Merck Strengthens Immunology Pipeline with Acquisition of Prometheus Biosciences, Inc.

PRA023 is a novel, late-stage candidate for ulcerative colitis and Crohn's disease and other autoimmune conditions

Prometheus Biosciences' comprehensive data set enables target discovery and precision medicine approach in inflammation and immunology

Merck (NYSE: MRK), known as MSD outside the United States and Canada, and Prometheus Biosciences, Inc. ("Prometheus") (Nasdaq: RXDX) today announced that the companies have entered into a definitive agreement under which Merck, through a subsidiary, has agreed to acquire Prometheus for $200.00 per share in cash for a total equity value of approximately $10.8 billion.

"At Merck, we are committed to delivering on our purpose to save and improve lives and continue to identify and secure opportunities where compelling science and value creation align," said Robert M. Davis, chairman and chief executive officer, Merck. "The agreement with Prometheus will accelerate our growing presence in immunology where there remains substantial unmet patient need. This transaction adds diversity to our overall portfolio and is an important building block as we strengthen the sustainable innovation engine that will drive our growth well into the next decade."

Prometheus is a clinical-stage biotechnology company pioneering a precision medicine approach for the discovery, development, and commercialization of novel therapeutic and companion diagnostic products for the treatment of immune-mediated diseases. The company's lead candidate, PRA023, is a humanized monoclonal antibody (mAb) directed to tumor necrosis factor (TNF)-like ligand 1A (TL1A), a target associated with both intestinal inflammation and fibrosis.

"Prometheus was established to revolutionize the treatment of immune-mediated diseases through the application of a powerful precision medicine approach," said Mark McKenna, chairman and chief executive officer of Prometheus Biosciences. "This agreement with Merck, a leader in biopharmaceutical research and development, allows Prometheus to maximize the potential for PRA023, while continuing to apply our technology and expertise to fuel further discoveries to address the needs of patients with immune disorders."

Prometheus is developing PRA023 for the treatment of immune-mediated diseases including ulcerative colitis (UC), Crohn's disease (CD), and other autoimmune conditions. In December 2022, the company announced positive results for PRA023 from ARTEMIS-UC, a Phase 2, placebo controlled, study evaluating safety and efficacy in patients with moderate to severely active UC and APOLLO-CD a Phase 2A, open-label, study evaluating safety and efficacy in patients with moderate to severe CD. The findings were recently presented at the 18 ^th Congress of European Crohn's and Colitis Organisation (ECCO).

"By applying a portfolio of powerful analytic tools to a comprehensive collection of IBD samples, Prometheus identified important disease insights that have now yielded a promising late-stage candidate," said Dr. Dean Y. Li, president, Merck Research Laboratories. "I look forward to working with the talented Prometheus team to establish a new paradigm of precision treatment for immune diseases."

Under the terms of the acquisition agreement, Merck, through a subsidiary, will acquire all of the outstanding shares of Prometheus. The acquisition is subject to Prometheus Biosciences shareholder approval. The closing of the proposed transaction will be subject to certain conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions. The transaction is expected to close in the third quarter of 2023.

A copy of the merger agreement pursuant to the transaction will be filed with the Securities and Exchange Commission ("SEC") and will be publicly available. In addition, Merck and Prometheus will file annual, quarterly and current reports and other information with the SEC, which are available to the public from commercial document-retrieval services and at the SEC's website at www.sec.gov . Copies of the documents filed with the SEC by Merck may be obtained at no charge on Merck's internet website at www.merck.com or by contacting Merck at 126 East Lincoln Avenue P.O. Box 2000, Rahway, NJ 07065 USA, or (908) 740-4000. Copies of the documents filed with the SEC by Prometheus may be obtained at no charge on Prometheus' internet website at https://www.prometheusbiosciences.com or by contacting Prometheus at 3050 Science Park Road, San Diego, CA 92121 or (646) 241-4400.

