Merck & Company, Inc. (MRK)

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Merck (MRK)

Q4 2012 Results Earnings Call

February 1, 2013 8:00.m. ET


Alex Kelly - SVP, Investor Relations

Kenneth C. Frazier - Chairman, Chief Executive Officer and President

Peter Kim - President, Merck Research

Adam H. Schechter - President, Global Human Health

Peter N. Kellogg - Chief Financial Officer and Executive Vice President


Tim Anderson - Sanford Bernstein

Tony Butler - Barclays Capital

Chris Schott - JP Morgan

Marc Goodman - UBS

Mark J. Schoenebaum - ISI Group

Alex Arfaei - BMO Capital Markets

Andrew Baum - Citi

Damien Conover - Morningstar



Good day everyone and welcome to Merck’s fourth quarter 2012 earnings conference call. [Operator instructions.] At this time, I’d like to turn the call over to Alex Kelly, Senior Vice President of Investor Relations. Please go ahead.

Alex Kelly

Thanks, operator, and good morning everyone, and welcome to Merck's Fourth Quarter 2012 Conference Call. Before I turn the call over to Ken, I just want to point out a couple of items.

First, you’ll see that we have items in our GAAP results such as acquisition-related charges, restructuring costs, and certain other items, and you should note that we've excluded those in our non-GAAP results. There are reconciliation tables available in our press release so you can get a better understanding of the underlying performance.

We've also provided tables to help you understand the sales results in the quarter, for the business units and also for the products. That’s in Table 3 of the press release. And the reconciliation table I mentioned is in Table 2 of our earnings release. During the call, we'll be referring to primarily Table 2 for the P&L and Table 3 as it relates to revenue.

Second, I'd like to remind you that some of the statements we make during today's call may be considered forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Such statements are based upon the current beliefs of Merck's management and are subject to significant risks and uncertainties. If underlying assumptions prove inaccurate, or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward looking statements.

Our SEC filings, including item 1A in the 2011 10-K, identify certain risk factors and cautionary statements that could cause the company’s actual results to differ materially from those projected in any of our forward-looking statements made this morning. Merck undertakes no obligation to publicly update any forward-looking statement. And you can find our SEC filings, as well as today's press release, on

This morning, I'm joined by Ken Frazier, our President, Chief Executive Officer; Peter Kim, President of Merck Research Labs, Adam Schechter, our President of Global Human Health; and Peter Kellogg, our Chief Financial Officer.

With that, I’d like to introduce Ken Frazier.

Ken Frazier

Thank you, Alex. Good morning everyone, and thank you for joining the call today. I’m pleased to be with you today. As we close out 2012, we see continued evidence that our focus on a core growth strategy to create shareholder value has us on the right track. We expected that 2012 would be a challenging year, particularly with the Singulair patent expiry as well as pricing and austerity challenges.

Despite these challenges, we were able to maintain our top line at 2011 levels without resetting our revenue base, as we committed to you at this time last year. We also committed to continuing to reduce our cost structure in order to deliver a leveraged P&L, and it is is clear that we delivered on both fronts.

By driving growth in our broad product portfolio, and reducing costs, we were able not only to absorb the impacts of a challenging year, but also reinvest for future growth. In addition, we returned more than $7.5 billion to shareholders last year by increasing our dividend 11% and increasing our share repurchase level to $2.6 billion.

In 2012, we also said that we would advance the pipeline, and we did just that. Although we were disappointed by the outcome of the HPS2-THRIVE trial, we successfully completed four new drug apps last year, with more on the way this year. Before I continue, I’d like to turn the call over to Peter Kim, who will provide a brief update regarding odanacatib. Peter?

Peter Kim

Thank you, Ken, and good morning everyone. As you will recall, last July the data monitoring committee for the fracture trial recommended the pivotal study be closed and the extension study, which includes more than 8,000 women, continue. We have just recently received data from the pivotal study, but do not have data from the ongoing extension trial.

We have decided to include data from the extension study in our filings for regulatory approvals. The extension study is double-blinded. Patients and investigators are blinded. Our plans to present the data are dependent on our need to maintain the blind in order to file.

Therefore, we do not intend to present the results of the pivotal study, and we do not intend to provide additional information on safety or efficacy until after we have locked the database for the filings. We will then present the data at an appropriate scientific meeting.

Let me underscore that we continue to believe in the potential of odanacatib to address unmet medical needs for patients with osteoporosis and look forward to filing in 2014. Ken?

Ken Frazier

Thank you, Peter. As we begin 2013, we face higher hurdles from patent expirations and many of the same external challenges we saw last year. Nevertheless, we are well-positioned to meet those challenges with the growth of our underlying portfolio and our four-part growth strategy.

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