Merck & Company, Inc. · NYSE:MRK
Merck & — Q4 2021 Earnings Presentation
38 slides from Merck &'s earnings presentation, Feb 3, 2022
Slide 1: Merck Q4 2021 Earnings
Merck Q4 2021 Earnings February 3, 2022
Slide 2: Agenda
Agenda Strategy and Business/Financial Research Question & Answer Business Update Results and Outlook Update Session Rob Davis Caroline Litchfield Dr. Dean Li President & Chief Chief Financial Officer President, Merck Executive Officer Research Laboratories 2
Slide 3: Forward-looking statement of Merck & Co., Inc.
Forward-looking statement of Merck & Co., Inc., Kenilworth, N.J., USA This presentation of Merck & Co., Inc., Kenilworth, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The
Slide 4: Strategy & Business Update
Strategy & Business Update Rob Davis President & Chief Executive Officer
Slide 5: Delivered on our key strategic priorities in 2021
Delivered on our key strategic priorities in 2021 Achieved strong commercial and financial performance Advanced the pipeline to meet patient unmet need Executed on strategic business development to enhance pipeline Created long-term value for patients and shareholders 5
Slide 6: Exceptional Q4 and 2021 sales and earnings growth
Exceptional Q4 and 2021 sales and earnings growth1 Q4 Worldwide Sales Full Year Revenue $48.7B $13.5B +17% $41.5B +6% +24% $39.1B* 2019 2020 2021 Q4 Non-GAAP EPS Full Year EPS $6.02 $1.80 +33% $4.53 +21% +84% $3.73* 2019 2020 2021 * Growth rate not available as restated 2018 results are not provided
Slide 7: Expect continued strong growth in revenue and earnings
Expect continued strong growth in revenue and earnings Revenue Operating margins1 Delivering visible de-risked revenue growth Commitment to drive leverage in the P&L with through 2025 operating margins >43% by 2025 $ in billions $60 45% $55 40% $50 35% $45 30% $40 25% $35 20% $30 15% $25 $20 10% 201
Slide 8: Multiple levers to navigate the KEYTRUDA LOE
Multiple levers to navigate the KEYTRUDA LOE Minimize • Leverage leadership in oncology the LOE gap • Enhance durable growth drivers Revenue • Deploy cash flow from key assets Shorten period to business development to return to strong growth • Advance pipeline across key therapeutic areas Time Chart
Slide 9: Business development remains an important strategic priority
Business development remains an important strategic priority • Accessing the best external science through value-enhancing $14.0B in 2021 business development • Financial flexibility to pursue both early- and late-stage $34.0B opportunities on business development $10.6B in 2020 transactions over •
Slide 10: Made progress towards integrating ESG into our strategy
Made progress towards integrating ESG into our strategy ESG Priority Areas • Inaugural issuance of $1 billion sustainability bond • Agreement with UNICEF to help Access to ensure broad global access for health Employees molnupiravir • Hosting ESG Investor Event on February 23, 2022 Environmental Eth
Slide 11: Business/Financial Results and Outlook
Business/Financial Results and Outlook Caroline Litchfield Chief Financial Officer
Slide 12: Merck achieved exceptional 2021 financial performance
Merck achieved exceptional 2021 financial performance1 WORLDWIDE SALES2 NON-GAAP EPS3,4 $48.7B $6.02 +17% growth +16% ex-exchange Merck +33% growth +32% ex-exchange 1. Results from continuing operations attributable to Merck & Co., Inc. 2. Worldwide Sales includes Other Revenue; 3. Merck is providin
Slide 13: Strong Q4 sales growth across Human Health and Animal Health
Strong Q4 sales growth across Human Health and Animal Health Merck WORLDWIDE SALES1,2 Human Health Animal Health $13.5B + 24% growth $12.0B +23% growth +23% ex-exchange $1.3B +8% growth +8% ex-exchange +23% ex-exchange +13% ex-exchange, molnupiravir3 +14% ex-exchange, molnupiravir3 1. Results from c
Slide 14: Oncology: KEYTRUDA drives continued momentum
Oncology: KEYTRUDA drives continued momentum • KEYTRUDA sales of $4.6B increased 16% year-over-year, driven by momentum across key tumor types and recent launches – In the U.S., sales of $2.7B driven by growth across all key tumor types, including continued leadership in lung, as well as TNBC, RCC,
