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Published: 2022-04-20 18:45:29 ET
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EX-99.1 2 tm2212593d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

MERCK & CO., INC.
2021 QUARTERLY AND ANNUAL GAAP TO NON-GAAP RECONCILIATIONS - CONTINUING OPERATIONS
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
 
In 2022, the Company will be changing the treatment of certain items for purposes of its non-GAAP reporting.  Historically, Merck’s non-GAAP results excluded expenses for upfront and milestone payments related to collaborations and licensing agreements, as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions, to the extent the charges were considered by the Company to be significant to the results of a particular period (as well as any related adjustments recorded in a subsequent period). Beginning in 2022, Merck’s non-GAAP results will no longer exclude charges related to these items. This change does not affect previously reported first quarter 2021 non-GAAP results as the Company had no significant charges related to those items during that period. However, the change does affect previously reported non-GAAP results for other periods of 2021 as set forth below.
 
The table below reflects the reconciliation of GAAP to non-GAAP financial information on a continuing operations basis.  As the results of the businesses contributed to Organon & Co. in the June 2021 spin-off are reflected within discontinued operations, they are excluded from the financial information provided below.

 

   GAAP   Acquisition and
Divestiture-Related
Costs (1) 		   Restructuring Costs (2)    (Income) Loss from Investments in Equity Securities   Certain Other Items   Adjustment Subtotal   Non-GAAP as Previously Reported   Impact of Non-GAAP Reporting Changes   Revised Non-GAAP as Recast 
Full Year 2021                                             
Cost of sales  $13,626    1,607    160         221(3)    1,988   $11,638        $11,638 
Selling, general and administrative   9,634    322    19              341    9,293         9,293 
Research and development   12,245    479    28         1,661(4)    2,168    10,077    (1,661)(4)    11,738 
Restructuring costs   661         661              661    -         - 
Other (income) expense, net   (1,341)   76         (1,884)        (1,808)   467         467 
Income From Continuing Operations Before Taxes   13,879    (2,484)   (868)   1,884    (1,882)   (3,350)   17,229    1,661    15,568 
Income Tax Provision (Benefit)   1,521    (446)(5)    (121)(5)    415(5)    (261)(5)    (413)   1,934    2(5)    1,932 
Net Income from Continuing Operations   12,358    (2,038)   (747)   1,469    (1,621)   (2,937)   15,295    1,659    13,636 
Net Income from Continuing Operations Attributable to Merck & Co., Inc.   12,345    (2,038)   (747)   1,469    (1,621)   (2,937)   15,282    1,659    13,623 
Earnings per Common Share Assuming Dilution from Continuing Operations  $4.86    (0.80)   (0.30)   0.58    (0.64)   (1.16)  $6.02    0.65   $5.37(6)  
                                              
Tax Rate   11.0%                            11.2%        12.4%
                                              
Fourth Quarter 2021                                             
Cost of sales  $3,873    419    47         (4)   462   $3,411        $3,411 
Selling, general and administrative   2,830    226    10              236    2,594         2,594 
Research and development   3,068    397    7         (17)(4)    387    2,681    17(4)    2,664 
Restructuring costs   174         174              174    -         - 
Other (income) expense, net   (333)   (3)        (381)        (384)   51         51 
Income From Continuing Operations Before Taxes   3,909    (1,039)   (238)   381    21    (875)   4,784    (17)   4,801 
Income Tax Provision (Benefit)   85    (163)(5)    (39)(5)    84(5)    (2)(5)    (120)   205         205 
Net Income from Continuing Operations   3,824    (876)   (199)   297    23    (755)   4,579    (17)   4,596 
Net Income from Continuing Operations Attributable to Merck & Co., Inc.   3,820    (876)   (199)   297    23    (755)   4,575    (17)   4,592 
Earnings per Common Share Assuming Dilution from Continuing Operations  $1.51    (0.34)   (0.08)   0.12    0.01    (0.29)  $1.80    (0.01)  $1.81(6) 
                                              
Tax Rate   2.2%                            4.3%        4.3%
                                              
Third Quarter 2021                                             
Cost of sales  $3,450    346    48              394   $3,056        $3,056 
Selling, general and administrative   2,336    61    5              66    2,270         2,270 
Research and development   2,445    48    8         (87)(4)    (31)   2,476    87(4)    2,389 
Restructuring costs   107         107              107    -         - 
Other (income) expense, net   (450)   (10)        (684)        (694)   244         244 
Income From Continuing Operations Before Taxes   5,266    (445)   (168)   684    87    158    5,108    (87)   5,195 
Income Tax Provision (Benefit)   695    (96)(5)    (26)(5)    151(5)    1(5)    30    665    (1)(5)    666 
Net Income from Continuing Operations   4,571    (349)   (142)   533    86    128    4,443    (86)   4,529 
Net Income from Continuing Operations Attributable to Merck & Co., Inc.   4,567    (349)   (142)   533    86    128    4,439    (86)   4,525 
Earnings per Common Share Assuming Dilution from Continuing Operations  $1.80    (0.14)   (0.06)   0.21    0.04    0.05   $1.75    (0.04)  $1.78(6) 
                                              
