UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported) July 31, 2020
 
Merck & Co., Inc.
(Exact name of registrant as specified in its charter)
 
New Jersey
(State or other jurisdiction
of incorporation)	 	1-6571
(Commission
File Number)	 	22-1918501
(I.R.S Employer
Identification No.)	
 
2000 Galloping Hill Road, Kenilworth, NJ
(Address of principal executive offices)	 	 	07033
(Zip Code)	 	
 
(Registrant’s telephone number, including area code) (908) 740-4000
 
Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company  ¨
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class	 	Trading Symbol(s)	 	Name of each exchange on which registered	
 	 	 	 	 	
Common Stock ($0.50 par value)	 	MRK	 	New York Stock Exchange	
1.125% Notes due 2021	 	MRK/21	 	New York Stock Exchange	
0.500% Notes due 2024	 	MRK 24	 	New York Stock Exchange	
1.875% Notes due 2026	 	MRK/26	 	New York Stock Exchange	
2.500% Notes due 2034	 	MRK/34	 	New York Stock Exchange	
1.375% Notes due 2036	 	MRK 36A	 	New York Stock Exchange	

 

 

Item 2.02. Results of Operations and Financial Condition.
 
The following information, including the exhibits hereto, is being furnished pursuant to this Item 2.02.
 
Incorporated by reference is a press release issued by Merck & Co., Inc. (the “Company”) on July 31, 2020, regarding earnings for the second quarter of 2020, attached as Exhibit 99.1. Also incorporated by reference is certain supplemental information not included in the press release, attached as Exhibit 99.2.
 
This information shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and is not incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
 
Item 9.01. Financial Statements and Exhibits.
 
(d)       Exhibits
 
Exhibit 99.1 	Press release issued July 31, 2020, regarding earnings for the second quarter of 2020	
 
Exhibit 99.2 	Certain supplemental information not included in the press release	
 
Exhibit 104	Cover Page Interactive Data File (embedded within the Inline XBRL document)	

 
  
 SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
  
 	 	Merck & Co., Inc.	
 	 	 	
Date: July 31, 2020	By:	/s/ Faye C. Brown	
 	 	FAYE C. BROWN	
 	 	Senior Assistant Secretary	

 

Exhibit 99.1
 
  	News Release	
 	 	
FOR IMMEDIATE RELEASE
 
Media Contacts:	Pamela Eisele	Investor Contacts:	Peter Dannenbaum	
 	(267) 305-3558	 	(908) 740-1037	
 	 	 	 	
 	Patrick Ryan	 	Michael DeCarbo	
 	(201) 452-2409	 	(908) 740-1807	
 
Merck Announces Second-Quarter 2020 Financial Results
 
	· 	Second-Quarter 2020 Worldwide Sales Were $10.9 Billion, a Decrease of 8%, Reflecting the Negative Impact of COVID-19; Excluding the Impact from Foreign Exchange, Sales Declined 5%	
	o	KEYTRUDA Sales Grew 29% to $3.4 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 31%	
 
	· 	Second-Quarter 2020 GAAP EPS Was $1.18; Second-Quarter Non-GAAP EPS Was $1.37	
 
	· 	Secured Multiple Regulatory Approvals and Progressed Pipeline	
	o	Revealed Initial Investigational Phase 3 Results for V114	
	o	First Data Presentation with Investigational, Novel HIF-2α Inhibitor MK-6482	
 
	· 	Company Accelerates Three COVID-19-Related Vaccine and Antiviral Research Programs	
 
	· 	Company Narrows and Raises 2020 Full-Year Revenue Range to be Between $47.2 Billion and $48.7 Billion, Including a Negative Impact from Foreign Exchange of Approximately 2%	
 
	· 	Company Narrows and Raises 2020 Full-Year GAAP EPS Range to be Between $4.58 and $4.73; Narrows and Raises 2020 Full-Year Non-GAAP EPS Range to be Between $5.63 and $5.78, Including a Negative Impact from Foreign Exchange of Approximately 3%	
 
KENILWORTH, N.J., July 31, 2020 – Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the second quarter of 2020.
 