Slide 15: Oncology: Strong growth across broad portfolio
Oncology: Strong growth across broad portfolio • Lynparza sales increased 33%, with growth $268M driven by advanced breast and continued +33% $206M uptake in other approved indications, including +53% advanced prostate $132M +>100% • Lenvima sales grew 31% driven by RCC and 4Q19 4Q20 4Q21 endometria
Slide 16: Vaccines: GARDASIL benefitting from robust global demand
Vaccines: GARDASIL benefitting from robust global demand and improved supply • GARDASIL sales of $1.5B increased 50% year- over-year driven by strong global demand and increased supply – Ex-U.S., growth was driven by robust demand, increased supply and reallocation of doses – U.S. impacted by CDC pu
Slide 17: Hospital: Strong performance by BRIDION and PREVYMIS
Hospital: Strong performance by BRIDION and PREVYMIS • BRIDION sales of $436M increased 24% year-over-year driven by increased usage of neuromuscular blockade reversal agents and BRIDION’s growing share within the class $436M • Continued uptake of PREVYMIS, driven by +24% ongoing launches $355M • ZE
Slide 18: Animal Health: durable growth across portfolio
Animal Health: durable growth across portfolio • Animal Health sales increased 8% to $1.3B, reflecting growth across geographies and species – Companion Animal sales increased 26%, driven by the BRAVECTO parasiticide line of products and vaccines $1.3B – Livestock sales reflect higher demand globall
Slide 19: Q4 2021 continuing operations non-GAAP financial results summary
Q4 2021 continuing operations non-GAAP financial results summary: Delivered strong revenue and EPS growth $ in billions, except EPS amounts Change Q4 2021 Q4 2020 Change Ex-FX Sales $13.5 $10.9 +24% +23% Non-GAAP Gross 74.8% 75.0% -0.2pts -0.8pts Margin1 Operating Expenses $5.3 $5.2 +2% +3% Tax Rate
Slide 20: Merck full-year 2022 guidance
Merck full-year 2022 guidance Guidance Key Assumptions $56.1B to $57.6B • Assumes ~2% negative FX impact Revenue +15% to +18% (+17% to +20% ex-FX) • Includes an expected $5-6 billion of molnupiravir revenue Non-GAAP ~74.0% • Impacted by inclusion of molnupiravir profit share Gross Margin Rate1 Non-G
Slide 21: Molnupiravir can be an important treatment option
Molnupiravir can be an important treatment option to combat ongoing global pandemic • Revenue guidance range of $5B to $6B in 2022, weighted to the first half of the year • Obtained 10 regulatory authorizations/approvals, including EUA from the FDA in December • Announced a number of supply and purc
Slide 22: Key modeling assumptions & outlook
Key modeling assumptions & outlook Oncology GARDASIL Pneumococcal Animal Health • Strong growth across • Very strong growth • Expect pneumococcal • Above market growth in oncology portfolio driven by robust demand franchise to grow in 2022 2022 and increased supply in • Normalization of 2022, albeit
Slide 23: Higher Q4 business development spend driven by Acceleron acquisition
Higher Q4 business development spend driven by Acceleron acquisition $ Billions1 Capital allocation order of priority $11.5 Well positioned balance sheet with capacity to fund additional value-enhancing business development $2.6 opportunities $1.6 $1.2 $0.0 After-Tax R&D CapEx Dividends Business Sha
Slide 24: Research Update
Research Update Dr. Dean Li President, Merck Research Laboratories
Slide 25: Driving value by progressing our pipeline in 2021
Driving value for patients and shareholders by progressing our pipeline in 2021 Key regulatory milestones Data and pipeline milestones • In the U.S. received 11 FDA approvals1, 1 NME • Presented new data and announced topline (WELIREG). FDA accepted filing for KN-158 and results for assets across ou
Slide 26: Molnupiravir represents an important treatment option against COVID-19