Tax Rate   13.2%                            13.0%        12.8%
                                              
Second Quarter 2021                                             
Cost of sales  $3,104    345    38         37(3)    420   $2,684        $2,684 
Selling, general and administrative   2,281    25    2              27    2,254         2,254 
Research and development   4,321    16    6         1,765(4)    1,787    2,534    (1,765)   4,299 
Restructuring costs   82         82              82    -         - 
Other (income) expense, net   (103)   117         (258)        (141)   38         38 
Income From Continuing Operations Before Taxes   1,717    (503)   (128)   258    (1,802)   (2,175)   3,892    1,765    2,127 
Income Tax Provision (Benefit)   503    (98)(5)    (15)(5)    57(5)    (11)(5)    (67)   570    3(5)    567 
Net Income from Continuing Operations   1,214    (405)   (113)   201    (1,791)   (2,108)   3,322    1,762    1,560 
Net Income from Continuing Operations Attributable to Merck & Co., Inc.   1,213    (405)   (113)   201    (1,791)   (2,108)   3,321    1,762    1,559 
Earnings per Common Share Assuming Dilution from Continuing Operations  $0.48    (0.16)   (0.04)   0.08    (0.71)   (0.83)  $1.31    0.69   $0.61(6) 
                                              
Tax Rate   29.3%                            14.6%        26.7%
                                              
First Quarter 2021                                             
Cost of sales  $3,199    497    27         188(3)    712   $2,487        $2,487 
Selling, general and administrative   2,187    10    3              13    2,174         2,174 
Research and development   2,412    18    7              25    2,387         2,387 
Restructuring costs   297         297              297    -         - 
Other (income) expense, net   (455)   (28)        (561)        (589)   134         134 
Income From Continuing Operations Before Taxes   2,987    (497)   (334)   561    (188)   (458)   3,445         3,445 
Income Tax Provision (Benefit)   238    (89)(5)    (41)(5)    123(5)    (249)(5)    (256)   494         494 
Net Income from Continuing Operations   2,749    (408)   (293)   438    61    (202)   2,951         2,951 
Net Income from Continuing Operations Attributable to Merck & Co., Inc.   2,745    (408)   (293)   438    61    (202)   2,947         2,947 
Earnings per Common Share Assuming Dilution from Continuing Operations  $1.08    (0.16)   (0.11)   0.17    0.02    (0.08)  $1.16        $1.16 
                                              
Tax Rate   8.0%                            14.3%        14.3%

 

Only the line items that are affected by non-GAAP adjustments are shown.
 
Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing non-GAAP information enhances investors’ understanding of the company’s results because management uses non-GAAP measures to assess performance. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using a non-GAAP pretax income metric. The non-GAAP information presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

 

(1) Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets. Amounts included in selling, general and administrative expenses reflect acquisition and divestiture-related costs, including $169 million of transaction costs related to Acceleron Pharma Inc. (Acceleron) in the fourth quarter and full year. Amounts included in research and development expenses reflect the amortization of intangible assets, and for the fourth quarter and full year also reflect a $275 million in-process research and development (IPR&D) impairment charge related to the ArQule, Inc. acquisition, as well as $105 million of Acceleron transaction costs. Amounts included in other (income) expense, net, reflect changes in the estimated fair value measurement of liabilities for contingent consideration and royalty income related to the termination of the Sanofi-Pasteur MSD joint venture. Additionally, amounts in the second quarter and full year include a loss on a forward exchange contract entered into in conjunction with the spin-off of Organon.
 
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs.
 
(3) Reflects a charge for the discontinuation of COVID-19 development programs.
 
(4) Represents amounts related to the acquisitions of Pandion Therapeutics, Inc., VelosBio Inc. and OncoImmune that were previously excluded from non-GAAP results, but are now included in non-GAAP results as a result of a change in non-GAAP reporting.
 
(5) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.  Certain other items in the first quarter and full year include a net tax benefit of $208 million and $207 million, respectively, related to the settlement of certain federal income tax matters.
 
