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Merck Announces Fourth-Quarter and Full-Year 2022 Financial Results

  • Fourth-Quarter and Full-Year 2022 Results Reflect Sustained Strong Revenue Growth
  • Fourth-Quarter 2022 Worldwide Sales Were $13.8 Billion, an Increase of 2% From Fourth Quarter 2021; Growth Excluding the Impact of Foreign Exchange Was 8%
  • Fourth-Quarter 2022 GAAP EPS From Continuing Operations Was $1.18; Fourth-Quarter 2022 Non-GAAP EPS Was $1.62
  • Full-Year 2022 Worldwide Sales Were $59.3 Billion, an Increase of 22% From Full Year 2021; Growth Excluding LAGEVRIO Was 12%; Growth Excluding LAGEVRIO and the Impact of Foreign Exchange Was 15%
    • KEYTRUDA Sales Grew 22% to $20.9 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 27%
    • GARDASIL/GARDASIL 9 Sales Grew 22% to $6.9 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 27%
  • Full-Year 2022 GAAP EPS From Continuing Operations Was $5.71; Full-Year 2022 Non-GAAP EPS Was $7.48
  • In 2022, Augmented Pipeline Through Strategic Business Development, Including Acquisition of Imago and Key Agreements With Moderna, Orna, Orion and Kelun-Biotech
  • 2023 Financial Outlook
    • Anticipates Full-Year 2023 Worldwide Sales To Be Between $57.2 Billion and $58.7 Billion; Outlook Includes Approximately $1.0 Billion of LAGEVRIO Sales
    • Expects Full-Year 2023 GAAP EPS To Be Between $5.86 and $6.01; Expects Non-GAAP EPS To Be Between $6.80 and $6.95

Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2022.

"2022 was an exceptional year for Merck, which is a testament to the profound impact our medicines and vaccines are having on patients globally," said Robert M. Davis, chairman and chief executive officer. “I am extremely proud of what our talented and dedicated colleagues have accomplished scientifically, commercially and operationally. Our science-led strategy is working as we continue to build a sustainable engine that will drive innovation and generate long-term value for patients and shareholders well into the next decade.”

Financial Summary

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

$ in millions, except EPS amounts

Fourth Quarter

Year Ended

2022

2021

Change

Change

Ex-Exchange

Dec. 31,

2022

Dec. 31,

2021

Change

Change

Ex-Exchange

Sales

$13,830

$13,521

2%

8%

$59,283

$48,704

22%

26%

GAAP net income1

3,017

3,820

-21%

-17%

14,519

12,345

18%

21%

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

4,129

4,592

-10%

-7%

19,005

13,623

40%

43%

GAAP EPS

1.18

1.51

-22%

-17%

5.71

4.86

17%

21%

Non-GAAP EPS that excludes certain items2*

1.62

1.81

-10%

-7%

7.48

5.37

39%

43%

*Refer to table on page 11.

Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) assuming dilution was $1.18 for the fourth quarter and $5.71 for the full year of 2022. Non-GAAP EPS was $1.62 for the fourth quarter and $7.48 for the full year of 2022. The declines in GAAP and non-GAAP EPS in the fourth quarter versus the prior year were primarily due to lower fourth quarter 2021 effective tax rates and the unfavorable impact of foreign exchange, partially offset by strong underlying business performance. The GAAP EPS decline in the fourth quarter also reflects the unfavorable impact of losses from investments in equity securities compared with gains in the prior year. Full-year 2022 and 2021 GAAP and non-GAAP EPS were negatively impacted by $0.22 and $0.65, respectively, related to an asset acquisition, and collaboration and licensing agreements.

Non-GAAP EPS excludes acquisition- and divestiture-related costs (including pretax intangible asset impairment research and development [R&D] charges of $780 million and $1.7 billion in the fourth quarter and full year of 2022, respectively, largely related to nemtabrutinib) and restructuring costs, as well as income and losses from investments in equity securities.

In 2022, the company changed the treatment of certain items for purposes of its non-GAAP reporting. Results for 2021 have been recast to conform to the new presentation. For more information, refer to the Form 8-K filed by the company on April 21, 2022.