“Despite the impact COVID-19 had on patient access to health care providers, Merck continued to execute well with business momentum improving through the quarter. We remain confident that Merck will drive strong long-term growth based on underlying demand for our unique portfolio of innovative medicines, vaccines and animal health products. Our financial strength underpins our capital allocation priorities, including business development and the breakthrough research and development that creates value for society and our shareholders,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “In response to the SARS-CoV-2 pandemic, Merck is moving with urgency on three critical priorities: protecting the health and safety of our employees and their families, sustaining the supply of our medicines and vaccines to our patients and customers, and mobilizing our unique scientific expertise and experience to develop vaccines and antivirals that we believe may help save many lives.”

 
 
Financial Summary
 
 	 	Second Quarter	 	
$ in millions, except EPS amounts	 	2020	 	 	2019	 	 	Change	 	 	Change
Ex-Exchange	 	
Sales	 	$	10,872	 	 	$	11,760	 	 	 	-8	%	 	 	-5	%	
GAAP net income1	 	 	3,002	 	 	 	2,670	 	 	 	12	%	 	 	17	%	
Non-GAAP net income that excludes certain items1,2*	 	 	3,484	 	 	 	3,356	 	 	 	4	%	 	 	7	%	
GAAP EPS	 	 	1.18	 	 	 	1.03	 	 	 	15	%	 	 	19	%	
Non-GAAP EPS that excludes certain items2*	 	 	1.37	 	 	 	1.30	 	 	 	6	%	 	 	9	%	
*Refer to table on page 11.
 
GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) was $1.18 for the second quarter of 2020. Non-GAAP EPS of $1.37 for the second quarter of 2020 excludes acquisition- and divestiture-related costs and restructuring costs. Year-to-date results can be found in the attached tables.
 
COVID-19 Research Highlights
 
Building on the company’s experience with antivirals and vaccines, Merck is accelerating two COVID-19 vaccine development efforts and a novel antiviral candidate, specifically,
 
	· 	Merck in collaboration with IAVI is developing V590, a SARS-CoV-2 vaccine candidate that uses a recombinant vesicular stomatitis virus (rVSV) platform, the same platform that was used for Merck’s approved Ebola Zaire virus vaccine. V590 is currently in preclinical development and clinical studies are planned to start this year.	
 	 	 	
	· 	Merck has acquired Themis to accelerate the development of V591, a SARS-CoV-2 vaccine candidate that uses a measles virus vector platform based on a vector originally developed by scientists at the Institut Pasteur, a world-leading European vaccine research institute, and licensed exclusively to Themis. V591 is currently in preclinical development and clinical studies are planned to start in the third quarter. The acquisition closed in June.	
 	 	 	
	· 	Merck in collaboration with Ridgeback Bio is developing MK-4482 (formerly known as EIDD-2801), an orally available antiviral candidate for the treatment of COVID-19. In preclinical studies, MK-4482 demonstrated antiviral properties against SARS-CoV-2, the virus that causes COVID-19, as well as the coronaviruses responsible for MERS and SARS. The candidate is currently being evaluated in Phase 2 clinical trials.	

 

1 Net income attributable to Merck & Co., Inc.
2 Merck is providing certain 2020 and 2019 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the items, see Table 2a attached to this release.

Page 2

	· 	As previously announced, Merck also is collaborating with the Institute for Systems Biology to investigate and define the molecular mechanisms of SARS-CoV-2 infection and COVID-19 and to identify targets for medicines and vaccines, as well as participating in the National Institutes of Health (NIH)-led Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV) consortium. 	
 
“We are conscious of our abiding responsibility to help advance vaccine and antiviral efforts as part of the global response to SARS-CoV-2 and to ensure broad, equitable and affordable global access to any medicines and vaccines we bring forward,” Frazier said. “This pandemic underscores the essential role of Merck and the biopharmaceutical industry in addressing the world’s greatest health challenges and underscores the importance of a health care ecosystem that incentivizes risk-taking and innovation. Ultimately, scientific and medical knowledge will help overcome this ongoing global pandemic – and that is why we must continue to trust and invest in breakthrough science.”
 
