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News

Altria Reports 2018 Fourth-Quarter and Full-Year Results; Provides 2019 Full-Year Earnings Guidance

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Altria Group, Inc. (Altria) (NYSE:MO) today announces its 2018 fourth-quarter and full-year business results and provides its guidance for 2019 full-year adjusted diluted earnings per share (EPS).

Altria closed out 2018 with excellent full-year adjusted diluted EPS growth, and we continued to reward shareholders by returning $5.4 billion in cash through dividends. PM USA stabilized Marlboro and strengthened our combustible business. We also took proactive steps that we believe uniquely position us for long-term success, said Howard Willard, Altrias Chairman and Chief Executive Officer. Altria enters 2019 with an evolved business platform that includes our strong core tobacco businesses and new strategic investments with tremendous potential for growth.

As previously announced, a conference call with the investment community and news media will be webcast on January 31, 2019 at 9:00 a.m. Eastern Time. Access to the webcast is available at www.altria.com/webcasts and via the Altria Investor app.

Altria Headline Financials1

($ in millions, except per share data)   Q4 2018   Change vs.

Q4 2017

      Full Year 2018   Change vs.

Full Year 2017

Net revenues   $   6,114     0.2 %       $   25,364    

(0.8

)%

Revenues net of excise taxes   $   4,786     1.5 %       $   19,627     0.7 %
 
Reported tax rate       26.8 %  

154.4

pp

          25.4 %  

29.5

pp

Adjusted tax rate       23.1 %  

(3.9

) pp

          23.1 %  

(10.3

) pp

 
Reported diluted EPS   $   0.66    

(74.6

)%

      $   3.68    

(30.7

) %

Adjusted diluted EPS   $   0.95     4.4 %       $   3.99     17.7 %

1 Adjusted financial measures presented in this release exclude the impact of special items. See Basis of Presentation for more information.

Cash Returns to Shareholders

Dividends:

  • Altrias current annualized dividend rate is $3.20 per share, representing an annualized dividend yield of 7.2% as of January 25, 2019.
  • Altria paid approximately $5.4 billion in dividends for the full year.
  • Altria expects to maintain a dividend payout ratio target of approximately 80% of adjusted diluted EPS. Future dividend payments remain subject to the discretion of Altrias Board of Directors (Board).

Share Repurchase Program:

  • Altria repurchased 27.9 million shares for the full year at an average price of $60.00 per share, for a cost of approximately $1.67 billion.
  • As of December 31, 2018, Altria had approximately $345 million remaining in the current $2 billion share repurchase program, which Altria expects to complete by the end of the second quarter of 2019. The timing of share repurchases depends upon marketplace conditions and other factors, and this program remains subject to the discretion of the Board.

Transactions

  • Altria entered into an agreement to acquire newly issued shares in Cronos Group Inc. (Cronos Group), a leading global cannabinoid company, headquartered in Toronto, Canada. These shares represent a 45% equity stake for an investment of approximately $1.8 billion (approximately CAD $2.4 billion).1 The agreement includes a warrant, if exercised in full, to acquire an additional 10% equity stake in Cronos Group at an expected cost of approximately $1.0 billion (approximately CAD $1.4 billion).1
    • Altria submitted its application for regulatory review under the Investment Canada Act in late December.
    • Cronos Groups shareholder vote is scheduled for February 21, 2019.
    • Altria still expects the transaction to close in the first half of 2019.
  • Altria signed and closed a $12.8 billion investment in JUUL, the U.S. leader in e-vapor, representing a 35% economic interest. Altria intends to file its application for antitrust approval shortly.
  • Altria financed the JUUL transaction through a $14.6 billion term loan facility arranged by JPMorgan Chase Bank, N.A. $1.8 billion of the facility remains undrawn and may be used by Altria to finance its investment in Cronos Group. Altria expects to access the credit and capital markets to refinance the debt prior to maturity.

1 Based on reference exchange rate of 0.757 USD / CAD at market close on January 25 as quoted by Bloomberg

Innovation

  • USSTC will present at the Tobacco Products Scientific Advisory Committee (TPSAC) meeting on February 6 and 7, 2019, related to its modified risk tobacco product application for Copenhagen Snuff.
  • PM USA is ready to deploy its initial lead market plans for IQOS upon authorization by the U.S. Food and Drug Administration (FDA).

Cost Reduction Program

  • In December 2018, Altria announced a cost reduction program that it expects will deliver approximately $575 million in annualized cost savings by the end of 2019 (Cost Reduction Program). The program includes, among other things, third-party spending reductions across the business and workforce reductions. Altria recorded pre-tax charges of $121 million in the fourth quarter of 2018 related to the program.

2019 Full-Year Guidance

Altria forecasts its guidance for 2019 full-year adjusted diluted EPS to be in a range of $4.15 to $4.27, representing a growth rate of 4% to 7% from an adjusted diluted EPS base of $3.99 in 2018, which excludes the special items in Table 1. Altrias 2019 guidance reflects its expectation for a higher full-year adjusted effective tax rate, primarily resulting from lower dividends from AB InBev; increased interest expense from the debt incurred from the Cronos Group and JUUL transactions; savings from the Cost Reduction Program, which Altria expects to build over the course of the year to an annualized level of approximately $575 million; and increased investments related to PM USAs lead market plans for launching IQOS, once authorized by the FDA. The guidance assumes little-to-no earnings or cash contributions from the Cronos Group and JUUL investments. Altria expects the adjusted diluted EPS growth to come in the last three quarters of 2019. In the first quarter of 2019, Altria will have the increased interest expense without the full benefits of the Cost Reduction Program and one fewer shipping day in the smokeable products segment.

This guidance range excludes estimated per share charges in 2019 of: (i) $0.04 of tax expense resulting from the Tax Cuts and Jobs Act (Tax Reform Act) related to a tax basis adjustment to Altrias AB InBev investment; (ii) $0.04 for acquisition-related costs associated with the Cronos Group and JUUL transactions; and (iii) $0.04 for the Cost Reduction Program.

Altria expects the 2019 full-year total domestic cigarette industry volume decline rate will be in a range of 3.5% to 5%.

Altria expects its 2019 full-year adjusted effective tax rate will be in a range of approximately 23.5% to 24.5%.

Altria expects its 2019 capital expenditures to be between $225 million and $275 million and depreciation and amortization expenses of approximately $240 million.

Altrias full-year adjusted diluted EPS guidance and full-year forecast for its adjusted effective tax rate exclude the impact of certain income and expense items that management believes are not part of underlying operations. These items may include, for example, loss on early extinguishment of debt, restructuring charges, gain/loss on AB InBev/SABMiller plc (SABMiller) business combination, AB InBev special items, certain tax items, charges associated with tobacco and health litigation items, and resolutions of certain non-participating manufacturer (NPM) adjustment disputes under the Master Settlement Agreement (such dispute resolutions are referred to as NPM Adjustment Items).

Altrias management cannot estimate on a forward-looking basis the impact of certain income and expense items, including those items noted in the preceding paragraph, on its reported diluted EPS and its reported effective tax rate because these items, which could be significant, may be infrequent, are difficult to predict and may be highly variable. As a result, Altria does not provide a corresponding U.S. generally accepted accounting principles (GAAP) measure for, or reconciliation to, its adjusted diluted EPS guidance or its adjusted effective tax rate forecast.

The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to Altrias forecast.

ALTRIA GROUP, INC.

See Basis of Presentation below for an explanation of financial measures and reporting segments discussed in this release.

Financial Performance

Fourth Quarter

  • Net revenues were essentially unchanged at $6.1 billion. Revenues net of excise taxes increased 1.5% to $4.8 billion.
  • Reported diluted EPS decreased 74.6% to $0.66, primarily driven by lower 2017 income taxes resulting from benefits from the Tax Reform Act and higher 2018 asset impairment, exit, implementation and acquisition-related costs.
  • Adjusted diluted EPS increased 4.4% to $0.95, primarily driven by lower income taxes and fewer shares outstanding, partially offset by lower adjusted equity earnings from AB InBev.

Full Year

  • Net revenues declined 0.8% to $25.4 billion, as lower net revenues in the smokeable products segment were partially offset by higher net revenues in the smokeless products segment. Revenues net of excise taxes increased 0.7% to approximately $19.6 billion.
  • Reported diluted EPS decreased 30.7% to $3.68, primarily driven by lower 2017 income taxes resulting from benefits from the Tax Reform Act; higher asset impairment, exit, implementation and acquisition-related costs; and the 2017 gain on the AB InBev/SABMiller business combination. These results were partially offset by higher reported equity earnings from AB InBev (which included AB InBev special items) and fewer shares outstanding.
  • Adjusted diluted EPS increased 17.7% to $3.99, primarily driven by lower income taxes, fewer shares outstanding, higher adjusted equity earnings from AB InBev and higher adjusted operating companies income (OCI) in the smokeless products segment, partially offset by lower adjusted OCI in the smokeable products and wine segments and higher spending in the innovative tobacco products businesses.
Table 1 – Altrias Adjusted Results        
                       
Fourth Quarter   Full Year
2018   2017   Change   2018   2017   Change
Reported diluted EPS $ 0.66   $ 2.60 (74.6 )% $ 3.68 $ 5.31 (30.7 )%
NPM Adjustment Items (0.06 )
Asset impairment, exit, implementation and acquisition-related costs 0.23 0.23 0.03
Tobacco and health litigation items 0.02 0.05 0.03
AB InBev special items 0.03 0.02 (0.03 ) 0.05
Loss (gain) on AB InBev/SABMiller business combination 0.01 (0.15 )
Settlement charge for lump sum pension

payments

0.03 0.03
Tax items   0.03     (1.76 ) 0.11     (1.91 )
Adjusted diluted EPS   $ 0.95     $ 0.91     4.4 %   $ 3.99     $ 3.39     17.7 %

Note: For details of pre-tax, tax and after-tax amounts, see Schedules 7 and 9.

Special Items

The EPS impact of the following special items is shown in Table 1 and Schedules 7 and 9.

NPM Adjustment Items

  • For the full year 2018, Altria recorded pre-tax income of $145 million (or $0.06 per share) for NPM adjustment settlements with ten states.

Asset Impairment, Exit, Implementation and Acquisition-Related Costs

  • In the fourth quarter of 2018, Altria recorded pre-tax charges of $532 million (or $0.23 per share) related to Altrias decision to refocus its innovative product efforts (which includes the discontinuation of production and distribution of all MarkTen and Green Smoke e-vapor products), the Cost Reduction Program, acquisition-related costs related to the JUUL transaction and the impairment of the Columbia Crest trademark.
  • For the full year 2017, Altria recorded pre-tax charges of $89 million (or $0.03 per share), primarily related to the 2016 manufacturing facilities consolidation.

Tobacco and Health Litigation Items

  • For the full year 2018 and 2017, Altria recorded pre-tax charges of $131 million (or $0.05 per share) and $80 million (or $0.03 per share), respectively, for tobacco and health litigation items, including related interest costs.

AB InBev Special Items

  • In the fourth quarter of 2018, equity earnings from AB InBev included net pre-tax charges of $69 million (or $0.03 per share), consisting primarily of Altrias share of AB InBevs mark-to-market losses on AB InBevs derivative financial instruments used to hedge certain share commitments.
  • For the full year 2018, equity earnings from AB InBev included net pre-tax income of $85 million (or $0.03 per share), consisting primarily of Altrias share of AB InBevs estimated effect of the Tax Reform Act and gains related to AB InBevs merger and acquisition activities, partially offset by Altrias share of AB InBevs mark-to-market losses on AB InBevs derivative financial instruments used to hedge certain share commitments.
  • In the fourth quarter of 2017, equity earnings from AB InBev included net pre-tax charges of $51 million (or $0.02 per share), consisting primarily of Altrias share of a Brazilian tax item reported by AB InBev.
  • For the full year 2017, equity earnings from AB InBev included net pre-tax charges of $160 million (or $0.05 per share), consisting primarily of Altrias share of a Brazilian tax item reported by AB InBev and Altrias share of AB InBevs mark-to-market losses on AB InBevs derivative financial instruments used to hedge certain share commitments.

Loss/Gain on AB InBev/SABMiller Business Combination

  • For the full year 2018, Altria recorded a pre-tax loss of $33 million (or $0.01 per share) related to AB InBevs divestitures of certain SABMiller assets and businesses in connection with the AB InBev/SABMiller business combination.
  • For the full year 2017, Altria recorded a pre-tax gain of $445 million (or $0.15 per share) related to AB InBevs divestitures described above.

Settlement Charge for Lump Sum Pension Payments

  • In the fourth quarter of 2017, Altria recorded a one-time pre-tax settlement charge of $81 million (or $0.03 per share) related to lump sum payments made in connection with a voluntary, limited-time offer to former employees with vested benefits in the Altria Retirement Plan who had not commenced receiving benefit payments and met certain other conditions.

Tax Items

  • In the fourth quarter of 2018, Altria recorded income tax charges of $45 million (or $0.03 per share) primarily related to a tax basis adjustment to Altrias AB InBev investment and an adjustment to the provisional estimates for the repatriation tax.
  • For the full year 2018, Altria recorded income tax charges $197 million (or $0.11 per share) primarily related to a tax basis adjustment to Altrias AB InBev investment, a valuation allowance on foreign tax credit carryforwards that are not realizable and an adjustment to the provisional estimates for the repatriation tax.
  • In the fourth quarter of 2017, Altria recorded income tax benefits of $3.4 billion (or $1.76 per share) primarily related to the Tax Reform Act.
  • For the full year 2017, Altria recorded income tax benefits of $3.7 billion (or $1.91 per share) primarily related to the Tax Reform Act, the release of a valuation allowance on foreign tax credit carryforwards and a federal income tax audit closure.

SMOKEABLE PRODUCTS

Revenues and OCI

Fourth Quarter

  • Net revenues increased 0.4%, as higher pricing and lower promotional investments were mostly offset by lower shipment volume. Revenues net of excise taxes increased 1.9%.
  • Reported OCI was essentially unchanged, as higher pricing, lower tobacco and health litigation items and lower promotional investments were offset by higher costs (including investments in strategic initiatives and higher asset impairment, exit, implementation and acquisition-related costs) and lower shipment volume.
  • Adjusted OCI increased 1.8%, as higher pricing and lower promotional investments were partially offset by lower shipment volume and higher costs (including investments in strategic initiatives). Adjusted OCI margins decreased 0.1 percentage point to 49.5%.

Full Year

  • Net revenues declined 1.5%, as lower shipment volume was partially offset by higher pricing and lower promotional investments. Revenues net of excise taxes were essentially unchanged.
  • Reported OCI was essentially unchanged, as lower shipment volume, higher costs (including investments in strategic initiatives and higher asset impairment, exit, implementation and acquisition-related costs), higher resolution expenses and higher tobacco and health litigation items were offset by higher pricing, higher NPM Adjustment Items and lower promotional investments.
  • Adjusted OCI declined 0.8%, primarily driven by lower shipment volume, higher costs (including investments in strategic initiatives) and higher resolution expenses, partially offset by higher pricing and lower promotional investments. Adjusted OCI margins decreased 0.4 percentage points to 50.6%.
Table 2 – Smokeable Products: Revenues and OCI ($ in millions)      
                     
Fourth Quarter   Full Year
2018   2017   Change   2018   2017   Change
Net revenues $ 5,302   $ 5,281  

0.4

%

$ 22,297 $ 22,636

(1.5)

%

Excise taxes (1,291 )   (1,346 ) (5,585 )   (5,927 )
Revenues net of excise taxes $ 4,011     $ 3,935  

1.9

%

$ 16,712     $ 16,709  

%

 
Reported OCI $ 1,892 $ 1,890

0.1

%

$ 8,408 $ 8,426

(0.2)

%

NPM Adjustment Items (145 ) (5 )
Asset impairment, exit, implementation and acquisition-related costs 86 6 83 28
Tobacco and health litigation items 9   56   103   72  
Adjusted OCI $ 1,987     $ 1,952  

1.8

%

$ 8,449     $ 8,521  

(0.8)

%

Adjusted OCI margins 1 49.5 %   49.6 % (0.1 ) pp   50.6 %   51.0 %

(0.4

) pp

1Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.

