Merck Continues to Anticipate Earnings Per Share (EPS) Growth in 2007; Reaffirms Long-Term, Double-Digit Compound Annual EPS Growth from 2005 to 2010, Excluding One-Time Items and Restructuring Charges.* Full-Year 2006 Anticipated EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. Range of $2.48 to $2.52, Excluding Restructuring Charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. ; Reported 2006 EPS Range of $2.18 to $2.25 * Full-Year 2007 Anticipated EPS Range of $2.51 to $2.59, Excluding Restructuring Charges; Reported 2007 EPS Range of $2.36 to $2.49 * Company Continues to Anticipate Compound Annual Revenue Growth (Including 50% of All Joint-Venture Revenue) of 4-6% from 2005 to 2010 * Company Remains on Track to Deliver Long-Term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. , Double-Digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. Compound Annual EPS Growth from 2005 to 2010, Excluding One-Time Items and Restructuring Charges * Merck Expects Strong Growth in Newer Franchises and New Launches, Including GARDASIL and JANUVIA WHITEHOUSE STATION, N.J. -- Merck & Co., Inc. today announced that it reaffirms its full-year 2006 earning per share Noun 1. earning per share - the portion of a company's profit allocated to each outstanding share of common stock net income, net profit, profit, profits, earnings, lucre, net - the excess of revenues over outlays in a given period of time (including depreciation (EPS) guidance and anticipates full-year 2007 EPS of $2.51 to $2.59 excluding restructuring charges related to site closures and position eliminations. On a reported basis, the Company anticipates 2007 EPS in the range of $2.36 to $2.49. The 2006 and 2007 guidance does not reflect the establishment of any reserves for any potential liability relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the VIOXX Vi·oxx A trademark for the drug rofecoxib. Vioxx® Rofecoxib Pain management A COX-2 inhibitor used to manage osteoarthritic pain, acute pain in adults, primary dysmenorrhea. See COX-2 inhibitor. litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and does not include the impact of any potential acquired research expense relating to the anticipated Sirna Therapeutics Sirna Therapeutics Inc. (NYSE: RNAI), Sirna develops therapeutics based on RNA interference (RNAi) technology, a new and extremely potent method of using nucleic acids as drugs. acquisition. In 2007 the Company expects continued growth in newer franchises, including the on-going launches of ROTATEQ, ZOSTAVAX, GARDASIL and JANUVIA, as well as potential new launches. "Merck continues to focus on results. We will achieve these results by continuing to improve the way we discover, develop, manufacture and market our medicines and vaccines. Our mission is to deliver to patients the innovative medicines they need to live healthier lives. We look forward to discussing our progress at our Annual Business Briefing for investors on December 12," said Richard T. Clark, chief executive officer and president. "Building off the 2005 base, we remain focused on executing so that we can deliver sustained revenue and earnings growth over the long term," Mr. Clark added. "As we implement fundamental changes to our business model, our current products, anticipated new product introductions and cost-savings initiatives will help position us to deliver compound annual double-digit earnings growth, excluding charges and one-time items, by 2010. Beyond 2010, we expect to deliver sustained revenue and earnings growth fueled by our growing pipeline." Commenting on the Company's longer-term financial prospects, Judy C. Lewent, Merck's executive vice president and chief financial officer, stated, "As we disclosed last year, Merck's new and in-line In-line Used in the context of general equities. (1) An order or market in a specific security within the inside market; 2) any announcement (earnings) that adheres closely to Wall Street analysts' expectations. pharmaceutical products and vaccines are expected to drive revenue at a compound annual growth rate of 4-6% from 2005 through 2010, including 50% of the revenues from the joint ventures from which Merck derives equity income. We also expect that we can fully support our expanding pipeline with mid single-digit compound annual growth in research funding Research funding is a term generally covering any funding for scientific research, in the areas of both "hard" science and technology and social science. The term often connotes funding obtained through a competitive process, in which potential research projects are evaluated and over the same period. By sustaining our cost management initiatives, Merck expects to fully capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the promise of our expanding product portfolio while maintaining marketing and administrative expense flat in 2010 relative to the 2006 base." "We expect bottom-line earnings