Merck(MRK) - 2024 Q1 - Quarterly Results

First-Quarter 2024 Financial Results Financial Highlights & Summary Merck reported strong Q1 2024 results with a 9% increase in worldwide sales to $15.8 billion, driven by robust growth in Oncology and Vaccines, and raised its full-year outlook Q1 2024 Financial Summary | Metric | Q1 2024 | Q1 2023 | Change | Change (Ex-FX) | | :--- | :--- | :--- | :--- | :--- | | Sales | $15,775 Million | $14,487 Million | 9% | 12% | | GAAP Net Income | $4,762 Million | $2,821 Million | 69% | 76% | | Non-GAAP Net Income | $5,279 Million | $3,564 Million | 48% | 54% | | GAAP EPS | $1.87 | $1.11 | 68% | 76% | | Non-GAAP EPS | $2.07 | $1.40 | 48% | 54% | - Sales growth was primarily driven by strong performance in the Oncology and Vaccines portfolios[1] - KEYTRUDA sales grew 20% to $6.9 billion, and GARDASIL/GARDASIL 9 sales grew 14% to $2.2 billion[1] - The company raised and narrowed its full-year 2024 worldwide sales outlook to between $63.1 billion and $64.3 billion, and its Non-GAAP EPS range to between $8.53 and $8.65[1] Sales Performance Review Total sales grew 9% to $15.8 billion, driven by the Pharmaceutical segment's 10% increase, primarily from KEYTRUDA and GARDASIL Pharmaceutical Sales Pharmaceutical sales rose 10% to $14.0 billion, driven by strong growth in KEYTRUDA and GARDASIL, while JANUVIA/JANUMET declined due to generics Top Pharmaceutical Product Sales (Q1 2024 vs Q1 2023) | Product | Q1 2024 Sales ($ Million) | Q1 2023 Sales ($ Million) | Change | Change (Ex-FX) | | :--- | :--- | :--- | :--- | :--- | | KEYTRUDA | 6,947 | 5,795 | 20% | 24% | | GARDASIL/GARDASIL 9 | 2,249 | 1,972 | 14% | 17% | | JANUVIA/JANUMET | 670 | 880 | -24% | -21% | | PROQUAD, M-M-R II, VARIVAX | 570 | 528 | 8% | 8% | | BRIDION | 440 | 487 | -10% | -8% | | VAXNEUVANCE | 219 | 106 | 106% | 106% | - KEYTRUDA's growth was driven by increased uptake in earlier-stage indications like triple-negative breast cancer and renal cell carcinoma, as well as continued strong demand in metastatic indications[7] - GARDASIL's growth was attributed to strong demand, particularly in China, which also benefited from the timing of shipments, and public-sector buying patterns in the U.S[7] Animal Health Sales Animal Health sales increased 1% to $1.5 billion, primarily due to higher pricing offsetting lower volumes, with Companion Animal sales up 3% Animal Health Sales Breakdown (Q1 2024 vs Q1 2023) | Segment | Q1 2024 Sales ($ Million) | Q1 2023 Sales ($ Million) | Change | Change (Ex-FX) | | :--- | :--- | :--- | :--- | :--- | | Total Animal Health | 1,511 | 1,491 | 1% | 4% | | Livestock | 850 | 849 | 0% | 4% | | Companion Animal | 661 | 642 | 3% | 4% | - Growth was primarily driven by higher pricing, which was partially offset by lower volumes[8] - Sales of BRAVECTO were $332 million, representing growth of 6% (7% ex-FX)[8] Expense and Earnings Analysis Profitability improved in Q1 2024 with expanded gross margins and decreased R&D expenses, leading to substantial growth in both GAAP and Non-GAAP EPS GAAP Results Analysis GAAP Gross Margin increased to 77.6% due to favorable product mix, while R&D expenses decreased to $4.0 billion, leading to higher GAAP EPS - Gross margin increased to 77.6% from 72.9% in Q1 2023, primarily due to favorable product mix (including lower royalty rates for KEYTRUDA and GARDASIL/GARDASIL 9)[12] - R&D expenses decreased to $4.0 billion, primarily due to lower charges for business development activity compared to the prior year[13] - The effective tax rate was 15.9%, compared with 22.6% in Q1 2023[14] Non-GAAP Results Analysis Non-GAAP Gross Margin improved to 81.2% due to favorable product mix, with Non-GAAP R&D expenses decreasing, resulting in higher Non-GAAP EPS of $2.07 - Non-GAAP gross margin increased to 81.2% from 76.9% in Q1 2023, driven by favorable product mix and foreign exchange[15] - Non-GAAP R&D expenses were $4.0 billion, down from $4.3 billion in Q1 2023, due to lower charges for business development[17] - The non-GAAP effective