- Double-Digit Non-GAAP EPS Growth in Second Quarter 2011: Non-GAAP EPS of $0.95; GAAP EPS of $0.65
- Total Company and Pharmaceutical Sales Grow by 7 Percent, Including Foreign Exchange
- Double-Digit Global Growth Continues for JANUVIA, JANUMET, REMICADE, and ISENTRESS
- VICTRELIS and Other Product Launches Underway
- Company Raises Lower End of its 2011 Non-GAAP EPS Range; Provides New Range of $3.68 to $3.76; Also Updates GAAP EPS Range to $1.95 to $2.17
• Company Announces New Phase of Merger Restructuring Program
WHITEHOUSE STATION, 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 2011.
Second
Quarter
2011
Second
Quarter
2010
Sales
$
12,151
$
11,346
GAAP EPS
0.65
0.24
Non-GAAP EPS that excludes items listed below 1
0.95
0.86
GAAP Net Income 2
2,024
752
Non-GAAP Net Income that excludes items listed below 1, 2
2,950
2,708
Non-GAAP (generally accepted accounting principles) earnings per share (EPS) for the second quarter of $0.95 excludes acquisition-related costs, restructuring costs and the benefit of certain tax items.
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the tables that follow.
Second
Quarter
2011
Second
Quarter
2010
$ in millions, except EPS amounts
Net
Income 2
EPS
Net
Income 2
EPS
GAAP
$
2,024
$
0.65
$
752
$
0.24
Difference
926
0.30
3
1,956
0.62
3
Non-GAAP that excludes items listed below
$
2,950
$
0.95
$
2,708
$
0.86
$ in millions
Second
Quarter
2011
Second
Quarter
2010
Acquisition-related costs 4
$
1,440
$
1,747
Costs related to restructuring programs
816
894
Gain on AstraZeneca's asset option exercise
-
(443
)
Other
7
-
Net decrease (increase) in income before taxes
2,263
2,198
Income tax (benefit) expense 5
(1,337
)
(242
)
Decrease (increase) in net income
$
926
$
1,956
Year-to-date results can be found in the attached financial tables.
"Double-digit growth from key products, and successful new product launches in markets worldwide led to Merck's strong second quarter results," said Kenneth C. Frazier, president and chief executive officer. "We're delivering on our promise to grow both the top and bottom lines while continuing our efforts to streamline and transform Merck.
"By improving the effectiveness and efficiency of our operations and focusing on scientific innovation, we are well-positioned for sustained and profitable growth in the future."
Update to Merger Restructuring Program
Merck said today that it remains on track to achieve its goal of $3.5 billion in annual cost synergies by the end of 2012.
The company said it will more aggressively reduce its cost structure so Merck can continue to invest in long term profitable growth opportunities while driving a more efficient operating model. As a result, Merck announced the next phase of its Merger Restructuring Program today. As part of this next phase, the company expects to reduce its workforce, as measured at December 31, 2009, by an additional 12 to 13 percent by the end of 2015. At the same time, Merck said it will continue to hire new employees in strategic growth areas of the business such as emerging markets.
"Merck is taking these difficult actions so that we can grow profitably and continue to deliver on our mission well into the future," said Frazier. "The environment we operate in is changing rapidly and dramatically, and these steps will help us more efficiently serve customers and patients around the world."
By the end of 2015, Merck now expects the overall Merger Restructuring Program to yield annual ongoing savings of $4.0 billion to $4.6 billion from the original estimate of $2.7 billion to $3.1 billion. Total cumulative pretax costs for the Program are estimated to range between $5.8 billion to $6.6 billion.
Select Revenue Highlights
Worldwide sales were $12.2 billion for the second quarter of 2011, the highest quarterly sales total for the combined company and an increase of 7 percent compared with the second quarter of 2010. Foreign exchange for the quarter favorably affected global sales performance by 4 percent. The revenue increase largely reflects strong sales of JANUVIA (sitagliptin), JANUMET (sitagliptin/metformin hydrochloride), REMICADE (infliximab), SINGULAIR (montelukast sodium), ISENTRESS (raltegravir), GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant], and ZOSTAVAX (zoster vaccine live). Pharmaceutical sales from emerging markets accounted for 18 percent of sales in the quarter.
