC and advanced or recurrent EC. The positive opinions are based on data from two pivotal Phase 3 trials: CLEAR (KEYNOTE-581/Study 307) evaluating the combination in adult patients with advanced RCC and KEYNOTE-775/Study 309 evaluating the combination in certain patients with advanced or recurrent EC.
  • National Medical Products Administration approval in China of KEYTRUDA in combination with platinum- and fluoropyrimidine-based chemotherapy for the first-line treatment of patients with locally advanced unresectable or metastatic carcinoma of the esophagus or gastroesophageal junction. This new indication was granted approval based on OS findings from the pivotal Phase 3 KEYNOTE-590 trial. KEYTRUDA is now approved for eight indications across five different types of cancer in China.
  • Pharmaceuticals and Medical Devices Agency approval in Japan of two KEYTRUDA indications. KEYTRUDA was approved for the treatment of patients with PD-L1-positive, hormone receptor-negative and human epidermal growth factor receptor 2-negative, inoperable or recurrent breast cancer based on the results of the Phase 3 KEYNOTE-355 trial and for the treatment of patients with unresectable, advanced or recurrent MSI-H colorectal cancer, based on the results of the Phase 3 KEYNOTE-177 trial. With these approvals, KEYTRUDA has 15 authorized uses in Japan, including indications in nine tumor types as well as MSI-H tumors.
• Merck provided additional data presentations and updates including:
  • Final OS results from the pivotal Phase 3 KEYNOTE-355 trial were presented at the European Society for Medical Oncology (ESMO) Congress 2021 demonstrating a 27% reduction in risk of death for patients with metastatic TNBC whose tumors expressed PD-L1 (CPS ≥10) using first-line treatment of KEYTRUDA in combination with chemotherapy (paclitaxel, nab-paclitaxel or gemcitabine/carboplatin) as compared to chemotherapy alone.
  • Positive results from the Phase 3 PROpel trial demonstrating superior radiographic progression-free survival with Lynparza in combination with abiraterone and prednisone versus abiraterone plus prednisone as a first-line treatment for men with metastatic castration-resistant prostate cancer with or without homologous recombination repair gene mutations.

Other Highlights

Vaccines

• Merck announced positive topline results from the pivotal Phase 3 PNEU-PED (V114-029) study evaluating the immunogenicity, safety and tolerability of VAXNEUVANCE (Pneumococcal 15-valent Conjugate Vaccine) in healthy infants enrolled between 42-90 days of age.
• Merck announced that the CHMP of the EMA has recommended the approval of VAXNEUVANCE for active immunization for the prevention of invasive disease and pneumonia caused by Streptococcus pneumoniae in individuals 18 years of age and older. The CHMP recommendation will now be reviewed by the European Commission for marketing authorization in the EU, and a final decision is expected by the end of the year.
• Merck announced the U.S. Centers for Disease Control and Prevention’s (CDC’s) Advisory Committee on Immunization Practices (ACIP) voted to provisionally recommend vaccination either with a sequential regimen of VAXNEUVANCE followed by PNEUMOVAX 23 (Pneumococcal Vaccine Polyvalent), or with a single dose of 20-valent pneumococcal conjugate vaccine, for both adults 65 years and older and for adults ages 19 to 64 with certain underlying medical conditions or other risk factors. Final recommendations are subject to review by the director of the CDC and the Department of Health and Human Services, and will become official when published in the CDC’s Morbidity and Mortality Weekly Report (MMWR).

Infectious Diseases

• Merck announced top-line results from two pivotal Phase 3 trials of the investigational, once-daily oral fixed dose combination pill of doravirine/islatravir in adults with HIV-1 infection who are virologically suppressed on different antiretroviral therapy regimens (ILLUMINATE SWITCH A) or bictegravir/emtricitabine/tenofovir (ILLUMINATE SWITCH B).
• Merck anticipates the initiation of a phased resupply of ZERBAXA (ceftolozane and tazobactam) for injection beginning with the U.S. in the fourth quarter of 2021 following a voluntary recall in 2020. Additionally, the FDA has accepted for review two supplemental New Drug Applications for ZERBAXA in pediatric complicated urinary tract infections and complicated intra-abdominal infections with PDUFA dates of April 21, 2022, and May 2, 2022, respectively.