Oncology Program Highlights

  • Merck announced the following regulatory and clinical milestones for KEYTRUDA (pembrolizumab), Merck’s anti-PD-1 therapy:
    • KEYTRUDA approved by the U.S. Food and Drug Administration (FDA) as adjuvant treatment following resection and platinum-based chemotherapy for adult patients with stage IB (T2a ≥4 centimeters), II, or IIIA non-small cell lung cancer (NSCLC), based on the pivotal Phase 3 KEYNOTE-091 trial.
    • In collaboration with Moderna, Inc. (Moderna), positive topline results from the Phase 2b KEYNOTE-942/mRNA-4157-P201 trial, which showed that KEYTRUDA in combination with mRNA-4157/V940, an investigational personalized mRNA therapeutic cancer vaccine, demonstrated a statistically significant and clinically meaningful improvement in the primary endpoint of recurrence-free survival versus KEYTRUDA alone for the adjuvant treatment of patients with stage III/IV melanoma following complete resection.
    • In collaboration with Seagen Inc. and Astellas Pharma Inc., acceptance by the FDA for priority review of the supplemental Biologics License Application for KEYTRUDA in combination with Padcev®3 (enfortumab vedotin-ejfv) for the treatment of patients with locally advanced or metastatic urothelial cancer who are not eligible to receive cisplatin-containing chemotherapy.
    • Positive topline results from the pivotal Phase 3 KEYNOTE-859 trial investigating KEYTRUDA in combination with chemotherapy for the first-line treatment of patients with human epidermal growth factor receptor 2 (HER2)-negative locally advanced unresectable or metastatic gastric or gastroesophageal junction adenocarcinoma.
    • Positive topline results from the Phase 3 KEYNOTE-966 trial investigating KEYTRUDA in combination with standard of care chemotherapy (gemcitabine and cisplatin) for the first-line treatment of patients with advanced or unresectable biliary tract cancer.
  • Merck announced that Lynparza (olaparib), an oral PARP inhibitor being co-developed and co-commercialized with AstraZeneca, was approved in the European Union (EU) in combination with abiraterone and prednisone or prednisolone for the treatment of adult patients with metastatic castration-resistant prostate cancer in whom chemotherapy is not clinically indicated, based on the Phase 3 PROpel trial.

Vaccine Program Highlights

  • Merck announced that an updated systematic literature review of 138 peer-reviewed studies observed that use of GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] led to reductions in the rates of high-grade (precancerous) and low-grade cervical lesions, as well as reductions in certain non-cervical HPV-related diseases and HPV infection in women and men.

Cardiovascular Program Highlights

  • Merck will present results from the Phase 3 STELLAR study evaluating investigational sotatercept for the treatment of patients with pulmonary arterial hypertension, and from the Phase 2 study evaluating MK-0616, the company’s investigational oral macrocyclic peptide PCSK9 inhibitor for the treatment of patients with hypercholesterolemia, at the American College of Cardiology’s 72nd Annual Scientific Session together with the World Heart Federation’s World Congress of Cardiology (ACC.23/WCC). Merck will host an investor event at ACC.23/WCC on March 6, 2023, to discuss these results. Further details will be announced at a later date.

Business Development Highlights

  • Merck announced and successfully completed the acquisition of Imago BioSciences, Inc. (Imago), for an approximate total equity value of $1.35 billion, expanding Merck’s growing hematology portfolio.
  • Merck announced that it has expanded its relationship and entered into an exclusive license and collaboration agreement with Kelun-Biotech (a holding subsidiary of Sichuan Kelun Pharmaceutical Co., Ltd) to develop up to seven investigational preclinical antibody-drug conjugates (ADCs) for the treatment of cancer.

Environmental, Social and Governance (ESG) Updates

  • Merck was named one of America’s most JUST companies by JUST Capital and CNBC, ranking No. 1 in the pharmaceuticals and biotech industry for the third straight year and No. 26 overall of all companies named.
  • Merck published its Sustainability Bond Allocation Report, which highlighted how the company’s initial $1.0 billion sustainability bond is helping to drive progress across ESG focus areas.

Fourth-Quarter and Full-Year Revenue Performance

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

$ in millions

Fourth Quarter

Year Ended

 

2022

2021

Change

Change

Ex-Exchange

Dec. 31,

2022

Dec. 31,

2021

Change

Change

Ex-Exchange

Total Sales

$13,830

 

$13,521

 

2%

 

8%

$59,283

 

$48,704

 

22%

 

26%

Pharmaceutical

12,180

 

12,039

 

1%

 

9%

52,005

 

42,754

 

22%

 

28%

KEYTRUDA

5,450

 

4,577

 

19%

 

26%

20,937

 

17,186

 

22%

 

27%

GARDASIL / GARDASIL 9

1,470

 

1,528

 

-4%

 

6%

6,897

 

5,673

 

22%

 

27%

LAGEVRIO

825

 

952

 

-13%

 

2%

5,684

 

952

 

***

 

***

JANUVIA / JANUMET

913

 

1,393

 

-34%

 

-29%

4,513

 

5,288

 

-15%

 

-9%

PROQUAD, M-M-R II and VARIVAX

526

 

509

 

3%

 

6%

2,241

 

2,135

 

5%

 

7%

BRIDION

441

 

436

 

1%

 

7%

1,685

 

1,532

 

10%

 

16%

Lynparza*

292

 

268

 

9%

 

14%

1,116

 

989

 

13%

 

18%

Lenvima*

216

 

206

 

5%

 

9%

876

 

704

 

24%

 

28%

ROTATEQ

139

 

213

 

-35%

 

-31%

783

 

807

 

-3%

 

0%

SIMPONI

166

 

206

 

-19%

 

-8%

706

 

825

 

-14%

 

-4%

Animal Health

1,230

 

1,261

 

-2%

 

6%

5,550

 

5,568

 

0%

 

6%

Livestock

814

 

791

 

3%

 

12%

3,300

 

3,295

 

0%

 

7%

Companion Animals

416

 

470

 

-11%

 

-5%

2,250

 

2,273

 

-1%

 

4%

Other Revenues**

420

 

221

 

90%

 

-25%

1,728

 

382

 

***

 

87%

*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.