The table below reflects sales of the company's top Pharmaceutical products, as well as total sales of Animal Health and Consumer Care products.
$ in millions
Second
Quarter
2011
Second
Quarter
2010
Change
Total Sales
$
12,151
$
11,346
7%
Pharmaceutical 6
10,360
9,638
7%
SINGULAIR
1,354
1,258
8%
REMICADE
842
669
26%
JANUVIA
779
600
30%
ZETIA
592
564
5%
VYTORIN
459
490
-6%
COZAAR/HYZAAR
406
485
-16%
ISENTRESS
337
267
26%
NASONEX
323
338
-4%
JANUMET
321
218
47%
GARDASIL
277
219
27%
Animal Health
802
731
10%
Consumer Care 6
541
544
-1%
Other Revenues 7
448
433
3%
The combined diabetes franchise of JANUVIA/JANUMET grew 35 percent to $1.1 billion in the second quarter of 2011.
Worldwide sales of SINGULAIR, a once-a-day oral medicine indicated for the chronic treatment of asthma and the relief of symptoms of allergic rhinitis, grew 8 percent from the second quarter of 2010 to $1.4 billion, driven by Japan and the United States.
Global sales grew 26 percent in the quarter for REMICADE, a treatment for inflammatory diseases, due to growth in Europe, Canada and the emerging markets, as well as increases in gastrointestinal indications for the treatment of ulcerative colitis and Crohn's disease. Under an agreement reached in the second quarter, Merck has transferred exclusive marketing rights for REMICADE and SIMPONI (golimumab) to Johnson & Johnson in territories including Canada, Central and South America, the Middle East, Africa and Asia Pacific, effective July 1, 2011. Merck retains exclusive marketing rights to these products throughout Europe, Russia and Turkey.
ISENTRESS, an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, grew 26 percent in the second quarter driven by demand in the United States and Europe.
As expected, global sales of Merck's antihypertensive medicines COZAAR (losartan potassium) and HYZAAR (losartan potassium and hydrochlorothiazide) continue to decline following loss of marketing exclusivity for these products in the United States and in major European markets. Sales of TEMODAR (temozolomide), a treatment for certain types of brain tumors, declined due to generic competition in Europe.
Sales of ZOSTAVAX were $122 million in the quarter as a significant number of backorders were filled. The company anticipates that backorders will continue until inventory levels are sufficient to meet market demand.
Product Performance - Animal Health
Merck Animal Health sales totaled $802 million for the second quarter of 2011, a 10 percent increase over the same period last year, including an 8 percent contribution from foreign exchange. Animal Health had strong second-quarter performance across all regions. The growth was primarily led by increased sales of new products in cattle, companion animal and poultry. The division's products include pharmaceutical and vaccine products for the prevention, treatment and control of disease in all major farm and companion animal species.
Product Performance - Consumer Care
Merck Consumer Care second-quarter global sales were comparable to the second quarter of 2010, reflecting declines in CLARITIN due to a weak allergy season that were partially offset by increases in suncare. Consumer Care includes a variety of over-the-counter medicines, as well as footcare and suncare products.
Second Quarter Expense and Other Information
The costs detailed below on a GAAP basis during the second quarter of 2011 totaled $10.4 billion and include $2.3 billion of acquisition-related costs and restructuring costs.
$ in millions
Included in the expense for the period
Second Quarter 2011
GAAP
Acquisition-
Related Costs 4
Restructuring Costs
Non-GAAP 1
Materials and production
$
4,284
$
1,344
$
109
$
2,831
Marketing and administrative
3,525
77
23
3,425
Research and development
1,936
19
16
1,901
Restructuring costs
668
-
668
-
Second Quarter 2010
Materials and production
$
4,549
$
1,662
$
224
$
2,663
Marketing and administrative
3,175
75
-
3,100
Research and development
2,179
-
144
2,035
Restructuring costs
526
-
526
-
The gross margin was 64.7 percent for the second quarter of 2011 and 59.9 percent for the second quarter of 2010, reflecting 12.0 and 16.6 percentage point unfavorable impacts, respectively, from the acquisition-related costs and restructuring costs noted above.
Equity income from affiliates was $55 million in the second quarter. Equity income from affiliates primarily includes the AstraZeneca LP, Johnson & Johnson°Merck Consumer Pharmaceuticals Company, and Sanofi Pasteur MSD partnerships.