Third-Quarter Revenue Performance

The following table reflects sales of the company’s top pharmaceutical products, as well as sales of Animal Health products.

	$ in millions			Third Quarter
				2021		2020		Change		Change Ex- Exchange
	Total Sales			$13,154		$10,929		20%		19%
	Pharmaceutical			11,496		9,714		18%		17%
	KEYTRUDA			4,534		3,715		22%		21%
	GARDASIL / GARDASIL 9			1,993		1,187		68%		63%
	JANUVIA / JANUMET			1,339		1,327		1%		0%
	PROQUAD, M-M-R II and VARIVAX			661		576		15%		14%
	BRIDION			369		320		16%		15%
	PNEUMOVAX 23			277		375		-26%		-26%
	Lynparza* ROTATEQ			246 227		196 210		25% 8%		25% 7%
	SIMPONI			203		209		-3%		-5%
	ISENTRESS / ISENTRESS HD Lenvima*			189 188		205 142		-8% 32%		-7% 30%
	Animal Health			1,417		1,220		16%		14%
	Livestock			864		758		14%		12%
	Companion Animals			553		462		20%		18%
	Other Revenues**			241		(5)		>100%		>100%
	*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 third-party manufacturing sales and miscellaneous corporate revenues, including revenue-hedging activities. Other revenues in the third quarter of 2021 include $135 million related to the receipt of a milestone payment for an out-licensed product.

Pharmaceutical Revenue

Third-quarter pharmaceutical sales increased 18% to $11.5 billion, compared to the third quarter of 2020. Excluding the favorable effect of foreign exchange, sales grew by 17%, reflecting strength in the company’s oncology and vaccine businesses.

Growth in oncology was largely driven by higher sales of KEYTRUDA, which rose 22% to $4.5 billion in the quarter. Global sales growth of KEYTRUDA reflects continued strong momentum from the non-small-cell lung cancer indications as well as uptake in other indications, including RCC, head and neck squamous cell carcinoma, TNBC and MSI-H cancers. Also contributing to higher sales in oncology was a 25% increase in Lynparza alliance revenue, primarily reflecting continued uptake in the United States and Europe, as well as a 32% increase in Lenvima alliance revenue, driven primarily by higher demand in the United States and China.

Growth in vaccines for the third quarter was primarily driven by higher combined sales of GARDASIL and GARDASIL 9, vaccines to prevent certain cancers and other diseases caused by HPV. Third-quarter 2021 GARDASIL/GARDASIL 9 sales grew 68% to $2.0 billion, primarily driven by strong global demand, particularly in China, which also benefitted from increased supply, as well as in the United States, which also benefitted from the timing of public sector purchases.

Combined sales of pediatric vaccines VARIVAX (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox; PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a combination vaccine to help protect against measles, mumps, rubella and varicella; and M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help prevent measles, mumps and rubella, also contributed to higher sales in vaccines, increasing by 15% to $661 million primarily driven by the ongoing recovery of wellness visits in the United States.

Vaccine performance was negatively affected by lower sales of PNEUMOVAX 23, a vaccine to help prevent pneumococcal disease, which declined 26% to $277 million primarily driven by lower demand in the United States reflecting prioritization of the COVID-19 vaccine.

Performance in hospital acute care reflects the suspension of sales of ZERBAXA for injection, a combination cephalosporin antibacterial and beta-lactamase inhibitor for the treatment of adults with certain bacterial infections, following a product recall in the fourth quarter of 2020. This unfavorability was partially offset by higher demand globally for BRIDION injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults and pediatric patients aged 2 years and older undergoing surgery, which increased 16% to $369 million due in part to the ongoing COVID-19 pandemic recovery, and growth in DIFICID (fidaxomicin), a macrolide antibacterial drug for treatment of Clostridioides difficile-associated diarrhea in adults and pediatric patients aged 6 months and older, in the United States.

Animal Health Revenue

Animal Health sales totaled $1.4 billion for the third quarter of 2021, an increase of 16% compared with the third quarter of 2020. Excluding the favorable effect from foreign exchange, Animal Health sales increased 14%, reflecting growth across geographies and species, including the biopharmaceutical portfolio and the Animal Health Intelligence portfolio. Sales growth in livestock was primarily driven by higher demand globally for ruminant products, including Animal Health Intelligence products. Sales growth in companion animal was primarily driven by the BRAVECTO parasiticide line of products, as well as vaccines.

