• Posted on August 28, 2023
• Unique Submission Team

BU7009 Financial Risk Management Assignment Sample

 

Introduction

There has been a decline in health-care visits, particularly in the United States, and there have been challenges with the acceptability of COVID immunizations in adults among other things, making it difficult to extend our vaccine portfolio.

The effects of last year’s influenza outbreak in the United States and Europe also had a significant negative impact on GARDASIL sales, which were further hampered by the timing of shipments to China and the timing of public sector purchases in the United States during both periods of the calendar year.

Sales of PNEUMOVAX decreased as a result of a difficult year-over-year comparison owing to the high demand for pneumococcal vaccination at the onset of the pandemic last year and the influence of the CDC COVID vaccine coadministration recommendations, which were implemented in response to the influenza pandemic. Increases in sales outside of the United States have somewhat compensated for the drop in sales within the United States.

Fluctuations in the market with respect to the foreign exchange and the rates of interest seem to be representing the significant flow of cash and profit risks for Merck. Merck is considered to be aggregating the risks that are group-wide along with steering them centrally, partly through the usage of the derivates.

For the estimation of the current risks of the fluctuations in the rate of interest and the foreign exchange, scenario analyses have been used by Merck. Merck is not considered to be subject to every concentration of material risk from the transactions of the finances.

Background

The health-care organisation has been able to keep its doors open while dealing with the pandemic’s aftereffects and recovery. In the past year, sales of BRIDION have increased significantly, in large part due to increased utilisation and improved operating room standards, which have enabled a greater number of elective procedures to be performed on a more consistent basis.

Due to the significant benefits the medicines provide to patients, the company have high confidence in the underlying demand for the unique portfolio, which is expected to continue to expand in the years to come.

As a result of the widespread distribution of COVID vaccinations, they anticipate that patients’ confidence in their ability to receive treatment in a timely manner will increase. The first quarter of 2014 ended with optimistic signs of recovery in the United States, with March wellness visits hitting levels higher than they had been since the outbreak began (Alim,2021).http://BU7009 Financial Risk Management Assignment Sample

Overview od current scenario

As a result of the epidemic’s onset, there has been a significant decrease in the number of cancer screenings performed, resulting in fewer patient diagnoses and fewer new patient enrollments in cancer treatments, particularly in areas such as lung cancer, as well as a decrease in overall cancer screenings.

Cancer screening and diagnosis are expected to return to normal levels in the near future as a result of the widespread use of COVID vaccinations, particularly among the elderly, who have the highest cancer incidence, and the expansion of public awareness campaigns, both of which are currently underway.

This will restore the rate of cancer screening and diagnosis to the level that it should have been in the first place. According to our expectations, the company will continue to grow at a rapid pace in the foreseeable future, as evidenced by its strong position across a broad range of current indications (Paté Cornell, 2019).http://BU7009 Financial Risk Management Assignment Sample

Currently, Merck is considered to be using the marketable forward exchange contracts, swaps of the interest and the options as the hedge of the instruments. The strategy for hedging the rate of interest and the fluctuations in the rate of the foreign exchange seem to be arising from the forecasting transactions and the transactions that are already in recognition within the balance sheet is considered to be set by a committee of risk management meeting regularly.

Risk management methods available to Merck for analysing its risks.

We are encouraged by the recent approval for esophageal cancer and the potential for further indications in renal cell carcinoma, including the possibility of utilising the medicine in combination with Lenvima and as a monotherapy in the adjuvant situation.

Furthermore, as patient access continues to expand throughout the portfolio, our awareness campaigns will assist to increasing the possibility that catch-up vaccines will be administered throughout the portfolio as well. However, while the recent increase in wellness checkups is a positive development, the recent surge in vaccinations is a cause for caution. Adolescents will be able to receive COVID vaccinations in the not-too-distant future, according to our predictions (Yue,2018).http://BU7009 Financial Risk Management Assignment Sample

The usage of the derivatives is considered to be regulation through the extensive guidelines along with being subject to the constant control of risk by the Group Treasury. There is prohibition of speculation as well. The strictness in the separation of the functions between settlement, functions of the control and trading is made sure.