***>100%

Pharmaceutical Revenue

Fourth-quarter pharmaceutical sales grew 1% to $12.2 billion. Excluding the unfavorable impact of foreign exchange, pharmaceutical sales grew 9%, primarily driven by oncology and hospital acute care, partially offset by diabetes.

Growth in oncology was largely driven by higher sales of KEYTRUDA, which rose 19% to $5.5 billion in the quarter. Global sales growth of KEYTRUDA reflects continued strong momentum from metastatic indications including certain types of NSCLC, renal cell carcinoma, head and neck squamous cell carcinoma, triple-negative breast cancer (TNBC) and microsatellite instability-high (MSI-H) cancers, and increased uptake across recent earlier-stage launches, including certain types of neoadjuvant/adjuvant TNBC in the U.S. Also contributing to growth in oncology was increased alliance revenue from Lynparza, which grew 9% to $292 million, driven primarily by higher demand in the U.S. In addition, sales of WELIREG (belzutifan), an oral hypoxia-inducible factor-2 alpha inhibitor, increased to $40 million due to continued uptake in the U.S. following the product’s launch in 2021.

Growth in hospital acute care reflects higher sales of ZERBAXA (ceftolozane and tazobactam), a combination cephalosporin antibacterial and beta-lactamase inhibitor for the treatment of patients with certain bacterial infections. ZERBAXA sales of $49 million in the fourth quarter of 2022 increased from $10 million in the fourth quarter of 2021, reflecting uptake from the completion of the phased resupply in 2022 that was initiated in the fourth quarter of 2021. Growth in hospital acute care also reflects higher sales of PREVYMIS (letermovir), a medicine for prophylaxis of CMV infection and disease in adult CMV-seropositive recipients of an allogenic hematopoietic stem cell transplant, which increased 17% to $118 million, reflecting higher demand globally.

Vaccines sales performance reflects lower combined sales of GARDASIL and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), vaccines to prevent certain cancers and other diseases caused by HPV, which declined 4% to $1.5 billion. Excluding the unfavorable impact of foreign exchange, GARDASIL/GARDASIL 9 sales grew 6%, reflecting higher demand outside of the U.S., particularly in China. Vaccines sales performance also reflects lower sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, which declined 50% to $145 million, primarily reflecting lower U.S. demand as the market continues to shift toward newer adult pneumococcal conjugate vaccines. In addition, sales of ROTATEQ (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children, declined 35% to $139 million, primarily due to lower sales in China, which benefited in the fourth quarter of 2021 from increased supply, and lower sales in the U.S. largely due to the timing of public-sector purchases. Vaccines sales performance benefited from the ongoing pediatric launch of VAXNEUVANCE (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help prevent invasive pneumococcal disease, which had sales of $138 million, largely due to inventory stocking in the U.S.

Pharmaceutical sales growth was partially offset by lower combined sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI), for the treatment of type 2 diabetes, which declined 34% to $913 million, primarily reflecting generic competition in certain international markets, particularly in Europe and the Asia Pacific region, and lower demand and net pricing in the U.S.

Sales of LAGEVRIO (molnupiravir), an investigational oral antiviral COVID-19 medicine, decreased 13% to $825 million. Excluding the unfavorable impact of foreign exchange, sales increased 2%, primarily driven by strong growth in Japan and the U.K. and the launch in Australia, offset by a decline in the U.S.

Full-year 2022 pharmaceutical sales grew 22% to $52.0 billion. Pharmaceutical sales growth was 16% excluding LAGEVRIO and the unfavorable impact of foreign exchange, primarily driven by higher sales in oncology, particularly KEYTRUDA, higher sales of vaccines, reflecting strong growth of GARDASIL/GARDASIL 9 and the ongoing pediatric launch of VAXNEUVANCE, as well as growth in hospital acute care products, including ZERBAXA and BRIDION (sugammadex) injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults and pediatric patients ages 2 years and older undergoing surgery. Pharmaceutical sales growth in 2022 was partially offset by lower sales of JANUVIA and JANUMET, primarily reflecting lower demand in Europe as a result of generic competition, and a decline in PNEUMOVAX 23 sales as the U.S. market continues to shift toward newer adult pneumococcal conjugate vaccines. COVID-19-related disruptions negatively affected sales in 2022, but to a lesser extent than in 2021, which benefited year-over-year sales growth.

Animal Health Revenue

Animal Health sales totaled $1.2 billion for the fourth quarter of 2022, a 2% decline compared with the fourth quarter of 2021. Excluding the unfavorable effect of foreign exchange, Animal Health sales increased 6%. Sales growth of livestock products reflects higher demand, notably in the ruminant and poultry product portfolio, which includes technology solutions products, as well as higher pricing. Sales of companion animal products were negatively impacted by a reduction in veterinary visits in the broader companion animal market following the more favorable trend during the pandemic, as well as supply constraints for certain vaccines, partially offset by higher pricing.