Advisors

Morgan Stanley & Co. LLC acted as financial advisor to Merck in this transaction and Paul, Weiss, Rifkind, Wharton & Garrison LLP as its legal advisors. Centerview Partners LLC and Goldman Sachs & Co. LLC acted as financial advisors to Prometheus and Latham & Watkins LLP as the company's legal advisor.

About inflammatory Bowel Disease

Inflammatory bowel disease (IBD) is a term used to collectively describe Crohn's disease and ulcerative colitis. These conditions are characterized by chronic inflammation of the gastrointestinal (GI) tract. Prolonged inflammation results in damage to the tissues lining the GI tract. Both ulcerative colitis and Crohn's disease usually are characterized by diarrhea, rectal bleeding, abdominal pain, fatigue and weight loss.

About PRA023

PRA023 is a humanized monoclonal antibody directed to tumor necrosis factor (TNF)-like ligand 1A (TL1A). PRA023 binds both soluble and membrane associated human TL1A with high affinity and specificity. Prometheus is developing PRA023 for the treatment of immune-mediated diseases including UC, CD, and other autoimmune conditions.

About Prometheus Biosciences

Prometheus Biosciences, Inc. is a clinical-stage biotechnology company pioneering a precision medicine approach for the discovery, development, and commercialization of novel therapeutic and companion diagnostic products for the treatment of immune-mediated diseases. The company's precision medicine platform, Prometheus360™, combines proprietary machine learning-based analytical approaches with one of the world's largest gastrointestinal bioinformatics databases to identify novel therapeutic targets and develop therapeutic candidates to engage those targets.

Investor Call

Merck will hold an investor call on Monday, April 17, at 8:00 a.m. EDT to discuss this proposed acquisition. Journalists who wish to ask questions are requested to contact a member of Merck's Media Relations team at the conclusion of the call. To listen to the call, please visit https://www.merck.com/investor-relations/events-and-presentations/ .

About Merck

At Merck, known as MSD outside of the United States and Canada, we are unified around our purpose: We use the power of leading-edge science to save and improve lives around the world. For more than 130 years, we have brought hope to humanity through the development of important medicines and vaccines. We aspire to be the premier research-intensive biopharmaceutical company in the world - and today, we are at the forefront of research to deliver innovative health solutions that advance the prevention and treatment of diseases in people and animals. We foster a diverse and inclusive global workforce and operate responsibly every day to enable a safe, sustainable and healthy future for all people and communities. For more information, visit www.merck.com and connect with us on Twitter , Facebook , Instagram , YouTube and LinkedIn .

Forward-Looking Statement of Merck & Co., Inc., Rahway, N.J., USA

This news release of Merck & Co., Inc., Rahway, N.J., USA includes statements that are not statements of historical fact, or "forward-looking statements," including with respect to Merck's proposed acquisition of Prometheus. Such forward-looking statements include, but are not limited to, the ability of Merck and Prometheus to complete the transactions contemplated by the merger agreement, including the parties' ability to satisfy the conditions to the consummation of the merger contemplated thereby and the other conditions set forth in the merger agreement, statements about the expected timetable for completing the transaction, Merck's and Prometheus's beliefs and expectations and statements about the benefits sought to be achieved in Merck's proposed acquisition of Prometheus, the potential effects of the acquisition on both Merck and Prometheus, the possibility of any termination of the merger agreement, as well as the expected benefits and success of Prometheus's product candidates. These statements are based upon the current beliefs and expectations of Merck's management and are subject to significant risks and uncertainties. There can be no guarantees that the conditions to the closing of the proposed transaction will be satisfied on the expected timetable or at all, with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Risks and uncertainties include, but are not limited to, uncertainties as to the timing of the merger; the risk that competing offers or acquisition proposals will be made; the possibility that various conditions to the consummation of the merger contemplated thereby may not be satisfied or waived (including the failure to obtain the requisite vote by Prometheus's stockholders); the effects of disruption from the transactions contemplated by the merger agreement and the impact of the announcement and pendency of the transactions on Prometheus's business; the risk that stockholder litigation in connection with the merger may result in significant costs of defense, indemnification and liability; general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of the global outbreak of novel coronavirus disease (COVID-19); the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; Merck's ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of Merck's patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in Merck's 2022 Annual Report on Form 10-K and Merck's other filings with the Securities and Exchange Commission (SEC) available at the SEC's Internet site ( www.sec.gov ).