Third-Quarter Expense, EPS and Related Information

The tables below present selected expense information.

	$ in millions   Third-Quarter 2021		GAAP		Acquisition- and Divestiture- Related Costs3		Restructuring Costs		(Income) Loss from Investments in Equity Securities		Certain Other Items		Non- GAAP2
	Cost of sales		$3,450		$346		$48		$-		$-		$3,056
	Selling, general and administrative		2,336		61		5		-		-		2,270
	Research and development		2,445		48		8		-		(87)		2,476
	Restructuring costs		107		-		107		-		-		-
	Other (income) expense, net		(450)		(10)		-		(684)		-		244
	Third-Quarter 2020
	Cost of sales		$3,013		$403		$38		$-		$-		$2,572
	Selling, general and administrative		2,060		25		15		-		-		2,020
	Research and development		3,349		19		19		-		1,082		2,229
	Restructuring costs		113		-		113		-		-		-
	Other (income) expense, net		(312)		-		-		(346)		(1)		35

GAAP Expense, EPS and Related Information

Gross margin was 73.8% for the third quarter of 2021 compared to 72.4% for the third quarter of 2020. The increase primarily reflects the favorable effects of product mix and lower acquisition- and divestiture-related costs, partially offset by higher manufacturing costs.

Selling, general and administrative expenses were $2.3 billion in the third quarter of 2021, an increase of 13% compared to the third quarter of 2020. The increase primarily reflects higher administrative costs, increased promotional expenses in support of the company’s growth pillars, higher acquisition- and divestiture-related costs, as well as the unfavorable effects of foreign exchange.

Research and development expenses were $2.4 billion in the third quarter of 2021 compared with $3.3 billion in the third quarter of 2020. The decrease was primarily driven by lower upfront payments related to collaborations and license agreements, partially offset by higher oncology and COVID-19 clinical development spending, as well as increased investment in discovery research and early drug development.

Other (income) expense, net, was $450 million of income in the third quarter of 2021 compared to $312 million of income in the third quarter of 2020, primarily reflecting higher income from investments in equity securities, net, partially offset by higher pension settlement costs.

The effective income tax rate was 13.2% for the third quarter of 2021, reflecting the beneficial impact of the settlement of a foreign tax matter.

GAAP EPS was $1.80 for the third quarter of 2021 compared with $0.92 for the third quarter of 2020.

Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 76.8% for the third quarter of 2021 compared to 76.5% for the third quarter of 2020. The increase in non-GAAP gross margin primarily reflects the favorable effect of product mix, partially offset by higher manufacturing costs.

Non-GAAP selling, general and administrative expenses were $2.3 billion in the third quarter of 2021, an increase of 12% compared to the third quarter of 2020. The increase primarily reflects higher administrative costs, increased promotional expenses in support of the company’s growth pillars, as well as the unfavorable effects of foreign exchange.

Non-GAAP R&D expenses were $2.5 billion in the third quarter of 2021, an 11% increase compared to the third quarter of 2020. The increase primarily reflects higher oncology and COVID-19 clinical development spending, as well as increased investment in discovery research and early drug development.

Non-GAAP other (income) expense, net, was $244 million of expense in the third quarter of 2021 compared to $35 million of expense in the third quarter of 2020, primarily reflecting higher pension settlement costs.

The non-GAAP effective income tax rate was 13.0% for the third quarter of 2021, reflecting the beneficial impact of the settlement of a foreign tax matter.

Non-GAAP EPS was $1.75 for the third quarter of 2021 compared with $1.37 for the third quarter of 2020.

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

	$ in millions, except EPS amounts		Third Quarter
			2021		2020
	EPS
	GAAP EPS		$1.80		$0.92
	Difference		(0.05)		0.45
	Non-GAAP EPS that excludes items listed below2		$1.75		$1.37
	Net Income
	GAAP net income1		$4,567		$2,324
	Difference		(128)		1,162
	Non-GAAP net income that excludes items listed below1,2		$4,439		$3,486
	Decrease (Increase) in Net Income Due to Excluded Items:
	Acquisition- and divestiture-related costs3		$445		$447
	Restructuring costs		168		185
	(Income) loss from investments in equity securities		(684)		(346)
	Charges for acquisitions and collaborations4		-		1,082
	Other		(87)		(1)
	Net decrease (increase) in income before taxes		(158)		1,367
	Income tax (benefit) expense5		30		(205)
	Decrease (increase) in net income		$(128)		$1,162