Full-year 2022 Animal Health sales were $5.5 billion, in line with the prior year. Excluding the unfavorable effect of foreign exchange, Animal Health sales grew 6%, primarily due to higher pricing. Full-year sales growth was also driven by higher demand of livestock products, led by ruminant, poultry and swine products. Sales of companion animal products also reflect higher demand for the BRAVECTO (fluralaner) parasiticide line of products, which had sales of $1.0 billion, partially offset by supply constraints for certain vaccines.

Fourth-Quarter and Full-Year Expense, EPS and Related Information

The tables below present selected expense information.

$ in millions

 

Fourth Quarter 2022

GAAP

Acquisition-

and

Divestiture-

Related Costs4

Restructuring

Costs

(Income) Loss

From

Investments in

Equity

Securities

Certain

Other

Items

Non-

GAAP2

Cost of sales

$3,881

$482

$38

$-

$-

$3,361

Selling, general and administrative

2,687

39

20

-

-

2,628

Research and development

3,775

740

-

-

-

3,035

Restructuring costs

49

-

49

-

-

-

Other (income) expense, net

(75)

(69)

-

80

-

(86)

 

Fourth Quarter 2021

 

 

 

 

 

 

Cost of sales

$3,873

$419

$47

$-

$(4)

$3,411

Selling, general and administrative

2,830

226

10

-

-

2,594

Research and development

3,068

397

7

-

-

2,664

Restructuring costs

174

-

174

-

-

-

Other (income) expense, net

(333)

(3)

-

(381)

-

51

$ in millions

 

Year Ended Dec. 31, 2022

GAAP

Acquisition-

and

Divestiture-

Related Costs4

Restructuring

Costs

(Income) Loss

From

Investments in

Equity

Securities

Certain

Other

Items

Non-

GAAP2

Cost of sales

$17,411

$2,059

$205

$-

$-

$15,147

Selling, general and administrative

10,042

176

94

-

-

9,772

Research and development

13,548

1,676

30

-

-

11,842

Restructuring costs

337

-

337

-

-

-

Other (income) expense, net

1,501

(207)

-

1,348

-

360

 

Year Ended Dec. 31, 2021

 

 

 

 

 

 

Cost of sales

$13,626

$1,607

$160

$-

$221

$11,638

Selling, general and administrative

9,634

322

19

-

-

9,293

Research and development

12,245

479

28

-

-

11,738

Restructuring costs

661

-

661

-

-

-

Other (income) expense, net

(1,341)

76

-

(1,884)

-

467

GAAP Expense, EPS and Related Information

Gross margin was 71.9% for the fourth quarter of 2022 compared with 71.4% for the fourth quarter of 2021. The increase primarily reflects favorable product mix and foreign exchange. Gross margin was 70.6% for the full year of 2022 compared to 72.0% for the full year of 2021. The decline primarily reflects the unfavorable impacts of higher amortization of intangible assets, as well as higher revenue from third-party manufacturing arrangements and sales of LAGEVRIO, both of which have lower gross margins. The full-year gross margin decline was partially offset by the favorable effects of product mix, foreign exchange and charges in the prior year related to the discontinuation of COVID-19 development programs.

Selling, general and administrative (SG&A) expenses were $2.7 billion in the fourth quarter of 2022, a decrease of 5% compared to the fourth quarter of 2021. The decrease primarily reflects lower acquisition- and divestiture-related costs and the favorable effect of foreign exchange, partially offset by higher promotional spending, as well as higher administrative costs. Full-year SG&A expenses were $10.0 billion, an increase of 4% compared to the full year of 2021. The increase primarily reflects higher administrative costs, as well as higher promotional spending, partially offset by the favorable impact of foreign exchange and lower acquisition- and divestiture-related costs.

R&D expenses were $3.8 billion in the fourth quarter of 2022, an increase of 23% compared to the fourth quarter of 2021. The increase was primarily driven by higher intangible asset impairment charges related to nemtabrutinib, which were $780 million in the fourth quarter of 2022 compared with $275 million in the fourth quarter of 2021, lower reimbursement of LAGEVRIO R&D costs from Ridgeback Biotherapeutics (Ridgeback), higher compensation and benefit costs reflecting in part increased headcount to support expanded clinical development activity, and higher clinical development spending. R&D expenses were $13.5 billion for the full year of 2022, an increase of 11% compared with the full year of 2021. The increase was primarily driven by higher intangible asset impairment charges, which were $1.7 billion in 2022 compared with $275 million in 2021, largely related to nemtabrutinib, $690 million of charges in 2022 related to collaboration and licensing agreements with Moderna, Orna Therapeutics (Orna) and Orion Corporation (Orion), as well as higher compensation and benefit costs and clinical development spending. The increase was partially offset by a $1.7 billion charge in the prior year for the acquisition of Pandion Therapeutics, Inc. (Pandion).