Shipment Volume

Fourth Quarter

  • Smokeable products segment reported domestic cigarette shipment volume declined 4.4%, primarily driven by the industrys rate of decline and retail share losses, partially offset by one extra shipping day and trade inventory movements.
  • When adjusted for trade inventory movements and one extra shipping day, smokeable products segment domestic cigarette shipment volume decreased by an estimated 5.5%.
  • Total domestic cigarette industry volumes declined by an estimated 5%.
  • Reported cigar shipment volume increased 2.9%.

Full Year

  • Smokeable products segment reported domestic cigarette shipment volume declined 5.8%, primarily driven by the industrys rate of decline, retail share losses and trade inventory movements, partially offset by one extra shipping day.
  • When adjusted for trade inventory movements and one extra shipping day, smokeable products segment domestic cigarette shipment volume decreased by an estimated 5.5%.
  • Total domestic cigarette industry volumes declined by an estimated 4.5%.
  • Reported cigar shipment volume increased 3.8%.
Table 3 – Smokeable Products: Shipment Volume (sticks in millions)
                       
Fourth Quarter Full Year
2018   2017   Change 2018   2017   Change
Cigarettes:        
Marlboro 21,977 22,667 (3.0)% 94,770 99,974 (5.2)%
Other premium 1,266 1,400 (9.6)% 5,552 5,967 (7.0)%
Discount 2,062     2,415   (14.6)% 9,469     10,665   (11.2)%
Total cigarettes 25,305     26,482   (4.4)% 109,791     116,606   (5.8)%
 
Cigars:
Black & Mild 393 381 3.1% 1,590 1,527 4.1%
Other 2     3   (33.3)% 11     15   (26.7)%
Total cigars 395     384   2.9% 1,601     1,542   3.8%
           
Total smokeable products   25,700     26,866     (4.3)%   111,392     118,148     (5.7)%

Note: Cigarettes volume includes units sold as well as promotional units, but excludes units sold for distribution to Puerto Rico, and units sold in U.S. Territories, to overseas military and by Philip Morris Duty Free Inc., none of which, individually or in the aggregate, is material to the smokeable products segment.

Brand Activity and Retail Share

IRI refreshed its cigarette database in the first quarter of 2018, which affected previously released retail share results.

Brand Activity

  • PM USA expanded its innovative reseal pack technology to Marlboro Black Label, a non-menthol offering, in three states in the fourth quarter.
  • PM USA launched Marlboro Rewards nationally in January 2019.

Retail Share

  • PM USA successfully stabilized Marlboro in 2018 at a full-year share of 43.1 share points, unchanged compared to Marlboros share in the fourth quarter of 2017.
  • Nat’s fourth-quarter 2018 share was 0.3 share points in states selling the product.
Table 4 – Smokeable Products: Cigarettes Retail Share (percent)
                           
Fourth Quarter Full Year
2018     2017  

Percentage point change

2018     2017  

Percentage point change

Cigarettes:            
Marlboro 43.0 % 43.1 % (0.1 ) 43.1 % 43.4 % (0.3 )
Other premium 2.6 2.6 2.6 2.7 (0.1 )
Discount 4.2       4.7     (0.5 ) 4.4       4.6     (0.2 )
Total cigarettes   49.8 %     50.4 %   (0.6 )   50.1 %     50.7 %   (0.6 )

Note: Retail share results for cigarettes are based on data from IRI/MSAi, a tracking service that uses a sample of stores and certain wholesale shipments to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes. For other trade classes selling cigarettes, retail share is based on shipments from wholesalers to retailers (STARS). This service is not designed to capture sales through other channels, including the internet, direct mail and some illicitly tax-advantaged outlets. It is IRIs standard practice to periodically refresh its services, which could restate retail share results that were previously released in this service.

SMOKELESS PRODUCTS

Revenues and OCI

Fourth Quarter

  • Net revenues decreased 0.5%, primarily driven by lower shipment volume, partially offset by higher pricing. Revenues net of excise taxes decreased 0.2%.
  • Reported OCI decreased 5.2%, primarily driven by higher costs (including asset impairment, exit and implementation costs and investments in strategic initiatives) and lower shipment volume, partially offset by higher pricing.
  • Adjusted OCI decreased 2.4%, primarily driven by lower shipment volume and higher costs (including investments in strategic initiatives), partially offset by higher pricing. Adjusted OCI margins decreased 1.6 percentage points to 66.5%.

Full Year

  • Net revenues increased 5%, primarily driven by higher pricing and lower promotional investments, partially offset by lower shipment volume. Revenues net of excise taxes increased 5.3%.
  • Reported OCI increased 9.6%, primarily driven by higher pricing, lower asset impairment, exit and implementation costs and lower promotional investments, partially offset by lower shipment volume and higher costs (including investments in strategic investments).
  • Adjusted OCI increased 7.5%, primarily driven by higher pricing and lower promotional investments, partially offset by lower shipment volume and higher costs (including investments in strategic initiatives). Adjusted OCI margins increased 1.4 percentage points to 68.7%.
Table 5 – Smokeless Products: Revenues and OCI ($ in millions)
                 
Fourth Quarter   Full Year
2018 2017 Change   2018 2017 Change
Net revenues $ 572 $ 575 (0.5 )% $ 2,262 $ 2,155 5.0%
Excise taxes (31 ) (33 ) (131 ) (132 )
Revenues net of excise taxes $ 541   $ 542   (0.2 )% $ 2,131   $ 2,023   5.3%
 
Reported OCI $ 346 $ 365 (5.2 )% $ 1,431 $ 1,306 9.6%
Asset impairment, exit and

implementation costs

14 4 23 56
Tobacco and health litigation items     10    
Adjusted OCI $ 360   $ 369   (2.4 )% $ 1,464   $ 1,362   7.5%
Adjusted OCI margins 1   66.5 % 68.1 %

(1.6

) pp

  68.7 % 67.3 % 1.4 pp

1Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.

Shipment Volume

Fourth Quarter

  • Smokeless products segment reported domestic shipment volume declined 1.9%, primarily driven by the industrys rate of decline. When adjusted for trade inventory movements and calendar differences, smokeless products segment shipment volume declined an estimated 2%.

Full Year

  • Smokeless products segment reported domestic shipment volume declined 1.0%, primarily driven by the industrys rate of decline. When adjusted for trade inventory movements and calendar differences, smokeless products segment shipment volume declined an estimated 1%.
  • Total smokeless industry volume declined by an estimated 1.5% over the past six months.
Table 6 – Smokeless Products: Shipment Volume (cans and packs in millions)
               
Fourth Quarter Full Year
2018 2017 Change 2018 2017 Change
Copenhagen 133.5 135.5 (1.5 )% 531.7 531.6 %
Skoal 56.6   58.9   (3.9 )% 231.1   241.9   (4.5 )%
Copenhagen and Skoal 190.1 194.4 (2.2 )% 762.8 773.5 (1.4 )%
Other 17.7   17.5   1.1 % 69.8   67.8   2.9 %
Total smokeless products   207.8   211.9   (1.9 )%   832.6   841.3   (1.0 )%

Note: Volume includes cans and packs sold, as well as promotional units, but excludes international volume, which is not material to the smokeless products segment. New types of smokeless products, as well as new packaging configurations of existing smokeless products, may or may not be equivalent to existing moist smokeless tobacco (MST) products on a can-for-can basis. To calculate volumes of cans and packs shipped, one pack of snus, irrespective of the number of pouches in the pack, is assumed to be equivalent to one can of MST.

Brand Activity and Retail Share

IRI refreshed its smokeless products database in the first quarter of 2018, which affected previously released retail share results.

Brand Activity

  • USSTC announces plans to expand Skoal Long Cut Cool Spearmint nationally.

Retail Share

  • Copenhagen full-year retail share grew 0.3 share points to 34.4% and Skoal retail share declined 0.1 share point to 16.2% compared to their share in the fourth quarter of 2017.
Table 7 – Smokeless Products: Retail Share (percent)
                           
Fourth Quarter   Full Year
2018     2017  

Percentage point change

2018     2017  

Percentage point change

Copenhagen 34.7 %     34.1 %   0.6 34.4 %     34.0 %   0.4
Skoal 15.7       16.3     (0.6 ) 16.2       16.7     (0.5 )
Copenhagen and Skoal 50.4 50.4 50.6 50.7 (0.1 )
Other 3.4       3.4       3.4       3.3     0.1  
Total smokeless products   53.8 %     53.8 %       54.0 %     54.0 %    

Note: Retail share results for smokeless products are based on data from IRI InfoScan, a tracking service that uses a sample of stores to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes on the number of cans and packs sold. Smokeless products is defined by IRI as moist smokeless and spit-free tobacco products. New types of smokeless products, as well as new packaging configurations of existing smokeless products, may or may not be equivalent to existing MST products on a can-for-can basis. For example, one pack of snus, irrespective of the number of pouches in the pack, is assumed to be equivalent to one can of MST. Because this service represents retail share performance only in key trade channels, it should not be considered a precise measurement of actual retail share. It is IRIs standard practice to periodically refresh its InfoScan services, which could restate retail share results that were previously released in this service.

WINE

Revenues, OCI and Shipment Volume

Fourth Quarter

  • Net revenues declined 11%, primarily driven by lower shipment volume, partially offset by favorable premium mix.
  • Reported OCI decreased $87 million, primarily driven by the impairment of the Columbia Crest trademark, higher costs and lower shipment volume.
  • Adjusted OCI decreased $33 million, primarily driven by higher costs and lower shipment volume.
  • Reported wine shipment volume declined 15.1% to approximately 2.4 million cases.

Full Year

  • Net revenues declined 1.0%, primarily driven by lower shipment volume, partially offset by favorable premium mix.
  • Reported OCI decreased $96 million, primarily driven by the impairment of the Columbia Crest trademark, higher costs and lower shipment volume, partially offset by favorable premium mix.
  • Adjusted OCI decreased $42 million, primarily driven by higher costs and lower shipment volume, partially offset by favorable premium mix.
  • Reported wine shipment volume declined 3.3% to approximately 8.2 million cases.
Table 8 – Wine: Revenues and Operating Companies (Loss) Income ($ in millions)
                 
Fourth Quarter Full Year
2018 2017 Change 2018 2017 Change
Net revenues $ 202 $ 227

(11.0

)%

$ 691 $ 698

(1.0

)%

Excise taxes (6 ) (8 ) (21 ) (23 )
Revenues net of excise taxes $ 196   $ 219  

(10.5

)%

$ 670   $ 675  

(0.7

)%

 
Reported Operating Companies (Loss) Income $ (23 ) $ 64 (100.0 )%+ $ 50 $ 146

(65.8

)%

Asset impairment costs 54     54    
Adjusted OCI $ 31   $ 64  

(51.6

)%

$ 104   $ 146  

(28.8

)%

Adjusted OCI margins 1   15.8 % 29.2 % (13.4 ) pp     15.5 % 21.6 % (6.1 ) pp

1Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.

Altria’s Profile

Altrias wholly-owned subsidiaries include Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Company LLC (USSTC), John Middleton Co. (Middleton), Sherman Group Holdings, LLC and its subsidiaries (Nat Sherman), Ste. Michelle Wine Estates Ltd. (Ste. Michelle) and Philip Morris Capital Corporation (PMCC). Altria holds an equity investment in Anheuser-Busch InBev SA/NV (AB InBev) and JUUL Labs, Inc. (JUUL).

The brand portfolios of Altrias tobacco operating companies include Marlboro, Black & Mild, Copenhagen and Skoal. Ste. Michelle produces and markets premium wines sold under various labels, including Chateau Ste. Michelle, Columbia Crest, 14 Hands and Stags Leap Wine Cellars„¢, and it imports and markets Antinori, Champagne Nicolas Feuillatte„¢, Torres and Villa Maria Estate„¢ products in the United States. Trademarks and service marks related to Altria referenced in this release are the property of Altria or its subsidiaries or are used with permission.

More information about Altria is available at altria.com and on the Altria Investor app, or follow us on Twitter, Facebook and LinkedIn.

Basis of Presentation

Altria reports its financial results in accordance with GAAP. Altrias management reviews OCI, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate the performance of, and allocate resources to, the segments. Altrias management also reviews OCI, OCI margins and diluted EPS on an adjusted basis, which excludes certain income and expense items, including those items noted under 2019 Full-Year Guidance. Altrias management does not view any of these special items to be part of Altrias underlying results as they may be highly variable, may be infrequent, are difficult to predict and can distort underlying business trends and results. Altrias management also reviews income tax rates on an adjusted basis. Altrias adjusted effective tax rate may exclude certain tax items from its reported effective tax rate. Altrias management believes that adjusted financial measures provide useful additional insight into underlying business trends and results and provide a more meaningful comparison of year-over-year results. Altrias management uses adjusted financial measures for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets. These adjusted financial measures are not consistent with GAAP and may not be calculated the same as similarly titled measures used by other companies. These adjusted financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. Reconciliations of historical adjusted financial measures to corresponding GAAP measures are provided in this release.

Altria uses the equity method of accounting for its investment in AB InBev and reports its share of AB InBevs results using a one-quarter lag because AB InBevs results are not available in time to record them in the concurrent period. The one-quarter reporting lag does not affect Altrias cash flows. Altria initially accounts for its investment in JUUL as an investment in an equity security. If and when antitrust clearance is obtained, Altria expects to account for its investment in JUUL under the equity method of accounting.

Altrias reportable segments are smokeable products, including combustible cigarettes and cigars manufactured and sold by PM USA, Middleton and Nat Sherman; smokeless products, including moist smokeless tobacco and snus products manufactured and sold by USSTC; and wine, produced and/or distributed by Ste. Michelle. Results for innovative tobacco products (including Nu Mark LLCs e-vapor products; VERVE; and IQOS) and PMCC are included in All Other.

Comparisons are to the corresponding prior-year period unless otherwise stated.

Forward-Looking and Cautionary Statements

This release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Important factors that may cause actual results and outcomes to differ materially from those contained in the projections and forward-looking statements included in this press release are described in Altrias publicly filed reports, including its Annual Report on Form 10-K for the year ended December 31, 2017 and its Quarterly Report on Form 10-Q for the period ended September 30, 2018. These factors include the following: significant competition; changes in adult consumer preferences and demand for Altrias operating companies products; fluctuations in raw material availability, quality and price; reliance on key facilities and suppliers; reliance on critical information systems, many of which are managed by third-party service providers; fluctuations in levels of customer inventories; the effects of global, national and local economic and market conditions; changes to income tax laws; federal, state and local legislative activity, including actual and potential federal and state excise tax increases; increasing marketing and regulatory restrictions; the effects of price increases related to excise tax increases and concluded tobacco litigation settlements, consumption rates and consumer preferences within price segments; health concerns relating to the use of tobacco products and exposure to environmental tobacco smoke; privately imposed smoking restrictions; and, from time to time, governmental investigations.

Furthermore, the results of Altrias tobacco businesses are dependent upon their continued ability to promote brand equity successfully; to anticipate and respond to evolving adult consumer preferences; to develop, manufacture, market and distribute products that appeal to adult tobacco consumers (including, where appropriate, through arrangements with, and investments in, third parties); to improve productivity; and to protect or enhance margins through cost savings and price increases.

Altria and its tobacco businesses are also subject to federal, state and local government regulation, including by the FDA. Altria and its subsidiaries continue to be subject to litigation, including risks associated with adverse jury and judicial determinations, courts reaching conclusions at variance with the companies understanding of applicable law, bonding requirements in the limited number of jurisdictions that do not limit the dollar amount of appeal bonds and certain challenges to bond cap statutes.