Financial Outlook

Merck continues to experience strong global underlying demand across its business. Consequently, Merck is raising and narrowing its full-year estimated ranges for revenue and EPS. At mid-October 2021 exchange ranges, Merck now expects sales growth of 14% to 15% in 2021, with full-year 2021 revenue estimated to be between $47.4 billion and $47.9 billion, including a positive impact from foreign exchange of approximately 1.5%.

Merck continues to believe that the global health systems and patients have largely adapted to the impacts of the COVID-19 pandemic, and, that while certain negative effects will persist, the trend will continue to improve. Merck continues to estimate that the pandemic will have a net unfavorable impact to 2021 revenues of less than 3%, all of which relates to the pharmaceutical segment.

Merck is raising and narrowing its full-year 2021 GAAP EPS range to be between $4.71 and $4.76.

Merck is raising and narrowing its non-GAAP EPS range and now expects full-year 2021 to be between $5.65 and $5.70, including a positive impact from foreign exchange of approximately 2%. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs, income and losses from investments in equity securities, and certain other items. Neither the sales nor the EPS ranges provided above include the impact of the potential launch of Merck’s COVID-19 antiviral drug candidate, molnupiravir.

The following table summarizes the company’s full-year 2021 financial guidance.

			GAAP		Non-GAAP2
	Revenue		$47.4 to $47.9 billion		$47.4 to $47.9 billion*
	Operating expenses		Lower than 2020 by a mid-single digit rate		Higher than 2020 by a high-single digit rate
	Effective tax rate		14.5% to 15.0%		14.0% to 14.5%
	EPS**		$4.71 to $4.76		$5.65 to $5.70
	*The company does not have any non-GAAP adjustments to revenue. **EPS guidance for 2021 assumes a share count (assuming dilution) of approximately 2.54 billion shares.

A reconciliation of anticipated 2021 GAAP EPS to non-GAAP EPS and the items excluded from non-GAAP EPS are provided in the table below.

	$ in millions, except EPS amounts		Full-Year 2021
	GAAP EPS		$4.71 to $4.76
	Difference		$0.94
	Non-GAAP EPS that excludes items listed below2		$5.65 to $5.70
	Acquisition- and divestiture-related costs Restructuring costs (Income) loss from investments in equity securities		$2,100 700 (2,000)
	Charge for the discontinuation of COVID-19 development programs		225
	Charge for the acquisition of Pandion Therapeutics		1,704
	Other		(29)
	Net decrease (increase) in income before taxes		2,700
	Income tax (benefit) expense6		(310)
	Decrease (increase) in net income		$2,390

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EDT on Merck’s website at https://investors.merck.com/events-and-presentations/default.aspx. Institutional investors and analysts can participate in the call by dialing (833) 353-0277 or (469) 886-1947 and using ID code number 6768456. Members of the media are invited to monitor the call by dialing (833) 353-0277 or (469) 886-1947 and using ID code number 6768456. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

About Merck

For over 130 years, Merck, known as MSD outside of the United States and Canada, has been inventing for life, bringing forward medicines and vaccines for many of the world’s most challenging diseases in pursuit of our mission to save and improve lives. We demonstrate our commitment to patients and population health by increasing access to health care through far-reaching policies, programs and partnerships. Today, Merck continues to be at the forefront of research to prevent and treat diseases that threaten people and animals – including cancer, infectious diseases such as HIV and Ebola, and emerging animal diseases – as we aspire to be the premier research-intensive biopharmaceutical company in the world. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.