Forward-Looking Statements of Prometheus Biosciences

Prometheus cautions readers that statements contained in this press release regarding matters that are not historical facts are forward-looking statements. These statements are based on Prometheus' current beliefs and expectations. Such forward-looking statements include but are not limited to statements regarding the company's plans to advance PRA023 into Phase 3 trials in UC and CD, including the timing thereof. The inclusion of forward-looking statements should not be regarded as a representation by Prometheus that any of its plans will be achieved. Actual results may differ from those set forth in this press release due to the risks and uncertainties inherent in our business, including, without limitation: topline results Prometheus reports are based on preliminary analysis of key efficacy and safety data, and such data may change following a more comprehensive review of the data related to the clinical trial and such topline data may not accurately reflect the complete results of a clinical trial; interim results of a clinical trial do not predict final results and the clinical outcomes may materially change following more comprehensive reviews of the data, as follow-up on the outcome of any particular patient continues and as more patient data become available, including from Cohort 2 of the ARTEMIS-UC trial; potential delays in the commencement, enrollment and completion of clinical trials and preclinical studies; the results of clinical trials are not necessarily predictive of future results; Prometheus' dependence on third parties in connection with product manufacturing, research and preclinical and clinical testing; Prometheus' ability to develop diagnostics for its therapeutic product candidates; unexpected adverse side effects or inadequate efficacy of its product candidates that may limit their development, regulatory approval and/or commercialization, or may result in recalls or product liability claims; planned future trials of PRA023 may not support regulatory registration; regulatory developments in the United States and foreign countries; Prometheus' ability to maintain undisrupted business operations due to the COVID-19 pandemic, including delaying or otherwise disrupting its preclinical studies, clinical trials, manufacturing and supply chain; and other risks described in the company's prior press releases and filings with the Securities and Exchange Commission (SEC), including under the heading "Risk Factors" in Prometheus' most recent annual report on Form 10-K and any subsequent filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof, and Prometheus undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, which is made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230416005034/en/

Merck Investor Contact:
Peter Dannenbaum
(908) 740-1037

Merck Media Contact:
Robert Josephson
(203) 914-2372

Prometheus Investor/Media Contact:
Noel Kurdi
(646) 241-4400
nkurdi@prometheusbiosciences.com

News Provided by Business Wire via QuoteMedia

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MRK

Merck Announces First-Quarter 2023 Financial Results

First Quarter 2023 Reflected Continued Strong Underlying Performance Across Key Growth Drivers, Particularly in Oncology and Vaccines
Total Worldwide Sales Were $14.5 Billion, a Decrease of 9% From First Quarter 2022; Excluding LAGEVRIO, Growth Was 11%; Excluding LAGEVRIO and the Impact of Foreign Exchange, Growth Was 15%
- KEYTRUDA Sales Grew 20% to $5.8 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 24%
- GARDASIL/GARDASIL 9 Sales Grew 35% to $2.0 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 43%
- LAGEVRIO Sales Declined 88% to $392 Million; Excluding the Impact of Foreign Exchange, Sales Declined 87%
GAAP EPS Was $1.11; Non-GAAP EPS Was $1.40; GAAP and Non-GAAP EPS Include $0.52 of Charges Related to Acquisition of Imago and Collaboration and Licensing Agreement With Kelun-Biotech
Announced Proposed Acquisition of Prometheus Biosciences to Strengthen Immunology Pipeline
Presented Compelling Data From Innovative Cardiovascular Pipeline With:
- Positive Phase 3 Results for Sotatercept
- Positive Phase 2b Results for MK-0616; Plans to Start Phase 3 Studies in 2023
Advanced Oncology Research Efforts, Sharing Notable Progress for Earlier Stages of Disease in Certain Tumor Types, Including:
- Positive Topline Results From Phase 3 KEYNOTE-671 Trial
- Positive Detailed Results in Collaboration With Moderna From Phase 2b KEYNOTE-942/mRNA-4157-P201 Trial
2023 Financial Outlook
- Raises and Narrows Expected Full-Year 2023 Worldwide Sales Range To Be Between $57.7 Billion and $58.9 Billion, Including Negative Impact of Foreign Exchange of Approximately 2 Percentage Points; Outlook Includes Approximately $1.0 Billion of LAGEVRIO Sales
- Lowers and Narrows Expected Full-Year 2023 GAAP EPS Range To Be Between $5.85 and $5.97, Reflecting Zetia Antitrust Litigation Settlement
- Raises and Narrows Expected Full-Year 2023 Non-GAAP EPS Range To Be Between $6.88 and $7.00, Including Negative Impact of Foreign Exchange of Approximately 4 Percentage Points
- Outlook Does Not Reflect Any Impact From Proposed Acquisition of Prometheus Biosciences, Which Is Expected to Close in Third Quarter 2023, and Would Result in a One-Time Charge to Both GAAP and Non-GAAP Results of Approximately $10.3 Billion or Approximately $4.00 per Share

Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the first quarter of 2023.

�Inspired by our commitment to bring bold science forward to address critical unmet patient needs, we began 2023 with significant advancements across our innovative pipeline," said Robert M. Davis, chairman and chief executive officer, Merck. "Our first-quarter results are a reflection of the focused execution of our science-led strategy, strong performance across our key growth drivers, continued momentum commercially and operationally, and most importantly the collective and dedicated efforts of our colleagues around the world. I'm proud of the progress we've made, and we will continue to move with speed and agility to deliver value for patients and shareholders, now and well into the future."

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Merck to provide KEYTRUDA® for use in the combination study.
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BriaCell Therapeutics Corp. (“BriaCell” or the “Company”) (TSXV:BCT, OTCQB:BCTXD), a clinical-stage biotechnology company specializing in targeted immunotherapy for advanced breast cancer, today announced that Dr. Saveri Bhattacharya, a board-certified medical oncologist and recognized expert in breast cancer treatment at the Sidney Kimmel Cancer Center – Jefferson Health in Philadelphia, PA, has been selected to receive support from the Merck Investigator Studies Program (“MISP”). The Investigator Grant is a highly coveted award granted by Merck & Co., Inc. (“Merck”) (NYSE: MRK) to leading investigators with highly innovative clinical studies.

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Bria-IMT™ in combination with INCMGA00012 (by Incyte Corporation).

BriaCell Therapeutics Corp. (“BriaCell” or the “Company”) (TSXV:BCT, OTCQB:BCTXD), a clinical-stage biotechnology company specializing in targeted immunotherapies for advanced breast cancer, is pleased to announce that the data of its clinical studies with its lead product candidate, Bria-IMT™, will be presented the at the Annual Symposium of Society of Surgical Oncology (SSO) 2020 – International Conference on Surgical Cancer Care taking place March 25-28 in Boston, MA.

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Pivotal Phase 3 VERITAC-2 clinical trial results presented at ASCO demonstrate 2.9-month improvement in median progression-free survival when compared to fulvestrant in second line-plus patients with an estrogen receptor 1 mutation
Vepdegestrant was generally well tolerated, with few discontinuations and low rates of gastrointestinal-related adverse events
Vepdegestrant is the first and only PROteolysis TArgeting Chimera (PROTAC) evaluated in a Phase 3 clinical trial and the first to show benefit in patients with breast cancer
Data to be featured in a late-breaking oral presentation at ASCO and simultaneously published in the New England Journal of Medicine
Arvinas will host a conference call to discuss these results on Monday, June 2, at 8:00 a.m. ET

Arvinas, Inc. (Nasdaq: ARVN) and Pfizer Inc. (NYSE: PFE) today announced detailed results from the Phase 3 VERITAC-2 clinical trial (NCT05654623) evaluating vepdegestrant monotherapy versus fulvestrant in adults with estrogen receptor-positive, human epidermal growth factor receptor 2-negative (ER+HER2-) advanced or metastatic breast cancer (MBC) whose disease progressed following prior treatment with cyclin-dependent kinase (CDK) 46 inhibitors and endocrine therapy. These data, which were highlighted in the American Society of Clinical Oncology (ASCO ® ) press briefing and selected for Best of ASCO, will be presented today in a late-breaking oral presentation (Abstract LBA1000) and have been simultaneously published in the New England Journal of Medicine .