The derivates are considered to be just entered within the banks, which are considered to be in possession of a better rating of credit. The risks related in default are considered to be consistently monitored.

The effects of GARDASIL on performance will be discussed in further depth in the following section. This year’s COVID vaccine rollout to this cohort, which will take place in the United States in the fall of this year, makes it necessary to cram teenagers into doctor’s appointments in order for them to catch up on missed routine vaccinations and to schedule additional vaccinations in order to coincide with the rollout.

This is being done in order to ensure a smooth transition back to in-person education for the autumn semester. Because certain ex-U.S. markets have lower rates of COVID immunisation than the United States, there have been periodic lockdowns in these markets, which will be investigated to see if they have an influence on physician well visits and school-based vaccination programmes, among other things.

According to the estimates, GARDASIL, on the other hand, is expected to have significant international demand, notably in non-US countries such as China, in general. A major increase in manufacturing capacity has occurred over the past year, which will have a favourable influence on both our revenues and bottom line.

Accordingly, as previously stated, the company anticipates that GARDASIL will experience significant worldwide growth this year.

The pipeline of innovative medicines and vaccines, which includes several novel anticancer therapeutics, also inspires high confidence in the robustness and long-term viability of the business model.

As previously stated, a return is anticipated to more normal business operations later this year, as well as ongoing solid growth over the remainder of the calendar year, as previously announced.

When the company is able to overcome the transient market dynamics produced by the pandemic, they expect to be able to maintain a robust growth trajectory that will last for many years into the future.

They have reason to be positive about the future because of the ongoing interest in the treatments from patients maintaining Merck’s capacity to maintain its competitive position in order to make the investments in research and innovation required to continue the unique tradition of making a difference in the world while simultaneously offering value to patients and investors

The main sources of financial and non-financial risk faced by Merck

As an illustration, let us consider our overall performance during the first quarter of fiscal year 2019. (see chart). The total company sales in the third quarter of 2018 were $12.1 billion when the favourable impact of foreign currency is excluded. When the favourable impact of foreign currency is considered, total company sales were $12.1 billion, which was almost unchanged year over year or down 1 percent when the favourable impact of foreign currency is considered. Our overall satisfaction with the findings was based on the fact that they were in accordance with our initial expectations.

The pandemic had a negative impact on the quarter, which we estimate to have been worth around $600 million in monetary value, based on our calculations, and the human health industry is expanding, as Frank has stated (Dallat,2018).http://BU7009 Financial Risk Management Assignment Sample

Sales in the animal health area experienced a particularly robust quarter, with revenues increasing by 15 percent year-over-year from the same period in 2017. In particular, a significant contributor to this growth in demand was the increase in the demand for companion animals and cattle, which climbed by 24 percent and 9 percent, respectively, during the quarter.

The company’s development into the companion animal market was aided by an increase in international demand for our parasiticides, particularly those belonging to the BRAVECTO family of drugs, as well as our immunisation experience in the companion animal sector.

Our intelligence solutions have seen a huge increase in popularity, and as a result, the overall performance of the cattle industry has seen a major boost. Our Intelligence solutions have seen substantial growth in recent years, which has resulted in improved performance in the cattle business as a result. This improvement in performance is due to a combination of factors, including higher demand for ruminants and poultry in international markets as well as remarkable growth in our Intelligence products.

How the company mitigates such risks.

To continue, please evaluate our most recent forecast for Merck, which includes Organon Pharmaceuticals, for the year 2021, which is available here. It is predicted using the assumptions that we had at the time of writing. These assumptions are as follows: We expect sales to total between $51.8 billion and $53.8 billion in the first quarter of 2019, which represents an increase of 8 percent to 12 percent over the same period last year, according to our projections.

Despite a less favourable effect from foreign currency and an impact from the flu outbreak that was more than expected, we are optimistic in our ability to generate sustained and significant revenue growth for the remainder of the year as long as our growth pillars remain strong.

Revenues from a hypothetical launch of molnupiravir have been removed from our revenue estimate due to the fact that they are not included in our revenue prediction. Because to the adoption of COVID, we believe that our gross margin will be in the range of 76 percent, which is a slight decline from our previous forecast.