In addition, the factors related to Altrias investment in AB InBev include the following: the risk that Altrias equity securities in AB InBev are subject to restrictions on transfer until October 10, 2021; the risk that Altrias reported earnings from and carrying value of its equity investment in AB InBev and the dividends paid by AB InBev on shares owned by Altria may be adversely affected by unfavorable foreign currency exchange rates and other factors, including the risks encountered by AB InBev in its business; the risk that the tax treatment of Altrias transaction consideration from the AB InBev/SABMiller business combination and the accounting treatment of its equity investment are not guaranteed; and the risk that the tax treatment of Altrias investment in AB InBev may not be as favorable as Altria anticipates.

The factors related to Altrias investment in JUUL include the following: the possibility that regulatory approvals required for the conversion of the shares into voting shares may not be obtained in a timely manner, if at all; and that such approvals may be subject to unanticipated conditions; the possibility that the expected benefits of the transaction may not materialize in the expected manner or timeframe, if at all; the potential inaccuracy of the financial projections (including, without limitation, projections relating to JUULs domestic growth and international expansion); prevailing economic, market, regulatory or business conditions, or changes in such conditions, negatively affecting the parties; the risk that Altria is not able to secure permanent financing for the transaction on favorable terms, if at all, and the risk of a downgrade in Altrias credit ratings; risks that the transaction disrupts JUULs current plans and operations; the fact that Altrias reported earnings and financial position and any future dividends paid by JUUL on shares owned by Altria may be adversely affected by tax and other factors, including the risks encountered (including, without limitation, regulatory and litigation risks) and decisions made by JUUL in its business; risks related to the investment disrupting Altria, JUUL or their respective management; and risks relating to the effect of announcement of the transaction on JUULs ability to retain and hire key personnel or on its relationships with customers, suppliers and other third parties.

The factors related to Altrias investment in Cronos Group include the following: the possibility that the parties may not be able to consummate the transaction as expected; the possibility that one or more of the conditions to the consummation of the transaction may not be satisfied; the possibility that regulatory or shareholder approvals required for the transaction may not be obtained in a timely manner, if at all; the parties ability to meet expectations regarding the timing, completion, and other matters relating to the transaction; any event that could give rise to the termination of the agreement between Altria and Cronos Group; the possibility that the expected benefits of the transaction may not materialize in the expected manner or timeframe, if at all; the potential inaccuracy of the financial projections; prevailing economic, market, or business conditions negatively affecting the parties; risks relating to the financing of the transaction, including the risk that Altria is not able to secure permanent financing for the transaction on favorable terms, if at all, and the risk of a downgrade in Altrias credit ratings; risks that the transaction disrupts Cronos Groups current plans and operations; the fact that Altrias reported earnings and financial position and any dividends paid by Cronos Group on shares owned by Altria may be adversely affected by unfavorable foreign currency exchange rates, tax and other factors, including the risks encountered by Cronos Group in its business; risks related to the disruption of the transaction to Altria, Cronos Group and their respective management; and risks relating to the effect of announcement of the transaction on Cronos Groups ability to retain and hire key personnel and maintain relationships with customers, suppliers and other third parties.

Altria cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statements that it may make except as required by applicable law. All subsequent written and oral forward-looking statements attributable to Altria or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements referenced above.

Schedule 1

 

ALTRIA GROUP, INC.

and Subsidiaries

Consolidated Statements of Earnings

For the Quarters Ended December 31,

(dollars in millions, except per share data)

(Unaudited)

 
   
2018 2017 % Change
 
Net revenues $ 6,114 $ 6,101 0.2%
Cost of sales 1 1,864 1,812
Excise taxes on products 1 1,328   1,387  
Gross profit 2,922 2,902 0.7%
Marketing, administration and research costs 626 595
Asset impairment and exit costs 381   8  
Operating companies income 1,915 2,299 (16.7)%
Amortization of intangibles 8 6
General corporate expenses 163   56  
Operating income 1,744 2,237 (22.0)%
Interest and other debt expense, net 162 180
Net periodic benefit cost, excluding service cost 3 74
Earnings from equity investment in AB InBev (131 ) (200 )
Earnings before income taxes 1,710 2,183 (21.7)%
Provision (benefit) for income taxes 459   (2,785 )
Net earnings 1,251 4,968 (74.8)%
Net earnings attributable to noncontrolling interests (1 ) (2 )
Net earnings attributable to Altria $ 1,250   $ 4,966   (74.8)%
 
Per share data:
Basic earnings per share attributable to Altria $ 0.67 $ 2.60 (74.2)%
Diluted earnings per share attributable to Altria $ 0.66 $ 2.60 (74.6)%
 
Weighted-average diluted shares outstanding 1,877 1,905 (1.5)%

1 Cost of sales includes charges for resolution expenses related to state settlement agreements and FDA user fees. Supplemental information concerning those items and excise taxes on products sold is shown in Schedule 5.

Note: As a result of the January 1, 2018 adoption of Accounting Standards Update (ASU) No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU No. 2017-07), certain immaterial prior-year amounts have been reclassified to conform with the current periods presentation.

Schedule 2

 

ALTRIA GROUP, INC.

and Subsidiaries

Selected Financial Data

For the Quarters Ended December 31,

(dollars in millions)

(Unaudited)

 
       
Net Revenues

Smokeable Products

 

Smokeless Products

Wine     All Other     Total  
2018 $ 5,302   $ 572 $ 202   $ 38   $ 6,114
2017 5,281 575 227 18 6,101
% Change 0.4 % (0.5 )%

(11.0

)%

100 %+

0.2

%

 

Reconciliation:

For the quarter ended December 31, 2017 $ 5,281 $ 575 $ 227 $ 18 $ 6,101
Operations 21     (3 )

(25

)

  20     13  
For the quarter ended December 31, 2018 $ 5,302     $ 572   $ 202     $ 38     $ 6,114  
                   
Operating Companies Income (Loss)

Smokeable Products

 

Smokeless Products

Wine     All Other     Total
2018 $ 1,892 $ 346 $

(23

)

$

(300

)

$ 1,915
2017 1,890 365 64

(20

)

2,299
% Change 0.1 % (5.2 )% (100.0 )%+ (100.0 )%+

(16.7

)%

 

Reconciliation:

For the quarter ended December 31, 2017 $ 1,890 $ 365 $ 64 $

(20

)

$ 2,299
 
Asset impairment, exit, implementation and acquisition-related costs – 2017 6 4 10
Tobacco and health litigation items – 2017 56               56  
62     4           66  
 
Asset impairment, exit and implementation

costs – 2018

(86 ) (14 )

(54

)

(290

)

(444

)

Tobacco and health litigation items – 2018 (9 )            

(9

)

(95 )   (14 )

(54

)

 

(290

)

 

(453

)

Operations 35     (9 )

(33

)

  10     3  
For the quarter ended December 31, 2018 $ 1,892     $ 346   $

(23

)

  $

(300

)

  $ 1,915  

Note: As a result of the January 1, 2018 adoption of ASU No. 2017-07, certain immaterial prior-year operating companies income (loss) amounts have been reclassified to conform with the current periods presentation.

   

Schedule 3

 

ALTRIA GROUP, INC.

and Subsidiaries

Consolidated Statements of Earnings

For the Years Ended December 31,

(dollars in millions, except per share data)

(Unaudited)

 
 
2018 2017 % Change  
 
Net revenues $ 25,364 $ 25,576 (0.8 )%
Cost of sales 1 7,373 7,531
Excise taxes on products 1 5,737   6,082  
Gross profit 12,254 11,963 2.4 %
Marketing, administration and research costs 2,403 2,104
Asset impairment and exit costs 383   32  
Operating companies income 9,468 9,827 (3.7 )%
Amortization of intangibles 38 21
General corporate expenses 315   213  
Operating income 9,115 9,593 (5.0 )%
Interest and other debt expense, net 665 705
Net periodic benefit (income) cost, excluding service cost (34 ) 37
Earnings from equity investment in AB InBev (890 ) (532 )
Loss (gain) on AB InBev/SABMiller business combination 33   (445 )
Earnings before income taxes 9,341 9,828 (5.0 )%
Provision (benefit) for income taxes 2,374   (399 )
Net earnings 6,967 10,227 (31.9 )%
Net earnings attributable to noncontrolling interests (4 ) (5 )
Net earnings attributable to Altria $ 6,963   $ 10,222   (31.9 )%
 
Per share data:
Basic earnings per share attributable to Altria $ 3.69 $ 5.31 (30.5 )%
Diluted earnings per share attributable to Altria $ 3.68 $ 5.31 (30.7 )%
 
Weighted-average basic shares outstanding 1,887 1,921 (1.8 )%
Weighted-average diluted shares outstanding 1,888 1,921 (1.7 )%
 

1 Cost of sales includes charges for resolution expenses related to state settlement agreements and FDA user fees. Supplemental information concerning those items and excise taxes on products sold is shown in Schedule 5.

Note: As a result of the January 1, 2018 adoption of ASU No. 2017-07, certain immaterial prior-year amounts have been reclassified to conform with the current periods presentation.

       

Schedule 4

 

ALTRIA GROUP, INC.

and Subsidiaries

Selected Financial Data

For the Years Ended December 31,

(dollars in millions)

(Unaudited)

 
                 
Net Revenues  

Smokeable Products

 

Smokeless Products

Wine   All Other     Total
2018 $ 22,297 $ 2,262 $ 691 $ 114 $ 25,364
2017 22,636 2,155 698 87 25,576
% Change (1.5 )% 5.0 % (1.0 )% 31.0 % (0.8 )%
 

Reconciliation:

For the year ended December 31, 2017 $ 22,636 $ 2,155 $ 698 $ 87 $ 25,576
Operations (339 )   107   (7 )   27     (212 )
For the year ended December 31, 2018 $ 22,297     $ 2,262   $ 691     $ 114     $ 25,364  
                 
Operating Companies Income (Loss)  

Smokeable Products

 

Smokeless Products

Wine   All Other     Total
2018 $ 8,408 $ 1,431 $ 50 $ (421 ) $ 9,468
2017 8,426 1,306 146 (51 ) 9,827
% Change (0.2 )% 9.6 % (65.8 )%

(100.0

)%+

(3.7 )%
 

Reconciliation:

For the year ended December 31, 2017 $ 8,426 $ 1,306 $ 146 $ (51 ) $ 9,827
 
NPM Adjustment Items – 2017 (5 ) (5 )
Asset impairment, exit, implementation and acquisition-related costs – 2017 28 56 84
Tobacco and health litigation items – 2017 72               72  
95     56           151  
 
NPM Adjustment Items – 2018 145 145
Asset impairment, exit and implementation costs – 2018 (83 ) (23 ) (54 ) (290 ) (450 )
Tobacco and health litigation items – 2018 (103 )   (10 )         (113 )
(41 )   (33 ) (54 )   (290 )   (418 )
Operations (72 )   102   (42 )   (80 )   (92 )
For the year ended December 31, 2018 $ 8,408     $ 1,431   $ 50     $ (421 ) $ 9,468  

Note: As a result of the January 1, 2018 adoption of ASU No. 2017-07, certain immaterial prior-year operating companies income (loss) amounts have been reclassified to conform with the current periods presentation.

Schedule 5

 

ALTRIA GROUP, INC.

and Subsidiaries

Supplemental Financial Data

(dollars in millions)

(Unaudited)

 
 
 

For the Quarters Ended December 31,

 

For the Years Ended December 31,

2018   2017 2018   2017
The segment detail of excise taxes on products sold is as follows:
 
Smokeable products $ 1,291 $ 1,346 $ 5,585 $ 5,927
Smokeless products 31 33 131 132
Wine 6   8   21   23
$ 1,328   $ 1,387   $ 5,737   $ 6,082
 
 
The segment detail of charges for resolution expenses related to state settlement agreements included in cost of sales is as follows:
 
Smokeable products $ 991 $ 1,035 $ 4,190 $ 4,451
Smokeless products 2   2   9   8
$ 993   $ 1,037   $ 4,199   $ 4,459
 
 
The segment detail of FDA user fees included in cost of sales is

as follows:

 
Smokeable products $ 74 $ 72 $ 286 $ 278
Smokeless products 1   1   4   4
$ 75   $ 73   $ 290   $ 282
 

Schedule 6

 

ALTRIA GROUP, INC.

and Subsidiaries

Net Earnings and Diluted Earnings Per Share – Attributable to Altria Group, Inc.

For the Quarters Ended December 31,

(dollars in millions, except per share data)

(Unaudited)

 
 
Net Earnings Diluted EPS
2018 Net Earnings $ 1,250 $ 0.66
2017 Net Earnings $ 4,966 $ 2.60
% Change (74.8 )% (74.6 )%
 

Reconciliation:

2017 Net Earnings $ 4,966 $ 2.60
 
2017 AB InBev special items 34 0.02
2017 Asset impairment, exit, implementation and acquisition-related costs 8
2017 Tobacco and health litigation items 38 0.02
2017 Settlement charge for lump sum pension payments 49 0.03
2017 Tax items (3,353 ) (1.76 )
Subtotal 2017 special items (3,224 ) (1.69 )
 
2018 AB InBev special items (54 ) (0.03 )
2018 Asset impairment, exit, implementation and acquisition-related costs (427 ) (0.23 )
2018 Tobacco and health litigation items (9 )
2018 Tax items (45 ) (0.03 )
Subtotal 2018 special items (535 ) (0.29 )
 
Fewer shares outstanding 0.01
Change in tax rate 84 0.05
Operations (41 ) (0.02 )
2018 Net Earnings $ 1,250   $ 0.66  
 

Schedule 7

 

ALTRIA GROUP, INC.

and Subsidiaries

Reconciliation of GAAP and non-GAAP Measures

For the Quarters Ended December 31,

(dollars in millions, except per share data)

(Unaudited)

 
 

Earnings before Income Taxes

Provision (Benefit) for Income Taxes

Net Earnings

Net Earnings Attributable to Altria

Diluted EPS

2018 Reported $ 1,710 $ 459 $ 1,251 $ 1,250 $ 0.66
AB InBev special items 69 15 54 54 0.03
Asset impairment, exit, implementation and acquisition-related costs 532 105 427 427 0.23
Tobacco and health litigation items 12 3 9 9
Tax items   (45 ) 45   45   0.03  
2018 Adjusted for Special Items $ 2,323   $ 537   $ 1,786   $ 1,785   $ 0.95  
 
2017 Reported $ 2,183 $ (2,785 ) $ 4,968 $ 4,966 $ 2.60
Tobacco and health litigation items 62 24 38 38 0.02
AB InBev special items 51 17 34 34 0.02
Asset impairment, exit, implementation and acquisition-related costs 12 4 8 8
Settlement charge for lump sum pension payments 81 32 49 49 0.03
Tax items   3,353   (3,353 ) (3,353 ) (1.76 )
2017 Adjusted for Special Items $ 2,389   $ 645   $ 1,744   $ 1,742   $ 0.91  
 
2018 Reported Net Earnings $ 1,250 $ 0.66
2017 Reported Net Earnings $ 4,966 $ 2.60
% Change (74.8 )% (74.6 )%
 
2018 Net Earnings Adjusted for Special Items $ 1,785 $ 0.95
2017 Net Earnings Adjusted for Special Items $ 1,742 $ 0.91
% Change 2.5 % 4.4 %
 

Schedule 8

 

ALTRIA GROUP, INC.

and Subsidiaries

Net Earnings and Diluted Earnings Per Share – Attributable to Altria Group, Inc.

