Caroline Litchfield
Executive Vice President and Chief Financial Officer at Merck & Co., Inc.
Thank you, Rob. Good morning. 2022 continues to be a year of excellent performance for our business. This quarter, we again achieved exceptional revenue and underlying earnings growth, driven by demand for our innovative portfolio. These results reinforce our commitment to our science-led strategy, enabled by the flawless execution of our dedicated colleagues across the globe. We are confident in our ability to continue to deliver in the short term while we make disciplined investments to maximize long-term value for patients and shareholders.
Total company revenues were $15 billion, an increase of 14%. Excluding LAGEVRIO, the business delivered strong growth of 10%. Underlying growth was 4 percentage points higher, given the growing headwind from foreign exchange.
The remainder of my revenue comments will be on an ex exchange basis.
Our Human Health business continued its momentum with growth of 19%, or 15% excluding LAGEVRIO, driven by strength across our key pillars. Our Animal Health business delivered a solid quarter as sales increased 4% in both our companion animal and livestock products.
Now turning to the third quarter performance of our key brands. In oncology, KEYTRUDA grew 26% to $5.4 billion, driven by strong global demand as well as continued expansion into new indications. In the U.S., KEYTRUDA grew across all key tumor types and continued to benefit from uptake in earlier-stage cancers, including triple-negative breast cancer as well as in certain types of renal cell carcinoma and melanoma. Intervening earlier in cancer progression provides the potential for better patient outcomes, which is why we remain excited by the impact KEYTRUDA is having on patients with these early-stage cancers. Notably, there continues to be very strong demand in neo adjuvant, adjuvant, high-risk, early-stage triple-negative breast cancer, a testament to the profound effect KEYTRUDA is having for patients with this aggressive form of disease.
In the metastatic setting, KEYTRUDA is maintaining its leadership position in non-small cell lung cancer.
Outside the U.S., KEYTRUDA growth continues to be driven by uptake in non-small cell lung cancer, head and neck cancer and renal cell carcinoma. Recently approved earlier-stage indications, including certain types of high-risk, early-stage triple-negative breast cancer and renal cell carcinoma, are off to a strong start following launches in key European markets earlier this year.
Lynparza maintained its leadership of the PARP inhibitor class. Our alliance revenue grew 23%, driven by continued demand in certain patients with high-risk, early-stage breast cancer based on the OlympiA study. The outlook for Lynparza remains strong. And if approved, we are confident in the potential to reach patients with metastatic castration-resistant prostate cancer based on the PROpel study.
Lenvima alliance revenue grew 11%. A strong demand in the U.S. driven by continued uptake in advanced renal cell carcinoma and endometrial cancer, was partially offset by shipment timing in China.
Lastly, WELIREG is performing consistent with our expectations, providing a treatment option to the significant unmet need of patients with certain VHL-associated tumors.
Our vaccines portfolio achieved excellent growth led by GARDASIL, which increased 20% to $2.3 billion. Growth is being driven by strong underlying demand in ex U. S. markets, particularly China. We recently received approval from China's National Medical Products Administration to expand the use of GARDASIL-9 to girls and women 9 to 45 years of age which will further expand our opportunity in this important market. Growth in the U.S. was due to timing of CDC purchases, which will negatively impact fourth quarter sales.
We are confident in our ability to drive sustainable growth of GARDASIL sales given its proven effectiveness in preventing certain types of HPV-related cancers and other diseases. Global immunization levels remain low, which provides us a tremendous opportunity to benefit more patients. And we have invested aggressively in manufacturing capacity, which positions us well to supply the demand we expect to see now and over the long term.
In our hospital acute care portfolio, BRIDION sales grew 22%, driven by an increase in market share among neuromuscular blockade reversal agents and an increase in surgical procedures.
As mentioned earlier, Animal Health sales increased 4%. livestock sales increased due to poultry products and ruminant technology solutions. Companion animal sales growth was driven by the BRAVECTO line of products, partially offset by supply challenges for certain vaccines.