Oncology Pipeline Highlights
 
Merck continued to advance the development programs for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy; Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca; and Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai), in addition to other notable developments as follows:
 
	· 	Merck announced the following regulatory milestones for KEYTRUDA:	
 	 	 	
	o	U.S. approval as monotherapy for the first-line treatment of patients with unresectable or metastatic microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) colorectal cancer based on the Phase 3 results of the KEYNOTE-177 trial. Approval granted less than one month following submission of regulatory application;	
 	 	 	
	o	U.S. approval as monotherapy for the treatment of patients with recurrent or metastatic cutaneous squamous cell carcinoma (cSCC) that is not curable by surgery or radiation based on data from the Phase 2 KEYNOTE-629 trial;	
 	 	 	
	o	U.S. approval as monotherapy 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. The approval was based on the KEYNOTE 158 trial;	
 	 	 	
	o	U.S. approval for use at an additional recommended dose of 400 mg every six weeks (Q6W) across all adult indications, including monotherapy and combination therapy. This dosing regimen was approved under accelerated approval based on pharmacokinetic data, the relationship of exposure to efficacy and the relationship of exposure to safety;	

Page 3

	o	China approval as monotherapy for second-line treatment of patients with locally advanced or metastatic esophageal squamous cell carcinoma whose tumors express PD-L1 (Combined Positive Score [CPS] ≥10) based on the KEYNOTE-181 trial;	
 	 	 	
	o	U.S. filing acceptance for priority review by the U.S. Food and Drug Administration (FDA) as monotherapy for the treatment of adult patients with relapsed or refractory classical Hodgkin lymphoma (cHL) based on data from the Phase 3 KEYNOTE-204 trial that was presented during the virtual scientific program of the 2020 American Society of Clinical Oncology (ASCO) Annual Meeting. A Prescription Drug User Fee Act (PDUFA) date is set for Oct. 30, 2020;	
 	 	 	
	o	U.S. filing acceptance for priority review by the FDA seeking accelerated approval in combination with chemotherapy for the treatment of patients with locally recurrent unresectable or metastatic triple-negative breast cancer (TNBC) whose tumors express PD-L1 (CPS ≥10), based on the Phase 3 KEYNOTE-355 trial that was presented at the 2020 ASCO Annual Meeting. A PDUFA date is set for Nov. 28, 2020; and	
 	 	 	
	o	U.S. filing acceptance for standard review by the FDA for the treatment of patients with high-risk early-stage TNBC, in combination with chemotherapy as neoadjuvant treatment, and then as a single agent as adjuvant treatment after surgery, based on the Phase 3 KEYNOTE-522 trial. A PDUFA date is set for March 29, 2021.	
 	 	 	
	· 	Merck presented new combination lung data for KEYTRUDA at the 2020 ASCO Annual Meeting that included initial results from the Phase 2 KEYNOTE-799 trial evaluating KEYTRUDA plus concurrent chemoradiation therapy (CCRT) in patients with unresectable, locally advanced stage III non-small cell lung cancer (NSCLC) as well as two-year, long-term survival data from the final analysis of the pivotal Phase 3 KEYNOTE-189 trial in patients with metastatic nonsquamous NSCLC; and	
 	 	 	
	· 	Merck announced that the Phase 3 KEYNOTE-361 trial investigating KEYTRUDA as monotherapy and in combination with chemotherapy in patients with advanced or metastatic urothelial carcinoma did not meet the dual primary endpoints of overall survival (OS) or progression-free survival (PFS) compared with standard of care chemotherapy.	
 	 	 	
	· 	Merck and AstraZeneca announced the following regulatory milestones for Lynparza:	
 	 	 	
	o	U.S. approval for the treatment of adult patients with deleterious or suspected deleterious germline or somatic homologous recombination repair (HRR) gene-mutated metastatic castration-resistant prostate cancer (mCRPC) who have progressed following prior treatment with enzalutamide or abiraterone based on the findings from the Phase 3 PROfound trial;	
 	 	 	
	o	U.S. approval as a combination therapy with bevacizumab for the first-line maintenance treatment of adult patients with advanced epithelial ovarian, fallopian tube or primary peritoneal cancer who are in complete or partial response to first-line platinum-based chemotherapy and whose cancer is associated with homologous recombination deficiency (HRD) positive status defined by either a deleterious or suspected deleterious BRCA mutation, and/or genomic instability based on results from the Phase 3 PAOLA-1 trial; and	

Page 4

	o	European Union approval as a monotherapy for the maintenance treatment of adult patients with germline BRCA1/2 mutations who have metastatic adenocarcinoma of the pancreas and have not progressed after a minimum of 16 weeks of platinum treatment within a first-line chemotherapy regimen based on results from the Phase 3 POLO trial.	
 	 	 	