For the Years Ended December 31,

(dollars in millions, except per share data)

(Unaudited)

 
 
Net Earnings Diluted EPS
2018 Net Earnings $ 6,963 $ 3.68
2017 Net Earnings $ 10,222 $ 5.31
% Change (31.9 )% (30.7 )%
 

Reconciliation:

2017 Net Earnings $ 10,222 $ 5.31
 
2017 NPM Adjustment Items 2
2017 Tobacco and health litigation items 50 0.03
2017 AB InBev special items 105 0.05
2017 Asset impairment, exit, implementation and acquisition-related costs 55 0.03
2017 Settlement charge for lump sum pension payments 49 0.03
2017 Gain on AB InBev/SABMiller business combination (289 ) (0.15 )
2017 Tax items (3,674 ) (1.91 )
Subtotal 2017 special items (3,702 ) (1.92 )
 
2018 NPM Adjustment Items 109 0.06
2018 Tobacco and health litigation items (98 ) (0.05 )
2018 AB InBev special items 68 0.03
2018 Asset impairment, exit, implementation and acquisition-related costs (432 ) (0.23 )
2018 Loss on AB InBev/SABMiller business combination (26 ) (0.01 )
2018 Tax items (197 ) (0.11 )
Subtotal 2018 special items (576 ) (0.31 )
 
Fewer shares outstanding 0.07
Change in tax rate 1,007 0.53
Operations 12    
2018 Net Earnings $ 6,963   $ 3.68  
 

Schedule 9

 

ALTRIA GROUP, INC.

and Subsidiaries

Reconciliation of GAAP and non-GAAP Measures

For the Years Ended December 31,

(dollars in millions, except per share data)

(Unaudited)

 
 

Earnings before Income Taxes

Provision (Benefit) for Income Taxes

Net Earnings

Net Earnings Attributable to Altria

Diluted EPS

2018 Reported $ 9,341 $ 2,374 $ 6,967 $ 6,963 $ 3.68
NPM Adjustment Items (145 ) (36 ) (109 ) (109 ) (0.06 )
Tobacco and health litigation items 131 33 98 98 0.05
AB InBev special items (85 ) (17 ) (68 ) (68 ) (0.03 )
Asset impairment, exit, implementation and

acquisition-related costs

538 106 432 432 0.23
Loss on AB InBev/SABMiller

business combination

33 7 26 26 0.01
Tax items   (197 ) 197   197   0.11  
2018 Adjusted for Special Items $ 9,813   $ 2,270   $ 7,543   $ 7,539   $ 3.99  
 
2017 Reported $ 9,828 $ (399 ) $ 10,227 $ 10,222 $ 5.31
NPM Adjustment Items 4 2 2 2
Tobacco and health litigation items 80 30 50 50 0.03
AB InBev special items 160 55 105 105 0.05
Asset impairment, exit, implementation and

acquisition-related costs

89 34 55 55 0.03
Settlement charge for lump sum pension payments 81 32 49 49 0.03
Gain on AB InBev/SABMiller business

combination

(445 ) (156 ) (289 ) (289 ) (0.15 )
Tax items   3,674   (3,674 ) (3,674 ) (1.91 )
2017 Adjusted for Special Items $ 9,797   $ 3,272   $ 6,525   $ 6,520   $ 3.39  
 
2018 Reported Net Earnings $ 6,963 $ 3.68
2017 Reported Net Earnings $ 10,222 $ 5.31
% Change (31.9 )% (30.7 )%
 
2018 Net Earnings Adjusted for Special Items $ 7,539 $ 3.99
2017 Net Earnings Adjusted for Special Items $ 6,520 $ 3.39
% Change 15.6 % 17.7 %
   

Schedule 10

 

ALTRIA GROUP, INC.

and Subsidiaries

Condensed Consolidated Balance Sheets

(dollars in millions)

(Unaudited)

 
 
December 31, 2018 December 31, 2017

Assets

Cash and cash equivalents $ 1,333 $ 1,253
Inventories 2,331 2,225
Other current assets 635 866
Property, plant and equipment, net 1,938 1,914
Goodwill and other intangible assets, net 17,475 17,707
Investment in AB InBev 17,696 17,952
Investment in JUUL 12,800
Other long-term assets 1,430   1,285
Total assets $ 55,638   $ 43,202
 

Liabilities and Stockholders Equity

Short-term borrowings $ 12,704 $
Current portion of long-term debt 1,144 864
Accrued settlement charges 3,454 2,442
Other current liabilities 3,891 3,486
Long-term debt 11,898 13,030
Deferred income taxes 5,172 5,247
Accrued postretirement health care costs 1,749 1,987
Accrued pension costs 544 445
Other long-term liabilities 254   283
Total liabilities 40,810 27,784
Redeemable noncontrolling interest 39 38
Total stockholders equity 14,789   15,380
Total liabilities and stockholders equity $ 55,638   $ 43,202
 
Total debt $ 25,746 $ 13,894
 

Schedule 11

 

ALTRIA GROUP, INC.

and Subsidiaries

Ratio of Debt to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

For the Twelve Months Ended December 31, 2018

(dollars in millions)

(Unaudited)

 
 
Twelve Months Ended December 31, 2018
Consolidated Net Earnings $ 6,967
Equity earnings and noncontrolling interests, net (895 )
Loss on AB InBev/SABMiller business combination 33
Dividends from less than 50% owned affiliates 657
Provision for income taxes 2,374
Depreciation and amortization 227
Asset impairment and exit costs 383
Interest and other debt expense, net 665  
Consolidated EBITDA 1 $ 10,411  
 
Short-term borrowings $ 12,704
Current portion of long-term debt 1,144
Long-term debt 11,898  
Debt 2 $ 25,746  
 
Debt / Consolidated EBITDA 2.5

1 Reflects the term Consolidated EBITDA as defined in Altrias senior unsecured revolving credit agreement and term loan agreement.

2 Reflects total debt as presented on Altrias Condensed Consolidated Balance Sheet at December 31, 2018. See Schedule 10.

             

Schedule 12

 

ALTRIA GROUP, INC.

and Subsidiaries

Supplemental Financial Data for Special Items

For the Quarters Ended December 31,

(dollars in millions)

(Unaudited)

 
 

Cost of Sales

 

Marketing, administration and research costs

 

Asset impairment and exit costs

 

General corporate expenses

 

Interest and other debt expense, net

 

Net periodic benefit cost, excluding service cost

 

Earnings from equity investment in AB InBev

 
2018 Special Items – (Income) Expense
AB InBev special items $ $     $     $     $     $     $   69
Asset impairment, exit, implementation and acquisition-related costs 63 381 82 3 3
Tobacco and health litigation items 9 3
 
2017 Special Items – (Income) Expense
Tobacco and health litigation items $ $ 56 $ $ $ 6 $ $
AB InBev special items 51
Asset impairment, exit, implementation and acquisition-related costs (2 ) 4 8 1 1
Settlement charge for lump sum pension payments 81

Note: This schedule is intended to provide supplemental financial data for certain income and expense items that management believes are not part of underlying operations and their presentation in Altrias consolidated statements of earnings. This schedule is not intended to provide, or reconcile, non-GAAP financial measures.

Cost of Sales

Marketing, administration and research costs

 

Asset impairment and exit costs

 

General corporate expenses

 

Interest and other debt expense, net

 

Net periodic benefit (income) cost, excluding service cost

 

Earnings from equity investment in AB InBev

 

Loss (gain) on AB Inbev/SABMiller business combination

2018 Special Items – (Income) Expense          
NPM Adjustment Items $ (145 ) $ $ $ $ $ $ $
Tobacco and health litigation items 113 18
AB InBev special items (85 )
Asset impairment, exit, implementation, and acquisition-related costs 67 383 82 3 3
Loss on AB InBev/SABMiller business combination 33
 
2017 Special Items – (Income) Expense
NPM Adjustment Items $ (5 ) $ $ $ $ 9 $ $ $
Tobacco and health litigation items 72 8
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Hecla Reports Strong Production and Cash Generation

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Hecla Mining Company (NYSE:HL) today announced preliminary production results, anticipated cash position at the end of the third quarter, repayment of the revolving credit facility and increased production estimates for the year.¹

HIGHLIGHTS

  • Estimated silver production between 3.2 million and 3.4 million ounces
  • Estimated gold production between 41,000 and 43,000 ounces.
  • Revolving credit facility repaid in full during the quarter.
  • Cash and Cash Equivalent position anticipated to exceed $90 million.

We are very pleased with third quarter operational performance particularly as the mines continue safe practices to manage COVID-19, said Phillips S. Baker, Jr., President and CEO. Lucky Fridays ramp up is as planned so this years production should double last year and is set up to potentially double again next year. The higher-than-expected silver grades at Greens Creek have driven silver production higher for the quarter and the annual estimate. Gold production was lower at Casa during the quarter where continued major planned maintenance activities in the mill reduced the processing days.

Baker continued, Our strong production for the quarter is expected to translate into robust cash flows in excess of $20 million even after repaying our revolver in full and the interest payments on the bonds. We are close to realizing our financial goal of having in excess of $100 million of cash and cash equivalents on the balance sheet. Finally, if our realized silver price is above $25 for September, we expect the silver-linked dividend to be paid pursuant to our enhanced dividend policy.

Performance Comparison and Updated Outlook

 

Silver (Moz)

Gold (Koz)

Greens Creek

Lucky Friday

San Sebastian

Total

Greens Creek

Casa Berardi

Nevada

San Sebastian

Total

Estimated First 9 months 2020

8.0

1.1

0.8

9.9

 

37

86

32

6

161

 

 

 

 

 

 

 

 

 

 

 

2020 Outlook

8.9-9.3

1.4-1.8

0.6-0.8

10.9-1198

 

46-48

119-124

24-29

6-7

195-208

 

 

 

 

 

 

 

 

 

 

 

2020 Updated Outlook

10-10.3

1.6-1.8

0.8-0.9

12.4-13.0

 

47-48

114-124

32

6

199-210

(1) See cautionary statement regarding estimated results and forward-looking statements at the end of this release.

Greens Creeks estimated nine months production has increased due to higher silver grades. The fourth quarter assumes planned grades. Lucky Friday is ramping up as expected so the lower end of the production range has been raised. San Sebastian mining is expected to be completed in the third quarter with processing concluding in the fourth quarter. Casa Berardis nine-month estimated production is low because of major planned mill maintenance activities but production in the fourth quarter should increase due to expected high-grade underground production from the East Mine. Nevada exceeded expectations as the developed stopes were mined out. For the remainder of the year, ore is being stockpiled for third-party processing expected in the fourth quarter. Gold production might not be realized until first quarter of 2021. Heclas per ounce cost estimates are unchanged at this time.

In September, the Company repaid $50 million on its revolving credit facility and has no remaining balance outstanding. During the third quarter, the Company received three of the four installments of C$12.5 million (US$9.2 million) each of Investissement Quebecs C$50 million (US$36.8 million) senior secured note proceeds. The fourth installment is expected to be received in the fourth quarter. The Companys cash and cash equivalents as of September 30, 2020, are estimated to exceed $90 million with the increase in cash for the third quarter expected to exceed $60 million.

ABOUT HECLA

Founded in 1891, Hecla Mining Company (NYSE:HL) is a leading low-cost U.S. silver producer with operating mines in Alaska, Idaho and Mexico, and is a growing gold producer with operating mines in Quebec and Nevada. The Company also has exploration and pre-development properties in eight world-class silver and gold mining districts in the U.S., Canada, and Mexico.

Cautionary Statements Regarding Estimated Results

In this news release we include certain estimated preliminary third quarter 2020 operating and financial results, including metals production and cash position. Each of these amounts is preliminary and reflects only the Companys estimated third quarter 2020 results as of the date of this news release, based on information available as of September 20, 2020, and should not be regarded as a representation by the Company as to its actual results for such quarter. Actual reported third quarter 2020 results are subject to the Companys financial closing procedures, completion of the financial statements, and managements final review as well as review by the Companys independent registered public accounting firm and may vary significantly from the preliminary estimates due to a number of factors, including, without limitation, additional or revised information, changes in accounting standards or policies or in how those standards are applied, and certain risks the Company faces, including, but not limited to those described under the heading Risk Factors in the Companys Annual Report on Form 10-K for the year ended December 31, 2019 and in the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. You are cautioned not to place undue reliance on these preliminary estimates of our third quarter 2020 operating and financial results.

Cautionary Statements Regarding Forward Looking Statements

Statements made or information provided in this news release that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of Canadian securities laws. Words such as may, will, should, expects, intends, projects, believes, estimates, targets, anticipates and similar expressions are used to identify these forward-looking statements. Forward-looking statements in this news release may include, without limitations, (i) estimates of silver production for the third quarter of 2020 on a consolidated basis and at each of the Greens Creek, Lucky Friday, San Sebastian, and Nevada Operations mines; (ii) estimates of gold production for the third quarter of 2020 on a consolidated basis and at each of Casa Berardi, Greens Creek and Nevada operations; (iii) estimates of lead and zinc production for the third quarter of 2020; (iv) quarter-end cash and cash-equivalent position which is dependent on the Company receiving cash receipts from sales of metals at its operations prior to September 30, which is expected, and zero balance on the revolving credit facility; (v) Lucky Friday expected to increase production and 2020s total production expected to be twice that of 2019, and 2020 could also significantly increase; (vi) production from bulk sample in Nevada expected in fourth quarter; (vii) expected increased production at Casa Berardi due to expected high-grade production; (viii) cash flow generation for the quarter is expected to be in excess of $30 million which is dependent on the Company receiving cash receipts from sales of metals at its operations prior to September 30, which is expected; and (ix) expected payment of the silver-linked dividend in the event the Companys realized silver price per ounce for the third quarter is above $25. The material factors or assumptions used to develop such forward-looking statements or forward-looking information include that the Companys plans for development and production will proceed as expected and will not require revision as a result of risks or uncertainties, whether known, unknown or unanticipated, to which the Companys operations are subject.

Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, expected, or implied. These risks and uncertainties include, but are not limited to, metals price volatility, volatility of metals production and costs, litigation, regulatory and environmental risks, operating risks, project development risks, political risks, labor issues, ability to raise financing and exploration risks and results. Refer to the Company’s Form 10-K and 10-Q reports for a more detailed discussion of factors that may impact expected future results. The Company undertakes no obligation and has no intention of updating forward-looking statements other than as may be required by law.

Russell Lawlar

Treasurer

Jeanne DuPont

Corporate Communications Coordinator

800-HECLA91 (800-432-5291)

Investor Relations

Email: [email protected]

Website: www.hecla-mining.com

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Sotorasib (AMG 510) Shows Promising Results in Some Patients With Solid Tumors, Suggests a Study With City of Hope as a Co-Lead Author

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A phase 1 clinical trial of sotorasib (AMG 510) in patients with heavily pretreated advanced solid tumors shows encouraging anti-cancer activity, especially in lung and colorectal cancers, reports a new study led by City of Hope and other renowned comprehensive cancer centers.

The multisite clinical trial included 129 metastatic cancer patients who had received an average of three prior therapies. These patients all had the mutated KRAS G12C gene, which increases the chances that an individual will be diagnosed with an aggressive cancer resistant to treatment.

We have finally shown that RAS targeting and inhibition is feasible. We hope that this will be the first step amongst many to effectively treat RASmutant cancers, one of the most common drivers of cancer, said Marwan Fakih, M.D., medical oncologist at City of Hope and co-lead author of the New England Journal of Medicine study that published today.

The KRAS gene, discovered nearly 40 years ago, is known as an oncogene. When mutated, KRAS could activate a pathway that turns normal cells cancerous. This gene belongs to the RAS gene family, which is responsible for more than 30% of all human cancers, according to the National Cancer Institute.

KRAS mutations have been linked with worse treatment outcomes in a variety of cancers, including lung and colorectal cancers, Fakih added. This proof-of-concept study has, in some cases, demonstrated a median progression-free survival that is two times longer than what we encounter in patients today.

The purpose of the clinical trial was to test the safety of various doses of sotorasib (180mg, 360mg, 720mg and 960mg), which were taken orally once a day. Patients had refractory metastatic non-small cell lung cancer (59 participants), colorectal cancer (42 participants) or other tumor types (28 participants). Their average age was 62, and the median follow-up was 12 months.

Sotorasib is a small molecule that inhibits KRAS G12C by plugging up a specific pocket (P2), inhibiting the ability of this mutated KRAS protein from driving tumor growth and spread. Current studies show that the drug, while able to target many cancers, appears to be most potent in non-small cell lung cancer, where KRAS G12C mutations exist in about 13% of patients.

