Merck Announces Second-Quarter 2022 Financial Results

July 28, 2022 6:30 am ET

Merck Delivers Robust Sales Growth and Important Clinical Advancements in Second Quarter
Second-Quarter 2022 Worldwide Sales Were $14.6 Billion, an Increase of 28% From Second Quarter 2021; LAGEVRIO Sales Were $1.2 Billion, Growth Excluding LAGEVRIO Was 18%; Growth Excluding LAGEVRIO and the Impact From Foreign Exchange Was 20%; Sales Growth Favorably Impacted by COVID-19 Recovery
- KEYTRUDA Sales Grew 26% to $5.3 Billion; Excluding the Impact From Foreign Exchange, Sales Grew 30%
- GARDASIL/GARDASIL 9 Sales Grew 36% to $1.7 Billion; Excluding the Impact From Foreign Exchange, Sales Grew 40%
Second-Quarter 2022 GAAP EPS From Continuing Operations Was $1.55; Second-Quarter 2022 Non-GAAP EPS Was $1.87
Advanced and Expanded Pipeline:
- The U.S. Food and Drug Administration (FDA) Approved Merck's VAXNEUVANCE for the Prevention of Invasive Pneumococcal Disease in Infants and Children
- The U.S. Centers for Disease Control and Prevention (CDC) Advisory Committee on Immunization Practices Unanimously Voted to Provisionally Recommend Use of Merck's VAXNEUVANCE as an Option for Pneumococcal Vaccination in Infants and Children
- Merck Announced Positive Results From a Phase 1/2 Study for V116, Merck's Investigational Pneumococcal 21-Valent Conjugate Vaccine for Adults, and Enrolled the First Patient Into the Phase 3 STRIDE-3 Trial Evaluating V116 in Vaccine-Naïve Adults
- The European Commission (EC) Approved Four Indications for KEYTRUDA
2022 Continuing Operations Financial Outlook:
- Company Raises and Narrows Expected Full-Year 2022 Worldwide Sales Range To Be Between $57.5 Billion and $58.5 Billion, Reflecting Full-Year Growth of 18% to 20%, Including Negative Impact From Foreign Exchange of Approximately 3%
- Company Expects Full-Year 2022 GAAP EPS To Be Between $5.89 and $5.99; Company Narrows Expected Full-Year 2022 Non-GAAP EPS Range To Be Between $7.25 and $7.35, Including Negative Impact From Foreign Exchange of Approximately 3%

RAHWAY, N.J.--(BUSINESS WIRE)-- Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the second quarter of 2022.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220728005295/en/

"I continue to be immensely proud of how the Merck team is performing in all facets of our business — scientifically, commercially and operationally," said Robert M. Davis, chief executive officer and president. "Our strategy is working and our future is bright. I am very confident that we are well-positioned to achieve our near- and long-term goals, anchored by our commitment to deliver innovative medicines and vaccines to patients and value to all of our stakeholders, including shareholders."

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 on June 2, 2021.

$ in millions, except EPS amounts	Second Quarter
$ in millions, except EPS amounts	2022	2021	Change	Change Ex- Exchange
Sales	$14,593	$11,402	28%	31%
GAAP net income¹	3,944	1,213	N/M**	N/M
Non-GAAP net income that excludes certain items^1,2*	4,743	1,559	N/M	N/M
GAAP EPS	1.55	0.48	N/M	N/M
Non-GAAP EPS that excludes certain items^2*	1.87	0.61	N/M	N/M
Refer to table on page 10 *Not meaningful

Generally accepted accounting principles (GAAP) earnings per share (EPS) assuming dilution was $1.55 for the second quarter of 2022. Non-GAAP EPS of $1.87 for the second quarter of 2022 excludes acquisition- and divestiture-related costs, 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, which reduced previously reported second-quarter 2021 non-GAAP EPS of $1.31, resulting in revised non-GAAP EPS of $0.61. For more information, refer to the Form 8-K filed by the company on April 21, 2022.

