Merck Announces Third-Quarter 2021 Financial Results

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

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

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

Financial Summary – Continuing Operations

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

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

Strong Performance Across the Business

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

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

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

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

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

Planned Acquisition of Acceleron Bolsters Innovation and Broadens Cardiovascular Pipeline

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

Oncology Program Highlights

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

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

Other Highlights

Vaccines

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

Infectious Diseases

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

Third-Quarter Revenue Performance

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

Pharmaceutical Revenue

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

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

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

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

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

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

Animal Health Revenue

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

Third-Quarter Expense, EPS and Related Information

The tables below present selected expense information.

GAAP Expense, EPS and Related Information

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

Selling, general and administrative expenses were $2.

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