The KRAS G12C inhibitor sotorasib produced lasting clinical benefits with mostly minor side effects that affected the gastrointestinal tract and included diarrhea (30%), fatigue (23%) and nausea (21%). Although trial patients had stubborn cancers resistant to standard-of-care treatments, those with non-small cell lung cancer had a 32% response rate with the majority (88%) achieving disease control for at least a few months. Their median progression-free survival was 6.3 months. This is a great improvement considering that later lines of treatment in non-small cell lung cancer are typically associated with response rates of only 9-18% and a median progression-free survival of approximately three months.

The other group that saw notable benefit were patients with refractory metastatic colorectal cancer a response rate of about 7%, disease control rate of 74% and major tumor shrinkage in 7% of the group, Fakih said. The median progression-free survival was four months. In comparable lines of treatment, response rates are rarely experienced, and the median progression-free survival is approximately two months.

The benefits of sotorasib appear to be quite durable with at least half of metastatic colorectal cancer patients still experiencing disease control four months after the start of treatment, Fakih said. When you consider the poor prognosis for the metastatic setting and the lack of effective treatments for this population, controlling tumor progression for a few additional months with an oral therapy is a significant and meaningful outcome.

Treatment was discontinued in 107 patients (83%), mostly because of disease progression. Fifty-four patients had died, a reasonable outcome given the prognosis and late stage of the disease.

Fakih, director of the Gastrointestinal Cancer Program at City of Hope, is involved in two sotorasib (AMG 510) clinical trials with a total of six treatment arms to evaluate use of sotorasib as a monotherapy or combination treatment in patients with non-small cell lung cancer, colorectal cancer and other solid tumors.

The inconsistency in tumor response between non-small cell lung cancer and colorectal cancer suggests that KRAS G12C inhibition is not sufficient for colorectal cancer and that additional cancer-causing pathways must be switched off, Fakih said. Combining sotorasib with other therapies that block the epidermal growth factor receptor (EGFR), a protein whose overexpression has been linked to many cancers, is a promising path forward that is under investigation, he added.

About City of Hope

City of Hope is an independent biomedical research and treatment center for cancer, diabetes and other life-threatening diseases. Founded in 1913, City of Hope is a leader in bone marrow transplantation and immunotherapy such as CAR T cell therapy. City of Hopes translational research and personalized treatment protocols advance care throughout the world. Human synthetic insulin and numerous breakthrough cancer drugs are based on technology developed at the institution. A National Cancer Institute-designated comprehensive cancer center and a founding member of the National Comprehensive Cancer Network, City of Hope has been ranked among the nations Best Hospitals in cancer by U.S. News & World Report for 14 consecutive years. Its main campus is located near Los Angeles, with additional locations throughout Southern California. For more information about City of Hope, follow us on Facebook, Twitter, YouTube or Instagram.

The study was supported by Amgen Inc., Cancer Prevention & Research Institute of Texas (RP150535, P30 CA016672), Fox Chase Cancer Centers National Institutes of Health grant (P30 CA006927), Memorial Sloan Kettering Cancer Centers NIH grant (P30 CA008748), NIH/NCI (1R01CA23074501, 1R01CA23026701A1), The Pew Charitable Trusts and the Damon Runyon Cancer Research Foundation.

Zen Vuong

626-409-9367

[email protected]

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Merck and Eisai Present First-Time Data From Two Studies Evaluating KEYTRUDA® (pembrolizumab) Plus LENVIMA® (lenvatinib) in Seven Different Tumor Types at ESMO Virtual Congress 2020

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Merck (NYSE: MRK), known as MSD outside the United States and Canada, and Eisai today announced new investigational data from two trials under the LEAP (LEnvatinib And Pembrolizumab) clinical program evaluating KEYTRUDA, Mercks anti-PD-1 therapy, plus LENVIMA, the orally available multiple receptor tyrosine kinase inhibitor discovered by Eisai. In the Phase 2 LEAP-004 trial, KEYTRUDA plus LENVIMA showed an objective response rate (ORR) of 21.4% (95% CI: 13.9-30.5) in patients with unresectable or advanced melanoma who had previously progressed on an anti-PD-1/PD-L1 therapy. In the Phase 2 LEAP-005 trial, KEYTRUDA plus LENVIMA demonstrated an ORR that ranged from 9.7-32.3% (95% CI: 2.0-51.4) in previously treated patients with triple-negative breast cancer (TNBC), ovarian cancer, gastric cancer, colorectal cancer (non-microsatellite instability-high [non-MSI-H]/mismatch repair proficient [pMMR]), glioblastoma multiforme (GBM) and biliary tract cancer (BTC). Results from LEAP-004 (Abstract #LBA44) and LEAP-005 (Abstract #LBA41) were accepted as late-breaking abstracts and are being presented in proffered paper presentations at the European Society for Medical Oncology (ESMO) Virtual Congress 2020.

These new data from our LEAP clinical program show encouraging activity across several aggressive cancer types and expand our knowledge about the potential of KEYTRUDA plus LENVIMA to help a range of patients with these cancers, said Dr. Scot Ebbinghaus, Vice President, Clinical Research, Merck Research Laboratories. This is the first time that clinical data from two LEAP trials are being presented, reflecting important progress we are making to explore the potential of this combination for patients in need of new options, particularly those with advanced melanoma who have progressed on an anti-PD-1 or PD-L1 therapy.

We are encouraged by the growing body of research that we have seen to date, now in 13 different cancers, supporting the potential of the KEYTRUDA plus LENVIMA combination, which were currently evaluating in 19 clinical trials, said Dr. Takashi Owa, Chief Medicine Creation and Chief Discovery Officer, Oncology Business Group at Eisai. These data not only help advance our understanding of the regimen but also fuel our deep-seated determination to work to address the unmet needs of these patients.

LEAP-004 Trial Design and Data (Abstract #LBA44)

LEAP-004 (ClinicalTrials.gov, NCT03776136) is a Phase 2, single-arm, open-label trial evaluating KEYTRUDA in combination with LENVIMA in patients with unresectable or advanced melanoma who had progressed on an anti-PD-1/PD-L1 therapy within 12 weeks. Patients were treated with LENVIMA 20 mg orally once daily until unacceptable toxicity or disease progression in combination with KEYTRUDA 200 mg intravenously every three weeks until unacceptable toxicity or disease progression for up to 35 cycles (approximately two years). The primary endpoint is ORR per Response Evaluation Criteria in Solid Tumors (RECIST) v1.1 as assessed by blinded independent central review (BICR). Secondary endpoints include progression-free survival (PFS) and duration of response (DOR) per RECIST v1.1 by BICR, overall survival (OS) and safety.

At data cutoff (June 10, 2020), a total of 103 patients were enrolled and treated. With a median duration of follow-up of 12 months (range: 8.7-15.6), KEYTRUDA plus LENVIMA demonstrated an overall ORR by BICR of 21.4% (n=22) (95% CI: 13.9-30.5), with a complete response rate of 1.9% (n=2) and a partial response rate of 19.4% (n=20). In the total study population, the median DOR was 6.3 months (range: 2.1+ to 11.1+), with 72.6% (95% CI: 46.2-87.6) of responses lasting for at least six months. Median PFS was 4.2 months (range: 3.5 to 6.3), with 73.8% of patients experiencing disease progression or death, and the nine-month PFS rate was 26.2% (95% CI: 17.4-35.9). Median OS was 13.9 months (range: 10.8-not reached [NR]), with death occurring in 44.7% of patients, and the nine-month OS rate was 65.4% (95% CI: 55.2-73.8).

The exploratory analysis showed that specifically in the 29 patients whose disease progressed after an anti-PD-1/L1 therapy plus an anti-CTLA-4 therapy, the ORR by BICR was 31.0% (95% CI: 15.3-50.8), with a complete response rate of 3.4% (n=1) and a partial response rate of 27.6% (n=8), and the disease control rate (DCR) by BICR was 62.1% (95% CI: 42.3-79.3). In the total study population, the DCR by BICR was 65.0% (95% CI: 55.0-74.2).

Treatment-related adverse events (TRAEs) led to discontinuation of KEYTRUDA and/or LENVIMA in 7.8% of patients. Grade 3-5 TRAEs occurred in 44.7% of patients (Grade 3: 39.8%; Grade 4: 3.9%; Grade 5: 1.0%), and serious TRAEs occurred in 18.4% of patients. The most common TRAEs of any grade occurring in at least 30% of the overall study population were hypertension (56.3%), diarrhea (35.9%), nausea (34.0%), hypothyroidism (33.0%) and decreased appetite (31.1%).

LEAP-005 Trial Design and Data (Abstract #LBA41)

LEAP-005 (ClinicalTrials.gov, NCT03797326) is a Phase 2, single-arm, open-label trial evaluating KEYTRUDA in combination with LENVIMA in patients with select previously treated advanced solid tumors. The study cohorts are TNBC, ovarian cancer, gastric cancer, colorectal cancer (non-MSI-H/pMMR), GBM and BTC. Patients were treated with LENVIMA 20 mg orally once daily until unacceptable toxicity or disease progression in combination with KEYTRUDA 200 mg intravenously every three weeks until unacceptable toxicity or disease progression for up to 35 cycles (approximately two years). The primary endpoints are ORR per RECIST v1.1 as assessed by BICR or Response Assessment in Neuro-Oncology (RANO) criteria (for GBM only) as assessed by BICR, and safety. Secondary endpoints include DCR per RECIST v1.1 by BICR or RANO (for GBM only) by BICR, DOR per RECIST v1.1 by BICR or RANO (for GBM only) by BICR, PFS per RECIST v1.1 by BICR or RANO (for GBM only) by BICR, and OS.

At data cutoff (April 10, 2020), a total of 187 patients were enrolled and treated. The confirmed ORR after a median duration of follow-up of 8.6 months (range: 1.9-13.1) for the six different tumor types, as well as additional efficacy and safety results, showed:

 

2L/3L TNBC

(n=31)

4L Ovarian

(n=31)

3L Gastric

(n=31)

3L Colorectal

(n=32)

2L BTC

(n=31)

2L GBM

(n=31)

ORR, % (95% CI)

29.0 (14.2-48.0)

32.3 (16.7-51.4)

9.7 (2.0-25.8)

21.9 (9.3-40.0)

9.7 (2.0-25.8)

16.1 (5.5-33.7)

DCR, % (95% CI)

58.1 (39.1-75.5)

74.2 (55.4-88.1)

48.4 (30.2-66.9)

46.9 (29.1-65.3)

67.7 (48.6-83.3)

58.1 (39.1-75.5)

DOR, median (range), months

NR (0.0+ to 8.4+)

NR (1.5+ to 7.9+)

NR (2.1+ to 2.3+)

NR (2.1+ to 10.4+)

5.3 (2.1+ to 6.2)

3.2 (2.5 to 4.9+)

Grade ‰¥3 TRAEs, % (n)

55 (17)

68 (21)

42 (13)

50 (16)

48 (15)

35 (11)

Death due to a TRAE, % (n)

3 (1)

3 (1)

3 (1)

3 (1)

0 (0)

3 (1)

Discontinued due to a TRAE, % (n)

10 (3)

13 (4)

6 (2)

9 (3)

6 (2)

6 (2)

+, no progressive disease (PD) as of last disease assessment; DCR, disease control rate (best confirmed response: complete/partial response; stable disease); DOR, duration of response; NR, not reached

The most common TRAEs of any grade occurring in at least 20% of the overall study population were hypertension (39.0%), fatigue (29.4%), diarrhea (26.7%), decreased appetite (25.1%), hypothyroidism (27.8%) and nausea (21.9%). The study is ongoing and will be expanded to enroll approximately 100 patients in each cohort.

About KEYTRUDA (pembrolizumab) Injection, 100 mg

KEYTRUDA is an anti-PD-1 therapy that works by increasing the ability of the bodys immune system to help detect and fight tumor cells. KEYTRUDA is a humanized monoclonal antibody that blocks the interaction between PD-1 and its ligands, PD-L1 and PD-L2, thereby activating T lymphocytes which may affect both tumor cells and healthy cells.

Merck has the industrys largest immuno-oncology clinical research program. There are currently more than 1,200 trials studying KEYTRUDA across a wide variety of cancers and treatment settings. The KEYTRUDA clinical program seeks to understand the role of KEYTRUDA across cancers and the factors that may predict a patient’s likelihood of benefitting from treatment with KEYTRUDA, including exploring several different biomarkers.

Selected KEYTRUDA (pembrolizumab) Indications

Melanoma

KEYTRUDA is indicated for the treatment of patients with unresectable or metastatic melanoma.

KEYTRUDA is indicated for the adjuvant treatment of patients with melanoma with involvement of lymph node(s) following complete resection.

Non-Small Cell Lung Cancer

KEYTRUDA, in combination with pemetrexed and platinum chemotherapy, is indicated for the first-line treatment of patients with metastatic nonsquamous non-small cell lung cancer (NSCLC), with no EGFR or ALK genomic tumor aberrations.

KEYTRUDA, in combination with carboplatin and either paclitaxel or paclitaxel protein-bound, is indicated for the first-line treatment of patients with metastatic squamous NSCLC.

KEYTRUDA, as a single agent, is indicated for the first-line treatment of patients with NSCLC expressing PD-L1 [tumor proportion score (TPS) ‰¥1%] as determined by an FDA-approved test, with no EGFR or ALK genomic tumor aberrations, and is stage III where patients are not candidates for surgical resection or definitive chemoradiation, or metastatic.

KEYTRUDA, as a single agent, is indicated for the treatment of patients with metastatic NSCLC whose tumors express PD-L1 (TPS ‰¥1%) as determined by an FDA-approved test, with disease progression on or after platinum-containing chemotherapy. Patients with EGFR or ALK genomic tumor aberrations should have disease progression on FDA-approved therapy for these aberrations prior to receiving KEYTRUDA.

Small Cell Lung Cancer

KEYTRUDA is indicated for the treatment of patients with metastatic small cell lung cancer (SCLC) with disease progression on or after platinum-based chemotherapy and at least 1 other prior line of therapy. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials.

Head and Neck Squamous Cell Cancer

KEYTRUDA, in combination with platinum and fluorouracil (FU), is indicated for the first-line treatment of patients with metastatic or with unresectable, recurrent head and neck squamous cell carcinoma (HNSCC).

KEYTRUDA, as a single agent, is indicated for the first-line treatment of patients with metastatic or with unresectable, recurrent HNSCC whose tumors express PD-L1 [combined positive score (CPS) ‰¥1] as determined by an FDA-approved test.

KEYTRUDA, as a single agent, is indicated for the treatment of patients with recurrent or metastatic head and neck squamous cell carcinoma (HNSCC) with disease progression on or after platinum-containing chemotherapy.

Classical Hodgkin Lymphoma

KEYTRUDA is indicated for the treatment of adult and pediatric patients with refractory classical Hodgkin lymphoma (cHL), or who have relapsed after 3 or more prior lines of therapy. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials.

Primary Mediastinal Large B-Cell Lymphoma

KEYTRUDA is indicated for the treatment of adult and pediatric patients with refractory primary mediastinal large B-cell lymphoma (PMBCL), or who have relapsed after 2 or more prior lines of therapy. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials. KEYTRUDA is not recommended for treatment of patients with PMBCL who require urgent cytoreductive therapy.

Urothelial Carcinoma

KEYTRUDA is indicated for the treatment of patients with locally advanced or metastatic urothelial carcinoma (mUC) who are not eligible for cisplatin-containing chemotherapy and whose tumors express PD-L1 [combined positive score (CPS) ‰¥10], as determined by an FDA-approved test, or in patients who are not eligible for any platinum-containing chemotherapy regardless of PD-L1 status. This indication is approved under accelerated approval based on tumor response rate and duration of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials.

KEYTRUDA is indicated for the treatment of patients with locally advanced or metastatic urothelial carcinoma (mUC) who have disease progression during or following platinum-containing chemotherapy or within 12 months of neoadjuvant or adjuvant treatment with platinum-containing chemotherapy.

KEYTRUDA is indicated for the treatment of patients with Bacillus Calmette-Guerin (BCG)-unresponsive, high-risk, non-muscle invasive bladder cancer (NMIBC) with carcinoma in situ (CIS) with or without papillary tumors who are ineligible for or have elected not to undergo cystectomy.