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

Vaccines Program Highlights

The FDA approved an expanded indication for VAXNEUVANCE (Pneumococcal 15-valent Conjugate Vaccine) to include infants and children. VAXNEUVANCE is now indicated to help prevent invasive pneumococcal disease caused by the serotypes in the vaccine in individuals six weeks and older.
The CDC Advisory Committee on Immunization Practices unanimously voted to provisionally recommend use of VAXNEUVANCE as an option to the currently available 13-valent pneumococcal conjugate vaccine (PCV13) for children under 19 years according to currently recommended PCV13 dosing and schedules. These provisional recommendations will be reviewed by the director of the CDC and the Department of Health and Human Services, and final recommendations will become official when published in the CDC's Morbidity and Mortality Weekly Report.
Merck presented positive results from the Phase 1/2 study for V116, Merck's investigational Pneumococcal 21-Valent Conjugate Vaccine designed to target serotypes that account for 85% of all invasive pneumococcal diseases in U.S. adults 65 years and older as of 2019³, and enrolled the first patient into the Phase 3 STRIDE-3 trial evaluating V116 in vaccine-naïve adults. V116 contains eight serotypes not included in any currently licensed pneumococcal vaccine.

Oncology Program Highlights

Merck announced the following regulatory milestones for KEYTRUDA (pembrolizumab):
- The FDA accepted an application seeking approval for KEYTRUDA as adjuvant therapy for stage IB (>4 centimeters), II or IIIA non-small cell lung cancer (NSCLC) following complete surgical resection based on data from the Phase 3 KEYNOTE-091 trial. The FDA has set a Prescription Drug User Fee Act date of January 29, 2023, however further data may be provided during the review process that may delay this date.
- The EC approved four indications for KEYTRUDA:
  - Approved as monotherapy for the adjuvant treatment of adult and adolescent patients (>12 years of age) with stage IIB or IIC melanoma and who have undergone complete resection, based on results from the KEYNOTE-716 trial. The EC also approved expanding the indication for KEYTRUDA in advanced and stage III melanoma to include adolescent patients 12 years and older.
  - Approved in combination with chemotherapy as neoadjuvant treatment, and then continued as adjuvant monotherapy after surgery, for adults with locally advanced or early-stage triple-negative breast cancer (TNBC) at high risk of recurrence, based on results from the KEYNOTE-522 trial.
  - Approved as monotherapy for the treatment of certain adult patients with microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) tumors for five types of cancer: unresectable or metastatic colorectal, gastric, small intestine or biliary cancer, as well as advanced or recurrent MSI-H/dMMR endometrial cancer, based on results from the KEYNOTE-164 and KEYNOTE-158 trials.
  - Approved in combination with chemotherapy, with or without bevacizumab, for patients with persistent, recurrent or metastatic cervical cancer whose tumors express PD-L1 (Combined Positive Score ≥ 1), based on results from the KEYNOTE 826 trial.
The European Medicines Agency Committee for Medicinal Products for Human Use adopted a positive opinion for Lynparza (olaparib), an oral poly (ADP-ribose) polymerase (PARP) inhibitor being co-developed and co-commercialized with AstraZeneca, as adjuvant treatment for patients with germline BRCA-mutated, human epidermal growth factor 2-negative high-risk early breast cancer who have been treated with neoadjuvant or adjuvant chemotherapy, based on results from the Phase 3 OlympiA trial.
At the 2022 American Society of Clinical Oncology Annual Meeting, Merck presented new data in more than 25 types of cancer and held an investor event to highlight key data and provide updates from its late-stage development programs and diverse early-stage pipeline.

Global Pharmaceuticals Program Highlight

Merck, in collaboration with Ridgeback Biotherapeutics, announced data from a pre-specified exploratory analysis for LAGEVRIO (molnupiravir) from the Phase 3 MOVe-OUT study indicating that a lower proportion of participants treated with LAGEVRIO had an acute care visit or COVID-19-related acute care visit versus placebo. Additionally, in a post-hoc subgroup analysis, fewer LAGEVRIO-treated patients who were hospitalized post-randomization in MOVe-OUT required respiratory interventions (including invasive mechanical ventilation) compared to those who received placebo.

