Solution
David answered on
Dec 23 2021
1
Financial analysis
Comparative analysis of Merck & Co., Inc. and
Pfizer Inc.
2
Table of contents
Company overview: Merck 3
Company overview: Pfizer 4
Merck Financial summary 5
Pfizer Financial summary 6
Financial ratios analysis 7
Conclusion and future recommendations 12
References 14
3
Company overview:
Merck & Co., Inc. is a renowned health care company that is involved in manufacturing
prescription medicines, vaccines, biologic therapies, animal health, and consumer care products.
These products are marketed directly and through the company’s joint ventures.
Major products of the company are categorized into the following segments primary care and
women’s health, cardiovascular, diabetes and obesity, respiratory, immunology, infectious
disease and others.
Kenneth C. Frazier is serves as the chairman of the board, president and chief executive officer.
The company is headquartered at New Jersey. As of December 31, 2012, the Company had
approximately 83,000 employees worldwide, with approximately 32,500 employed in the United
States, including Puerto Rico. Geographies that the company sells its products in is United
States, Europe, Middle East and Africa, Japan and others.
Market Capitalization for Merck as on 29 March 2013 was USD 133.59 billion.
Revenue and Operating income in USD billions
24.2 23.9
27.4
46.0 48.0 47.3
6.3 6.4 6.2
9.2 10.7 10.7
$1.49
$3.63
$5.65
$0.28
$2.02 $2.0
$ -
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
0
10.0
20.0
30.0
40.0
50.0
60.0
2007 2008 2009 2010 2011 2012
Revenue Operating Income Diluted EPS
43%
27%
11%
19%
Revenue by geography (2012)
United States
Europe, Middle East
and Africa
Japan
International
86%
14%
0%
Revenue by segment (2012)
Pharmaceutical
Othe
Corporate
4
Pfizer is mainly involved in manufacture and sale of biopharmaceutical products. It has a
diversified healthcare portfolio that consists of human and animal biologic and small molecule
medicines and vaccines, as well as many of the consumer products.
Ian Read serves as the chief executive officer of the company. It is headquartered at New York.
Major products of the company include pharmaceutical products like Aricept, Aromasin,
Arthrotec, Caduet, Camptosar, Cele
ex, Chantix, Detrol/Detrol LA, Effexor, En
el, Eraxis,
Fragmin, Genotropin, Geodon/Zeldox, Lipitor, Lyrica, Mylotarg, Norvasc, Prevnar, Rebif,
Relpax, Revatio, Spiriva, Sutent, Torisel, Vfend, Viagra, Xalatan/Xalacom, Zmax, Zoloft,
Zyvox. In addition, Pfizer has many animal health products in its portfolio.
As of 2011 the company had 103,700 employees and its market capitalization as of 29 March
2013 is USD 207.48 billion. Its operations are spread over United States, developed Europe
egion( Western Europe, Finland and the Scandinavian countries) developed Rest of World
egion (Australia, Canada, Japan, New Zealand and South Korea) emerging markets region(
includes, but is not limited to, the following markets: Asia (excluding Japan and South Korea),
Latin America, the Middle East, Eastern Europe, Africa, Turkey and Central Europe)
Revenue and Operating income in UDS billions
48.4 48.3 49.3
65.2 65.3
59.0
14.6 16.2 15.8
17.6 19.3 19.2
$1.17
$1.2 $1.23
$1.02
$1.27
$1.94
$ -
$0.5
$1.0
$1.5
$2.0
$2.5
0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2007 2008 2009 2010 2011 2012
Revenue Operating Income Diluted EPS
27%
26%
34%
13%
Revenue by segment (2012)
Primary Care
Specialty Care and
Oncology (SC&O)
Established Products and
Emerging Markets (EP&EM)
Othe
39%
23%
18%
20%
Revenue by geography (2012)
United States
Developed Europe
Developed Rest of World
Emerging Markets
5
Merck financial summary:
In 2012, worldwide sales totaled $47.3 billion , declining by 2% as compared to $48.0 billion in
the year 2011. Foreign exchange fluctuations affected the global sales performance unfavorably
y 3%. The decrease in sales was primarily because of Singulair, which lost market exclusivity
in the United States in August 2012. It resulted in a significant and rapid decline in sales of the
product in U.S. Materials and production costs came to around $16.4 billion in 2012, $16.9
illion in 2011. Gross margin came to 65.2% for the year 2012 when compared to 64.9% in 2011
and 60.0% in 2010.
The amortization of intangible assets and purchase accounting adjustments to inventories, as well
as the restructuring and impairment charges noted above reduced gross margin by 10.7
percentage points in 2012, 11.4 percentage points in 2011 and 15.2 percentage points in 2010.
There was a decline in marketing and administrative expenses by 7% in 2012 to $12.8 billion
due to the favorable effect of foreign exchange, reduction in promotion costs and lowering of
selling costs coming as a result of restructuring activities. The effective income tax rates is
around 27.9% in 2012, 12.8% in 2011 and 40.6% in 2010 reflects the impact of some
acquisition-related costs and costs of restructuring , which have been partially offset by the
positive impact of foreign earnings. Sales revenues from products have been decided by the
company policy to be recognized at the time of delivery when title and risk of loss passes to the
customer. Recognition process also requires reasonable assurance of collection of sales proceeds
and completion of all performance obligations.
Company has seen a major increase in cash and equivalents as well as its cu
ent assets.
Inventories’ valuation is done at the lower of cost or the market value. The cost of a majority of
domestic pharmaceutical and vaccine inventories for the company is determined by the last-in,
first-out (“LIFO”) method for purposes of both financial reporting and tax. The cu
ent assets
comprises of 26% and 27% of inventories at December 31, 2012 and 2011, respectively.
Investments in marketable debt and equity securities which have been classified as the available-
for-sale are reported at fair value. Depreciation provided over the estimated useful lives of the
assets is recorded using straight-line method. Capital expenditures done by the company
equalled $2.0 billion in 2012, $1.7 billion in 2011 and $1.7 billion in 2010.
6
Pfizer financial summary:
Revenues decreased by 10% in 2012 to $59.0 billion, when compared to $65.3 billion in 2011.
This reflects a decline in operational revenue of $4.8 billion or 8%, as a result of the loss of
exclusivity of Lipitor in most major markets, which includes the U.S. market from November 30,
2011 and most of developed Europe in March and May 2012, as well as the unfavorable impact
of foreign exchange of $1.5 billion, or 2%. Certain provisions of the U.S. Healthcare Legislation
which became effective in 2010 or in 2011 impacted the company revenues, while other
provisions will become effective on various dates in the future. The principal provisions which
had an effect on the company revenues are an increase in the minimum rebate on
anded
prescription drugs sold to Medicaid...