Microsatellite Instability-High or Mismatch Repair Deficient Cancer

KEYTRUDA is indicated for the treatment of adult and pediatric patients with unresectable or metastatic microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR)

  • solid tumors that have progressed following prior treatment and who have no satisfactory alternative treatment options, or
  • colorectal cancer that has progressed following treatment with fluoropyrimidine, oxaliplatin, and irinotecan.

This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials. The safety and effectiveness of KEYTRUDA in pediatric patients with MSI-H central nervous system cancers have not been established.

Microsatellite Instability-High or Mismatch Repair Deficient Colorectal Cancer

KEYTRUDA is indicated for the first-line treatment of patients with unresectable or metastatic MSI-H or dMMR colorectal cancer (CRC).

Gastric Cancer

KEYTRUDA is indicated for the treatment of patients with recurrent locally advanced or metastatic gastric or gastroesophageal junction (GEJ) adenocarcinoma whose tumors express PD-L1 (CPS ‰¥1) as determined by an FDA-approved test, with disease progression on or after two or more prior lines of therapy including fluoropyrimidine- and platinum-containing chemotherapy and if appropriate, HER2/neu-targeted therapy. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials.

Esophageal Cancer

KEYTRUDA is indicated for the treatment of patients with recurrent locally advanced or metastatic squamous cell carcinoma of the esophagus whose tumors express PD-L1 (CPS ‰¥10) as determined by an FDA-approved test, with disease progression after one or more prior lines of systemic therapy.

Cervical Cancer

KEYTRUDA is indicated for the treatment of patients with recurrent or metastatic cervical cancer with disease progression on or after chemotherapy whose tumors express PD-L1 (CPS ‰¥1) as determined by an FDA-approved test. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials.

Hepatocellular Carcinoma

KEYTRUDA is indicated for the treatment of patients with hepatocellular carcinoma (HCC) who have been previously treated with sorafenib. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials.

Merkel Cell Carcinoma

KEYTRUDA is indicated for the treatment of adult and pediatric patients with recurrent locally advanced or metastatic Merkel cell carcinoma (MCC). This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials.

Renal Cell Carcinoma

KEYTRUDA, in combination with axitinib, is indicated for the first-line treatment of patients with advanced renal cell carcinoma (RCC).

Endometrial Carcinoma

KEYTRUDA, in combination with LENVIMA, is indicated for the treatment of patients with advanced endometrial carcinoma that is not MSI-H or dMMR, who have disease progression following prior systemic therapy and are not candidates for curative surgery or radiation. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trial.

Tumor Mutational Burden-High

KEYTRUDA is indicated for the treatment of adult and pediatric patients with unresectable or metastatic tumor mutational burden-high (TMB-H) [‰¥10 mutations/megabase (mut/Mb)] solid tumors, as determined by an FDA-approved test, that have progressed following prior treatment and who have no satisfactory alternative treatment options. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials. The safety and effectiveness of KEYTRUDA in pediatric patients with TMB-H central nervous system cancers have not been established.

Cutaneous Squamous Cell Carcinoma

KEYTRUDA is indicated for the treatment of patients with recurrent or metastatic cutaneous squamous cell carcinoma (cSCC) that is not curable by surgery or radiation.

Selected Important Safety Information for KEYTRUDA (pembrolizumab)

Immune-Mediated Pneumonitis

KEYTRUDA can cause immune-mediated pneumonitis, including fatal cases. Pneumonitis occurred in 3.4% (94/2799) of patients with various cancers receiving KEYTRUDA, including Grade 1 (0.8%), 2 (1.3%), 3 (0.9%), 4 (0.3%), and 5 (0.1%). Pneumonitis occurred in 8.2% (65/790) of NSCLC patients receiving KEYTRUDA as a single agent, including Grades 3-4 in 3.2% of patients, and occurred more frequently in patients with a history of prior thoracic radiation (17%) compared to those without (7.7%). Pneumonitis occurred in 6% (18/300) of HNSCC patients receiving KEYTRUDA as a single agent, including Grades 3-5 in 1.6% of patients, and occurred in 5.4% (15/276) of patients receiving KEYTRUDA in combination with platinum and FU as first-line therapy for advanced disease, including Grades 3-5 in 1.5% of patients.

Monitor patients for signs and symptoms of pneumonitis. Evaluate suspected pneumonitis with radiographic imaging. Administer corticosteroids for Grade 2 or greater pneumonitis. Withhold KEYTRUDA for Grade 2; permanently discontinue KEYTRUDA for Grade 3 or 4 or recurrent Grade 2 pneumonitis.

Immune-Mediated Colitis

KEYTRUDA can cause immune-mediated colitis. Colitis occurred in 1.7% (48/2799) of patients receiving KEYTRUDA, including Grade 2 (0.4%), 3 (1.1%), and 4 (<0.1%). Monitor patients for signs and symptoms of colitis. Administer corticosteroids for Grade 2 or greater colitis. Withhold KEYTRUDA for Grade 2 or 3; permanently discontinue KEYTRUDA for Grade 4 colitis.

Immune-Mediated Hepatitis (KEYTRUDA) and Hepatotoxicity (KEYTRUDA in Combination With Axitinib)

Immune-Mediated Hepatitis

KEYTRUDA can cause immune-mediated hepatitis. Hepatitis occurred in 0.7% (19/2799) of patients receiving KEYTRUDA, including Grade 2 (0.1%), 3 (0.4%), and 4 (<0.1%). Monitor patients for changes in liver function. Administer corticosteroids for Grade 2 or greater hepatitis and, based on severity of liver enzyme elevations, withhold or discontinue KEYTRUDA.

Hepatotoxicity in Combination With Axitinib

KEYTRUDA in combination with axitinib can cause hepatic toxicity with higher than expected frequencies of Grades 3 and 4 ALT and AST elevations compared to KEYTRUDA alone. With the combination of KEYTRUDA and axitinib, Grades 3 and 4 increased ALT (20%) and increased AST (13%) were seen. Monitor liver enzymes before initiation of and periodically throughout treatment. Consider more frequent monitoring of liver enzymes as compared to when the drugs are administered as single agents. For elevated liver enzymes, interrupt KEYTRUDA and axitinib, and consider administering corticosteroids as needed.

Immune-Mediated Endocrinopathies

KEYTRUDA can cause adrenal insufficiency (primary and secondary), hypophysitis, thyroid disorders, and type 1 diabetes mellitus. Adrenal insufficiency occurred in 0.8% (22/2799) of patients, including Grade 2 (0.3%), 3 (0.3%), and 4 (<0.1%). Hypophysitis occurred in 0.6% (17/2799) of patients, including Grade 2 (0.2%), 3 (0.3%), and 4 (<0.1%). Hypothyroidism occurred in 8.5% (237/2799) of patients, including Grade 2 (6.2%) and 3 (0.1%). The incidence of new or worsening hypothyroidism was higher in 1185 patients with HNSCC (16%) receiving KEYTRUDA, as a single agent or in combination with platinum and FU, including Grade 3 (0.3%) hypothyroidism. Hyperthyroidism occurred in 3.4% (96/2799) of patients, including Grade 2 (0.8%) and 3 (0.1%), and thyroiditis occurred in 0.6% (16/2799) of patients, including Grade 2 (0.3%). Type 1 diabetes mellitus, including diabetic ketoacidosis, occurred in 0.2% (6/2799) of patients.

Monitor patients for signs and symptoms of adrenal insufficiency, hypophysitis (including hypopituitarism), thyroid function (prior to and periodically during treatment), and hyperglycemia. For adrenal insufficiency or hypophysitis, administer corticosteroids and hormone replacement as clinically indicated. Withhold KEYTRUDA for Grade 2 adrenal insufficiency or hypophysitis and withhold or discontinue KEYTRUDA for Grade 3 or Grade 4 adrenal insufficiency or hypophysitis. Administer hormone replacement for hypothyroidism and manage hyperthyroidism with thionamides and beta-blockers as appropriate. Withhold or discontinue KEYTRUDA for Grade 3 or 4 hyperthyroidism. Administer insulin for type 1 diabetes, and withhold KEYTRUDA and administer antihyperglycemics in patients with severe hyperglycemia.

Immune-Mediated Nephritis and Renal Dysfunction

KEYTRUDA can cause immune-mediated nephritis. Nephritis occurred in 0.3% (9/2799) of patients receiving KEYTRUDA, including Grade 2 (0.1%), 3 (0.1%), and 4 (<0.1%) nephritis. Nephritis occurred in 1.7% (7/405) of patients receiving KEYTRUDA in combination with pemetrexed and platinum chemotherapy. Monitor patients for changes in renal function. Administer corticosteroids for Grade 2 or greater nephritis. Withhold KEYTRUDA for Grade 2; permanently discontinue for Grade 3 or 4 nephritis.

Immune-Mediated Skin Reactions

Immune-mediated rashes, including Stevens-Johnson syndrome (SJS), toxic epidermal necrolysis (TEN) (some cases with fatal outcome), exfoliative dermatitis, and bullous pemphigoid, can occur. Monitor patients for suspected severe skin reactions and based on the severity of the adverse reaction, withhold or permanently discontinue KEYTRUDA and administer corticosteroids. For signs or symptoms of SJS or TEN, withhold KEYTRUDA and refer the patient for specialized care for assessment and treatment. If SJS or TEN is confirmed, permanently discontinue KEYTRUDA.

Other Immune-Mediated Adverse Reactions

Immune-mediated adverse reactions, which may be severe or fatal, can occur in any organ system or tissue in patients receiving KEYTRUDA and may also occur after discontinuation of treatment. For suspected immune-mediated adverse reactions, ensure adequate evaluation to confirm etiology or exclude other causes. Based on the severity of the adverse reaction, withhold KEYTRUDA and administer corticosteroids. Upon improvement to Grade 1 or less, initiate corticosteroid taper and continue to taper over at least 1 month. Based on limited data from clinical studies in patients whose immune-related adverse reactions could not be controlled with corticosteroid use, administration of other systemic immunosuppressants can be considered. Resume KEYTRUDA when the adverse reaction remains at Grade 1 or less following corticosteroid taper. Permanently discontinue KEYTRUDA for any Grade 3 immune-mediated adverse reaction that recurs and for any life-threatening immune-mediated adverse reaction.

The following clinically significant immune-mediated adverse reactions occurred in less than 1% (unless otherwise indicated) of 2799 patients: arthritis (1.5%), uveitis, myositis, Guillain-Barr syndrome, myasthenia gravis, vasculitis, pancreatitis, hemolytic anemia, sarcoidosis, and encephalitis. In addition, myelitis and myocarditis were reported in other clinical trials, including classical Hodgkin lymphoma, and postmarketing use.

Treatment with KEYTRUDA may increase the risk of rejection in solid organ transplant recipients. Consider the benefit of treatment vs the risk of possible organ rejection in these patients.

Infusion-Related Reactions

KEYTRUDA can cause severe or life-threatening infusion-related reactions, including hypersensitivity and anaphylaxis, which have been reported in 0.2% (6/2799) of patients. Monitor patients for signs and symptoms of infusion-related reactions. For Grade 3 or 4 reactions, stop infusion and permanently discontinue KEYTRUDA.

Complications of Allogeneic Hematopoietic Stem Cell Transplantation (HSCT)

Immune-mediated complications, including fatal events, occurred in patients who underwent allogeneic HSCT after treatment with KEYTRUDA. Of 23 patients with cHL who proceeded to allogeneic HSCT after KEYTRUDA, 6 (26%) developed graft-versus-host disease (GVHD) (1 fatal case) and 2 (9%) developed severe hepatic veno-occlusive disease (VOD) after reduced-intensity conditioning (1 fatal case). Cases of fatal hyperacute GVHD after allogeneic HSCT have also been reported in patients with lymphoma who received a PD-1 receptor“blocking antibody before transplantation. Follow patients closely for early evidence of transplant-related complications such as hyperacute graft-versus-host disease (GVHD), Grade 3 to 4 acute GVHD, steroid-requiring febrile syndrome, hepatic veno-occlusive disease (VOD), and other immune-mediated adverse reactions.

In patients with a history of allogeneic HSCT, acute GVHD (including fatal GVHD) has been reported after treatment with KEYTRUDA. Patients who experienced GVHD after their transplant procedure may be at increased risk for GVHD after KEYTRUDA. Consider the benefit of KEYTRUDA vs the risk of GVHD in these patients.

Increased Mortality in Patients With Multiple Myeloma

In trials in patients with multiple myeloma, the addition of KEYTRUDA to a thalidomide analogue plus dexamethasone resulted in increased mortality. Treatment of these patients with a PD-1 or PD-L1 blocking antibody in this combination is not recommended outside of controlled trials.

Embryofetal Toxicity

Based on its mechanism of action, KEYTRUDA can cause fetal harm when administered to a pregnant woman. Advise women of this potential risk. In females of reproductive potential, verify pregnancy status prior to initiating KEYTRUDA and advise them to use effective contraception during treatment and for 4 months after the last dose.

Adverse Reactions

In KEYNOTE-006, KEYTRUDA was discontinued due to adverse reactions in 9% of 555 patients with advanced melanoma; adverse reactions leading to permanent discontinuation in more than one patient were colitis (1.4%), autoimmune hepatitis (0.7%), allergic reaction (0.4%), polyneuropathy (0.4%), and cardiac failure (0.4%). The most common adverse reactions (‰¥20%) with KEYTRUDA were fatigue (28%), diarrhea (26%), rash (24%), and nausea (21%).

In KEYNOTE-002, KEYTRUDA was permanently discontinued due to adverse reactions in 12% of 357 patients with advanced melanoma; the most common (‰¥1%) were general physical health deterioration (1%), asthenia (1%), dyspnea (1%), pneumonitis (1%), and generalized edema (1%). The most common adverse reactions were fatigue (43%), pruritus (28%), rash (24%), constipation (22%), nausea (22%), diarrhea (20%), and decreased appetite (20%).

In KEYNOTE-054, KEYTRUDA was permanently discontinued due to adverse reactions in 14% of 509 patients; the most common (‰¥1%) were pneumonitis (1.4%), colitis (1.2%), and diarrhea (1%). Serious adverse reactions occurred in 25% of patients receiving KEYTRUDA. The most common adverse reaction (‰¥20%) with KEYTRUDA was diarrhea (28%).

In KEYNOTE-189, when KEYTRUDA was administered with pemetrexed and platinum chemotherapy in metastatic nonsquamous NSCLC, KEYTRUDA was discontinued due to adverse reactions in 20% of 405 patients. The most common adverse reactions resulting in permanent discontinuation of KEYTRUDA were pneumonitis (3%) and acute kidney injury (2%). The most common adverse reactions (‰¥20%) with KEYTRUDA were nausea (56%), fatigue (56%), constipation (35%), diarrhea (31%), decreased appetite (28%), rash (25%), vomiting (24%), cough (21%), dyspnea (21%), and pyrexia (20%).

In KEYNOTE-407, when KEYTRUDA was administered with carboplatin and either paclitaxel or paclitaxel protein-bound in metastatic squamous NSCLC, KEYTRUDA was discontinued due to adverse reactions in 15% of 101 patients. The most frequent serious adverse reactions reported in at least 2% of patients were febrile neutropenia, pneumonia, and urinary tract infection. Adverse reactions observed in KEYNOTE-407 were similar to those observed in KEYNOTE-189 with the exception that increased incidences of alopecia (47% vs 36%) and peripheral neuropathy (31% vs 25%) were observed in the KEYTRUDA and chemotherapy arm compared to the placebo and chemotherapy arm in KEYNOTE-407.

In KEYNOTE-042, KEYTRUDA was discontinued due to adverse reactions in 19% of 636 patients with advanced NSCLC; the most common were pneumonitis (3%), death due to unknown cause (1.6%), and pneumonia (1.4%). The most frequent serious adverse reactions reported in at least 2% of patients were pneumonia (7%), pneumonitis (3.9%), pulmonary embolism (2.4%), and pleural effusion (2.2%). The most common adverse reaction (‰¥20%) was fatigue (25%).

