Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Merck & Co. Inc. (NYSE:MRK)

Analysis of Goodwill and Intangible Assets

Advanced level


Goodwill and Intangible Asset Disclosure

Merck & Co. Inc., balance sheet: goodwill and intangible assets

US$ in millions

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Products and product rights 45,947  46,615  46,693  46,269  45,949 
Licenses 3,185  2,081  —  —  — 
IPR&D 1,032  1,064  1,194  1,653  4,226 
Trade names 2,899  209  209  215  198 
Other 2,261  2,403  2,035  1,947  1,418 
Other intangibles, gross carrying amount 55,324  52,372  50,131  50,084  51,791 
Accumulated amortization (41,128) (39,268) (35,948) (32,779) (29,189)
Other intangibles, net 14,196  13,104  14,183  17,305  22,602 
Goodwill 19,425  18,253  18,284  18,162  17,723 
Goodwill and other intangibles 33,621  31,357  32,467  35,467  40,325 

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26).

Item Description The company
Other intangibles, net Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Merck & Co. Inc.’s other intangibles, net decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Merck & Co. Inc.’s goodwill decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Goodwill and other intangibles Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Merck & Co. Inc.’s goodwill and other intangibles decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Adjustments to Financial Statements: Removal of Goodwill

Merck & Co. Inc., adjustments to financial statements

US$ in millions

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Adjustment to Total Assets
Total assets (as reported) 84,397  82,637  87,872  95,377  101,779 
Less: Goodwill 19,425  18,253  18,284  18,162  17,723 
Total assets (adjusted) 64,972  64,384  69,588  77,215  84,056 
Adjustment to Total Merck & Co., Inc. Stockholders’ Equity
Total Merck & Co., Inc. stockholders’ equity (as reported) 25,907  26,701  34,336  40,088  44,676 
Less: Goodwill 19,425  18,253  18,284  18,162  17,723 
Total Merck & Co., Inc. stockholders’ equity (adjusted) 6,482  8,448  16,052  21,926  26,953 
Adjustment to Net Income Attributable To Merck & Co., Inc.
Net income attributable to Merck & Co., Inc. (as reported) 9,843  6,220  2,394  3,920  4,442 
Add: Goodwill impairments 162  144  38  47  47 
Net income attributable to Merck & Co., Inc. (adjusted) 10,005  6,364  2,432  3,967  4,489 

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26).


Merck & Co. Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Goodwill (Summary)

Merck & Co. Inc., adjusted financial ratios

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Net Profit Margin
Reported net profit margin 21.01% 14.71% 5.97% 9.85% 11.25%
Adjusted net profit margin 21.36% 15.05% 6.06% 9.97% 11.37%
Total Asset Turnover
Reported total asset turnover 0.55 0.51 0.46 0.42 0.39
Adjusted total asset turnover 0.72 0.66 0.58 0.52 0.47
Financial Leverage
Reported financial leverage 3.26 3.09 2.56 2.38 2.28
Adjusted financial leverage 10.02 7.62 4.34 3.52 3.12
Return on Equity (ROE)
Reported ROE 37.99% 23.30% 6.97% 9.78% 9.94%
Adjusted ROE 154.35% 75.33% 15.15% 18.09% 16.65%
Return on Assets (ROA)
Reported ROA 11.66% 7.53% 2.72% 4.11% 4.36%
Adjusted ROA 15.40% 9.88% 3.49% 5.14% 5.34%

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Merck & Co. Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Merck & Co. Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Merck & Co. Inc.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Merck & Co. Inc.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Merck & Co. Inc.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

Merck & Co. Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Merck & Co., Inc. 9,843  6,220  2,394  3,920  4,442 
Sales 46,840  42,294  40,122  39,807  39,498 
Profitability Ratio
Net profit margin1 21.01% 14.71% 5.97% 9.85% 11.25%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Merck & Co., Inc. 10,005  6,364  2,432  3,967  4,489 
Sales 46,840  42,294  40,122  39,807  39,498 
Profitability Ratio
Adjusted net profit margin2 21.36% 15.05% 6.06% 9.97% 11.37%

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26).

