Merck, known as MSD outside the United States and Canada, announced financial results for the first quarter of 2015. Non-GAAP EPS of $0.85 exclude acquisition- and divestiture-related costs and restructuring costs.
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Worldwide sales were $9.4 billion for the first quarter of 2015, a decrease of 8 percent compared with the first quarter of 2014, including a 5 percent negative impact from foreign exchange and a 9 percent net unfavorable impact resulting from the divestiture of the Consumer Care business and select products, partially offset by the acquisition of Cubist Pharmaceuticals.
The gross margin was 62.1 percent for the first quarter of 2015 compared to 62.0 percent for the first quarter of 2014, reflecting 14.4 and 12.1 unfavorable percentage point impacts, respectively, from the acquisition- and divestiture-related costs and restructuring costs noted above.
The increase in non-GAAP gross margin was driven by product mix, including the impact of acquisitions and divestitures, and foreign exchange.
Marketing and administrative expenses, on a non-GAAP basis, were $2.3 billion in the first quarter of 2015, a decrease from $2.7 billion in the same period of 2014, which was primarily driven by the sale of the Consumer Care business and declines in direct selling costs.
R&D expenses, on a non-GAAP basis, were $1.7 billion in the first quarter of 2015, a 10 percent increase compared to the first quarter of 2014, largely driven by an increase in licensing expenses.
Other (income) expense, net, was $55 million of expense in the first quarter of 2015 compared to $163 million of income in the first quarter of 2014. The first quarter of 2014 included a $182 million gain on the divestiture of the company’s Sirna Therapeutics, Inc. subsidiary.
The GAAP effective tax rate of 30.6 percent for the first quarter of 2015 reflects the impacts of acquisition- and divestiture-related costs and restructuring costs. The non-GAAP effective tax rate, which excludes these items, was 22.4 percent for the first quarter of 2015.
Merck has narrowed and raised its full-year 2015 non-GAAP EPS range to be between $3.35 and $3.48, including a $0.27 negative impact from foreign exchange. The range excludes acquisition- and divestiture-related costs and costs related to restructuring programs.
The company has lowered its full-year 2015 GAAP EPS range to be between $1.58 and $1.85. The change in the GAAP EPS range primarily reflects the incorporation of updated estimated Cubist intangible amortization expense.
At current exchange rates, the company continues to anticipate full-year 2015 revenues to be between $38.3 billion and $39.8 billion, including a $2.8 billion negative impact from foreign exchange and approximately $1 billion of net lost sales from acquisitions and divestitures.
In addition, the company continues to expect full-year 2015 non-GAAP marketing and administrative expenses to be below 2014 levels and R&D expenses to be modestly above 2014 levels.
The company continues to anticipate its full-year 2015 non-GAAP tax rate will be in the range of 22 to 23 percent, not including a 2015 R&D tax credit. ■