We have witnessed a moderate to high single-digit increase in operating costs as a result of our cautious control of general and administrative spending, which is lower than the growth rate we predicted in our earlier prediction. Overall, it is predicted that corporate SG&A spending would grow at a slower rate than operational spending in the foreseeable future. It is anticipated that the impact of COVID will be a little increase in operational costs, in the mid-to-high single digits, when all factors are taken into account.

While the forecast for other revenue and costs for this quarter has not moved much from the previous quarter’s prediction, other factors such as tax rate and the number of shares outstanding have changed slightly. According to non-GAAP estimates, the company’s earnings per share would range from $6.48 to $6.68 in the fourth quarter and year-end, representing an increase of 12 percent to 15 percent over the previous year. Even while foreign money has a favourable impact on this industry, the percentage of foreign money is less than 3 percent, which is within the range regarded to be acceptable ( Borkovskaya,2018).http://BU7009 Financial Risk Management Assignment Sample

According to the company’s pro-forma predictions, the company expects to generate revenues of between $6.1 billion and $6.4 billion for the fiscal year, assuming that Organon will continue to operate as a distinct business throughout the year.

If the spinoff is successfully completed, Merck expects full-year revenues from continuing operations to be in the range of $45.7 billion to $47.8 billion, which is a reasonable projection of the company’s future performance. According to our estimates, the spin-off will result in operating savings of about $1.5 billion over the next three years, with $500 million of those savings occurring in the first year of operation in 2021, and the remaining savings occurring over the next three years. (Greuning,2020).http://BU7009 Financial Risk Management Assignment Sample

Sales and profitability growth rates are expected to climb for Merck as a result of the separation of its pharmaceutical sector, according to the company’s predictions. In light of Merck’s planned growth acceleration and improved operational efficiency, we anticipate Organon’s growth to increase as well, thanks to the company’s newly constructed independent structure.

It is our expectation that the combined profits per share (EPS) of the two companies will be greater within 12 to 24 months than what would have been achieved if the spin-off had not occurred (Al Rahahleh,2019).http://BU7009 Financial Risk Management Assignment Sample

Analyse the company’s approach to strategic planning

As a result of the Organon spin-off, we expect to receive a special tax-free dividend of $9 billion, which we want to reinvest in value-enhancing strategic business development opportunities in the pharmaceutical industry. In the alternative, if our company does not achieve significant success, we would like to provide cash to shareholders in the form of a dividend payment to compensate them (Anton,2020).http://BU7009 Financial Risk Management Assignment Sample

 

Adjustments to accounting records that are not in compliance with generally accepted accounting standards (GAAP) have a solely positive or negative impact on the line items in this table, which are explained in greater detail in the following section. A formal recognition was made on June 30, 2021, which happened to be the last day of the year, that the second quarter and the first six months of the MERCK & CO., INCfiscalyear had come to an end, marking the end of the company’s fiscal year.

With the exception of per share data, the following actions are currently underway (all values are in millions of dollars unless otherwise stated): a. Accounting for the differences between financial statements prepared in accordance with GAAP and financial statements generated outside of GAAP (UNAUDITED)

It can be seen in the table below that the percentage of GAAP financial information that has been converted to non-GAAP financial information, which is based on the assumption that the firm will continue to operate, is expressed as a percentage of GAAP financial information.

The results of Organon’s activities are excluded from the financial figures presented in the next section since they are classed as “stopped operations” and so cannot be included in the figures (Duong2019).http://BU7009 Financial Risk Management Assignment Sample

Acquisition and divestiture-related expenses are comprised of the following components, according to generally accepted accounting principles: The following terms are used to describe restructuring costs: (1) Restructuring costs; (2) Restructuring costs; (3) Restructuring expenses; (4) Restructuring costs (Income) Individual investors suffer a net loss as a result of their investments in stock market securities.

Besides that, there are a plethora of other considerations to take into mind (Dandage,2019).http://BU7009 Financial Risk Management Assignment Sample

 

A non-GAAP financial measure is provided by Merck to help investors and analysts better understand the underlying business performance and trends. This financial measure excludes certain items from the company’s financial statements in order to help investors and analysts better understand the underlying business performance and trends.