Other (income) expense, net, was $75 million of income in the fourth quarter of 2022 compared to $333 million of income in the fourth quarter of 2021. Other (income) expense, net, was $1.5 billion of expense in the full year of 2022 compared to $1.3 billion of income in the full year of 2021. The change in both periods is primarily due to net losses from investments in equity securities in 2022 compared with net gains from investments in equity securities in 2021.

The effective tax rate for the fourth quarter of 2022 of 14.1% reflects the unfavorable impact of a higher than anticipated full-year rate of 11.7% due to a less favorable mix of income and expense than previously anticipated, while the effective tax rate for the fourth quarter of 2021 of 2.2% reflects the favorable impact of a lower than previously expected full-year 2021 rate of 11.0%.

GAAP EPS was $1.18 for the fourth quarter of 2022 compared to $1.51 for the fourth quarter of 2021. GAAP EPS was $5.71 for the full year of 2022 compared to $4.86 for the full year of 2021.

Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 75.7% for the fourth quarter of 2022 compared to 74.8% for the fourth quarter of 2021. The increase primarily reflects the favorable effects of product mix and foreign exchange. Non-GAAP gross margin was 74.4% for the full year of 2022 compared to 76.1% for the full year of 2021. The decrease primarily reflects the impact of higher revenue from third-party manufacturing arrangements and sales of LAGEVRIO, both of which have lower gross margins, partially offset by the favorable effects of product mix and foreign exchange.

Non-GAAP SG&A expenses were $2.6 billion in the fourth quarter of 2022, an increase of 1% compared to the fourth quarter of 2021. Non-GAAP SG&A expenses for the full year were $9.8 billion, an increase of 5% compared to the full year of 2021. The increase in both periods primarily reflects higher administrative costs, as well as higher promotional spending, partially offset by the favorable impact of foreign exchange.

Non-GAAP R&D expenses were $3.0 billion in the fourth quarter of 2022, an increase of 14% compared with the fourth quarter of 2021. The increase was primarily driven by lower reimbursement of LAGEVRIO R&D costs from Ridgeback, higher compensation and benefit costs reflecting in part increased headcount to support expanded clinical development activity, and higher clinical development spending. Non-GAAP R&D expenses were $11.8 billion for the full year of 2022, an increase of 1% compared with the full year of 2021. The increase was primarily driven by $690 million of charges in 2022 related to collaboration and licensing agreements with Moderna, Orna and Orion, as well as higher compensation and benefit costs and clinical development spending. The increase was partially offset by a $1.7 billion charge in the prior year for the acquisition of Pandion.

Non-GAAP other (income) expense, net, was $86 million of income in the fourth quarter of 2022 compared to $51 million of expense in the fourth quarter of 2021. Non-GAAP other (income) expense, net, was $360 million of expense in the full year of 2022 compared to $467 million of expense in the full year of 2021.

The non-GAAP effective tax rate for the fourth quarter of 2022 of 15.6% reflects the unfavorable impact of a higher than anticipated full-year rate of 14.2% due to a less favorable mix of income and expense than previously anticipated, while the non-GAAP effective tax rate for the fourth quarter of 2021 of 4.3% reflects the favorable impact of a lower than previously expected full-year 2021 rate of 12.4%.

Non-GAAP EPS was $1.62 for the fourth quarter of 2022 compared to $1.81 for the fourth quarter of 2021. Non-GAAP EPS was $7.48 for the full year of 2022 compared to $5.37 for the full year of 2021.

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

$ in millions, except EPS amounts

Fourth Quarter

Year Ended

 

2022

2021

Dec. 31, 2022

Dec. 31, 2021

EPS

 

 

 

 

GAAP EPS

$1.18

$1.51

$5.71

$4.86

Difference

0.44

0.30

1.77

0.51

Non-GAAP EPS that excludes items listed below2

$1.62

$1.81

$7.48

$5.37

 

 

 

 

 

Net Income

 

 

 

 

GAAP net income1

$3,017

$3,820

$14,519

$12,345

Difference

1,112

772

4,486

1,278

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

$4,129

$4,592

$19,005

$13,623

 

 

 

 

 

Decrease (Increase) in Net Income Due to Excluded Items:

 

 

 

 

Acquisition- and divestiture-related costs4

$1,192

$1,039

$3,704

$2,484

Restructuring costs

107

238

666

868

Loss (income) from investments in equity securities

80

(381)

1,348

(1,884)

Charges for the discontinuation of COVID-19 development programs

-

-

-

221

Other

-

(4)

-

-

Net decrease (increase) in income before taxes

1,379

892

5,718

1,689

Income tax (benefit) expense5

(267)

(120)

(1,232)

(411)

Decrease (increase) in net income

$1,112

$772

$4,486

$1,278

Financial Outlook

The following table summarizes the company’s full-year 2023 financial guidance.