2019 Calculations

1 Net profit margin = 100 × Net income attributable to Merck & Co., Inc. ÷ Sales
= 100 × 9,843 ÷ 46,840 = 21.01%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Merck & Co., Inc. ÷ Sales
= 100 × 10,005 ÷ 46,840 = 21.36%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Merck & Co. Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Total Asset Turnover

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Sales 46,840  42,294  40,122  39,807  39,498 
Total assets 84,397  82,637  87,872  95,377  101,779 
Activity Ratio
Total asset turnover1 0.55 0.51 0.46 0.42 0.39
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Sales 46,840  42,294  40,122  39,807  39,498 
Adjusted total assets 64,972  64,384  69,588  77,215  84,056 
Activity Ratio
Adjusted total asset turnover2 0.72 0.66 0.58 0.52 0.47

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26).

2019 Calculations

1 Total asset turnover = Sales ÷ Total assets
= 46,840 ÷ 84,397 = 0.55

2 Adjusted total asset turnover = Sales ÷ Adjusted total assets
= 46,840 ÷ 64,972 = 0.72

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Merck & Co. Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Total assets 84,397  82,637  87,872  95,377  101,779 
Total Merck & Co., Inc. stockholders’ equity 25,907  26,701  34,336  40,088  44,676 
Solvency Ratio
Financial leverage1 3.26 3.09 2.56 2.38 2.28
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets 64,972  64,384  69,588  77,215  84,056 
Adjusted total Merck & Co., Inc. stockholders’ equity 6,482  8,448  16,052  21,926  26,953 
Solvency Ratio
Adjusted financial leverage2 10.02 7.62 4.34 3.52 3.12

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26).

2019 Calculations

1 Financial leverage = Total assets ÷ Total Merck & Co., Inc. stockholders’ equity
= 84,397 ÷ 25,907 = 3.26

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Merck & Co., Inc. stockholders’ equity
= 64,972 ÷ 6,482 = 10.02

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Merck & Co. Inc.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Merck & Co., Inc. 9,843  6,220  2,394  3,920  4,442 
Total Merck & Co., Inc. stockholders’ equity 25,907  26,701  34,336  40,088  44,676 
Profitability Ratio
ROE1 37.99% 23.30% 6.97% 9.78% 9.94%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Merck & Co., Inc. 10,005  6,364  2,432  3,967  4,489 
Adjusted total Merck & Co., Inc. stockholders’ equity 6,482  8,448  16,052  21,926  26,953 
Profitability Ratio
Adjusted ROE2 154.35% 75.33% 15.15% 18.09% 16.65%

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26).

2019 Calculations

1 ROE = 100 × Net income attributable to Merck & Co., Inc. ÷ Total Merck & Co., Inc. stockholders’ equity
= 100 × 9,843 ÷ 25,907 = 37.99%

2 Adjusted ROE = 100 × Adjusted net income attributable to Merck & Co., Inc. ÷ Adjusted total Merck & Co., Inc. stockholders’ equity
= 100 × 10,005 ÷ 6,482 = 154.35%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Merck & Co. Inc.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Merck & Co., Inc. 9,843  6,220  2,394  3,920  4,442 
Total assets 84,397  82,637  87,872  95,377  101,779 
Profitability Ratio
ROA1 11.66% 7.53% 2.72% 4.11% 4.36%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Merck & Co., Inc. 10,005  6,364  2,432  3,967  4,489 
Adjusted total assets 64,972  64,384  69,588  77,215  84,056 
Profitability Ratio
Adjusted ROA2 15.40% 9.88% 3.49% 5.14% 5.34%

Based on: 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-26).

2019 Calculations

1 ROA = 100 × Net income attributable to Merck & Co., Inc. ÷ Total assets
= 100 × 9,843 ÷ 84,397 = 11.66%

2 Adjusted ROA = 100 × Adjusted net income attributable to Merck & Co., Inc. ÷ Adjusted total assets
= 100 × 10,005 ÷ 64,972 = 15.40%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Merck & Co. Inc.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.