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A Look at Merck’s Financial Position

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Revenue trends

In the second quarter of 2018, Merck (MRK) generated revenues of $10.5 billion, which reflected 5% growth on a year-over-year (or YoY) basis and 4% growth sequentially. In the first half of 2018, Merck reported net revenues of $20.5 billion, reflecting ~6% YoY growth.

Merck’s Keytruda, Gardasil/Gardasil 9, and Bridion primarily pushed the revenue growth in the second quarter. Keytruda, Gardasil/Gardasil 9, and Bridion witnessed ~89%, 30%, and ~48% YoY growth, respectively, in the second quarter of 2018. Merck’s Animal Health business witnessed ~14% growth in the second quarter of 2018 with its companion health segment reporting ~23% growth on a YoY basis.

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Earnings trends

In Q2 2018, Merck reported GAAP (generally accepted accounting principles) net income of $1.7 billion compared to $1.9 billion in Q2 2017.  Merck’s second-quarter 2018 non-GAAP net income was $2.9 billion compared to $2.8 billion during the same period of the previous year.

In Q2 2018, Merck reported GAAP and non-GAAP EPS (earnings per share) of $0.63 and $1.06, respectively, compared to $0.71 and $1.01 in Q2 2017. In the first half of 2018, Merck reported GAAP EPS of $0.90 compared to GAAP EPS of $1.27 in the first half of 2017.

Expense trends

In the second quarter and first half of 2018, Merck reported M&P (materials and production) cost of $3.4 billion and $6.6 billion, respectively, compared to $3.1 billion and $6.1 billion in the second quarter and first half of 2018.

Merck reported M&A (marketing and administrative) expenses of $2.5 billion and $5.0 billion in the second quarter and the first half of 2018, respectively. Merck’s M&A expenditure for the first half and second quarter of 2018 remained nearly flat compared to the same periods in 2017.

In Q2 2018 and the first half of 2018, Merck reported R&D (research and development) expenses of $2.3 billion and $5.5 billion, respectively, compared to $1.8 billion and $3.6 billion during the same period in the prior year.

Notably, Merck’s peers Bristol-Myers Squibb (BMY), Eli Lilly (LLY), and Celgene (CELG) reported revenues of $5.7 billion, $6.4 billion, and $3.8 billion, respectively, in the second quarter of 2018.

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