Other (income) expense, net was $121 million of expense in the second quarter of 2011 compared with $281 million of income in the second quarter of 2010. The second quarter of 2010 reflects $443 million of income recognized upon AstraZeneca's asset option exercise.
The GAAP tax benefit for the second quarter of 2011 primarily reflects a net favorable impact of approximately $700 million relating to the settlement of the company's 2002 to 2005 federal income tax audit, as well as a favorable impact of certain foreign and state tax rate changes that resulted in a net $230 million reduction of deferred tax liabilities on intangibles established in purchase accounting. The non-GAAP effective tax rate, which excludes the impact of these items as well as acquisition-related costs, restructuring costs, and certain other items, was 24.3 percent for the quarter.
Key Developments
New Drug Approvals
- VICTRELIS (boceprevir), the company's oral hepatitis C protease inhibitor, was approved by the U.S. Food and Drug Administration (FDA) and in Europe by the European Medicines Agency. The U.S. launch of VICTRELIS is underway. Separately, the company entered into strategic agreements with Roche to market VICTRELIS globally to physicians as part of a triple combination therapy regimen.
• The Japanese Ministry of Health, Labour and Welfare approved three products - GARDASIL, ZOLINZA (vorinostat), and CUBICIN (daptomycin for injection).
Other Pipeline Updates
- Supplemental New Drug Applications (sNDAs) for the cholesterol-lowering medicines VYTORIN (ezetimibe/simvastatin) and ZETIA (ezetimibe) have been accepted for standard review by the FDA. The sNDAs seek indications for VYTORIN, and for ZETIA when used in combination with simvastatin, for the prevention of major cardiovascular events in patients with chronic kidney disease.
- An sNDA for DULERA (mometasone furoate and formoterol fumarate dihydrate) for the treatment of chronic obstructive pulmonary disease (COPD) has been accepted for review by the FDA. DULERA is currently indicated in the United States for the treatment of asthma.
- Merck is discontinuing the clinical development program for telcagepant, the company's investigational calcitonin gene-related peptide receptor antagonist for the treatment of acute migraine. The decision is based on an assessment of data across the clinical program, including findings from a recently completed six-month Phase III study.
• The company received a Complete Response letter from the FDA for the extended release formulation of JANUMET related to the resolution of pre-approval inspection issues. Merck is responding to the questions raised by the FDA.
Business Development
- The company and China's Simcere Pharmaceutical Group announced last week the establishment of a joint venture that will serve China's rapidly expanding healthcare needs by providing significantly improved access to quality medicines in major therapeutic areas.
- Merck and Hanwha Chemical Corporation entered into an exclusive global agreement to develop and commercialize a candidate biosimilar form of Enbrel® (etanercept).
• Earlier this week Merck announced the acquisition of exclusive rights to develop and commercialize the investigational intravenous formulation of vernakalant (vernakalant i.v.) in Canada, Mexico and the United States. The company now has secured worldwide rights to vernakalant i.v., which is currently approved in the EU for rapid conversion of recent onset atrial fibrillation to sinus rhythm and has launched in more than 10 European countries.
Financial Targets
The company raised the lower end of its 2011 non-GAAP EPS range and is now targeting a range of $3.68 to $3.76 and a 2011 GAAP EPS target range of $1.95 to $2.17. The 2011 non-GAAP range excludes acquisition-related costs, costs related to restructuring programs, the benefit of certain tax items, a charge related to the resolution of the arbitration proceeding with Johnson & Johnson, and certain other items.
Merck continues to expect full year 2011 revenue to grow in the low- to mid-single digit percent range from a base of $46.0 billion in 2010.
In addition, the company lowered the top end of its non-GAAP R&D expense target to a range of $8.0 billion to $8.3 billion for the full year of 2011.
The company updated its anticipated consolidated non-GAAP 2011 tax rate to a range of 23 to 24 percent.
A reconciliation of anticipated 2011 EPS as reported in accordance with GAAP to non-GAAP EPS that excludes certain items is provided in the table below.