	· 	Merck and Eisai presented results from two trials evaluating KEYTRUDA plus Lenvima at the 2020 ASCO Annual Meeting: tumor response data from the KEYNOTE-524/Study 116 trial in patients with hepatocellular carcinoma (HCC) with no prior systemic therapy and tumor response data from the KEYNOTE-146/Study 111 trial in patients with metastatic clear cell renal cell carcinoma (ccRCC) who progressed following immune checkpoint inhibitor therapy; and	
 	 	 	
	· 	Merck and Eisai announced receipt of a Complete Response Letter (CRL) from the FDA for the applications seeking accelerated approval of KEYTRUDA plus Lenvima for the first-line treatment of patients with unresectable HCC based on data from the Phase 1b KEYNOTE-524/Study 116 trial, as another combination therapy was approved ahead of the PDUFA action dates, based on a randomized, controlled trial that demonstrated OS. Consequently, the CRL stated that Merck’s and Eisai’s applications do not provide evidence that KEYTRUDA in combination with Lenvima represents a meaningful advantage over available therapies for the treatment of unresectable or metastatic HCC with no prior systemic therapy for advanced disease.	
 	 	 	
	· 	Merck also presented first-time results from a Phase 2 trial evaluating the hypoxia-inducible factor-2 alpha (HIF-2α) inhibitor MK-6482, a novel investigational candidate in Merck’s oncology pipeline, for the treatment of von Hippel-Lindau (VHL) disease-associated ccRCC at the 2020 ASCO Annual Meeting.	
 
Vaccine Pipeline Highlights
 
	· 	Merck announced results from two initial Phase 3 studies that showed V114, the company’s investigational 15-valent pneumococcal conjugate vaccine, met safety and immunogenicity objectives in the PNEU-WAY (V114-018) and PNEU-FLU (V114-021) studies in adults; and	
 	 	 	
	· 	Merck announced FDA approval of an expanded indication for GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) for the prevention of oropharyngeal and other head and neck cancers caused by HPV Types 16, 18, 31, 33, 45, 52, and 58.	

Page 5

Other Pipeline Highlights
 
	· 	Merck announced U.S. filing acceptance for priority review by the FDA for a New Drug Application (NDA) seeking approval for vericiguat, an orally administered soluble guanylate cyclase (sGC) stimulator being jointly developed with Bayer AG, to reduce the risk of cardiovascular death and heart failure hospitalization following a worsening heart failure event in patients with symptomatic chronic heart failure with reduced ejection fraction (HFrEF), in combination with other heart failure therapies. A PDUFA date is set for Jan. 20, 2021;	
 	 	 	
	· 	Merck presented new supportive analyses from the Phase 2b trial evaluating the safety and efficacy of islatravir, the company’s investigational oral nucleoside reverse transcriptase translocation inhibitor (NRTTI), in combination with PIFELTRO (doravirine), in adults with HIV-1 infection who had not previously received antiretroviral treatment at the 23rd International AIDS Conference; and	
 	 	 	
	· 	Merck announced FDA approval of RECARBRIO (imipenem, cilastatin, and relebactam) for the treatment of adults with hospital-acquired and ventilator-associated bacterial pneumonia (HABP/VABP).	
 
Business Developments
 
	· 	Merck signed an agreement to acquire U.S. rights from Virbac to the SENTINEL brand of combination parasiticides, used to protect dogs against fleas and common intestinal parasites including heartworm, broadening its companion animal business. The acquisition closed in July; and	
 	 	 	
	· 	Merck announced the completion of its acquisition of Quantified Ag, a leading data and analytics company that monitors cattle body temperature and movement in order to detect illness early.	
 
Organon & Co.
 
	· 	Merck announced the external appointments of Organon & Co. Chief Financial Officer and Chief Information Officer as well as the external appointment of Organon’s General Counsel. Merck remains fully committed to its spinoff transaction and continues to expect completion in the first half of 2021.	
 
