KENILWORTH, N.J. – Merck & Co., with multiple locations in eastern Pennsylvania and New Jersey, announced fourth quarter and full year 2020 results.
The results were mixed.
However, earnings weren’t the big news Thursday morning. The big news was the announcement that chairman and CEO Kenneth C. Frazier is retiring at the end of June after almost 11 years at the helm of the pharmaceutical giant. He will remain on the board as executive director.
Frazier was one of the few Black corporate leaders of Fortune 500 companies in the U.S. He will be succeeded as CEO by Chief Financial Officer Robert Davis, who has been with the company since 2014.
In a statement, Frazier said: “It has been a privilege to serve as Merck’s CEO for the past decade and to work with the most dedicated and talented employees and management team in the industry. As executive chairman, I look forward to collaborating with Rob and our board of directors to help Merck achieve even higher levels of success.”
For the year, Merck posted a 4% increase in sales, excluding the impact of foreign exchange. KEYTRUDA, the company’s premier cancer drug, grew 30%. BRIDION, used to treat certain patients during surgery, saw sales increase 7%, while Animal Health sales worldwide also grew 7%.
The estimated overall negative impact of the COVID-19 pandemic to Merck’s revenue for the full year 2020 was approximately $2.5 billion, largely attributable to the human health business but including approximately $50 million attributable to Animal Health.
Commenting on 2020 results, Frazier said, “Despite extraordinary challenges brought on by the COVID-19 pandemic, Merck achieved solid growth and made meaningful progress in our pipeline in 2020. We remain focused on our science-led strategy and are confident that this approach will continue to deliver value to patients and shareholders.”
Worldwide sales in 2020 were $47.994 billion, up from $46.840 billion in 2019. But a 37% increase in Research and Development costs led to lower earnings. R&D costs included the acquisition of VelosBio Inc. and Oncolmmune, plus the discontinuation of Merck’s COVID-19 vaccine development programs. GAAP (Generally Accepted Accounting Principles) net income for the year was $7.067 billion, a decrease of 28% from 2019 net income of $9.777 billion. Earnings per share (EPS) were $2.78 in 2020, down 27% from EPS of $3.81 in 2019.
Full-year 2020 pharmaceutical sales increased 3% to $43.0 billion; excluding the unfavorable effect from foreign exchange, sales grew 4%, primarily due to higher sales in oncology, reflecting strong growth in KEYTRUDA, higher sales of certain vaccines including PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, and higher sales of certain hospital acute care products, including PREVYMIS and BRIDION.
The COVID-19 pandemic negatively affected pharmaceutical sales in 2020. Also negatively affecting sales were the ongoing impacts of the loss of market exclusivity for several products, lower sales of pediatric vaccines, as well as pricing pressure in diabetes.
Worldwide Animal Health sales for the full year of 2020 were $4.7 billion, an increase of 7%. Excluding the unfavorable effect from foreign exchange, sales grew 10%. Full-year sales growth was primarily driven by livestock sales which included an additional five months of sales in the year related to the 2019 acquisition of Antelliq, along with higher sales of companion animal products, primarily the BRAVECTO (fluralaner) line of products for parasitic control, and companion animal vaccines.
“Our scientists continue to advance our internal pipeline of promising medicines and vaccines,” Frazier commented,” including in oncology, HIV, and pneumococcal disease, and, more recently, therapeutics for COVID-19. These pipeline developments provide us with increasing line-of-sight to significant potential growth drivers later this decade and into the next.”
In the battle against the coronavirus, Merck continued the clinical development of molnupiravir, an orally available antiviral candidate for the treatment of COVID-19, in collaboration with Ridgeback Biotherapeutics LP. It is currently being evaluated in Phase 2/3 clinical trials in both the hospital and outpatient settings. The primary completion date for the Phase 2/3 studies is May 2021.
In December 2020, Merck acquired OncoImmune, a privately held, clinical-stage biopharmaceutical company, to accelerate the development of MK-7110, a therapeutic candidate for the treatment of patients with severe and critical COVID-19. Also, in December 2020, Merck entered into a supply agreement with the U.S. government to support the development, manufacture and initial distribution of MK-7110 upon approval or Emergency Use Authorization from the U.S. Food and Drug Administration (FDA).
In oncology, Merck continued to advance the development programs for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy; Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca; and Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai).
Merck offered guidance based on the assumption that the Organon business will be part of Merck for all of 2021; however, the company expects that the Organon spinoff will occur late in the second quarter of 2021. If the spinoff occurs, their financial estimates will be updated.
Merck anticipates full-year 2021 revenue to be between $51.8 billion and $53.8 billion, including a positive impact from foreign exchange of approximately 2%.
Merck expects full-year 2021 GAAP EPS to be between $5.52 and $5.72.
Merck projects strong underlying business growth for 2021. This growth is partially offset by the anticipated continuing impacts of the pandemic into 2021. Merck believes that global health systems and patients have largely adapted to the impacts of COVID-19 disease, but the company’s assumption is that ongoing residual negative impacts will persist, particularly during the first half of 2021 and most notably with respect to vaccine sales.
Merck (NYSE:MRK), known as MSD outside the U.S. and Canada, is a leading pharmaceutical company that develops and markets prescription medicines, vaccines, biologic therapies and animal health products. The company is at the forefront of research to advance the prevention and treatment of diseases including cancer, cardio-metabolic diseases, emerging animal diseases, Alzheimer’s disease and infectious diseases including COVID, HIV and Ebola.