Merck & Co. (MRK)
Q3 2012 Earnings Call
October 26, 2012 8:00 am ET
Kenneth C. Frazier - Chairman, Chief Executive Officer and President
Adam H. Schechter - Executive Vice President and President of Global Human Health
Peter N. Kellogg - Chief Financial Officer and Executive Vice President
Marc Goodman - UBS Investment Bank, Research Division
Christopher Schott - JP Morgan Chase & Co, Research Division
Charles Anthony Butler - Barclays Capital, Research Division
David Risinger - Morgan Stanley, Research Division
Tim Anderson - Sanford C. Bernstein & Co., LLC., Research Division
Mark J. Schoenebaum - ISI Group Inc., Research Division
Jami Rubin - Goldman Sachs Group Inc., Research Division
Steve Scala - Cowen and Company, LLC, Research Division
Catherine J. Arnold - Crédit Suisse AG, Research Division
Gregory B. Gilbert - BofA Merrill Lynch, Research Division
Alex Arfaei - BMO Capital Markets U.S.
Seamus Fernandez - Leerink Swann LLC, Research Division
Michael Kallai Tong - Wells Fargo Securities, LLC, Research Division
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Thank you, Jackie, and good morning, everyone, and welcome to Merck's Third Quarter 2012 Conference Call. Before I turn the call over to Ken, I want to mention just a couple of housekeeping items. First, there are a number of items in the 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 numbers. You can see reconciliation tables for the non-GAAP results in the press release and also in Table 2 of our supplement. We've also provided tables to help you understand the GAAP results, and that is in Table 1; the reconciliation tables, as I mentioned, on Table 2; and Table 3 in our press release provides sales performance for the company, our business units and our products. During the call, we'll be referring primarily to Tables 2 and Table 3.
Finally, 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. The statements are based upon the current beliefs of Merck's management and are subject to significant risks and uncertainties. You can see our SEC filings, including the 2011 10-K. They identify certain risk factors and cautionary statements that could cause our actual results to differ materially from any forward-looking statements we make today. You should note that Merck undertakes no obligation to publicly update any forward-looking statement. And importantly, you can find our SEC filings as well as today's press release on our website at merck.com.
This morning, I'm joined by Ken Frazier, our President, Chief Executive Officer and Chairman; Adam Schechter, our -- the President of Global Human Health; and Peter Kellogg, our Chief Financial Officer.
Now I'd like to turn it over to Ken Frazier.
Kenneth C. Frazier
Thank you, Alex. Good morning, everyone, and thank you for joining the call today. Our results this quarter reflect the continuing momentum of our underlying business. One year ago, we told you that our intention was to maintain 2012 revenues at or near 2011 levels despite the U.S. SINGULAIR patent expiration, and the Merck team is making good on that commitment. In the third quarter, we drove growth of our key products and in our key geographies, which offset the impact of the SINGULAIR patent expiration. With one more quarter to go in 2012, our year-to-date sales are up 2%, excluding the impact of exchange, so we are right on track in executing our strategy.
We strongly believe that our 4-part strategy provides a sound basis for weathering short-term market volatility and driving longer-term shareholder value. As a reminder, our strategy is focused on executing on our core business, which includes our largest markets, core brands, new launched brands and innovative R&D targeted at therapeutic areas with the greatest future patient demand and scientific opportunity; two, expanding geographically to leverage high-growth markets such as Japan and key emerging markets; three, extending into the complementary businesses of Consumer Care and Animal Health; and four, excelling at managing our costs while continuing to invest for future growth. We also believe this strategy will allow us to continue doing what Merck does best: providing innovative products that have demonstrated patient outcomes, provide value to the public and private payers alike and make a real difference for our customers.
In terms of executing our core business, our company-wide sales grew 7% this quarter, excluding SINGULAIR sales globally and foreign exchange. We are pleased with the solid growth across the portfolio, including double-digit growth for a number of our key products.
In terms of expanding geographically, we continue to invest disproportionately in higher-growth markets. In the third quarter, emerging market sales grew 15% excluding exchange. We are also starting to get our joint ventures up and running, such as our partnership with Simcere in China, which began operating this quarter. As always, Adam will provide more specific details about our human health performance by product and by geography.
The third part of our strategy is extending into complementary businesses. Our Animal Health business continues as a strong contributor with 7% growth in the third quarter, excluding exchange. Additionally, we launched ACTIVYL in the U.S., a companion animal health product line for ticks and fleas. Merck Consumer Care grew 10%, excluding exchange. This growth was led by the expansion of our Dr. Scholl's franchise with the launch of the Active Series as well as key skin care brands.