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An estimated 74 million women globally receive Depo-Provera injections according to a 2019 UN study ² .

A Case Management Conference (CMC) in the Depo-Provera legal action against Pfizer Inc. (NYSE:PFE) will take place on Friday, 30 May at 9:00am CT in the United States Courthouse is Pensacola, Florida. The litigation is being brought on behalf of women in the USA who developed meningiomas after receiving at least 4 consecutive injections of Pfizer's Depo-Provera (DMPA). One of the law firms appointed to the Plaintiff's Executive Committee responsible for overseeing the MDL is Levin Papantonio, which has helped to secure more than $80 billion in jury verdicts and settlements against some of the world's largest corporations, including Johnson & Johnson, BP, Dupont, 3M, Merck and big tobacco. The law firm is currently acting for plaintiffs in the Talcum Powder Litigation against Johnson & Johnson and the Preterm Infant Nutrition Products Liability Litigation against Abbott Laboratories and Mead Johnson, owned by Reckitt Benckiser.

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After a median follow-up of 61.4 months, treatment with XTANDI (enzalutamide) plus ADT was associated with a 66% probability of survival at five years compared to 53% probability of survival with placebo plus ADT
XTANDI (enzalutamide) is the first and only androgen receptor inhibitor to demonstrate an overall survival benefit at five years in men with metastatic hormone-sensitive prostate cancer
Data continue to show wide-ranging effect of treatment with XTANDI (enzalutamide) plus ADT across various patient subgroups, notably those with high-volume disease, no prior docetaxel use, and synchronous disease
Long-term data reinforce XTANDI (enzalutamide) plus ADT as a standard of care

Astellas Pharma Inc. (TSE: 4503, President and CEO: Naoki Okamura "Astellas") and Pfizer Inc. (NYSE: PFE) today announced longer-term follow-up results from an open-label extension of the Phase 3 ARCHES ( NCT02677896 ) study, reporting a five-year follow up of overall survival (OS) benefits and a 30% reduction in the risk of death in men with metastatic hormone-sensitive prostate cancer (mHSPC) treated with XTANDI ™ (enzalutamide), an androgen receptor pathway inhibitor (ARPI), plus androgen deprivation therapy (ADT) compared to placebo plus ADT. These data will be presented during an oral presentation (Abstract #5005) at the American Society of Clinical Oncology (ASCO) Annual Meeting in Chicago ( Tuesday, June 3 9:45 a.m.- 12:45 p.m. US CT).

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Under the terms of the agreement, 3SBio and its subsidiaries Shenyang Sunshine Pharmaceutical Co., Ltd. and 3S Guojian Pharmaceutical (Shanghai) Co., Ltd. will grant Pfizer an exclusive global license to develop, manufacture and commercialize SSGJ-707 worldwide, excluding China. The agreement also provides Pfizer the option of commercialization rights in China. 3SBio will receive an upfront payment of $1.25 billion and is eligible to receive milestone payments associated with certain development, regulatory and commercial milestones up to $4.8 billion as well as tiered double-digit royalties on sales of SSGJ-707, if approved.

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$ in millions, except EPS amounts	First Quarter
$ in millions, except EPS amounts	2023	2022	Change	Change Ex- Exchange
Sales	$14,487	$15,901	-9%	-5%
GAAP net income ¹	2,821	4,310	-35%	-29%
Non-GAAP net income that excludes certain items ^1,2*	3,564	5,429	-34%	-30%
GAAP EPS	1.11	1.70	-35%	-30%
Non-GAAP EPS that excludes certain items ^2*	1.40	2.14	-35%	-30%
*Refer to table on page 10.

