Merck (NYSE: MRK), known as MSD outside the United States and Canada,
today announced financial results for the third quarter of 2012.
"Our strong global sales this quarter offset the impact of the SINGULAIR patent expiry in the U.S.," said Kenneth C. Frazier, chairman and chief executive officer of Merck. "We will continue to drive value for our customers and shareholders through Merck's four-part strategy of executing on our core business, expanding geographically in high-growth markets, extending our complementary businesses and excelling at managing our costs while investing for growth. With our robust pipeline, we remain on target to submit multiple new products for marketing approval between now and the end of 2013, including suvorexant for insomnia, odanacatib for osteoporosis and TREDAPTIVE for multiple lipid parameters."
Select Revenue Highlights
Worldwide sales were $11.5 billion for the third quarter of 2012, a decrease of 4 percent. Excluding the unfavorable impact of foreign exchange, sales were comparable with the third quarter of 2011. Strong growth of key products offset the negative impact of the August 2012 loss of market exclusivity for SINGULAIR (montelukast sodium) in the United States.
Pharmaceutical Revenue Performance
Third-quarter pharmaceutical sales declined 5 percent to $9.9 billion, including a 5 percent negative impact due to foreign exchange. Strong sales growth for GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant], JANUVIA (sitagliptin), VICTRELIS (boceprevir), ZOSTAVAX (zoster vaccine live), ISENTRESS (raltegravir), and JANUMET (sitagliptin/metformin hydrochloride) offset the expected declines in sales of SINGULAIR, COZAAR (losartan potassium) and HYZAAR (losartan potassium and hydrochlorothiazide).
Sales from emerging markets accounted for approximately 20 percent of pharmaceutical sales in the third quarter. Sales growth in the emerging markets is being driven by primary care and women's health, vaccines, hospital and specialty, and diversified brands. China continues to be a key driver with 19 percent growth for the third quarter, including a 1 percent benefit from foreign exchange.
Worldwide sales of the combined diabetes franchise of JANUVIA/JANUMET, medicines that help lower blood sugar levels in adults with type 2 diabetes, grew 15 percent to $1.4 billion in the third quarter of 2012 primarily driven by growth in the United States and Japan.
Sales of ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), medicines for lowering LDL cholesterol, declined 1 percent to $1.1 billion in the third quarter driven by lower sales of VYTORIN, partially offset by growth of ZETIA in the United States.
Worldwide sales of SINGULAIR, a once-a-day oral medicine for the chronic treatment of asthma and the relief of symptoms of allergic rhinitis, declined $734 million, or 55 percent, to $602 million in the third quarter of 2012. The patent for SINGULAIR expired in the United States on Aug. 3, 2012 and will expire in major European markets in February 2013. The company is experiencing a significant and rapid reduction in sales in the United States and expects a similar decline in Europe following patent expiry there. SINGULAIR will retain marketing exclusivity in Japan until 2016.
Sales recorded by Merck for GARDASIL, a vaccine to help prevent certain diseases caused by four types of human papillomavirus (HPV), increased 31 percent to $581 million for the quarter driven by greater uptake in males in the United States and favorable performance in the emerging markets.
Combined sales of REMICADE (infliximab) and SIMPONI (golimumab), treatments for inflammatory diseases, declined 9 percent to $576 million for the third quarter of 2012. The combined sales grew 4 percent excluding foreign exchange.
ISENTRESS, an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, grew 16 percent to $399 million in the third quarter driven by strong growth in the United States and the emerging markets.
Global sales of Merck's antihypertensive medicines COZAAR and HYZAAR were down 27 percent to $295 million in the third quarter of 2012 due to the loss of market exclusivity in the United States and major European markets in 2010.
Sales of ZOSTAVAX, a vaccine for the prevention of herpes zoster, grew 87 percent to $202 million in the quarter. Growth this quarter was due to a positive response to supply availability and increased promotional efforts in the United States.
Sales of VICTRELIS, the company's oral hepatitis C virus NS3/4A protease inhibitor, grew to $149 million in the quarter versus $31 million last year as the product continues to launch. VICTRELIS is approved in 64 countries and has launched in 31 of those markets.