Second-Quarter Revenue Performance

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

	Second Quarter
$ in millions	2022	2021	Change	Change Ex- Exchange
Total Sales	$14,593	$11,402	28%	31%
Pharmaceutical	12,756	9,980	28%	33%
KEYTRUDA	5,252	4,176	26%	30%
GARDASIL / GARDASIL 9	1,674	1,234	36%	40%
JANUVIA / JANUMET	1,233	1,261	-2%	3%
LAGEVRIO	1,177	0	-	-
PROQUAD, M-M-R II and VARIVAX	578	516	12%	14%
BRIDION Lynparza*	426 275	387 248	10% 11%	15% 17%
Lenvima*	231	181	28%	33%
SIMPONI ROTATEQ	181 173	202 208	-10% -17%	1% -14%
Animal Health	1,467	1,472	0%	5%
Livestock	826	821	1%	6%
Companion Animals	641	651	-2%	3%
Other Revenues**	370	(50)	N/M***	N/M
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. The revenue-hedging activities resulted in negative revenue in the second quarter of 2021. **Not meaningful

Pharmaceutical Revenue

Second-quarter pharmaceutical sales increased 28% to $12.8 billion. Pharmaceutical sales growth in the second quarter was 16% excluding LAGEVRIO sales, and was primarily driven by oncology, vaccines and hospital acute care products. The COVID-19 pandemic unfavorably affected sales in the second quarter of 2021 by approximately $400 million, which favorably impacted the growth rate in the second quarter of 2022.

LAGEVRIO sales totaled $1.2 billion for the second quarter, primarily consisting of sales in Japan and the U.K. The initial commitment of LAGEVRIO to the U.S. was fulfilled in the first quarter of 2022.

Growth in oncology was largely driven by higher sales of KEYTRUDA, which rose 26% to $5.3 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, TNBC and 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 higher sales in oncology was a 28% increase in Lenvima (lenvatinib) alliance revenue driven primarily by higher demand in the U.S., and an 11% increase in Lynparza alliance revenue reflecting continued demand globally, particularly in the U.S. driven by strong uptake in earlier-stage breast cancer.

Growth in vaccines was primarily driven by higher combined sales of GARDASIL (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant) and GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) vaccines to prevent certain cancers and other diseases caused by human papillomavirus (HPV). Second-quarter GARDASIL/GARDASIL 9 sales grew 36% to $1.7 billion primarily driven by strong demand outside of the U.S., particularly in China, which also benefited from increased supply.

Growth in hospital acute care reflects higher demand globally for 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 aged 2 years and older undergoing surgery. Sales increased 10% to $426 million, primarily due to an increase in its share among neuromuscular blockade reversal agents and an increase in surgical procedures during the second quarter. Growth in hospital acute care also reflects higher sales of ZERBAXA (ceftolozane and tazobactam), a combination cephalosporin antibacterial and beta-lactamase inhibitor for the treatment of adults with certain bacterial infections. Sales of $46 million resulted from the phased resupply initiated in the fourth quarter of 2021 that is being expanded to additional markets during 2022.

Pharmaceutical sales growth was partially offset by lower combined sales of ISENTRESS/ISENTRESS HD (raltegravir), an HIV integrase inhibitor used in combination with other antiretroviral agents for the treatment of HIV-1 infection, which declined 24% to $147 million reflecting lower global demand. Pharmaceutical sales growth was also partially offset by lower combined sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI), which declined 2% to $1.2 billion, primarily reflecting the unfavorable effect of foreign exchange and lower pricing in certain international markets, partially offset by the impact of a prior year unfavorable adjustment to rebate reserves in the U.S. The company lost market exclusivity for JANUVIA and JANUMET in China in July and will lose market exclusivity in the European Union in September.

Animal Health Revenue

Animal Health sales totaled $1.5 billion for the second quarter of 2022, flat compared to the second quarter of 2021. Excluding the unfavorable effect from foreign exchange, Animal Health sales grew 5%. Sales were driven primarily by livestock products reflecting higher demand globally for ruminant and poultry products. Sales in companion animal products were primarily driven by the BRAVECTO (fluralaner) parasiticide line of products.

Second-Quarter Expense, EPS and Related Information

The tables below present selected expense information.

$ in millions Second Quarter 2022	GAAP	Acquisition- and Divestiture- Related Costs ⁴	Restructuring Costs	(Income) Loss from Investments in Equity Securities	Certain Other Items	Non- GAAP ²
Cost of sales	$4,216	$451	$67	$-	$-	$3,698
Selling, general and administrative	2,512	65	27	-	-	2,420
Research and development	2,798	12	22	-	-	2,764
Restructuring costs	142	-	142	-	-	-
Other (income) expense, net	438	2	-	234	-	202
Second Quarter 2021
Cost of sales	$3,104	$345	$38	$-	$37	$2,684
Selling, general and administrative	2,281	25	2	-	-	2,254
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Merck Announces Second-Quarter 2022 Financial Results - Merck

Merck Announces Second-Quarter 2022 Financial Results

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