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Merck Q4 Profit Tops View; Plans Spin-off Of Women's Health, Biosimilar Businesses

merck nov14 05feb20 lt

Merck & Co., Inc. (MRK) reported profit for the fourth quarter that increased 29 percent from last year, reflecting higher sales for Keytruda. Quarterly sales increased by 8 percent. Adjusted earnings per share topped analysts' expectations, but quarterly sales missed their estimates.

Further, Merck said it plans to spin off its Women's Health, Trusted Legacy Brands and Biosimilar Products businesses into a separate publicly traded company. The name of the new company has not yet been determined. The new company is expected to be headquartered in New Jersey, with about 10,000 to 11,000 employees.

Merck will retain its cancer drugs, including blockbuster Keytruda, along with its hospital, vaccines and animal health businesses.

Merck expects to achieve more than $1.5 billion in operating efficiencies by 2024 from the spin-off, which is expected to be completed in the first half of 2021.

The products to be spun off into new company are expected to generate 2020 revenue of approximately $6.5 billion.

Merck expects to receive $8 billion to $9 billion through a special tax-free dividend from the new company. It will retain its current 2020 dividend of $2.44 per share and anticipates future increases with the goal of achieving 47 to 50 percent payout ratio over time.

Merck will appoint Kevin Ali, who brings three decades of pharmaceutical commercial experience from within Merck, as chief executive officer of the new company. Carrie Cox will be named Chairman the new company.

Merck expects full-year 2020 GAAP earnings per share to be between $4.57 and $4.72. It expects full-year 2020 non-GAAP earnings per share of $5.62 - $5.77, including an approximately 1.5% negative impact from foreign exchange. Analysts expect annual earnings of $5.61 per share.

The company anticipates full-year 2020 revenue to be between $48.8 billion and $50.3 billion, including a negative impact from foreign exchange of less than 1%. Analysts expect revenues of $49.53 billion for 2020.

The company reported that its net Income attributable to the company for the fourth-quarter rose 29 percent to $2.36 billion from last year's $1.83 billion, with earning per share improving to $0.92 from $0.69 in the previous year.

On an adjusted basis, net income attributable to the company for the fourth-quarter was $2.98 billion or $1.16 per share compared to $2.75 billion or $1.04 per share in the previous year. Analysts polled by Thomson Reuters expected the company to report earnings of $1.15 per share for the fourth-quarter. Analysts' estimates typically exclude special items.

Sales for the forth-quarter grew 8 percent to $11.87 billion from $11.00 billion last year. Excluding the impact from foreign exchange, gales grew 9%. Wall Street analysts had a consensus revenue estimate of $11.98 billion for the fourth-quarter.

Quarterly pharmaceutical sales increased 7% to $10.5 billion, excluding the unfavorable effect from foreign exchange, sales grew 8%. The increase was driven primarily by growth in oncology, partially offset by the ongoing impacts of the loss of market exclusivity for several products.

The company's anti-PD-1 therapy, Keytruda sales grew 45 percent to $3.11 billion from the prior year.

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