GAAP

Non-GAAP2

Revenue*

$57.2 to $58.7 billion

$57.2 to $58.7 billion

Gross margin

Approximately 73%

Approximately 77%

Operating expenses**

$23.3 to $24.3 billion

$23.1 to $24.1 billion

Effective tax rate

17% to 18%

17% to 18%

EPS***

$5.86 to $6.01

$6.80 to $6.95

*Includes approximately $1.0 billion of LAGEVRIO sales. The company does not have any non-GAAP adjustments to revenue.

**Includes an aggregate $1.4 billion of R&D expenses related to the Imago acquisition and upfront payment for a license and collaboration agreement with Kelun-Biotech.

***Includes $0.53 of charges related to the Imago acquisition and upfront payment to Kelun-Biotech. EPS guidance for 2023 assumes a share count (assuming dilution) of approximately 2.55 billion shares.

Merck anticipates full-year 2023 revenue to be between $57.2 billion and $58.7 billion, including a negative impact of foreign exchange of approximately 2% at mid-January 2023 exchange rates. The company expects a significant decline in sales of LAGEVRIO, which are expected to be approximately $1.0 billion.

Merck expects full-year 2023 GAAP EPS to be between $5.86 and $6.01.

Merck expects full-year 2023 non-GAAP EPS to be between $6.80 and $6.95, including a negative impact of foreign exchange of approximately 4%. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs, as well as income and losses from investment in equity securities.

In the fourth quarter of 2022, Merck announced the acquisition of Imago for an approximate total value of $1.35 billion and a license and collaboration agreement with Kelun-Biotech, which includes an upfront payment of $175 million. The Imago acquisition closed in January 2023 and the collaboration with Kelun-Biotech is expected to close in the first quarter of 2023, resulting in the inclusion of an aggregate $1.4 billion of R&D expenses in Merck’s GAAP and non-GAAP results for the first quarter and full year of 2023. The Imago acquisition is also anticipated to result in an approximate 1 percentage point unfavorable impact to Merck’s expected full-year 2023 GAAP and non-GAAP tax rates. The impact of these two transactions on expected full-year 2023 GAAP and non-GAAP EPS is approximately $0.53. GAAP and non-GAAP EPS in 2022 were negatively impacted by $0.22 of charges related to the collaboration and licensing agreements with Moderna, Orna and Orion.

Operating expenses include incremental R&D spending to advance the development of the Imago and Kelun-Biotech programs, as well as other promising programs related to the collaboration and licensing agreements with Moderna, Orna and Orion.

The financial outlook does not assume additional significant potential business development transactions.

A reconciliation of anticipated 2023 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 2023

 

GAAP EPS

$5.86 to $6.01

Difference

$0.94

Non-GAAP EPS that excludes items listed below2

$6.80 to $6.95

 

 

Acquisition- and divestiture-related costs

$2,500

Restructuring costs

400

(Income) loss from investments in equity securities

(20)

Net decrease (increase) in income before taxes

$2,880

Estimated income tax (benefit) expense

(480)

Decrease (increase) in net income

$2,400

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Thursday, Feb. 2, at 8:00 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 (888) 769-8514 (U.S. Toll-Free) or (517) 308-9208 (International) and using the access code 8206435.

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 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 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 Annual Report on Form 10-K for the year ended December 31, 2021, 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 2022 and 2021 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, senior management’s annual compensation is derived in part using a non-GAAP pre-tax 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. Non-GAAP results for 2021 have been recast to conform to presentation changes implemented in 2022.

3 Registered trademark of Seagen and Agensys.

4 Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. R&D expenses include intangible asset impairment charges of $780 million and $1.7 billion in fourth quarter and full year 2022, respectively, and $275 million in both fourth quarter and full year 2021, largely related to nemtabrutinib, which was obtained as part of the 2020 acquisition of ArQule, Inc. Also includes integration, transaction and certain other costs related to acquisitions and divestitures.

5 Includes the estimated tax impact on the reconciling items. In addition, the amount for full-year 2021 includes 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). The historical results of the 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

 

4Q22

4Q21

Full Year

2022

Full Year

2021

 
 
Sales

$

13,830

 

$

13,521

 

2

%

$

59,283

 

$

48,704

 

22

%

 
Costs, Expenses and Other
Cost of sales

 

3,881

 

 

3,873

 

0

%

 

17,411

 

 

13,626

 

28

%

Selling, general and administrative

 

2,687

 

 

2,830

 

-5

%

 

10,042

 

 

9,634

 

4

%

Research and development

 

3,775

 

 

3,068

 

23

%

 

13,548

 

 

12,245

 

11

%

Restructuring costs

 

49

 

 

174

 

-72

%

 

337

 

 

661

 

-49

%

Other (income) expense, net

 

(75

)

 

(333

)

-77

%

 

1,501

 

 

(1,341

)

*
Income from Continuing Operations Before Taxes

 

3,513

 

 

3,909

 

-10

%

 

16,444

 

 

13,879

 

18

%

Income Tax Provision

 

495

 

 

85

 

 

1,918

 

 

1,521

 

Net Income from Continuing Operations

 

3,018

 

 

3,824

 

-21

%

 

14,526

 

 

12,358

 

18

%

Less: Net Income Attributable to Noncontrolling Interests

 

1

 

 

4

 

 

7

 

 

13

 

Net Income from Continuing Operations Attributable to Merck & Co., Inc.

