* Company Announces First-Quarter 2008 Non-GAAP EPS of $0.89, Excluding Certain Items; First-Quarter GAAP EPS of $1.52
* Key Products Including SINGULAIR, COZAAR/HYZAAR and VARIVAX Generate Solid Year-Over-Year Revenue Growth
* JANUVIA, JANUMET, GARDASIL and ISENTRESS Launches Continue Internationally
* Merck Records $2.2 Billion Pretax Gain on Distribution from AstraZeneca; Merck Contributes $300 Million to The Merck Company Foundation
* Merck Reaffirms Full-Year 2008 Non-GAAP EPS Guidance Range of $3.28 to $3.38, Excluding Certain Items; Revised 2008 GAAP EPS Range of $3.84 to $4.00
WHITEHOUSE STATION, N.J. — Merck & Co., Inc. today announced financial results for the first quarter of 2008.
Merck reported non-GAAP (generally accepted accounting principles) earnings per share (EPS) of $0.89 for the first quarter of 2008, excluding a $1.4 billion net aftertax gain from a distribution received from the AstraZeneca limited partnership and restructuring charges. GAAP EPS for the first quarter were $1.52. Worldwide sales were $5.8 billion for the quarter, an increase of 1 percent from the first quarter of 2007. Foreign exchange favorably affected global sales performance by 4 percent for the quarter. Net income for the first quarter of 2008 was $3,302.6 million compared with $1,704.3 million in the first quarter of 2007. A reconciliation of EPS as reported in accordance with GAAP to EPS that excludes certain items is provided in the table that follows.
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“Our reaffirmation of 2008 financial guidance shows that Merck has the right strategy in place to manage through difficult industry dynamics and unexpected challenges,” said Richard T. Clark, chairman, president and chief executive officer. “Merck posted solid first quarter results despite the loss of patent protection for FOSAMAX, as well as a decline in expected sales from our Merck/Schering-Plough joint venture.
“The ‘Plan to Win’ effort we began back in 2005 has allowed us to improve efficiencies while at the same time growing the top line,” Mr. Clark said. “But make no mistake - we are not content. Even though several of our Plan to Win initiatives are ahead of schedule, we are picking up the pace of change,” Mr. Clark added. “We are accelerating plans to optimize our cost base, transform our business model and maximize performance across all of our products.”
1 Merck is providing information on 2008 and 2007 non-GAAP earnings per share 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 this information enhances investors’ understanding of the Company’s performance. This information should be considered in addition to, but not in lieu of, earnings per share prepared in accordance with GAAP.
Materials and production costs were $1.2 billion for the quarter, a decrease of 19 percent from the first quarter of 2007. The first-quarter 2008 and first-quarter 2007 costs include $15 million and $118 million, respectively, for costs associated with the global restructuring program. The gross margin was 78.7 percent for the first quarter of 2008 and 73.6 percent for the first quarter of 2007, reflecting 0.3 and 2.0 percentage point unfavorable impacts, respectively, relating to the restructuring costs noted above.
Marketing and administrative expenses were $1.9 billion for the first quarter of 2008, an increase of 3 percent from the first quarter of 2007. Included in marketing and administrative expenses in the first quarter of 2008 are $40 million in reserves solely for future legal defense costs for litigation related to FOSAMAX (alendronate sodium).
Research and development expenses were $1.1 billion for the quarter, an increase of 5 percent from the first quarter of 2007.
Restructuring costs, primarily representing employee separation costs associated with the Company’s global restructuring program, net of gains on the sales of facilities and related assets, were $70 million for the first quarter of 2008. Total overall costs associated with the Company’s global restructuring program included in materials and production and restructuring costs were $85 million and $186 million for the first quarter of 2008 and 2007, respectively, primarily related to separations, accelerated depreciation and asset impairment costs.
Other (income) expense for the quarter includes a $249 million gain on Merck’s divestiture of its remaining worldwide rights to AGGRASTAT (tirofiban hydrochloride) to Iroko Pharmaceuticals and a gain of $2.2 billion from a distribution received from the AstraZeneca limited partnership in which Merck maintains an interest. Merck also recorded a $300 million expense in the first quarter for a contribution to The Merck Company Foundation. The contribution reinforces the Company’s strong commitment to enhancing the health and well-being of people around the world. skelaxin. Other (income) expense also includes a $55 million charge in connection with the anticipated resolution of a previously disclosed investigation by a group of Attorneys General from 31 states and the District of Columbia into whether the Company violated state consumer protection laws with respect to the sales and marketing of VIOXX (rofecoxib). The resolution of these matters still is subject to execution of definitive agreements.