growth to begin in 2007, excluding restructuring charges and the impact of any potential acquired research expense relating to the anticipated Sirna Therapeutics acquisition," Ms. Lewent continued. "As earnings growth strengthens by the end of the period, on a compound annual basis, earnings per share growth is expected to reach double digits Double Digits was a pricing game on the American television game show, The Price Is Right. Played from April 20, 1973 through May 18, 1973's show, it was played for a car and used small prizes. , excluding restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs, net tax charges, any one-time gains associated with the AstraZeneca partnership and the establishment of any reserves for any potential liability relating to the VIOXX litigation." This anticipated performance, together with Merck's ongoing inventory and capital management programs which contribute to ensuring strong cash flow, supports the Company's commitment to maintaining its dividend at current levels and is also expected to provide opportunities for share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . 2006 Guidance Merck anticipates full-year 2006 EPS of $2.48 to $2.52, excluding the restructuring charges related to site closures and position eliminations. Merck anticipates reported full-year 2006 EPS of $2.18 to $2.25. This 2006 guidance does not reflect the establishment of any reserves for any potential liability relating to the VIOXX litigation and does not include the impact of any potential acquired research expense relating to the anticipated Sirna Therapeutics acquisition. 2007 Guidance Merck anticipates full-year 2007 EPS of $2.51 to $2.59, excluding the restructuring charges related to site closures and position eliminations. Merck anticipates reported full-year 2007 EPS of $2.36 to $2.49. This 2007 guidance does not reflect the establishment of any reserves for any potential liability relating to the VIOXX litigation and does not include the impact of any potential acquired research expense relating to the anticipated Sirna Therapeutics acquisition. Details on both the 2006 and 2007 guidance can be found on pages 5-6 and 7-8 of this release. Elements of Long-Term Guidance Merck continues to expect the initial phase of the cost reduction program, announced in 2005, to yield cumulative pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern savings of $4.5 billion to $5.0 billion from 2006 through 2010 and as previously stated, a significant portion of the total restructuring savings through 2010, or approximately $2 billion, will result from the implementation of the manufacturing supply strategy. The Company continues to expect that these savings in manufacturing should enable Merck's gross margin after 2008 to return to levels consistent with those seen in the period prior to the loss of U.S. market exclusivity for ZOCOR Zo·cor A trademark for the drug simvastatin. simvastatin Simvador (UK), Zocor Pharmacologic class: HMG-CoA reductase inhibitor Therapeutic class: Antihyperlipidemic . As part of the Company's global restructuring program announced in November 2005, Merck remains on track to eliminate 7,000 positions by the end of 2008. Since the inception of the program through September 30, approximately 3,900 positions have been eliminated. The Company expects the pretax costs of the restructuring to be $900 million to $1 billion in 2006 and $300 million to $500 million in 2007. Through the end of 2008, when the initial phase of the restructuring program is substantially complete, the cumulative pretax costs of the restructuring activities announced in November 2005 are expected to range from $1.9 billion to $2.2 billion. Approximately 70% of the cumulative pretax costs are non-cash, relating primarily to accelerated depreciation Accelerated Depreciation Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. Notes: The straight-line depreciation method spreads the cost evenly over the life of an asset. for those facilities scheduled for closure. Merck anticipates capital expenditures of approximately $1.1 billion in 2006, a $200 million reduction from the $1.3 billion previously disclosed. Capital expenditures for 2007 are estimated to be $1.2 billion. As Merck continues its initiatives in managing capital, the total reduction over the 2005 to 2008 period is expected to be $1.4 billion versus the Company's expectations for long-range capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. at the end of 2004. Merck continues on track to generate $1.2 billion in aggregate procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. savings across the Company by 2008. Conference Call The Company will host a conference call to discuss the Company's financial guidance. Investors are invited to a live Web cast of Merck's conference call today at 8:30 a.m. ET, by visiting the Newsroom section of the Merck Web site (www.merck.com/newsroom/webcast/). Institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. and analysts can participate in the call by dialing (706) 758-9927. Journalists are invited to listen by calling (706) 758-9928. A replay of the conference call will be available starting at 10 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy today through 5 p.m. ET on Dec. 13. To listen to the replay, dial (706) 645-9291 or (800) 642-1687 and enter ID # 2738232. Merck Financial Guidance for 2006 Worldwide sales will be driven by the Company's major products, including the impact of new studies and indications. Sales forecasts Sales forecast A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors. for those products for 2006 are as follows: [TABLE OMITTED] * Under an agreement with AstraZeneca (AZN AZN Asian ), Merck receives revenue at predetermined pre·de·ter·mine v. pre·de·ter·mined, pre·de·ter·min·ing, pre·de·ter·mines v.tr. 1. To determine, decide, or establish in advance: percentages of the U.S. sales of certain products by AZN, most notably NEXIUM Nex·i·um A trademark for the drug esomeprazole magnesium. esomeprazole magnesium Nexium Pharmacologic class: Proton pump inhibitor Therapeutic class: Antiulcer agent . In 2006, Merck anticipates these revenues to be approximately $1.5 to $1.7 billion. * Equity income from affiliates includes the results of the Merck and Schering-Plough collaboration Working together on a project. See collaborative software. and SP-MSD, combined with the results of Merck's other joint venture relationships. Equity income from affiliates is expected to be approximately $2.1 to $2.4 billion for 2006. * Product gross margin (PGM PGM Program PGM Pragmatic General Multicast PGM Phosphoglucomutase PgM Program Manager PGM Platinum Group Metal PGM Pagemaker (software) PGM Portable Gray Map PGM Precision Guided Munition ) percentage is estimated to be approximately 76% to 78% for the full year 2006. This guidance excludes the portion of the restructuring costs that will be included in product costs and will affect reported PGM in 2006. This guidance includes the impact of stock option expense. * Marketing and administrative expense is anticipated to increase at a mid-to-high single-digit percentage growth rate over the full-year 2005 level. The marketing and administrative expense guidance excludes the charges taken in the fourth quarter of 2005 and the third quarter of 2006 related solely to future legal defense costs of VIOXX litigation. The full-year 2005 and 2006 levels exclude the costs associated with position eliminations in 2005, as well as other restructuring costs pursuant to the Company's streamlining of its business processes. The 2006 amount includes the impact of stock option expense. * Research and development expense (which excludes joint ventures) is anticipated to increase at a high single-digit percentage growth rate over the full-year 2005 level. Research and development expense in 2006 includes the impact of stock option expense and the second quarter 2006 acquired research expense relating to GlycoFi. The full-year 2006 level excludes the portion of the restructuring costs that are reported in research and development expense. The full-year 2006 R&D guidance does not include the impact of any potential acquired research expense relating to the anticipated Sirna Therapeutics acquisition. * Stock option expense is expected to be approximately $220 million in 2006. The impact of stock option expense is reflected in the materials and production, marketing and administrative, and research and development guidance respectively. * As part of the Company's restructuring of its operations, additional costs related to site closings, position eliminations and related costs will be incurred in 2006. The aggregate 2006 pretax expense related to these activities is estimated to be $900 million to $1.0 billion. * The consolidated 2006 tax rate is estimated to be approximately 26 to 28% (including the net tax rate impact in the second quarter related primarily to the acquisition of GlycoFi). This guidance does not reflect the tax rate impact of restructuring costs. The effective tax rate to be applied to the Company's restructuring costs is at a higher level than the underlying effective tax rate guidance. * Merck plans to continue its stock buyback Stock buyback A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share. stock buyback See buyback. program in 2006. As of Nov. 30, $6.6 billion remains under the current buyback Buyback The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may authorizations approved by Merck's Board of Directors. Given these guidance elements, Merck anticipates full-year 2006 EPS of $2.48 to $2.52, excluding the restructuring charges related to site closures and position eliminations. Merck anticipates reported full-year 2006 EPS of $2.18 to $2.25. This 2006 guidance does not reflect the establishment of any