Because of their inherent character, as well as the influence they have on the analysis of underlying corporate performance and trending conditions, this is the case. Since this information will aid investors in better understanding the company’s outcomes, the company believes that disclosing it will benefit investors in having a better understanding of how the firm’s performance is evaluated by management.

This statistic, in conjunction with other indicators, is used by management inside an organisation to assist them in planning for the future and predicting the success of their company, as well as to analyse the overall performance of the organisation as a whole. When calculating a component of the yearly remuneration for senior management, non-GAAP pretax income is used instead of GAAP pretax income, which is not established in compliance with GAAP.

It has been recommended that information produced in accordance with generally accepted accounting principles (GAAP) be considered an addition to rather than a replacement for, or as superior to, information produced in accordance with the disclosures required by these standards, according to recommendations made by the International Accounting Standards Board (IASB) (GAAP).

It is included in the cost of sales figures to account for accumulated charges for amortisation on non-cash intangible assets, and the great majority of these costs are accounted for by a reduction in the amount included in the cost of sales figures. Sales, general, and administrative costs (SG&A) are expenditures incurred in connection with acquisitions and divestitures, regardless of the dollar amount of the expenditures (SG&A).

Among other reasons, employee separation charges and accelerated depreciation associated with facilities that will be closed or sold account for the majority of the sums as a result of the company’s formal restructuring procedures. They appear on a corporation’s income statement since they are a product of the company’s operations.

It was decided by the executive to terminate development of the COVID-19 system, which resulted in the incurring of expenses as a result of the action.

Consideration of stakeholders in this process.

Since this information will aid investors in better understanding the company’s outcomes, the company believes that disclosing it will benefit investors in having a better understanding of how the firm’s performance is evaluated by management.

This statistic, in conjunction with other indicators, is used by management inside an organisation to assist them in planning for the future and predicting the success of their company, as well as to analyse the overall performance of the organisation as a whole. When calculating a component of the yearly remuneration for senior management, non-GAAP pretax income is used instead of GAAP pretax income, which is not established in compliance with GAAP.

It has been recommended that information produced in accordance with generally accepted accounting principles (GAAP) be considered an addition to rather than a replacement for, or as superior to, information produced in accordance with the disclosures required by these standards, according to recommendations made by the International Accounting Standards Board (IASB) (GAAP).

It is included in the cost of sales figures to account for accumulated charges for amortisation on non-cash intangible assets, and the great majority of these costs are accounted for by a reduction in the amount included in the cost of sales figures. A total of $95 million in purchase-related transaction expenditures connected with the company’s acquisition of Arqule, Inc.

were incurred during the six-month period under consideration, and these costs were included in the company’s selling, general, and administrative (SG&A) expenses. When the estimated fair value assessment of liabilities for contingent consideration is reduced, research and development expenditures are often reduced as a result.

This is due to cost savings associated with the decrease in the estimated fair value assessment of liabilities for contingent consideration, which results in a reduction in research and development expenditures. Furthermore, royalties earned as a result of the closure of the Sanofi-Pasteur MSD joint venture are included in other (income) expense, net, and amounts included in other (income) expense, net include amounts included in other (income) expense, net include amounts included in other (income) expense, net include amounts included in other (income) expense, net include amounts included in other (income) expense, net include amounts included in other (income) expense, net include amounts included in other (income) expense (income) As a result of the increase in the estimated fair value measurement of liabilities for contingent consideration, other (income) expenditure, net includes expenses incurred in connection with the increase in the estimated fair value measurement of obligations for other consideration, in addition to the expenses incurred in connection with the increase in the estimated fair value measurement of liabilities for contingent consideration.

Analyse the cyber-security threats to the company

Among other reasons, employee separation charges and accelerated depreciation associated with facilities that will be closed or sold account for the majority of the sums as a result of the company’s formal restructuring procedures. These items appear on a corporation’s income statement as a result of the operations of the corporation (Willumsen,2019).http://BU7009 Financial Risk Management Assignment Sample

The anticipated tax implications of reconciling items are presented as a result of applying the statutory tax rates applicable to their respective source regions to the reconciling items, which are obtained from the reconciling items’ expected tax implications. The anticipated tax implications of reconciling items are presented as a result of applying the statutory tax rates applicable to their respective source regions to the reconciling items.