	First Quarter
$ in millions	2023	2022	Change	Change Ex- Exchange
Total Sales	$14,487	$15,901	-9%	-5%
Pharmaceutical	12,721	14,107	-10%	-6%
KEYTRUDA	5,795	4,809	20%	24%
GARDASIL / GARDASIL 9	1,972	1,460	35%	43%
JANUVIA / JANUMET	880	1,233	-29%	-25%
PROQUAD, M-M-R II and VARIVAX	528	470	12%	14%
BRIDION	487	395	23%	27%
LAGEVRIO	392	3,247	-88%	-87%
ROTATEQ	297	216	38%	42%
Lynparza*	275	266	3%	8%
Lenvima*	232	227	2%	5%
SIMPONI	180	186	-3%	2%
Animal Health	1,491	1,482	1%	5%
Livestock	849	832	2%	8%
Companion Animals	642	650	-1%	2%
Other Revenues**	275	312	-12%	-22%
*Alliance revenue for this product represents Merck's share of profits, which are product sales net of cost of sales and commercialization costs.
**Other revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities.

$ in millions	GAAP	Acquisition- and Divestiture-Related Costs ⁴	Restructuring Costs	(Income) Loss From Investments in Equity Securities	Certain Other Items	Non-GAAP ²
First Quarter 2023
Cost of sales	$3,926	$545	$29	$-	$-	$3,352
Selling, general and administrative	2,479	20	1	-	-	2,458
Research and development	4,276	10	-	-	-	4,266
Restructuring costs	67	-	67	-	-	-
Other (income) expense, net	89	15	-	(429)	573	(70)

First Quarter 2022
Cost of sales	$5,380	$680	$46	$-	$-	$4,654
Selling, general and administrative	2,323	50	21	-	-	2,252
Research and development	2,576	22	7	-	-	2,547
Restructuring costs	53	-	53	-	-	-
Other (income) expense, net	708	(115)	-	684	-	139

	First Quarter
$ in millions, except EPS amounts	2023	2022
EPS
GAAP EPS	$1.11	$1.70
Difference	0.29	0.44
Non-GAAP EPS that excludes items listed below ²	$1.40	$2.14

Net Income
GAAP net income ¹	$2,821	$4,310
Difference	743	1,119
Non-GAAP net income that excludes items listed below ^1,2	$3,564	$5,429

Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition- and divestiture-related costs ⁴	$590	$637
Restructuring costs	97	127
(Income) loss from investments in equity securities	(429)	684
Charge for Zetia antitrust litigation settlements	573	-
Net decrease (increase) in income before taxes	831	1,448
Estimated income tax (benefit) expense	(88)	(329)
Decrease (increase) in net income	$743	$1,119

	GAAP	Non-GAAP ²
Sales*	$57.7 to $58.9 billion	$57.7 to $58.9 billion
Gross margin	Approximately 73%	Approximately 77%
Operating expenses**	$23.5 to $24.3 billion	$23.3 to $24.1 billion
Effective tax rate	17% to 18%	17% to 18%
EPS***	$5.85 to $5.97	$6.88 to $7.00
*Includes approximately $1.0 billion of LAGEVRIO sales. The company does not have any non-GAAP adjustments to sales.
**Includes an aggregate $1.4 billion of R&D expenses related to the Imago acquisition and upfront payment for the license and collaboration agreement with Kelun-Biotech. Outlook does not assume the proposed acquisition of Prometheus or any additional significant potential business development transactions.
***Includes $0.52 of charges related to the Imago acquisition and upfront payment to Kelun-Biotech.
Assumes a share count (assuming dilution) of approximately 2.55 billion shares.

Investing News NetworkYour trusted source for investing success

Merck Strengthens Immunology Pipeline with Acquisition of Prometheus Biosciences, Inc.