In KEYNOTE-010, KEYTRUDA monotherapy was discontinued due to adverse reactions in 8% of 682 patients with metastatic NSCLC; the most common was pneumonitis (1.8%). The most common adverse reactions (‰¥20%) were decreased appetite (25%), fatigue (25%), dyspnea (23%), and nausea (20%).

Adverse reactions occurring in patients with SCLC were similar to those occurring in patients with other solid tumors who received KEYTRUDA as a single agent.

In KEYNOTE-048, KEYTRUDA monotherapy was discontinued due to adverse events in 12% of 300 patients with HNSCC; the most common adverse reactions leading to permanent discontinuation were sepsis (1.7%) and pneumonia (1.3%). The most common adverse reactions (‰¥20%) were fatigue (33%), constipation (20%), and rash (20%).

In KEYNOTE-048, when KEYTRUDA was administered in combination with platinum (cisplatin or carboplatin) and FU chemotherapy, KEYTRUDA was discontinued due to adverse reactions in 16% of 276 patients with HNSCC. The most common adverse reactions resulting in permanent discontinuation of KEYTRUDA were pneumonia (2.5%), pneumonitis (1.8%), and septic shock (1.4%). The most common adverse reactions (‰¥20%) were nausea (51%), fatigue (49%), constipation (37%), vomiting (32%), mucosal inflammation (31%), diarrhea (29%), decreased appetite (29%), stomatitis (26%), and cough (22%).

In KEYNOTE-012, KEYTRUDA was discontinued due to adverse reactions in 17% of 192 patients with HNSCC. Serious adverse reactions occurred in 45% of patients. The most frequent serious adverse reactions reported in at least 2% of patients were pneumonia, dyspnea, confusional state, vomiting, pleural effusion, and respiratory failure. The most common adverse reactions (‰¥20%) were fatigue, decreased appetite, and dyspnea. Adverse reactions occurring in patients with HNSCC were generally similar to those occurring in patients with melanoma or NSCLC who received KEYTRUDA as a monotherapy, with the exception of increased incidences of facial edema and new or worsening hypothyroidism.

In KEYNOTE-087, KEYTRUDA was discontinued due to adverse reactions in 5% of 210 patients with cHL. Serious adverse reactions occurred in 16% of patients; those ‰¥1% included pneumonia, pneumonitis, pyrexia, dyspnea, GVHD, and herpes zoster. Two patients died from causes other than disease progression; 1 from GVHD after subsequent allogeneic HSCT and 1 from septic shock. The most common adverse reactions (‰¥20%) were fatigue (26%), pyrexia (24%), cough (24%), musculoskeletal pain (21%), diarrhea (20%), and rash (20%).

In KEYNOTE-170, KEYTRUDA was discontinued due to adverse reactions in 8% of 53 patients with PMBCL. Serious adverse reactions occurred in 26% of patients and included arrhythmia (4%), cardiac tamponade (2%), myocardial infarction (2%), pericardial effusion (2%), and pericarditis (2%). Six (11%) patients died within 30 days of start of treatment. The most common adverse reactions (‰¥20%) were musculoskeletal pain (30%), upper respiratory tract infection and pyrexia (28% each), cough (26%), fatigue (23%), and dyspnea (21%).

In KEYNOTE-052, KEYTRUDA was discontinued due to adverse reactions in 11% of 370 patients with locally advanced or metastatic urothelial carcinoma. Serious adverse reactions occurred in 42% of patients; those ‰¥2% were urinary tract infection, hematuria, acute kidney injury, pneumonia, and urosepsis. The most common adverse reactions (‰¥20%) were fatigue (38%), musculoskeletal pain (24%), decreased appetite (22%), constipation (21%), rash (21%), and diarrhea (20%).

In KEYNOTE-045, KEYTRUDA was discontinued due to adverse reactions in 8% of 266 patients with locally advanced or metastatic urothelial carcinoma. The most common adverse reaction resulting in permanent discontinuation of KEYTRUDA was pneumonitis (1.9%). Serious adverse reactions occurred in 39% of KEYTRUDA-treated patients; those ‰¥2% were urinary tract infection, pneumonia, anemia, and pneumonitis. The most common adverse reactions (‰¥20%) in patients who received KEYTRUDA were fatigue (38%), musculoskeletal pain (32%), pruritus (23%), decreased appetite (21%), nausea (21%), and rash (20%).

In KEYNOTE-057, KEYTRUDA was discontinued due to adverse reactions in 11% of 148 patients with high-risk NMIBC. The most common adverse reaction resulting in permanent discontinuation of KEYTRUDA was pneumonitis (1.4%). Serious adverse reactions occurred in 28% of patients; those ‰¥2% were pneumonia (3%), cardiac ischemia (2%), colitis (2%), pulmonary embolism (2%), sepsis (2%), and urinary tract infection (2%). The most common adverse reactions (‰¥20%) were fatigue (29%), diarrhea (24%), and rash (24%).

Adverse reactions occurring in patients with MSI-H or dMMR CRC were similar to those occurring in patients with melanoma or NSCLC who received KEYTRUDA as a monotherapy.

Adverse reactions occurring in patients with gastric cancer were similar to those occurring in patients with melanoma or NSCLC who received KEYTRUDA as a monotherapy.

Adverse reactions occurring in patients with esophageal cancer were similar to those occurring in patients with melanoma or NSCLC who received KEYTRUDA as a monotherapy.

In KEYNOTE-158, KEYTRUDA was discontinued due to adverse reactions in 8% of 98 patients with recurrent or metastatic cervical cancer. Serious adverse reactions occurred in 39% of patients receiving KEYTRUDA; the most frequent included anemia (7%), fistula, hemorrhage, and infections [except urinary tract infections] (4.1% each). The most common adverse reactions (‰¥20%) were fatigue (43%), musculoskeletal pain (27%), diarrhea (23%), pain and abdominal pain (22% each), and decreased appetite (21%).

Adverse reactions occurring in patients with hepatocellular carcinoma (HCC) were generally similar to those in patients with melanoma or NSCLC who received KEYTRUDA as a monotherapy, with the exception of increased incidences of ascites (8% Grades 3-4) and immune-mediated hepatitis (2.9%). Laboratory abnormalities (Grades 3-4) that occurred at a higher incidence were elevated AST (20%), ALT (9%), and hyperbilirubinemia (10%).

Among the 50 patients with MCC enrolled in study KEYNOTE-017, adverse reactions occurring in patients with MCC were generally similar to those occurring in patients with melanoma or NSCLC who received KEYTRUDA as a monotherapy. Laboratory abnormalities (Grades 3-4) that occurred at a higher incidence were elevated AST (11%) and hyperglycemia (19%).

In KEYNOTE-426, when KEYTRUDA was administered in combination with axitinib, fatal adverse reactions occurred in 3.3% of 429 patients. Serious adverse reactions occurred in 40% of patients, the most frequent (‰¥1%) were hepatotoxicity (7%), diarrhea (4.2%), acute kidney injury (2.3%), dehydration (1%), and pneumonitis (1%). Permanent discontinuation due to an adverse reaction occurred in 31% of patients; KEYTRUDA only (13%), axitinib only (13%), and the combination (8%); the most common were hepatotoxicity (13%), diarrhea/colitis (1.9%), acute kidney injury (1.6%), and cerebrovascular accident (1.2%). The most common adverse reactions (‰¥20%) were diarrhea (56%), fatigue/asthenia (52%), hypertension (48%), hepatotoxicity (39%), hypothyroidism (35%), decreased appetite (30%), palmar-plantar erythrodysesthesia (28%), nausea (28%), stomatitis/mucosal inflammation (27%), dysphonia (25%), rash (25%), cough (21%), and constipation (21%).

In KEYNOTE-146, when KEYTRUDA was administered in combination with LENVIMA to patients with endometrial carcinoma (n=94), fatal adverse reactions occurred in 3% of patients. Serious adverse reactions occurred in 52% of patients, the most common (‰¥3%) were hypertension (9%), abdominal pain (6%), musculoskeletal pain (5%), hemorrhage, fatigue, nausea, confusional state, and pleural effusion (4% each), adrenal insufficiency, colitis, dyspnea, and pyrexia (3% each).

KEYTRUDA was discontinued for adverse reactions (Grade 1-4) in 19% of patients, regardless of action taken with LENVIMA; the most common (‰¥2%) leading to discontinuation of KEYTRUDA were adrenal insufficiency, colitis, pancreatitis, and muscular weakness (2% each).

The most common adverse reactions (‰¥20%) observed with KEYTRUDA in combination with LENVIMA were fatigue, musculoskeletal pain and hypertension (65% each), diarrhea (64%), decreased appetite (52%), hypothyroidism (51%), nausea (48%), stomatitis (43%), vomiting (39%), decreased weight (36%), abdominal pain and headache (33% each), constipation (32%), urinary tract infection (31%), dysphonia (29%), hemorrhagic events (28%), hypomagnesemia (27%), palmar-plantar erythrodysesthesia syndrome (26%), dyspnea (24%), and cough and rash (21% each).

Adverse reactions occurring in patients with TMB-H cancer were similar to those occurring in patients with other solid tumors who received KEYTRUDA as a single agent.

Adverse reactions occurring in patients with cSCC were similar to those occurring in patients with melanoma or NSCLC who received KEYTRUDA as a monotherapy.

Lactation

Because of the potential for serious adverse reactions in breastfed children, advise women not to breastfeed during treatment and for 4 months after the final dose.

Pediatric Use

There is limited experience in pediatric patients. In a trial, 40 pediatric patients (16 children aged 2 years to younger than 12 years and 24 adolescents aged 12 years to 18 years) with various cancers, including unapproved usages, were administered KEYTRUDA 2 mg/kg every 3 weeks. Patients received KEYTRUDA for a median of 3 doses (range 1“17 doses), with 34 patients (85%) receiving 2 doses or more. The safety profile in these pediatric patients was similar to that seen in adults; adverse reactions that occurred at a higher rate (‰¥15% difference) in these patients when compared to adults under 65 years of age were fatigue (45%), vomiting (38%), abdominal pain (28%), increased transaminases (28%), and hyponatremia (18%).

Please see Prescribing Information for KEYTRUDA (pembrolizumab) at http://www.merck.com/product/usa/pi_circulars/k/keytruda/keytruda_pi.pdf and Medication Guide for KEYTRUDA at http://www.merck.com/product/usa/pi_circulars/k/keytruda/keytruda_mg.pdf.

About LENVIMA (lenvatinib)

LENVIMA (lenvatinib) is a kinase inhibitor that is indicated:

  • For the treatment of patients with locally recurrent or metastatic, progressive, radioactive iodine-refractory differentiated thyroid cancer (RAI-refractory DTC)
  • In combination with everolimus, for the treatment of patients with advanced renal cell carcinoma (RCC) following one prior anti-angiogenic therapy
  • For the first-line treatment of patients with unresectable hepatocellular carcinoma (HCC)
  • In combination with KEYTRUDA, for the treatment of patients with advanced endometrial carcinoma that is not microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR), who have disease progression following prior systemic therapy, and are not candidates for curative surgery or radiation. This indication is approved under accelerated approval based on tumor response rate and durability of response. Continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trial

LENVIMA, discovered and developed by Eisai, is a kinase inhibitor that inhibits the kinase activities of vascular endothelial growth factor (VEGF) receptors VEGFR1 (FLT1), VEGFR2 (KDR), and VEGFR3 (FLT4). LENVIMA inhibits other kinases that have been implicated in pathogenic angiogenesis, tumor growth, and cancer progression in addition to their normal cellular functions, including fibroblast growth factor (FGF) receptors FGFR1-4, the platelet derived growth factor receptor alpha (PDGFRα), KIT, and RET. In syngeneic mouse tumor models, lenvatinib decreased tumor-associated macrophages, increased activated cytotoxic T cells, and demonstrated greater antitumor activity in combination with an anti-PD-1 monoclonal antibody compared to either treatment alone.

Selected Safety Information

Warnings and Precautions

Hypertension. In DTC, hypertension occurred in 73% of patients on LENVIMA (44% grade 3-4). In RCC, hypertension occurred in 42% of patients on LENVIMA + everolimus (13% grade 3). Systolic blood pressure ‰¥160 mmHg occurred in 29% of patients, and 21% had diastolic blood pressure ‰¥100 mmHg. In HCC, hypertension occurred in 45% of LENVIMA-treated patients (24% grade 3). Grade 4 hypertension was not reported in HCC.

Serious complications of poorly controlled hypertension have been reported. Control blood pressure prior to initiation. Monitor blood pressure after 1 week, then every 2 weeks for the first 2 months, and then at least monthly thereafter during treatment. Withhold and resume at reduced dose when hypertension is controlled or permanently discontinue based on severity.

Cardiac Dysfunction. Serious and fatal cardiac dysfunction can occur with LENVIMA. Across clinical trials in 799 patients with DTC, RCC, and HCC, grade 3 or higher cardiac dysfunction occurred in 3% of LENVIMA treated patients. Monitor for clinical symptoms or signs of cardiac dysfunction. Withhold and resume at reduced dose upon recovery or permanently discontinue based on severity.

Arterial Thromboembolic Events. Among patients receiving LENVIMA or LENVIMA + everolimus, arterial thromboembolic events of any severity occurred in 2% of patients in RCC and HCC and 5% in DTC. Grade 3-5 arterial thromboembolic events ranged from 2% to 3% across all clinical trials. Permanently discontinue following an arterial thrombotic event. The safety of resuming after an arterial thromboembolic event has not been established and LENVIMA has not been studied in patients who have had an arterial thromboembolic event within the previous 6 months.

Hepatotoxicity. Across clinical studies enrolling 1,327 LENVIMA-treated patients with malignancies other than HCC, serious hepatic adverse reactions occurred in 1.4% of patients. Fatal events, including hepatic failure, acute hepatitis and hepatorenal syndrome, occurred in 0.5% of patients. In HCC, hepatic encephalopathy occurred in 8% of LENVIMA-treated patients (5% grade 3-5). Grade 3-5 hepatic failure occurred in 3% of LENVIMA-treated patients. 2% of patients discontinued LENVIMA due to hepatic encephalopathy and 1% discontinued due to hepatic failure.

Monitor liver function prior to initiation, then every 2 weeks for the first 2 months, and at least monthly thereafter during treatment. Monitor patients with HCC closely for signs of hepatic failure, including hepatic encephalopathy. Withhold and resume at reduced dose upon recovery or permanently discontinue based on severity.

Renal Failure or Impairment. Serious including fatal renal failure or impairment can occur with LENVIMA. Renal impairment was reported in 14% and 7% of LENVIMA-treated patients in DTC and HCC, respectively. Grade 3-5 renal failure or impairment occurred in 3% of patients with DTC and 2% of patients with HCC, including 1 fatal event in each study. In RCC, renal impairment or renal failure was reported in 18% of LENVIMA + everolimus“treated patients (10% grade 3).

Initiate prompt management of diarrhea or dehydration/hypovolemia. Withhold and resume at reduced dose upon recovery or permanently discontinue for renal failure or impairment based on severity.

Proteinuria. In DTC and HCC, proteinuria was reported in 34% and 26% of LENVIMA-treated patients, respectively. Grade 3 proteinuria occurred in 11% and 6% in DTC and HCC, respectively. In RCC, proteinuria occurred in 31% of patients receiving LENVIMA + everolimus (8% grade 3). Monitor for proteinuria prior to initiation and periodically during treatment. If urine dipstick proteinuria ‰¥2+ is detected, obtain a 24-hour urine protein. Withhold and resume at reduced dose upon recovery or permanently discontinue based on severity.

Diarrhea. Of the 737 LENVIMA-treated patients in DTC and HCC, diarrhea occurred in 49% (6% grade 3). In RCC, diarrhea occurred in 81% of LENVIMA + everolimus“treated patients (19% grade 3). Diarrhea was the most frequent cause of dose interruption/reduction, and diarrhea recurred despite dose reduction. Promptly initiate management of diarrhea. Withhold and resume at reduced dose upon recovery or permanently discontinue based on severity.