Second-Quarter Financial Impact of COVID-19
 
In the second quarter, the estimated overall negative impact of the COVID-19 pandemic to Merck’s revenue was approximately $1.6 billion, consisting of approximately $1.5 billion for pharmaceuticals and approximately $100 million for Animal Health. As expected, within the company’s human health business, revenue was negatively impacted by reduced access to health care providers given social distancing measures and within Animal Health, by reduced veterinary visits and decreased protein and milk demand.
 
Operating expenses were positively impacted in the second quarter by approximately $325 million, primarily driven by lower promotional and selling costs as well as lower research and development (R&D) expenses.
 
Page 6

Second-Quarter Revenue Performance
 
The following table reflects sales of the company’s top pharmaceutical products, as well as sales of animal health products.
 
$ in millions	 	Second Quarter	 	
 	 	2020	 	 	2019	 	 	
Change	 	 	Change Ex-Exchange	 	
Total Sales	 	$	10,872	 	 	$	11,760	 	 	 	-8	%	 	 	-5	%	
Pharmaceutical	 	 	9,679	 	 	 	10,460	 	 	 	-7	%	 	 	-6	%	
KEYTRUDA	 	 	3,388	 	 	 	2,634	 	 	 	29	%	 	 	31	%	
JANUVIA / JANUMET	 	 	1,344	 	 	 	1,441	 	 	 	-7	%	 	 	-5	%	
GARDASIL / GARDASIL 9	 	 	656	 	 	 	886	 	 	 	-26	%	 	 	-24	%	
PROQUAD, M-M-R II and VARIVAX	 	 	378	 	 	 	675	 	 	 	-44	%	 	 	-43	%	
BRIDION	 	 	224	 	 	 	278	 	 	 	-19	%	 	 	-18	%	
ISENTRESS / ISENTRESS HD	 	 	196	 	 	 	247	 	 	 	-21	%	 	 	-17	%	
SIMPONI	 	 	191	 	 	 	214	 	 	 	-11	%	 	 	-8	%	
Lynparza*	 	 	178	 	 	 	111	 	 	 	61	%	 	 	62	%	
ZETIA / VYTORIN	 	 	175	 	 	 	232	 	 	 	-24	%	 	 	-23	%	
ROTATEQ	 	 	168	 	 	 	172	 	 	 	-2	%	 	 	-1	%	
Lenvima*	 	 	151	 	 	 	97	 	 	 	57	%	 	 	57	%	
Animal Health	 	 	1,101	 	 	 	1,124	 	 	 	-2	%	 	 	3	%	
Livestock	 	 	648	 	 	 	671	 	 	 	-3	%	 	 	3	%	
Companion Animals	 	 	453	 	 	 	453	 	 	 	0	%	 	 	3	%	
Other Revenues	 	 	92	 	 	 	176	 	 	 	-47	%	 	 	-23	%	
*Alliance revenue for these products represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.
 
Pharmaceutical Revenue
 
Second-quarter pharmaceutical sales decreased by $780 million, or 7%, to $9.7 billion; excluding the unfavorable effect from foreign exchange, sales declined by 6%. The decrease was driven primarily by the negative impact of the COVID-19 pandemic on vaccines and hospital acute care products and the ongoing impacts of the loss of market exclusivity for several products, partially offset by growth in oncology.
 
The decline in vaccine sales was primarily driven by GARDASIL (Human Papillomavirus Quadrivalent [Types 6,11,16 and 18] Vaccine, Recombinant)/GARDASIL 9, vaccines to prevent certain cancers and other diseases caused by HPV, largely due to lower demand in the U.S. and Hong Kong, SAR, PRC attributable to the COVID-19 pandemic, partially offset by higher demand in China.
 
Also contributing to the decline in vaccine sales were pediatric vaccines PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a combination vaccine to help protect against measles, mumps, rubella and varicella; M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help prevent measles, mumps and rubella; and VARIVAX (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox, primarily attributable to lower demand in the U.S. related to the COVID-19 pandemic. Lower demand for M-M-R II in the U.S. due to fewer measles outbreaks and the timing of government tenders in Latin America for VARIVAX also contributed to the sales declines.
 
Sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, declined in the second quarter, primarily reflecting lower demand in the U.S. related to the COVID-19 pandemic, partially offset by higher volumes in Europe attributable in part to increased demand for pneumococcal vaccination during the COVID-19 pandemic.