Molnupiravir represents an important treatment option against COVID-19 in high-risk, non-hospitalized patients • Pandemic continues to impact communities and health care systems • Accessible therapeutic options are needed for high-risk patients Early treatment with molnupiravir reduced the risk of h
Slide 27: Broadest early-stage IO clinical development program
Continuing to make progress with the broadest early-stage IO clinical development program • Recent approvals in RCC and melanoma ‒ KEYTRUDA is the first and only immunotherapy treatment option in the adjuvant RCC setting ‒ KEYTRUDA is first and only anti-PD1 therapy approved as adjuvant treatment in
Slide 28: Pipeline updates and progress
Pipeline updates and progress Chronic Cough Pneumococcal Disease HIV Cardiometabolic • Discuss next steps with • VAXNEUVANCE • Continue to evaluate • Completed acquisition of the FDA for gefapixant approved for adults in data in studies with Acceleron with ongoing U.S. and EU islatravir1 integration
Slide 29: Extensive research efforts across multiple therapeutic areas and modalities
Extensive research efforts across multiple therapeutic areas and modalities Immunology Executing on our strategy to: Cardiometabolic 6% ID/Vaccines • Become the leading oncology Disease company by 2025 and ensure that 13% position is durable beyond 34% • Extend our impact across cardiometabolic, imm
Slide 30: Q&A
Q&A Rob Davis President & Chief Executive Officer Caroline Litchfield Chief Financial Officer Dr. Dean Li President, Merck Research Laboratories Peter Dannenbaum Vice President, Investor Relations
Slide 31: Appendix
Appendix 31
Slide 32: Q4 2021 continuing operations GAAP financial results summary
Q4 2021 continuing operations GAAP financial results summary: $ in billions, except EPS amounts Change Q4 2021 Q4 2020 Change Ex-FX Sales $13.5 $10.9 +24% +23% Operating Expenses $5.9 $8.4 -30% -30% Tax Rate 2.2% -2.7% +4.9% N/A GAAP EPS $1.51 ($1.03) +>100% +>100% 32
Slide 33: 2021 continuing operations GAAP financial results summary
2021 continuing operations GAAP financial results summary: $ in billions, except EPS amounts Change 2021 2020 Change Ex-FX Sales $48.7 $41.5 +17% +16% Operating Expenses $21.9 $22.4 -2% -3% Tax Rate 11.0% 22.9% -11.9pts N/A GAAP EPS $4.86 $1.78 +>100% +>100% 33
Slide 34: 2021 continuing operations non-GAAP financial results summary
2021 continuing operations non-GAAP financial results summary: Delivered strong revenue and EPS growth $ in billions, except EPS amounts Change 2021 2020 Change Ex-FX Sales $48.7 $41.5 +17% +16% Non-GAAP Gross 76.1% 76.3% -0.2pts -0.3pts Margin1 Operating Expenses $19.4 $17.7 +9% +8% Tax Rate 11.2%
Slide 35: 2021: key pillars driving strong growth over the past four years
2021: key pillars driving strong growth over the past four years1 +18% YOY $17,186 +35% YOY $989 +20% YOY $14,380 $704 $11,084 $725 $580 $444 $404 $7,171 $187 $149 2018 2019 2020 2021 2018 2019 2020 2021 2018 2019 2020 2021 KEYTRUDA Performance Lynparza Performance Lenvima Performance +16% YOY +39%
Slide 36: Capital allocation: Trailing twelve months
Capital allocation: Trailing twelve months Over the past 12 months $15 Order of priority $12 $14.0 Well positioned balance sheet with capacity to fund Billions $9 $6 $8.9 additional value-enhancing $3 $4.5 $6.6 business development $0 $0.8 opportunities After-Tax R&D CapEx Dividends Paid Business Sh
Slide 37: Driving value for patients and shareholders by progressing our pipeline
Driving value for patients and shareholders by progressing our pipeline Key regulatory milestones Key data and presentations since the last earnings call: since the last earnings call: • In the U.S., received approval for KEYTRUDA • Presented data for KEYTRUDA at SMR, SITC as adjuvant therapy for ce
Slide 38: Broad and innovative pipeline to solve significant unmet medical needs
Broad and innovative pipeline to solve significant unmet medical needs Phase 2 Phase 3 Under regulatory review Oncology Oncology Oncology KEYTRUDA (MK-3475) MK-4280 V937 MK-1308A MK-2140 KEYTRUDA (MK-3475) LENVIMA (MK-7902) KEYTRUDA (MK-3475) Advanced Solid Tumors (favezelimab) Melanoma (quavonlimab