$ in millions, except EPS amounts
Full Year 2011
GAAP EPS
$1.95 to $2.17
Difference 3
1.73 to 1.59
Non-GAAP EPS that excludes items listed below
$3.68 to $3.76
Acquisition-related costs 4
$5,600 to $5,250
Costs related to restructuring programs
1,500 to 1,300
Arbitration settlement charge
500
Other 8
(127)
Net decrease (increase) in income before taxes
7,473 to 6,923
Income tax (benefit) expense 5
(2,109) to (1,993)
Decrease (increase) in net income
$5,364 to $4,930
Total Employees
As of June 30, 2011, Merck had approximately 91,000 employees worldwide.
Earnings Conference Call
Investors are invited to a live audio webcast of Merck's second quarter earnings conference call today at 8:00 a.m. EDT by visiting Merck's Web site, www.merck.com/investors/events-and-presentations/home.html. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782. Journalists are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917. A replay of the call will be available starting at 11 a.m. EDT today for approximately one week. To listen to the replay, dial (706) 645-9291 or (800) 642-1687 and enter ID No. 76798557.
About Merck
Today's Merck is a global healthcare leader working to help the world be well. Merck is known as MSD outside the United States and Canada. Through our prescription medicines, vaccines, biologic therapies, and consumer care and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to healthcare through far-reaching policies, programs and partnerships. For more information, visit www.merck.com.
Forward-Looking Statement
This news release includes "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, statements about the benefits of the merger between Merck and Schering-Plough, including future financial and operating results, the combined company's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of Merck's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the possibility that the expected synergies from the merger of Merck and Schering-Plough will not be realized, or will not be realized within the expected time period; the impact of pharmaceutical industry regulation and health care legislation; the risk that the businesses will not be integrated successfully; disruption from the merger making it more difficult to maintain business and operational relationships; Merck's ability to accurately predict future market conditions; dependence on the effectiveness of Merck's patents and other protections for innovative products; the risk of new and changing regulation and health policies in the U.S. and internationally and the exposure to litigation and/or regulatory actions.
Merck 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 Merck's 2010 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 Merck is providing certain 2011 and 2010 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 performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP. For a description of the items, see Table 2a, including the related footnotes, attached to this release.
2 Net income attributable to Merck & Co., Inc.
3 Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS which may be different than the amount calculated by dividing the impact of the excluded items by the weighted average shares.
4 Includes expenses for the amortization of intangible assets and amortization of purchase accounting adjustments to inventories recognized as a result of the merger, as well as intangible asset impairment charges. Also includes integration and other costs associated with mergers and acquisitions.
5 Includes an estimated income tax (benefit) expense on the reconciling items. In addition, amount for 2011 includes the net favorable impact of approximately $700 million relating to the settlement of a federal income tax audit, as well as the favorable impact of certain foreign and state tax rate changes that resulted in a net $230 million reduction of deferred tax liabilities on intangibles established in purchase accounting.
6 In the first quarter of 2011, Merck changed the reporting for certain over-the-counter products. Sales of these products outside the United States were previously recorded in the Pharmaceutical business, and are now reported in the Consumer Care business. Prior period amounts have been recast on a comparative basis.
7 Other revenues are primarily comprised of alliance revenue, miscellaneous corporate revenues and third party manufacturing sales. Revenue from AstraZeneca LP recorded by Merck was $306 million in the second quarter of 2011.
8 Represents a gain on the sale of certain manufacturing facilities and related assets reflected in other (income) expense, net.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1
GAAP
% Change
GAAP
% Change
2Q11
2Q10
YTD 2011
YTD 2010
Sales
$
12,151
$
11,346
7%
$
23,732
$
22,768
4%
Costs, Expenses and Other
Materials and production (1)
4,284
4,549
-6%
8,343
9,764
-15%
Marketing and administrative (1) / (2)
3,525
3,175
11%
6,689
6,397
5%
Research and development (1) / (2)
1,936
2,179
-11%
4,094
4,230
-3%
Restructuring costs (3)
668
526
27%
654
814
-20%
Equity income from affiliates (4)
(55
)
(43
)
28%
(193
)
(180
)
7%
Other (income) expense, net (1) / (5)
121
(281
)
*
744
(113
)
*
Income Before Taxes
1,672
1,241
35%
3,401
1,856
83%
Income Tax (Benefit) Provision
(382
)
461
276
746
Net Income
2,054
780
*
3,125
1,110
*
Less: Net Income Attributable to Noncontrolling Interests
30
28
58
59
Net Income Attributable to Merck & Co., Inc.