Fistula Formation and Gastrointestinal Perforation. Of the 799 patients treated with LENVIMA or LENVIMA + everolimus in DTC, RCC, and HCC, fistula or gastrointestinal perforation occurred in 2%. Permanently discontinue in patients who develop gastrointestinal perforation of any severity or grade 3-4 fistula.

QT Interval Prolongation. In DTC, QT/QTc interval prolongation occurred in 9% of LENVIMA-treated patients and QT interval prolongation of >500 ms occurred in 2%. In RCC, QTc interval increases of >60 ms occurred in 11% of patients receiving LENVIMA + everolimus and QTc interval >500 ms occurred in 6%. In HCC, QTc interval increases of >60 ms occurred in 8% of LENVIMA-treated patients and QTc interval >500 ms occurred in 2%.

Monitor and correct electrolyte abnormalities at baseline and periodically during treatment. Monitor electrocardiograms in patients with congenital long QT syndrome, congestive heart failure, bradyarrhythmias, or those who are taking drugs known to prolong the QT interval, including Class Ia and III antiarrhythmics. Withhold and resume at reduced dose upon recovery based on severity.

Hypocalcemia. In DTC, grade 3-4 hypocalcemia occurred in 9% of LENVIMA-treated patients. In 65% of cases, hypocalcemia improved or resolved following calcium supplementation with or without dose interruption or dose reduction. In RCC, grade 3-4 hypocalcemia occurred in 6% of LENVIMA + everolimus“ treated patients. In HCC, grade 3 hypocalcemia occurred in 0.8% of LENVIMA-treated patients. Monitor blood calcium levels at least monthly and replace calcium as necessary during treatment. Withhold and resume at reduced dose upon recovery or permanently discontinue depending on severity.

Reversible Posterior Leukoencephalopathy Syndrome. Across clinical studies of 1,823 patients who received LENVIMA as a single agent, RPLS occurred in 0.3%. Confirm diagnosis of RPLS with MRI. Withhold and resume at reduced dose upon recovery or permanently discontinue depending on severity and persistence of neurologic symptoms.

Hemorrhagic Events. Serious including fatal hemorrhagic events can occur with LENVIMA. In DTC, RCC, and HCC clinical trials, hemorrhagic events, of any grade, occurred in 29% of the 799 patients treated with LENVIMA as a single agent or in combination with everolimus. The most frequently reported hemorrhagic events (all grades and occurring in at least 5% of patients) were epistaxis and hematuria. In DTC, grade 3-5 hemorrhage occurred in 2% of LENVIMA-treated patients, including 1 fatal intracranial hemorrhage among 16 patients who received LENVIMA and had CNS metastases at baseline. In RCC, grade 3-5 hemorrhage occurred in 8% of LENVIMA + everolimus“treated patients, including 1 fatal cerebral hemorrhage. In HCC, grade 3-5 hemorrhage occurred in 5% of LENVIMA-treated patients, including 7 fatal hemorrhagic events. Serious tumor-related bleeds, including fatal hemorrhagic events, occurred in LENVIMA-treated patients in clinical trials and in the postmarketing setting. In postmarketing surveillance, serious and fatal carotid artery hemorrhages were seen more frequently in patients with anaplastic thyroid carcinoma (ATC) than other tumors. Safety and effectiveness of LENVIMA in patients with ATC have not been demonstrated in clinical trials.

Consider the risk of severe or fatal hemorrhage associated with tumor invasion or infiltration of major blood vessels (e.g., carotid artery). Withhold and resume at reduced dose upon recovery or permanently discontinue based on severity.

Impairment of Thyroid Stimulating Hormone Suppression/Thyroid Dysfunction. LENVIMA impairs exogenous thyroid suppression. In DTC, 88% of patients had baseline thyroid stimulating hormone (TSH) level ‰¤0.5 mU/L. In patients with normal TSH at baseline, elevation of TSH level >0.5 mU/L was observed post baseline in 57% of LENVIMA-treated patients. In RCC and HCC, grade 1 or 2 hypothyroidism occurred in 24% of LENVIMA + everolimus“treated patients and 21% of LENVIMA-treated patients, respectively. In patients with normal or low TSH at baseline, elevation of TSH was observed post baseline in 70% of LENVIMA-treated patients in HCC and 60% of LENVIMA + everolimus“treated patients in RCC.

Monitor thyroid function prior to initiation and at least monthly during treatment. Treat hypothyroidism according to standard medical practice.

Impaired Wound Healing. Impaired wound healing has been reported in patients who received LENVIMA. Withhold LENVIMA for at least 1 week prior to elective surgery. Do not administer for at least 2 weeks following major surgery and until adequate wound healing. The safety of resumption of LENVIMA after resolution of wound healing complications has not been established.

Embryo-fetal Toxicity. Based on its mechanism of action and data from animal reproduction studies, LENVIMA can cause fetal harm when administered to pregnant women. In animal reproduction studies, oral administration of lenvatinib during organogenesis at doses below the recommended clinical doses resulted in embryotoxicity, fetotoxicity, and teratogenicity in rats and rabbits. Advise pregnant women of the potential risk to a fetus; and advise females of reproductive potential to use effective contraception during treatment with LENVIMA and for at least 30 days after the last dose.

Adverse Reactions

In DTC, the most common adverse reactions (‰¥30%) observed in LENVIMA-treated patients were hypertension (73%), fatigue (67%), diarrhea (67%), arthralgia/myalgia (62%), decreased appetite (54%), decreased weight (51%), nausea (47%), stomatitis (41%), headache (38%), vomiting (36%), proteinuria (34%), palmar-plantar erythrodysesthesia syndrome (32%), abdominal pain (31%), and dysphonia (31%). The most common serious adverse reactions (‰¥2%) were pneumonia (4%), hypertension (3%), and dehydration (3%). Adverse reactions led to dose reductions in 68% of LENVIMA-treated patients; 18% discontinued LENVIMA. The most common adverse reactions (‰¥10%) resulting in dose reductions were hypertension (13%), proteinuria (11%), decreased appetite (10%), and diarrhea (10%); the most common adverse reactions (‰¥1%) resulting in discontinuation of LENVIMA were hypertension (1%) and asthenia (1%).

In RCC, the most common adverse reactions (‰¥30%) observed in LENVIMA + everolimus“treated patients were diarrhea (81%), fatigue (73%), arthralgia/myalgia (55%), decreased appetite (53%), vomiting (48%), nausea (45%), stomatitis (44%), hypertension (42%), peripheral edema (42%), cough (37%), abdominal pain (37%), dyspnea (35%), rash (35%), decreased weight (34%), hemorrhagic events (32%), and proteinuria (31%). The most common serious adverse reactions (‰¥5%) were renal failure (11%), dehydration (10%), anemia (6%), thrombocytopenia (5%), diarrhea (5%), vomiting (5%), and dyspnea (5%). Adverse reactions led to dose reductions or interruption in 89% of patients. The most common adverse reactions (‰¥5%) resulting in dose reductions were diarrhea (21%), fatigue (8%), thrombocytopenia (6%), vomiting (6%), nausea (5%), and proteinuria (5%). Treatment discontinuation due to an adverse reaction occurred in 29% of patients.

In HCC, the most common adverse reactions (‰¥20%) observed in LENVIMA-treated patients were hypertension (45%), fatigue (44%), diarrhea (39%), decreased appetite (34%), arthralgia/myalgia (31%), decreased weight (31%), abdominal pain (30%), palmar-plantar erythrodysesthesia syndrome (27%), proteinuria (26%), dysphonia (24%), hemorrhagic events (23%), hypothyroidism (21%), and nausea (20%). The most common serious adverse reactions (‰¥2%) were hepatic encephalopathy (5%), hepatic failure (3%), ascites (3%), and decreased appetite (2%). Adverse reactions led to dose reductions or interruption in 62% of patients. The most common adverse reactions (‰¥5%) resulting in dose reductions were fatigue (9%), decreased appetite (8%), diarrhea (8%), proteinuria (7%), hypertension (6%), and palmar-plantar erythrodysesthesia syndrome (5%). Treatment discontinuation due to an adverse reaction occurred in 20% of patients. The most common adverse reactions (‰¥1%) resulting in discontinuation of LENVIMA were fatigue (1%), hepatic encephalopathy (2%), hyperbilirubinemia (1%), and hepatic failure (1%).

In EC, the most common adverse reactions (‰¥20%) observed in LENVIMA + pembrolizumab – treated patients were fatigue (65%), hypertension (65%), musculoskeletal pain (65%), diarrhea (64%), decreased appetite (52%), hypothyroidism (51%), nausea (48%), stomatitis (43%), vomiting (39%), decreased weight (36%), abdominal pain (33%), headache (33%), constipation (32%), urinary tract infection (31%), dysphonia (29%), hemorrhagic events (28%), hypomagnesemia (27%), palmar-plantar erythrodysesthesia (26%), dyspnea (24%), cough (21%) and rash (21%).

Adverse reactions led to dose reduction or interruption in 88% of patients receiving LENVIMA. The most common adverse reactions (‰¥5%) resulting in dose reduction or interruption of LENVIMA were fatigue (32%), hypertension (26%), diarrhea (18%), nausea (13%), palmar-plantar erythrodysesthesia (13%), vomiting (13%), decreased appetite (12%), musculoskeletal pain (11%), stomatitis (9%), abdominal pain (7%), hemorrhages (7%), renal impairment (6%), decreased weight (6%), rash (5%), headache (5%), increased lipase (5%) and proteinuria (5%).

Fatal adverse reactions occurred in 3% of patients receiving LENVIMA + pembrolizumab, including gastrointestinal perforation, RPLS with intraventricular hemorrhage, and intracranial hemorrhage.

Serious adverse reactions occurred in 52% of patients receiving LENVIMA + pembrolizumab. Serious adverse reactions in ‰¥3% of patients were hypertension (9%), abdominal pain (6%), musculoskeletal pain (5%), hemorrhage (4%), fatigue (4%), nausea (4%), confusional state (4%), pleural effusion (4%), adrenal insufficiency (3%), colitis (3%), dyspnea (3%), and pyrexia (3%).

Permanent discontinuation due to adverse reaction (Grade 1-4) occurred in 21% of patients who received LENVIMA + pembrolizumab. The most common adverse reactions (>2%) resulting in discontinuation of LENVIMA were gastrointestinal perforation or fistula (2%), muscular weakness (2%), and pancreatitis (2%).

Use in Specific Populations

Because of the potential for serious adverse reactions in breastfed infants, advise women to discontinue breastfeeding during treatment and for at least 1 week after last dose. LENVIMA may impair fertility in males and females of reproductive potential.

No dose adjustment is recommended for patients with mild (CLcr 60-89 mL/min) or moderate (CLcr 30-59 mL/min) renal impairment. LENVIMA concentrations may increase in patients with DTC, RCC or EC and severe (CLcr 15-29 mL/min) renal impairment. Reduce the dose for patients with DTC, RCC, or EC and severe renal impairment. There is no recommended dose for patients with HCC and severe renal impairment. LENVIMA has not been studied in patients with end stage renal disease. No dose adjustment is recommended for patients with HCC and mild hepatic impairment (Child-Pugh A). There is no recommended dose for patients with HCC with moderate (Child-Pugh B) or severe (Child-Pugh C) hepatic impairment.

No dose adjustment is recommended for patients with DTC, RCC, or EC and mild or moderate hepatic impairment. LENVIMA concentrations may increase in patients with DTC, RCC, or EC and severe hepatic impairment. Reduce the dose for patients with DTC, RCC, or EC and severe hepatic impairment.

LENVIMA (lenvatinib) is available as 10 mg and 4 mg capsules.

Please see Prescribing Information for LENVIMA (lenvatinib) at http://www.lenvima.com/pdfs/prescribing-information.pdf.

About the Eisai and Merck Strategic Collaboration

In March 2018, Eisai and Merck, known as MSD outside the United States and Canada, through an affiliate, entered into a strategic collaboration for the worldwide co-development and co-commercialization of LENVIMA. Under the agreement, the companies will jointly develop, manufacture and commercialize LENVIMA, both as monotherapy and in combination with Mercks anti-PD-1 therapy KEYTRUDA.

In addition to ongoing clinical studies evaluating the KEYTRUDA plus LENVIMA combination across several different tumor types, the companies have jointly initiated new clinical studies through the LEAP (LEnvatinib And Pembrolizumab) clinical program and are evaluating the combination in 13 different tumor types (endometrial carcinoma, hepatocellular carcinoma, melanoma, non-small cell lung cancer, renal cell carcinoma, squamous cell carcinoma of the head and neck, urothelial cancer, biliary tract cancer, colorectal cancer, gastric cancer, glioblastoma, ovarian cancer and triple-negative breast cancer) across 19 clinical trials.

Mercks Focus on Cancer

Our goal is to translate breakthrough science into innovative oncology medicines to help people with cancer worldwide. At Merck, the potential to bring new hope to people with cancer drives our purpose and supporting accessibility to our cancer medicines is our commitment. As part of our focus on cancer, Merck is committed to exploring the potential of immuno-oncology with one of the largest development programs in the industry across more than 30 tumor types. We also continue to strengthen our portfolio through strategic acquisitions and are prioritizing the development of several promising oncology candidates with the potential to improve the treatment of advanced cancers. For more information about our oncology clinical trials, visit www.merck.com/clinicaltrials.

About Merck

For more than 125 years, Merck, known as MSD outside of the United States and Canada, has been inventing for life, bringing forward medicines and vaccines for many of the worlds most challenging diseases in pursuit of our mission to save and improve lives. We demonstrate our commitment to patients and population health by increasing access to health care through far-reaching policies, programs and partnerships. Today, Merck continues to be at the forefront of research to prevent and treat diseases that threaten people and animals “ including cancer, infectious diseases such as HIV and Ebola, and emerging animal diseases “ as we aspire to be the premier research-intensive biopharmaceutical company in the world. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.

Eisais Focus on Cancer

Eisai focuses on the development of anticancer drugs, targeting the tumor microenvironment (with experience and knowledge from existing in-house discovered compounds) and the driver gene mutation and aberrant splicing (leveraging RNA Splicing Platform) as areas (Ricchi) where real patient needs are still unmet, and where Eisai can aim to become a frontrunner in oncology. Eisai aspires to discover innovative new drugs with new targets and mechanisms of action from these Ricchi, with the aim of contributing to the cure of cancers.

About Eisai

Eisai is a leading global research and development-based pharmaceutical company headquartered in Japan, with approximately 10,000 employees worldwide. We define our corporate mission as giving first thought to patients and their families and to increasing the benefits health care provides, which we call our human health care (hhc) philosophy. We strive to realize our hhc philosophy by delivering innovative products in therapeutic areas with high unmet medical needs, including Oncology and Neurology. In the spirit of hhc, we take that commitment even further by applying our scientific expertise, clinical capabilities and patient insights to discover and develop innovative solutions that help address societys toughest unmet needs, including neglected tropical diseases and the Sustainable Development Goals.

For more information about Eisai, please visit www.eisai.com (for global), us.eisai.com (for U.S.) or www.eisai.eu (for Europe, Middle East, Africa), and connect with us on Twitter (U.S. and global) and LinkedIn (for U.S.).

Forward-Looking Statement of Merck & Co., Inc., Kenilworth, N.J., USA

This news release of Merck & Co., Inc., Kenilworth, N.J., USA (the company) includes forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the companys management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline products that the products will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of the global outbreak of novel coronavirus disease (COVID-19); the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the companys ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the companys patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the companys 2019 Annual Report on Form 10-K and the companys other filings with the Securities and Exchange Commission (SEC) available at the SECs Internet site (www.sec.gov).

Merck Media Relations

Pamela Eisele: (267) 305-3558

Rebecca Newberry: (484) 678-2952

Merck Investor Relations

Peter Dannenbaum: (908) 740-1037

Courtney Ronaldo: (908) 740-6132

Eisai Inc. Media Relations

Michele Randazzo: (551) 579-4465

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