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

This news release of Merck & Co., Inc., Kenilworth, 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 products, including if the Acceleron acquisition is consummated, Acceleron’s pipeline products, that the products 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; uncertainties as to the timing of the offer and subsequent merger with Acceleron; uncertainties as to how many of Acceleron’s stockholders will tender their shares in the offer; the risk that competing offers or acquisition proposals will be made; the possibility that various conditions to the consummation of the merger and the offer contemplated thereby may not be satisfied or waived; the effects of disruption from the transactions contemplated by the merger agreement and the impact of the announcement and pendency of the transactions on Acceleron’s business; the risk that stockholder litigation in connection with the offer or the merger may result in significant costs of defense, indemnification and liability; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of the global outbreak of novel coronavirus disease (COVID-19); 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 2020 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

_________________________________

1		Net income from continuing operations attributable to Merck & Co., Inc.
2		Merck is providing certain 2021 and 2020 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 and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. 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		Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories, 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 related to acquisitions and divestitures.
4		2020 includes $832 million related to the Seagen collaborations.
5		Includes the estimated tax impact on the reconciling items. In addition, the amount for 2020 includes a tax cost of $67 million, representing an adjustment to the tax benefits recorded in conjunction with the 2015 acquisition of Cubist Pharmaceuticals, Inc.
6		Includes the estimated tax impact on the reconciling items, as well as a $207 million net tax benefit related to the settlement of certain federal income tax matters.

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1
On June 2, 2021, Merck completed the spinoff of products from its women’s health, biosimilars and established brands businesses into a new, independent, publicly traded company named Organon & Co. (Organon) through a distribution of Organon’s publicly traded stock to company shareholders. The historical results of the women’s health, biosimilars and established brands businesses that were contributed to Organon in the spin-off are excluded from sales and expenses below and reflected as discontinued operations in the company’s Consolidated Statements of Income provided below.
		GAAP							% Change		GAAP							% Change
			3Q21			3Q20					Sep YTD 2021			Sep YTD 2020
Sales		$	13,154		$	10,929			20%		$	35,183		$	30,570			15%
Costs, Expenses and Other
Cost of sales			3,450			3,013			15%			9,752			8,589			14%
Selling, general and administrative			2,336			2,060			13%			6,804			6,336			7%
Research and development			2,445			3,349			-27%			9,177			7,609			21%
Restructuring costs (1)			107			113			-5%			487			265			84%
Other (income) expense, net			(450	)		(312	)		44%			(1,007	)		(637	)		58%
Income from Continuing Operations Before Taxes			5,266			2,706			95%			9,970			8,408			19%
Income Tax Provision			695			380						1,436			1,271
Net Income from Continuing Operations			4,571			2,326			97%			8,534			7,137			20%
Less: Net Income Attributable to Noncontrolling Interests			4			2						9			1
Net Income from Continuing Operations Attributable to Merck & Co., Inc.		$	4,567		$	2,324			97%		$	8,525		$	7,136			19%
Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests		$	-		$	617			*		$	766		$	2,025			-62%
Net Income Attributable to Merck & Co., Inc.		$	4,567		$	2,941			55%		$	9,291		$	9,161			1%
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations		$	1.81		$	0.92			97%		$	3.37		$	2.82			20%
Income from Discontinued Operations		$	-		$	0.24			*		$	0.30		$	0.80			-63%
Net Income		$	1.81		$	1.16			56%		$	3.67		$	3.62			1%
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations		$	1.80		$	0.92			96%		$	3.36		$	2.81			20%
Income from Discontinued Operations		$	-		$	0.24			*		$	0.30		$	0.80			-63%
Net Income		$	1.80		$	1.16			55%		$	3.66		$	3.61			1%
Average Shares Outstanding			2,530			2,529						2,531			2,530
Average Shares Outstanding Assuming Dilution			2,536			2,538						2,539			2,541
Tax Rate from Continuing Operations (2)			13.2	%		14.0	%					14.4	%		15.1	%

* 100% or greater
(1) Represents separation and other related costs associated with restructuring activities under the company's formal restructuring programs.
(2) The effective income tax rate for the first nine months of 2021 reflects the unfavorable impact of a charge for the acquisition of Pandion Therapeutics, Inc. for which no tax benefit was recognized and a net tax benefit of $207 million related to the settlement of certain federal income tax matters.