$
2,024
$
752
*
$
3,067
$
1,051
*
Earnings per Common Share Assuming Dilution (6)
$
0.65
$
0.24
*
$
0.98
$
0.33
*
Average Shares Outstanding Assuming Dilution
3,110
3,125
3,106
3,132
Tax Rate (7)
-22.8
%
37.1
%
8.1
%
40.2
%
*≥ 100%
(1) Amounts include the impact of acquisition-related costs and restructuring costs. See accompanying tables for details.
(2) The second quarter and first six months of 2010 include a reclassification of certain expenses from marketing and administrative to research and development of $28 million and $52 million, respectively.
(3) Represents separation and other related costs associated with restructuring activities.
(4) Primarily reflects equity income from the AstraZeneca LP, Johnson & JohnsonºMerck Consumer Pharmaceuticals Company, and Sanofi Pasteur MSD partnerships.
(5) Other (income) expense, net in the first six months of 2011 includes a charge of $500 million related to the resolution of the arbitration proceeding with Johnson & Johnson and a $127 million gain on the sale of certain manufacturing facilities and related assets. Other (income) expense, net in the second quarter and first six months of 2010 includes $443 million of income recognized upon AstraZeneca's asset option exercise. In addition, other (income) expense, net in the first six months of 2010 reflects $102 million of income on the settlement of certain disputed royalties.
(6) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Merck & Co., Inc. common shareholders used to calculate earnings per common share assuming dilution was $2,020 million and $749 million for the second quarter of 2011 and 2010, respectively, and was $3,059 million and $1,047 million for the first six months of 2011 and 2010, respectively.
(7) The GAAP effective tax rates for the second quarter and first six months of 2011 were (22.8)% and 8.1%, respectively, which reflect the net favorable impact of approximately $700 million related to the settlement of the company's 2002-2005 federal income tax audit and the favorable impact of certain foreign and state tax rate changes that resulted in a net $230 million reduction of deferred tax liabilities on intangibles established in purchase accounting. Excluding these items and the other non-GAAP reconciling items detailed in the accompanying tables, the effective tax rates were 24.3% and 24.9% for the second quarter and first six months of 2011, respectively. The GAAP effective tax rates for the second quarter and first six months of 2010 were 37.1% and 40.2%, respectively. Excluding the impact of the non-GAAP reconciling items detailed in the accompanying tables, the effective tax rates were 20.5% and 21.7% for the second quarter and first six months of 2010, respectively.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
SECOND QUARTER 2011
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a
GAAP
Acquisition-
Related Costs (1)
Restructuring
Costs (2)
Certain Other
Items
Adjustment
Subtotal
Non-GAAP
Sales
$
12,151
$
-
$
12,151
Materials and production
4,284
1,344
109
1,453
2,831
Marketing and administrative
3,525
77
23
100
3,425
Research and development
1,936
19
16
35
1,901
Restructuring costs
668
668
668
-
Equity income from affiliates
(55
)
-
(55
)
Other (income) expense, net
121
7
7
114
Income Before Taxes
1,672
(1,440
)
(816
)
(7
)
(2,263
)
3,935
Taxes on Income
(382
)
(1,337
)
(3)
955
Net Income
2,054
(926
)
2,980
Less: Net Income Attributable to Noncontrolling Interests
30
-
30
Net Income Attributable to Merck & Co., Inc.
$
2,024
$
(926
)
$
2,950
Earnings per Common Share Assuming Dilution
$
0.65
$
0.95
(4)
Average Shares Outstanding Assuming Dilution
3,110
3,110
Tax Rate
-22.8
%
24.3
%
Merck is providing 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 performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
(1) Amounts included in materials and production costs reflect expenses of $1.2 billion for the amortization of intangible assets and the amortization of purchase accounting adjustments to inventories recognized as a result of the merger, as well as $118 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect integration costs, as well as other costs associated with mergers and acquisitions, such as severance costs which are not part of the company's formal restructuring programs. Amounts included in research and development expenses represent in-process research and development ("IPR&D") impairment charges.
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company's formal restructuring programs.