tax rate was 16.1%, compared to 20.4% in the prior year[18] GAAP to Non-GAAP Reconciliation Reconciliation from GAAP EPS of $1.87 to Non-GAAP EPS of $2.07 reflects a $0.20 per share difference, primarily from acquisition and restructuring cost adjustments Q1 2024 EPS Reconciliation | Item | Per Share Amount | | :--- | :--- | | GAAP EPS | $1.87 | | Difference | $0.20 | | Non-GAAP EPS | $2.07 | Q1 2024 Excluded Items (Pre-tax, $ Million) | Item | Amount ($ Million) | | :--- | :--- | | Acquisition- and divestiture-related costs | $496 | | Restructuring costs | $246 | | Income from investments in equity securities | ($116) | Pipeline and Portfolio Developments Merck achieved significant regulatory and clinical milestones, including FDA approval for WINREVAIR, expanded KEYTRUDA indications, positive vaccine data, and the acquisition of Harpoon Therapeutics - Received FDA approval for WINREVAIR, a first-in-class biologic for adults with pulmonary arterial hypertension (PAH)[21] - KEYTRUDA received European approval for resectable NSCLC and FDA Priority Review for frontline advanced endometrial cancer[22] - Shared positive Phase 3 data for V116, an investigational 21-valent pneumococcal conjugate vaccine for adults[23] - Completed the acquisition of Harpoon Therapeutics, expanding the oncology pipeline with novel T-cell engagers[26] - Announced plans for clinical trials of a new multi-valent HPV vaccine and a single-dose regimen for GARDASIL 9[23] Full-Year 2024 Financial Outlook Merck raised its full-year 2024 financial guidance, with worldwide sales now expected between $63.1 billion and $64.3 billion and Non-GAAP EPS between $8.53 and $8.65 Full-Year 2024 Financial Outlook | Metric | Updated 2024 Outlook | Prior 2024 Outlook | | :--- | :--- | :--- | | Sales | $63.1 to $64.3 billion | $62.7 to $64.2 billion | | Non-GAAP Gross Margin | Approx. 81% | Approx. 80.5% | | Non-GAAP Operating Expenses | $25.2 to $26.1 billion | $25.1 to $26.1 billion | | Non-GAAP EPS | $8.53 to $8.65 | $8.44 to $8.59 | - The sales outlook includes an estimated negative impact of approximately 3% from foreign exchange[34] - The Non-GAAP EPS outlook includes a charge of $0.26 per share for the Harpoon acquisition and an estimated negative foreign exchange impact of approximately $0.30 per share[36] Appendix: Detailed Financial Tables Consolidated Statement of Income (GAAP) The GAAP consolidated statement of income for Q1 2024 shows total sales of $15.775 billion, with net income attributable to Merck at $4.762 billion, resulting in diluted EPS of $1.87 Q1 2024 Consolidated Statement of Income (GAAP, $ Million) | Line Item | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Sales | 15,775 | 14,487 | 9% | | Cost of sales | 3,540 | 3,926 | -10% | | Research and development | 3,992 | 4,276 | -7% | | Income Before Taxes | 5,670 | 3,650 | 55% | | Net Income Attributable to Merck | 4,762 | 2,821 | 69% | | Earnings per Share (Diluted) | $1.87 | $1.11 | 68% | GAAP to Non-GAAP Reconciliation This table details the reconciliation of Q1 2024 GAAP to Non-GAAP results, adjusting for acquisition and restructuring costs to reconcile income before taxes and EPS Q1 2024 GAAP to Non-GAAP Reconciliation Summary ($ Million) | Line Item | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Income Before Taxes | 5,670 | 626 | 6,296 | | Net Income Attributable to Merck | 4,762 | 517 | 5,279 | | Earnings per Share (Diluted) | $1.87 | $0.20 | $2.07 | Franchise / Key Product Sales This table provides a detailed breakdown of Q1 2024 sales by franchise and key products, highlighting top performers like KEYTRUDA, GARDASIL, and Animal Health Select Product Sales (Q1 2024 vs Q1 2023, $ Million) | Product/Franchise | Q1 2024 | Q1 2023 | Nom % Change | | :--- | :--- | :--- | :--- | | Total Sales | 15,775 | 14,487 | 9% | | Pharmaceutical | 14,006 | 12,721 | 10% | | Keytruda | 6,947 | 5,795 | 20% | | Gardasil/Gardasil 9 | 2,249 | 1,972 | 14% | | Januvia/Janumet (Total) | 670 | 880 | -24% | | Animal Health | 1,511 | 1,491 | 1% |