reserves for any potential liability relating to the VIOXX litigation and does not include the impact of any potential acquired research expense relating to the anticipated Sirna Therapeutics acquisition. Merck Financial Guidance for 2007 Worldwide sales will be driven by the Company's major products, including the impact of new studies and indications. Sales forecasts for those products for 2007 are as follows: [TABLE OMITTED] * Under an agreement with AstraZeneca (AZN), Merck receives revenue at predetermined percentages of the U.S. sales of certain products by AZN, most notably NEXIUM. In 2007, Merck anticipates these revenues to be approximately $1.6 to $1.8 billion. * Equity income from affiliates includes the results of the Merck and Schering-Plough collaboration and SP-MSD, combined with the results of Merck's other joint venture relationships. Equity income from affiliates is expected to be approximately $2.6 to $2.9 billion for 2007. * Product gross margin (PGM) percentage is estimated to be approximately 74 to 76% for the full year 2007. This guidance excludes the portion of the restructuring costs that will be included in product costs and will affect reported PGM in 2007. * Marketing and administrative expense is anticipated to increase between 0 and 2 percentage points over the full-year 2006 level. The marketing and administrative expense guidance excludes the charges taken in the third quarter of 2006 related solely to future legal defense costs of VIOXX litigation. * Research and development expense (which excludes joint ventures) is anticipated to increase at a low-to-mid single-digit percentage growth rate over the full-year 2006 level. The full-year 2006 level includes the second quarter 2006 acquired research expense relating to GlycoFi. The full-year 2006 level excludes the portion of the restructuring costs that are reported in research and development expense. The full-year 2007 R&D guidance does not include the impact of any potential acquired research expense relating to the anticipated Sirna Therapeutics acquisition. * As part of the Company's restructuring of its operations, additional costs related to site closings, position eliminations and related costs will be incurred in 2007. The aggregate 2007 pretax expense related to these activities is estimated to be $300 million to $500 million. * The consolidated 2007 tax rate is estimated to be approximately 24 to 26%. This guidance does not reflect the tax rate impact of restructuring costs. The effective tax rate to be applied to the Company's restructuring costs is at a higher level than the underlying effective tax rate guidance. * Merck plans to continue its stock buyback program in 2007. As of Nov. 30, $6.6 billion remains under the current buyback authorizations approved by Merck's Board of Directors. Given these guidance elements, Merck anticipates full-year 2007 EPS of $2.51 to $2.59, excluding the restructuring charges related to site closures and position eliminations. Merck anticipates reported full-year 2007 EPS of $2.36 to $2.49. This 2007 guidance does not reflect the establishment of any reserves for any potential liability relating to the VIOXX litigation and does not include the impact of any potential acquired research expense relating to the anticipated Sirna Therapeutics acquisition. About Merck Merck & Co., Inc. is a global research-driven pharmaceutical company dedicated to putting patients first. Established in 1891, Merck discovers, develops, manufactures and markets vaccines and medicines to address unmet un·met adj. Not satisfied or fulfilled: unmet demands. medical needs. The Company devotes extensive efforts to increase access to medicines through far-reaching programs that not only donate Merck medicines but help deliver them to the people who need them. Merck also publishes unbiased health information as a not-for-profit Not-for-profit An organization established for charitable, humanitarian, or educational purposes that is exempt from some taxes and in which no one in profits or losses. service. For more information, visit www.merck.com. Forward-Looking Statement forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are based on management's current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding product development, product potential or financial performance. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. Merck undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this press release should be evaluated together with the many uncertainties that affect Merck's business, particularly those mentioned in the cautionary statements in Item 1 of Merck's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended Dec. 31, 2005, and in its periodic reports on Form 10-Q Form 10-Q See 10-Q. and Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. , which the Company incorporates by reference. |
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