I will now walk you through the remainder of our P&L, and my comments will be on a non-GAAP basis.
Gross margin was 77%, an increase of 0.2 percentage points, reflecting favorable product mix and foreign exchange, partially offset by the impact of lower margin LAGEVRIO and supply sales.
Operating expenses were $6 billion, which includes $619 million of payments related to certain collaborations and licensing agreements. Excluding these payments, operating expenses grew 13%, driven by increased investments to support our key growth drivers and pipeline. Other expense was approximately $100 million, which reflects lower pension expense compared to last year.
Our tax rate was 13.6%. Taken together, we earned $1.85 per share, which includes $0.22 of charges related to significant collaboration and licensing agreement. Excluding these charges, we had exceptional underlying growth.
Turning now to our 2022 non-GAAP guidance. The continued operational strength of our business enables us to raise and narrow our full year revenue guidance. We now expect revenue to be between $58.5 billion and $59 billion, including LAGEVRIO sales of $5.2 billion to $5.4 billion. Our increased revenue guidance range represents growth of 20% to 21%.
The projected impact from foreign exchange includes an incremental headwind of nearly 1% using mid-October rates, resulting in a full year negative impact of approximately 4%. Excluding foreign exchange and LAGEVRIO, we expect growth of approximately 16%.
We are maintaining our gross margin expectation of between 74% and 74.5%. We are increasing and narrowing our operating expense projection to $21.3 billion to $21.7 billion, principally driven by a $250 million payment related to the recent exercise of our option to jointly develop a personalized cancer vaccine as part of our ongoing collaboration with Moderna. As a reminder, our guidance does not assume additional significant potential business development transactions.
We continue to assume other expense of approximately $500 million. We expect our full year tax rate to be approximately 14%. We assume 2.54 billion shares outstanding. Taken together, we have increased and narrowed our expected EPS rate to $7.32 to $7.37, an increase of $0.05 at the midpoint.
The operational momentum in our business would have led to an approximately $0.20 increase in our guidance. However, it is being partially offset by the option payment in Moderna and an incremental headwind from foreign exchange of nearly 1% using mid-October rates.
Our guidance reflects confidence in the underlying strength of our business. We continue to demonstrate strong momentum and expect durable underlying demand across our key pillars, including KEYTRUDA, GARDASIL and Animal Health.
As you consider your model, there are a few items to keep in mind. While we actively manage foreign exchange through our revenue hedging program, it continues to be a headwind to growth, particularly across products with a larger portion of international revenues, such as in our Animal Health business. The hedging program mitigates the impact of foreign exchange. And to the extent we continue to see foreign exchange headwinds recorded at the product level, we will see a benefit in other revenues. In addition, other revenue includes the supply sales to Organon.
As you saw in our results, PNEUMOVAX23 is experiencing pressure, particularly in the U.S. as the market continues to shift towards newer adult pneumococcal conjugate vaccine. We remain committed to our capital allocation priorities. We will continue to prioritize investments in our pipeline and business to drive near- and long-term growth across our portfolio.
We have made significant progress across our pipeline which Dean will speak to that has the potential to drive sustainable revenue growth. We are augmenting our pipeline by receiving the best external science through value-enhancing business development which we will invest in to realize the promise of these products. We continue to consider the full breadth of the business development landscape. We have ample balance sheet capacity and we will act only when science and value align.
Should meaningful business development not materialize and depending on the pipeline of potential transactions, we will opportunistically buy back shares. We remain committed to our dividend, with the goal of increasing it over time.
To conclude, as we finish the year, we remain confident in the continued growth of our business. Global demand for our innovative medicines and vaccines remain strong, and we continue to demonstrate the operational momentum and commercial execution that will enable us to deliver value to patients and shareholders now and well into the future.
With that, I'd now like to turn the call over to Dean.