(3) Includes a net benefit of approximately $700 million relating to the settlement of the company's 2002-2005 federal income tax audit, the favorable impact of certain foreign and state tax rate changes that resulted in a net $230 million reduction of deferred tax liabilities on intangibles established in purchase accounting, as well as the estimated tax impact on the reconciling items.
(4) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $2,942 million for the second quarter of 2011.
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF OPERATIONS
GAAP TO NON-GAAP RECONCILIATION
SIX MONTHS ENDED JUNE 30, 2011
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2b
GAAP
Acquisition-
Related Costs (1)
Restructuring
Costs (2)
Certain Other
Items (3)
Adjustment
Subtotal
Non-GAAP
Sales
$
23,732
$
-
$
23,732
Materials and production
8,343
2,641
181
2,822
5,521
Marketing and administrative
6,689
135
46
181
6,508
Research and development
4,094
321
61
382
3,712
Restructuring costs
654
654
654
-
Equity income from affiliates
(193
)
-
(193
)
Other (income) expense, net
744
373
373
371
Income Before Taxes
3,401
(3,097
)
(942
)
(373
)
(4,412
)
7,813
Taxes on Income
276
(1,668
)
(4)
1,944
Net Income
3,125
(2,744
)
5,869
Less: Net Income Attributable to Noncontrolling Interests
58
-
58
Net Income Attributable to Merck & Co., Inc.
$
3,067
$
(2,744
)
$
5,811
Earnings per Common Share Assuming Dilution
$
0.98
$
1.87
(5)
Average Shares Outstanding Assuming Dilution
3,106
3,106
Tax Rate
8.1
%
24.9
%
Merck is providing 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 performance. This information should be considered in addition to, but not in lieu of, information prepared in accordance with GAAP.
(1) Amounts included in materials and production costs reflect expenses of $2.5 billion for the amortization of intangible assets and the amortization of purchase accounting adjustments to inventories recognized as a result of the merger, as well as $118 million of impairment charges on product intangibles. Amounts included in marketing and administrative expenses reflect integration costs, as well as other costs associated with mergers and acquisitions, such as severance costs which are not part of the company's formal restructuring programs. Amounts included in research and development expenses represent in-process research and development ("IPR&D") impairment charges.
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to actions under the company's formal restructuring programs.
(3) Included in other (income) expense, net is a $500 million charge related to the resolution of the arbitration proceeding with Johnson & Johnson and a $127 million gain on the sale of certain manufacturing facilities and related assets.
(4) Includes a net benefit of approximately $700 million relating to the settlement of the company's 2002-2005 federal income tax audit, the favorable impact of certain foreign and state tax rate changes that resulted in a net $230 million reduction of deferred tax liabilities on intangibles established in purchase accounting, as well as the estimated tax impact on the reconciling items.
(5) The company calculates earnings per share pursuant to the two-class method which requires the allocation of net income between common shareholders and participating security holders. Net income attributable to Merck & Co., Inc. common shareholders used to calculate non-GAAP earnings per common share assuming dilution was $5,795 million for the first six months of 2011.
MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
(AMOUNTS IN MILLIONS)
Table 3
2011
2010
% Change
% Change
Jun
1Q
2Q
YTD
1Q
2Q
Jun YTD
3Q
4Q
Full Year
2Q
Jun YTD
TOTAL SALES (1)
$11,580
$12,151
$23,732
$11,422
$11,346
$22,768
$11,125
$12,094
$45,987
7
4
PHARMACEUTICAL (2)
9,820
10,360
20,179
9,665
9,638
19,303
9,523
10,441
39,267
7
5
Cardiovascular
Zetia
582
592
1,174
534
564
1,098
571
629
2,297
5
7
Vytorin
480
459
939
477
490
967
485
562
2,014
-6
-3
Integrilin
64
56
120
70
70
140
63
63
266
-20
-14
Diabetes & Obesity
Januvia
739
779
1,518
511
600
1,111
600
675
2,385
30
37
Janumet
305
321
626
201
218
419
247
288
954
47
50
Diversified Brands
Cozaar / Hyzaar
426
406
832
782
485
1,267
423
415
2,104
-16
-34
Zocor
127
107
234
116
117
233
114
121
468
-9
--
Propecia
106
112
218
100
113
213
109
124
447
-1
3
Claritin Rx
120
65
186
98
58
157
53
86
296
12
19
Remeron
60
57
117
51
59
110
50
62
223
-4
6
Vasotec / Vaseretic
57
59
116
59
63
122
69
64
255
-6
-5
Proscar
60
53
113
58
56
114
58
44
216
-5
-1
Infectious Disease
Isentress
292
337
629
232
267
499
278
313
1,090
26
26
Cancidas
158
168
326
153
150
303
135
174
611
12
8
PegIntron
166
154
319
186
185
371
168
198
737
-17
-14
Primaxin
136
136
272
159
158
317
135
158
610
-13
-14
Invanz
87
103
189
75
83
158
91
113
362
24
20
Avelox
106
61
167
106
59
165
59
92
316
3
1
Noxafil
55
56
110
49
50
99
52
48
198
12
12
Rebetol
53
48
100
56
55
111
55
54
221
-13
-10
Crixivan / Stocrin
45
50
95
52
48
100
49
58
206
4
-5
Neurosciences & Ophthalmology
Maxalt
173
131
304
135
133
268
133
149
550
-1
14
Cosopt / Trusopt
114
122
236
115
123
238
114
131
484
-1
-1
Oncology
Temodar
248
234
481
274
271
545
254
266
1,065
-14
-12
Emend
87
120
207
84
93
177
91
110
378
29
17
Intron A
49
47
96
54
51
105
50
54
209
-7
-9
Respiratory & Immunology
Singulair
1,328
1,354
2,682
1,165
1,258
2,423
1,215
1,349
4,987
8
11
Remicade
753
842
1,595
674
669
1,343
661
710
2,714
26
19
Nasonex
373
323
696
320
338
658
259
303
1,219
-4
6
Clarinex
155
209
364
164
191
355
131
138
623
9
3
Arcoxia
114
100
214
95
95
190
94
115
398
5
12
Simponi
54
75
129
10
18
28
27
42
97
*
*
Asmanex
60
47
107
51
56
107
48
53
208
-16
-1
Proventil
42
37
80
57
55
112
43
55
210
-32
-29
Dulera
13
25
37
0
0
0
2
6
8
*
*
Vaccines
ProQuad, M-M-R II and Varivax
244
291
535
319
340
659
434
285
1,378
-14
-19
Gardasil
214
277
490
233
219
451
316
221
988
27
9
RotaTeq
125
148
272
93
139
231
119
169
519
7
18
Zostavax
24
122
146
95
18
114
23
107
243
*
28
Pneumovax
79
64
143
51
59
110
110
156
376
8
29
Women's Health & Endocrine
Fosamax
208
221
429
230
241
472
220
234
926
-9
-9
NuvaRing
142
154
297
135
145
280
134
145
559
6
6
Follistim AQ
133
143
276
134
137
270
119
138
528
4
2
Implanon
60
81
141
51
51
101
64
71
236
60
39
Cerazette
59
66
125
55
49
104
56
49
209
34
20
Other Pharmaceutical (3)
745
948
1,697
946
941
1,888
942
1,044
3,879
1
-10
ANIMAL HEALTH
758
802
1,560
709
731
1,440
687
815
2,941
10
8
CONSUMER CARE (2)
517
541
1,058
489
544
1,032
409
381
1,823
-1
2
Claritin OTC
167
134
301
136
167
303
120
103
526
-19
-1
Other Revenues (4)
486
448
935
559
433
993
506
457
1,956
3
-6
Astra
322
306
628
364
241
605
345
302
1,252
27
4
* 100% or greater
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
(1) Only select products are shown.
(2) Beginning in 2011, Merck changed the reporting for certain over-the-counter products. Sales of these products outside the United States were previously recorded in the Pharmaceutical business, and are now reported in the Consumer Care business. Prior period amounts have been recast on a comparative basis.
(3) Includes pharmaceutical products not individually shown above. Other vaccines sales included in Other Pharmaceutical were $54 million and $67 million for the first and second quarters of 2011, respectively. Other vaccines sales included in Other Pharmaceutical were $55 million, $57 million, $94 million and $75 million for the first, second, third and fourth quarters of 2010, respectively.
(4) Other revenues are primarily comprised of alliance revenue, miscellaneous corporate revenues and third party manufacturing sales.