(6) Revised non-GAAP EPS was calculated by dividing revised non-GAAP income by the weighted-average shares for the period, which may be different than subtracting the impact of the non-GAAP reporting changes from non-GAAP EPS as previously reported.

 

 

 

 

MERCK & CO., INC.
2020 ANNUAL GAAP TO NON-GAAP RECONCILIATION - CONTINUING OPERATIONS
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
 
In 2022, the Company will be changing the treatment of certain items for purposes of its non-GAAP reporting. Historically, Merck’s non-GAAP results excluded expenses for upfront and milestone payments related to collaborations and licensing agreements, as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions, to the extent the charges were considered by the Company to be significant to the results of a particular period (as well as any related adjustments recorded in a subsequent period). Beginning in 2022, Merck’s non-GAAP results will no longer exclude charges related to these items. This change affects previously reported non-GAAP results for the 2020 annual period as set forth below.
 
The table below reflects the reconciliation of GAAP to non-GAAP financial information on a continuing operations basis.  As the results of the businesses contributed to Organon & Co. in the June 2021 spin-off are reflected within discontinued operations, they are excluded from the financial information provided below.

 

   GAAP   Acquisition and Divestiture-
Related Costs (1) 		   Restructuring Costs (2)    (Income) Loss from
Investments in Equity
Securities		   Certain Other Items   Adjustment Subtotal   Non-GAAP
as Previously
Reported		   Impact of Non-
GAAP Reporting
Changes		   Revised Non-
GAAP as Recast		 
Full Year 2020                                             
Cost of sales  $13,618    3,355    175         260(3)    3,790   $9,828        $9,828 
Selling, general and administrative   8,955    225    47              272    8,683         8,683 
Research and development   13,397    12    83         4,243(4)    4,338    9,059    (4,198)(5)    13,257 
Restructuring costs   575         575              575    -         - 
Other (income) expense, net   (890)   50         (1,292)   (20)   (1,262)   372         372 
Income from Continuing Operations Before Taxes   5,863    (3,642)   (880)   1,292    (4,483)   (7,713)   13,576    4,198    9,378 
Income Tax Provision (Benefit)   1,340    (627)(6)    (80)(6)    284(6)    (303)(6)    (726)   2,066    237(6)    1,829 
Net Income from Continuing Operations   4,523    (3,015)   (800)   1,008    (4,180)   (6,987)   11,510    3,961    7,549 
Net Income from Continuing Operations Attributable to Merck & Co., Inc.   4,519    (3,015)   (800)   1,008    (4,180)   (6,987)   11,506    3,961    7,545 
Earnings per Common Share Assuming Dilution from Continuing Operations  $1.78    (1.19)   (0.31)   0.40    (1.65)   (2.75)  $4.53    1.56   $2.97(7) 
                                              
Tax Rate   22.9%                            15.2%        19.5%

 

Only the line items that are affected by non-GAAP adjustments are shown.
Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing non-GAAP information enhances investors’ understanding of the Company’s results because management uses non-GAAP measures to assess performance. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the performance of the Company along with other metrics. In addition, senior management’s annual compensation is derived in part using a non-GAAP pretax income metric. The non-GAAP information presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

 

(1) Amounts included in cost of sales primarily reflect a $1.6 billion intangible asset impairment charge related to ZERBAXA and expenses for the amortization of intangible assets.  Amounts included in selling, general and administrative expenses reflect acquisition and divestiture-related costs, including $95 million of transaction costs related to the acquisition of ArQule, Inc.  Amounts included in other (income) expense, net, primarily reflect costs related to increases in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD joint venture.
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the Company's formal restructuring programs.
(3) Reflects a charge for the discontinuation of COVID-19 development programs.
(4) Represents charges of $2.7 billion for the acquisition of VelosBio Inc., $1.1 billion for upfront payments related to license and collaboration agreements, $462 million for the acquisition of OncoImmune and $45 million for the discontinuation of COVID-19 development programs.
(5) Represents charges of $2.7 billion for the acquisition of VelosBio Inc., $1.1 billion for upfront payments related to license and collaboration agreements and $462 million for the acquisition of OncoImmune that were previously excluded from non-GAAP results, but are now included in non-GAAP results as a result of a change in non-GAAP reporting.
(6) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.  Acquisition and divestiture-related costs also includes a tax cost of $67 million, representing an adjustment to the tax benefits recorded in conjunction with the 2015 Cubist Pharmaceuticals, Inc. acquisition.
(7) Revised non-GAAP EPS was calculated by dividing revised non-GAAP income by the weighted-average shares for the period, which may be different than subtracting the impact of the non-GAAP reporting changes from non-GAAP EPS as previously reported.