 

3,017

 

 

3,820

 

-21

%

 

14,519

 

 

12,345

 

18

%

(Loss) Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests

 

-

 

 

(62

)

*

 

-

 

 

704

 

*
Net Income Attributable to Merck & Co., Inc.

$

3,017

 

$

3,758

 

-20

%

$

14,519

 

$

13,049

 

11

%

 
Basic Earnings (Loss) per Common Share Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations

$

1.19

 

$

1.51

 

-21

%

$

5.73

 

$

4.88

 

17

%

(Loss) Income from Discontinued Operations

 

-

 

 

(0.02

)

*

 

-

 

 

0.28

 

*
Net Income

$

1.19

 

$

1.49

 

-20

%

$

5.73

 

$

5.16

 

11

%

 
Earnings (Loss) per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations

$

1.18

 

$

1.51

 

-22

%

$

5.71

 

$

4.86

 

17

%

(Loss) Income from Discontinued Operations

 

-

 

 

(0.02

)

*

 

-

 

 

0.28

 

*
Net Income

$

1.18

 

$

1.48

 

-20

%

$

5.71

 

$

5.14

 

11

%

 
Average Shares Outstanding

 

2,536

 

 

2,527

 

 

2,532

 

 

2,530

 

Average Shares Outstanding Assuming Dilution

 

2,548

 

 

2,535

 

 

2,542

 

 

2,538

 

Tax Rate from Continuing Operations

 

14.1

%

 

2.2

%

 

11.7

%

 

11.0

%

 
 

* 100% or greater

MERCK & CO., INC.
FOURTH QUARTER AND FULL YEAR 2022 GAAP TO NON-GAAP RECONCILIATION - CONTINUING OPERATIONS
(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

Adjustment Subtotal

Non-GAAP

 
Fourth Quarter
Cost of sales

$

3,881

 

482

 

38

 

520

 

$

3,361

 

Selling, general and administrative

 

2,687

 

39

 

20

 

59

 

 

2,628

 

Research and development

 

3,775

 

740

 

740

 

 

3,035

 

Restructuring costs

 

49

 

49

 

49

 

 

-

 

Other (income) expense, net

 

(75

)

(69

)

80

 

11

 

 

(86

)

Income from Continuing Operations Before Taxes

 

3,513

 

(1,192

)

(107

)

(80

)

(1,379

)

 

4,892

 

Income Tax Provision (Benefit)

 

495

 

(222

)

(3)

(32

)

(3)

(13

)

(3)

(267

)

 

762

 

Net Income from Continuing Operations

 

3,018

 

(970

)

(75

)

(67

)

(1,112

)

 

4,130

 

Net Income from Continuing Operations Attributable to Merck & Co., Inc.

 

3,017

 

(970

)

(75

)

(67

)

(1,112

)

 

4,129

 

Earnings per Common Share Assuming Dilution from Continuing Operations

$

1.18

 

(0.38

)

(0.03

)

(0.03

)

(0.44

)

$

1.62

 

 
Tax Rate

 

14.1

%

 

15.6

%

 
 
Full Year
Cost of sales

$

17,411

 

2,059

 

205

 

2,264

 

$

15,147

 

Selling, general and administrative

 

10,042

 

176

 

94

 

270

 

 

9,772

 

Research and development

 

13,548

 

1,676

 

30

 

1,706

 

 

11,842

 

Restructuring costs

 

337

 

337

 

337

 

 

-

 

Other (income) expense, net

 

1,501

 

(207

)

1,348

 

1,141

 

 

360

 

Income from Continuing Operations Before Taxes

 

16,444

 

(3,704

)

(666

)

(1,348

)

(5,718

)

 

22,162

 

Income Tax Provision (Benefit)

 

1,918

 

(809

)

(3)

(129

)

(3)

(294

)

(3)

(1,232

)

 

3,150

 

Net Income from Continuing Operations

 

14,526

 

(2,895

)

(537

)

(1,054

)

(4,486

)

 

19,012

 

Net Income from Continuing Operations Attributable to Merck & Co., Inc.

 

14,519

 

(2,895

)

(537

)

(1,054

)

(4,486

)

 

19,005

 

Earnings per Common Share Assuming Dilution from Continuing Operations

$

5.71

 

(1.14

)

(0.21

)

(0.42

)

(1.77

)

$

7.48

 

 
Tax Rate

 

11.7

%

 

14.2

%

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, senior management’s annual 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 for the fourth quarter and full year primarily reflect $780 million and $1.7 billion, respectively, of intangible asset impairment charges largely related to nemtabrutinib, which was obtained as part of the 2020 ArQule, Inc. acquisition, and expenses for the amortization of intangible assets, partially offset by a reduction in expenses related to changes in the estimated fair value of liabilities for contingent consideration. Amounts included in other (income) expense, net, for the fourth quarter and full year reflect royalty income and decreases in the estimated fair value measurement of liabilities for contingent consideration 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.

MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES - CONTINUING OPERATIONS
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3
 

2022

2021

4Q

Full Year

1Q

2Q

3Q

4Q

Full Year

1Q

2Q

3Q

4Q

Full Year

Nom %

Ex-Exch %

Nom %

Ex-Exch %

 
TOTAL SALES (1)

$15,901

$14,593

$14,959

$13,830

$59,283

$10,627

$11,402

$13,154

$13,521

$48,704

2

8

 

22

26

PHARMACEUTICAL

14,107

12,756

12,963

12,180

52,005

9,238

9,980

11,496

12,039

42,754

1

9

 

22

28

Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keytruda

4,809

5,252

5,426

5,450

20,937

3,899

4,176

4,534

4,577

17,186

19

26

 

22

27

Alliance Revenue – Lynparza (2)

266

275

284

292

1,116

228

248

246

268

989

9

14

 

13

18

Alliance Revenue – Lenvima (2)

227

231

202

216

876

130

181

188

206

704

5

9

 

24

28

Alliance Revenue – Reblozyl (3)

52

33

39

41

166

 

 

 

17

17

145

145

 

*

*

Vaccines (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gardasil / Gardasil 9

1,460

1,674

2,294

1,470

6,897

917

1,234

1,993

1,528

5,673

-4

6

 

22

27

ProQuad / M-M-R II / Varivax

470

578

668

526

2,241

449

516

661

509

2,135

3

6

 

5

7

RotaTeq

216

173

256

139

783

158

208

227

213

807

-35

-31

 

-3

0

Pneumovax 23

173

153

131

145

602

171

152

277

292

893

-50

-47

 

-33

-30

Vaqta

36

35

64

39

173

34

56

48

41

179

-5

-2

 

-3

-2

Hospital Acute Care

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bridion

395

426

423

441

1,685

340

387

369

436

1,532

1

7

 

10

16

Prevymis

94

103

114

118

428

82

93

96

100

370

17

28

 

16

24

Dificid

52

66

77

67

263

27

34

54

60

175

12

12

 

50

50

Primaxin

58

64

63

54

239

65

60

70

65

259

-17

-7

 

-8

-4

Noxafil

57

60

62

58

238

67

66

64

62

259

-5

7

 

-8

-1

Invanz

52

46

50

40

189

57

48

53

45

202

-10

-2

 

-7

-1

Cancidas

53

42

43

36

174

57

54

56

45

212

-19

-10

 

-18

-14

Zerbaxa

30

46

43

49

169

(8)

(1)

(2)

10

(1)

*

*

 

*

*

Cardiovascular

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alliance Revenue - Adempas/Verquvo (5)

72

98

88

82

341

74

74

100

94

342

-12

-12

 

-

-

Adempas (6)

61

63

57

57

238

55

74

59

63

252

-10

6

 

-6

7

Virology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lagevrio

3,247

1,177

436

825

5,684

 

 

 

952

952

-13

2

 

*

*

Isentress / Isentress HD

158

147

161

167

633

209

192

189

178

769

-7

-1

 

-18

-13

Neuroscience

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Belsomra

69

69

62

59

258

79

78

81

80

318

-27

-14

 

-19

-9

Immunology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Simponi

186

181

173

166

706

214

202

203

206

825

-19

-8

 

-14

-4

Remicade

61

53

49

44

207

85

75

73

67

299

-34

-22

 

-31

-21

Diabetes (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Januvia

779

756

717

561

2,813

809

784

852

878

3,324

-36

-31

 

-15

-11

Janumet

454

476

417

353

1,700

486

477

487

514

1,964

-31

-25

 

-13

-7

Other Pharmaceutical (8)

520

479

564

685

2,249

554

512

518

533

2,118

29

37

 

6

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ANIMAL HEALTH

1,482

1,467

1,371

1,230

5,550

1,418

1,472

1,417

1,261

5,568

-2

6

 

-

6

Livestock

832

826

829

814

3,300

819

821

864

791

3,295

3

12

 

-

7

Companion Animals

650

641

542

416

2,250

599

651

553

470

2,273

-11

-5

 

-1

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Revenues (9)

312

370

625

420

1,728

(29)

(50)

241

221

382

90

-25

 

*

87

 
 

* 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) Alliance Revenue represents royalties and a milestone payment.

(4) Total Vaccines sales were $2,481 million, $2,709 million, $3,552 million and $2,554 million in the first, second, third and fourth quarter of 2022, respectively, and $1,809 million, $2,293 million, $3,315 million and $2,715 million in the first, second, third and fourth quarter of 2021, 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 $1,305 million, $1,300 million, $1,231 million and $1,012 million in the first, second, third quarter and fourth quarter of 2022, respectively, and $1,363 million, $1,330 million, $1,417 million and $1,475 million in the first, second, third and fourth quarter of 2021, 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 $114 million, $32 million, $10 million and $10 million in the first, second, third and fourth quarter of 2022, respectively, and $56 million, $135 million and $27 million in the first, third and fourth quarter of 2021, respectively.

 

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