Animal Health Revenue Performance
Animal Health sales totaled $815 million for the third quarter of 2012, a 1 percent decrease compared with the third quarter of 2011, which includes an 8 percent negative impact due to foreign exchange. Excluding the negative impact of foreign exchange, performance was driven by the cattle, poultry and companion animal segments. The Animal Health division launched the ACTIVYL line of products in the United States, which is an important addition to the companion animal product line.
Consumer Care Revenue Performance
Third-quarter global sales of Consumer Care were $451 million, an increase of 7 percent compared to the third quarter of 2011, including a 3 percent negative impact due to foreign exchange. The increase was primarily driven by the DR. SCHOLL'S footcare line and COPPERTONE suncare line.
Other Revenue Performance
Other revenues -- primarily comprised of alliance revenue, miscellaneous corporate revenues and third-party manufacturing sales -- declined 17 percent to $347 million. The change was driven largely by lower revenue from AstraZeneca LP (AZLP) recorded by Merck, which declined 15 percent to $255 million, as well as by lower third-party manufacturing sales.
Third-Quarter Expense and Other Information
Marketing and administrative expenses, on a non-GAAP basis, were $3.0 billion in the third quarter of 2012, a decrease from $3.3 billion in the third quarter of 2011. The decrease was primarily due to foreign exchange and productivity measures.
Research and development (R&D) expenses, on a non-GAAP basis, were $1.9 billion in the third quarter of 2012, which is in line with the third quarter of 2011.
Equity income from affiliates was $158 million for the third quarter of 2012, which primarily reflects the performance of AZLP and Sanofi Pasteur MSD.
Other (income) expense, net was $200 million of expense in the third quarter of 2012, compared to $66 million of expense in the third quarter of 2011. The third quarter of 2011 reflects a $136 million gain on the divestiture of the company's interest in the Johnson & JohnsonÂ°Merck Consumer Pharmaceuticals Company joint venture.
The GAAP effective tax rate of 20.5 percent for the third quarter of 2012 reflects the impact of acquisition-related costs and restructuring costs. The non-GAAP effective tax rate, which excludes these items, was 20.3 percent for the quarter. Both the GAAP and non-GAAP effective tax rates reflect the favorable impacts of a settlement with a foreign tax authority and the realization of foreign tax credits.
The company noted the following developments:
In October, entered into an exclusive worldwide licensing agreement for AiCuris' late-stage antiviral candidate for the treatment and prevention of human cytomegalovirus infection in transplant recipients;
Completed a study of sugammadex, a neuromuscular blocker reversal agent, to assess bleeding risk when co-administered with anticoagulants in a surgical setting. The company remains on track to resubmit sugammadex to the FDA this year;
Announced results from a Phase II trial for odanacatib, an investigational cathepsin K inhibitor in development for the treatment of osteoporosis in post-menopausal women. In that Phase II trial, odanacatib significantly increased bone mineral density over a two-year period in patients previously treated with alendronate;
Presented Phase IIb data for MK-3102, the company's investigational once-weekly DPP-4 inhibitor in development for the treatment of type 2 diabetes. MK-3102 significantly lowered blood sugar in this 12-week study compared with placebo, with an incidence of symptomatic hypoglycemia that was similar to placebo, in patients with type 2 diabetes. The company has initiated the Phase III clinical program;
Presented new clinical data for suvorexant that showed patients who had been taking suvorexant for 12 months and were then switched to placebo for two months saw their insomnia return, but clinically meaningful withdrawal symptoms and rebound insomnia did not emerge;
Announced plans to file applications for vorapaxar, an investigational anti-thrombotic medicine, in the United States and Europe in 2013. The company will seek an indication for the prevention of cardiovascular events in patients with a history of heart attack and no history of transient ischemic attack or stroke.
Merck narrows the range of full-year 2012 non-GAAP EPS to be between $3.78 and $3.82 and the 2012 GAAP EPS range to be $2.08 to $2.24. The 2012 non-GAAP range excludes acquisition-related costs and costs related to restructuring programs.
Merck continues to expect full-year 2012 revenues to be at or near 2011 levels on a constant currency basis. At current exchange rates, sales would be affected unfavorably by approximately 1 percent for the fourth quarter and more than 2 percent for the full year.
In addition, the company expects full-year 2012 non-GAAP R&D expenses to be higher than the 2011 level. The company continues to expect the full-year 2012 non-GAAP tax rate to be approximately 25 percent.
As of Sept. 30, 2012, Merck had approximately 84,000 employees worldwide.
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