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Merck Announces Q4 and Full-Year 2019 Financial Results

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Arvinas Announces Submission of New Drug Application to U.S. FDA for Vepdegestrant for Patients with ESR1-Mutated ER+/HER2- Advanced or Metastatic Breast Cancer

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Hearing Against Pfizer Set For 30 May In Contraceptive 'Depo-Provera' Multidistrict Litigation Overseen By Levin Papantonio

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$ in millions, except EPS amounts	Full Year 2023
GAAP EPS	$5.85 to $5.97
Difference	$1.03
Non-GAAP EPS that excludes items listed below ²	$6.88 to $7.00

Acquisition- and divestiture-related costs	$2,500
Restructuring costs	400
(Income) loss from investments in equity securities	(375)
Charge for Zetia antitrust litigation settlements	573
Net decrease (increase) in income before taxes	$3,098
Estimated income tax (benefit) expense	(470)
Decrease (increase) in net income	$2,628

________________________________
¹		Net income attributable to Merck & Co., Inc.
²		Merck is providing certain 2023 and 2022 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 this information enhances investors' understanding of the company's results because management uses non-GAAP results 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 pre-tax income metric. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the non-GAAP adjustments, see Table 2a attached to this release.
³		Registered trademark of Seagen and Agensys.
⁴		Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also includes integration, transaction and certain other costs related to acquisitions and divestitures.

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1

	GAAP						% Change
	GAAP
		1Q23			1Q22
		1Q23			1Q22

Sales	$	14,487		$	15,901		-9	%

Costs, Expenses and Other
Cost of sales		3,926			5,380		-27	%
Selling, general and administrative		2,479			2,323		7	%
Research and development		4,276			2,576		66	%
Restructuring costs		67			53		26	%
Other (income) expense, net		89			708		-87	%
Income Before Taxes		3,650			4,861		-25	%
Income Tax Provision		825			554
Net Income		2,825			4,307		-34	%
Less: Net Income (Loss) Attributable to Noncontrolling Interests		4			(3	)
Net Income Attributable to Merck & Co., Inc.	$	2,821		$	4,310		-35	%

Earnings per Common Share Assuming Dilution	$	1.11		$	1.70		-35	%

Average Shares Outstanding Assuming Dilution		2,551			2,537
Tax Rate		22.6	%		11.4	%

MERCK & CO., INC.
FIRST QUARTER 2023 GAAP TO NON-GAAP RECONCILIATION
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a


	GAAP			Acquisition and Divestiture-Related Costs ⁽¹⁾				Restructuring Costs ⁽²⁾				(Income) Loss from Investments in Equity Securities				Certain Other Items				Adjustment Subtotal		Non-GAAP

First Quarter
Cost of sales	$	3,926		545				29												574		$	3,352
Selling, general and administrative		2,479		20				1												21			2,458
Research and development		4,276		10																10			4,266
Restructuring costs		67						67												67			-
Other (income) expense, net		89		15								(429	)			573		⁽³	⁾	159			(70	)
Income Before Taxes		3,650		(590	)			(97	)			429				(573	)			(831	)		4,481
Income Tax Provision (Benefit)		825		(105	)	⁽⁴	⁾	(18	)	⁽⁴	⁾	95		⁽⁴	⁾	(60	)	⁽⁴	⁾	(88	)		913
Net Income		2,825		(485	)			(79	)			334				(513	)			(743	)		3,568
Net Income Attributable to Merck & Co., Inc.		2,821		(485	)			(79	)			334				(513	)			(743	)		3,564
Earnings per Common Share Assuming Dilution	$	1.11		(0.19	)			(0.03	)			0.13				(0.20	)			(0.29	)	$	1.40

Tax Rate		22.6	%																				20.4	%



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 integration, transaction and certain other costs related to acquisitions and divestitures. Amounts included in research and development expenses primarily reflect the amortization of intangible assets. Amounts included in other (income) expense, net, reflect a $37 million loss on the sale of a business and an increase in the estimated fair value measurement of liabilities for contingent consideration related to the prior termination of the Sanofi-Pasteur MSD joint venture, partially offset by royalty income.