MERCK & CO., INC.
THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2021 GAAP TO NON-GAAP RECONCILIATION - CONTINUING OPERATIONS
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a
The table below reflects a reconciliation of GAAP to non-GAAP financial information on a continuing operations basis.  As Organon results are reflected within discontinued operations, they are excluded from the financial information provided below.
		GAAP				Acquisition and Divestiture- Related Costs (1)		Restructuring Costs (2)		(Income) Loss from Investments in Equity Securities		Certain Other Items		Adjustment Subtotal		Non-GAAP
Third Quarter
Cost of sales		$	3,450			346		48						394		$	3,056
Selling, general and administrative			2,336			61		5						66			2,270
Research and development			2,445			48		8				(87)	(4)	(31)			2,476
Restructuring costs			107					107						107			-
Other (income) expense, net			(450)			(10)				(684)				(694)			244
Income From Continuing Operations Before Taxes			5,266			(445)		(168)		684		87		158			5,108
Income Tax Provision (Benefit)			695			(96)	(5)	(26)	(5)	151	(5)	1	(5)	30			665
Net Income from Continuing Operations			4,571			(349)		(142)		533		86		128			4,443
Net Income from Continuing Operations Attributable to Merck & Co., Inc.			4,567			(349)		(142)		533		86		128			4,439
Earnings per Common Share Assuming Dilution from Continuing Operations		$	1.80			(0.14)		(0.06)		0.21		0.04		0.05		$	1.75
Tax Rate			13.2%														13.0%
Sep YTD
Cost of sales		$	9,752			1,188		113				225	(3)	1,526		$	8,226
Selling, general and administrative			6,804			96		9						105			6,699
Research and development			9,177			82		21				1,678	(4)	1,781			7,396
Restructuring costs			487					487						487			-
Other (income) expense, net			(1,007)			79				(1,503)				(1,424)			417
Income From Continuing Operations Before Taxes			9,970			(1,445)		(630)		1,503		(1,903)		(2,475)			12,445
Income Tax Provision (Benefit)			1,436			(283)	(5)	(82)	(5)	331	(5)	(259)	(5)	(293)			1,729
Net Income from Continuing Operations			8,534			(1,162)		(548)		1,172		(1,644)		(2,182)			10,716
Net Income from Continuing Operations Attributable to Merck & Co., Inc.			8,525			(1,162)		(548)		1,172		(1,644)		(2,182)			10,707
Earnings per Common Share Assuming Dilution from Continuing Operations		$	3.36			(0.46)		(0.22)		0.46		(0.65)		(0.86)		$	4.22
Tax Rate			14.4%														13.9%

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 this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information 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 acquisition and divestiture-related costs.  Amounts included in research and development expenses primarily reflect expenses for the amortization of intangible assets.  Amounts included in other (income) expense, net, for the third quarter and nine months period primarily reflect an increase in the estimated fair value measurement of liabilities for contingent consideration related to the termination of the Sanofi-Pasteur MSD joint venture.  Additionally, the first nine months also includes a loss on a forward exchange contract entered into in conjunction with the Organon spinoff.  Amount included in other (income) expense, net, for the nine month period is partially offset by royalty income related to the 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 charges for the discontinuation of COVID-19 development programs.

(4) Amounts included in the third quarter and first nine months reflect a $90 million adjustment to deferred tax assets identified in conjunction with the VelosBio Inc. acquisition.  Additionally, the first nine months includes a $1.7 billion charge for the acquisition of Pandion Therapeutics, Inc.

(5) Represent the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.  Certain other items for the nine month period also includes a $207 million net tax benefit related to the settlement of certain federal income tax matters.

MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES - CONTINUING OPERATIONS
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3
		2021													2020																			3Q							September YTD
		1Q			2Q			3Q			Sep YTD				1Q			2Q			3Q			Sep  YTD			4Q			Full Year				Nom %			Ex-Exch %				Nom %			Ex-Exch %
TOTAL SALES (1)		$10,627			$11,402			$13,154			$35,183				$10,288			$9,353			$10,929			$30,570			$10,948			$41,518				20			19				15			13
PHARMACEUTICAL		9,238			9,980			11,496			30,714				8,905			8,178			9,714			26,797			9,813			36,610				18			17				15			12
Oncology
Keytruda		3,899			4,176			4,534			12,609				3,284			3,388			3,715			10,387			3,993			14,380				22			21				21			19
Alliance Revenue – Lynparza (2)		228			248			246			721				145			178			196			519			206			725				25			25				39			35
Alliance Revenue – Lenvima (2)		130			181			188			498				128			151			142			421			158			580				32			30				18			15
Vaccines (3)
Gardasil / Gardasil 9		917			1,234			1,993			4,144				1,097			656			1,187			2,941			998			3,938				68			63				41			35
ProQuad / M-M-R II / Varivax		449			516			661			1,626				435			378			576			1,390			488			1,878				15			14				17			16
Pneumovax 23		171			152			277			600				256			117			375			748			339			1,087				-26			-26				-20			-21
RotaTeq		158			208			227			593				222			168			210			601			196			797				8			7				-1			-3
Vaqta		34			56			48			138				60			28			51			139			31			170				-6			-6				-1			-2
Hospital Acute Care
Bridion		340			387			369			1,096				299			224			320			843			355			1,198				16			15				30			27
Prevymis		82			93			96			270				60			63			77			200			80			281				23			22				35			31
Noxafil		67			66			64			197				94			73			79			247			82			329				-19			-20				-20			-23
Primaxin		65			60			70			194				51			64			74			189			62			251				-6			-12				3			-4
Cancidas		57			54			56			168				55			43			50			148			65			213				13			9				13			8
Invanz		57			48			53			157				64			43			51			159			53			211				5			0				-1			-4
Zerbaxa		(8)			(1)			(2)			(11)				37			32			43			112			19			130				-105			-105				-110			-110
Immunology
Simponi		214			202			203			619				215			191			209			615			223			838				-3			-5				1			-5
Remicade		85			75			73			233				88			73			82			242			88			330				-11			-11				-4			-8
Neuroscience
Belsomra		79			78			81			238				79			84			81			244			83			327				0			3				-2			-2
Virology
Isentress / Isentress HD		209			192			189			590				245			196			205			646			211			857				-8			-7				-9			-9
Cardiovascular
Alliance Revenue - Adempas/Verquvo (4)		74			74			100			248				53			79			83			216			65			281				20			20				15			15
Adempas (5)		55			74			59			188				56			57			55			167			53			220				7			8				13			7
Diabetes (6)
Januvia		809			784			852			2,445				774			854			821			2,449			857			3,306				4			3				0			-3
Janumet		486			477			487			1,449				503			490			506			1,499			472			1,971				-4			-6				-3			-7
Other Pharmaceutical (7)		581			546			572			1,704				605			548			526			1,675			636			2,312				9			8				2			1
ANIMAL HEALTH		1,418			1,472			1,417			4,307				1,214			1,101			1,220			3,535			1,168			4,703				16			14				22			19
Livestock		819			821			864			2,503				739			648			758			2,145			794			2,939				14			12				17			14
Companion Animals		599			651			553			1,804				475			453			462			1,390			374			1,764				20			18				30			26
Other Revenues (8)		(29)			(50)			241			162				169			74			(5)			238			(33)			205				*			*				-32			88

* 200% or greater
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) Total Vaccines sales were $1,809 million, $2,293 million, and $3,315 million in the first, second, and third quarter of 2021, respectively, and $2,155 million, $1,418 million, $2,521 million and $2,163 million in the first, second, third and fourth quarters of 2020, respectively.
(4) 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.
(5) Net product sales in Merck's marketing territories.
(6) Total Diabetes sales were $1,363 million, $1,330 million, and $1,417 million in the first, second, and third quarter of 2021, respectively, and $1,353 million, $1,418 million, $1,405 million and $1,412 million in the first, second, third and fourth quarters of 2020, respectively.
(7) Includes Pharmaceutical products not individually shown above.
(8) Other Revenues are comprised primarily of third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.  Other Revenues in the third quarter and September year-to-date period of 2021 include $135 million related to the receipt of a milestone payment for an out-licensed product.

 

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(908) 740-1037



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(908) 740-2107

Source: Merck & Co., Inc.

FAQ

What were Merck's third-quarter 2021 sales figures?

Merck reported third-quarter 2021 sales of $13.2 billion, a 20% increase from the previous year.

How much did KEYTRUDA sales increase in Q3 2021?

KEYTRUDA sales increased by 22% to $4.5 billion in the third quarter of 2021.

What is Merck's earnings per share for Q3 2021?

Merck's GAAP EPS for Q3 2021 was $1.80, while the non-GAAP EPS was $1.75.

What is the updated revenue outlook for Merck in 2021?

Merck has raised its 2021 revenue outlook to between $47.4 billion and $47.9 billion.

What acquisition did Merck announce recently?

Merck announced an agreement to acquire Acceleron Pharma for approximately $11.5 billion.