As indicated in a joint press release, the following are some of the regulatory milestones that Merck and Ridgeback have achieved:

Following six preclinical testing conducted by multiple independent labs, Merck and Ridgeback Pharmaceuticals, Inc. revealed that molnupiravir was effective against the SARS-CoV-2 variant Omicron (B1.1.529) in vitro conditions following the publication of their findings. These findings came as a result of six preclinical experiments that were carried out by a variety of different labs.

With the assistance of a long-term supply agreement between Merck and Ridgeback and the United Nations Children’s Fund (UNICEF), molnupiravir will be made available to the broadest possible number of people around the world, including children, through the use of a generic version of the drug. Following the approval of the pharmaceuticals by regulatory authorities, Merck plans to donate up to 3 million courses of molnupiravir to UNICEF during the first half of 2022, according to the company’s press release.

Over the course of the year, the FDA will assess and approve the medications that are being distributed in more than 100 low- and middle-income countries (LMICs) to patients. Another demonstration of Merck’s dedication to making molnupiravir available on a timely manner in every country on Earth, regardless of location, is that the drug has been approved by the FDA. As a result of its efforts, the company claims that generic molnupiravir is now available in more than 100 low- and middle-income countries, as well as the Medicines Patent Pool (LMICs).

Merck, the financial manufacturer, revealed within the financial summary for the second quarter of the year 2017 that a destructive cyber-attack was considered to be disturbed the operations on a global basis inclusive of sales, research and manufacture as well. Merck was considered to be the only organization of pharmaceuticals for publicly acknowledging that it was hit and was hit hard.

Evaluation of the measures put in place to guard against such threats.

Because of this news, molnupiravir supply agreements have been made or extended in a number of jurisdictions throughout the world, including the United States and Canada. Japan, the United Kingdom, and the United States of America are among the countries represented on this list.

Japan, the United Kingdom, and the United States of America are among the countries with which new or changed supply agreements have been signed or amended.

Following publication, Merck and Ridgeback stated that their findings, which included high-risk people with mild to moderate COVID-19 who did not require hospitalisation, had been published in the prestigious New England Journal of Medicine.

The results of the Phase 3 MOVe-OUT trial were published in the New England Journal of Medicine, which is considered to be a highly reputable medical publication. The results of an interim analysis demonstrated that early treatment with molnupiravir, when coupled with the data from the entire randomised patient group, significantly reduced the likelihood of hospitalisation or death in high-risk, unvaccinated individuals with COVID-19 infection.

Some of the most promising characteristics of the Cardiovascular Program are as follows:

Meanwhile, Merck announced that the company’s acquisition of Acceleron had been completed without incident. If sotatercept, Acceleron’s primary therapeutic candidate for the treatment of pulmonary arterial hypertension, were included in Merrill Lynch’s cardiovascular pipeline, it would strengthen and improve the pipeline as a whole (PAH). Phase 3 research trials are currently being conducted to determine whether the medicine Sotatercept can be used in conjunction with the already available standard of care in the treatment of PAH.

Merck presented findings from two early Phase 1 clinical studies evaluating its experimental oral PCSK9 inhibitor, which were financed by Merck and done by the firm, at the 2021 American Heart Association Scientific Sessions, which were aired live on the internet (MK-0616).

Conclusion

Over the course of the investigation, the investigators looked at a candidate pharmaceutical that was being considered for cholesterol-lowering purposes, as well as its ability to lower high levels of LDL cholesterol, among other things. It is anticipated that MK-0616 would progress to the Phase 2 stage by the end of 2022, according to information available on the company’s website.

During a virtual Investor Event scheduled for February 23, 2022, senior executives from Merck Corporation will address the firm’s Environmental, Social, and Governance (ESG) strategy, which is intended to generate long-term value for both the company and society. One of the concerns that the organisation is addressing is the availability of health care for its workers.

Another factor to consider is environmental sustainability, and a third one to examine is ethical and moral considerations. The firm addresses a wide range of issues in order to improve its performance and development in each of its four ESG emphasis areas, some of which are described below. A later date will be announced with further specifics on the logistics of the event itself.

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