⁽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 related to settlements with certain plaintiffs in the Zetia antitrust litigation.

⁽⁴⁾ Represents the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.


MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3

	2023		2022										1Q
	1Q		1Q		2Q		3Q		4Q		Full Year		Nom %	Ex-Exch %
TOTAL SALES ⁽¹⁾	$	14,487	$	15,901	$	14,593	$	14,959	$	13,830	$	59,283	-9	-5
PHARMACEUTICAL		12,721		14,107		12,756		12,963		12,180		52,005	-10	-6
Oncology
Keytruda		5,795		4,809		5,252		5,426		5,450		20,937	20	24
Alliance Revenue – Lynparza ⁽²⁾		275		266		275		284		292		1,116	3	8
Alliance Revenue – Lenvima ⁽²⁾		232		227		231		202		216		876	2	5
Alliance Revenue – Reblozyl ⁽³⁾		43		52		33		39		41		166	-19	-19
Welireg		42		18		27		38		40		123	128	128
Vaccines ⁽⁴⁾
Gardasil / Gardasil 9		1,972		1,460		1,674		2,294		1,470		6,897	35	43
ProQuad / M-M-R II / Varivax		528		470		578		668		526		2,241	12	14
RotaTeq		297		216		173		256		139		783	38	42
Vaxneuvance		106		5		12		16		138		170	*	*
Pneumovax 23		96		173		153		131		145		602	-44	-40
Vaqta		40		36		35		64		39		173	12	13
Hospital Acute Care
Bridion		487		395		426		423		441		1,685	23	27
Prevymis		129		94		103		114		118		428	38	44
Primaxin		80		58		64		63		54		239	37	48
Dificid		65		52		66		77		67		263	25	25
Noxafil		60		57		60		62		58		238	5	14
Zerbaxa		50		30		46		43		49		169	66	70
Cardiovascular
Alliance Revenue - Adempas/Verquvo ⁽⁵⁾		99		72		98		88		82		341	38	38
Adempas ⁽⁶⁾		59		61		63		57		57		238	-3	5
Virology
Lagevrio		392		3,247		1,177		436		825		5,684	-88	-87
Isentress / Isentress HD		123		158		147		161		167		633	-23	-20
Neuroscience
Belsomra		56		69		69		62		59		258	-19	-9
Immunology
Simponi		180		186		181		173		166		706	-3	2
Remicade		51		61		53		49		44		207	-15	-10
Diabetes ⁽⁷⁾
Januvia		551		779		756		717		561		2,813	-29	-26
Janumet		329		454		476		417		353		1,700	-28	-24
Other Pharmaceutical ⁽⁸⁾		584		602		528		603		583		2,319	-3	1
ANIMAL HEALTH		1,491		1,482		1,467		1,371		1,230		5,550	1	5
Livestock		849		832		826		829		814		3,300	2	8
Companion Animals		642		650		641		542		416		2,250	-1	2
Other Revenues ⁽⁹⁾		275		312		370		625		420		1,728	-12	-22

*200% or greater

⁽¹⁾ Only select products are shown.

⁽²⁾ Alliance Revenue represents Merck's share of profits, which are product sales net of cost of sales and commercialization costs.

⁽³⁾ Alliance Revenue represents royalties and a milestone payment of $20 million received in the first quarter of 2022.

⁽⁴⁾ Total Vaccines sales were $3,133 million in the first quarter of 2023 and $2,481 million in the first quarter of 2022.

⁽⁵⁾ Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs.

⁽⁶⁾ Net product sales in Merck's marketing territories.

⁽⁷⁾ Total Diabetes sales were $950 million in the first quarter of 2023 and $1,305 million in the first quarter of 2022.

⁽⁸⁾ Includes Pharmaceutical products not individually shown above.

⁽⁹⁾ Other Revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities. Other Revenues related to the receipt of upfront and milestone payments for out-licensed products were $51 million in the first quarter of 2023 and $114 million in the first quarter of 2022.