Page 7

Performance in hospital acute care reflects lower demand globally for BRIDION (sugammadex), a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery, driven by reductions in elective surgeries due to the COVID-19 pandemic, partially offset by the ongoing launch of PREVYMIS (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant.
 
Pharmaceutical sales performance for the quarter also was negatively affected by the ongoing impacts from the loss of market exclusivity, including for NUVARING (etonogestrel/ethinyl estradiol vaginal ring), NOXAFIL (posaconazole), EMEND (aprepitant)/EMEND (fosaprepitant dimeglumine) for Injection, VYTORIN (ezetimibe/simvastatin), CUBICIN (daptomycin) and REMICADE (infliximab). In addition, the decline in sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI) reflects continued pricing pressure in the U.S.
 
Growth in oncology partially offset the decline in pharmaceutical revenue, largely driven by higher sales of KEYTRUDA, which grew 29% to $3.4 billion for the quarter. Continued strong momentum from the NSCLC indications as well as continued uptake in other indications, including adjuvant melanoma, renal cell carcinoma (RCC), bladder, head and neck squamous cell carcinoma (HNSCC) and microsatellite instability-high (MSI-H) cancers, was partially offset by the negative impacts of the COVID-19 pandemic globally. Also contributing to growth in oncology was higher alliance revenue related to Lynparza and Lenvima reflecting continued uptake in approved indications in the U.S., Europe and China.
 
Animal Health Revenue
 
Animal Health sales totaled $1.1 billion for the second quarter of 2020, a decrease of 2% compared with the second quarter of 2019; excluding the unfavorable effect from foreign exchange, Animal Health sales grew 3%. Performance in livestock products reflects lower demand driven by reduced protein and milk demand due to restaurant and school closures resulting from the COVID-19 pandemic, partially offset by an additional month of sales included in the current quarter related to the 2019 acquisition of Antelliq Corporation. Performance in companion animal products was driven largely by lower demand in companion animal vaccines due to reduced veterinary access resulting from the COVID-19 pandemic, offset by higher demand for the BRAVECTO (fluralaner) line of products for parasitic control.
 
Second-Quarter Expense, EPS and Related Information
 
The tables below present selected expense information.
 
$ in millions
 
Second-Quarter 2020	 	 
 
GAAP	 	 	Acquisition- and
Divestiture-Related
Costs3	 	 	 
Restructuring
Costs	 	 	 
Certain Other
Items	 	 	 
 
Non-GAAP2	 	
Cost of sales	 	$	3,159	 	 	$	282	 	 	$	25	 	 	$	-	 	 	$	2,852	 	
Selling, general and administrative	 	 	2,378	 	 	 	163	 	 	 	11	 	 	 	-	 	 	 	2,204	 	
Research and development	 	 	2,123	 	 	 	(65	)	 	 	31	 	 	 	-	 	 	 	2,157	 	
Restructuring costs	 	 	83	 	 	 	-	 	 	 	83	 	 	 	-	 	 	 	-	 	
Other (income) expense, net	 	 	(390	)	 	 	63	 	 	 	-	 	 	 	(16	)	 	 	(437	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Second-Quarter 2019	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	$	3,401	 	 	$	447	 	 	$	65	 	 	$	-	 	 	$	2,889	 	
Selling, general and administrative	 	 	2,712	 	 	 	61	 	 	 	32	 	 	 	-	 	 	 	2,619	 	
Research and development	 	 	2,189	 	 	 	4	 	 	 	3	 	 	 	-	 	 	 	2,182	 	
Restructuring costs	 	 	59	 	 	 	-	 	 	 	59	 	 	 	-	 	 	 	-	 	
Other (income) expense, net	 	 	140	 	 	 	148	 	 	 	–	 	 	 	48	 	 	 	(56	)	

3 Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also includes integration, transaction and certain other costs related to business acquisitions and divestitures.

Page 8

GAAP Expense, EPS and Related Information
 
Gross margin was 70.9% for the second quarter of 2020 compared to 71.1% for the second quarter of 2019. The decrease reflects higher amortization of intangible assets related to collaborations and unfavorable manufacturing variances, partially offset by the favorable effects of foreign exchange, product mix and lower acquisition- and divestiture-related costs.
 
Selling, general and administrative expenses were $2.4 billion in the second quarter of 2020, a decrease of 12% compared to the second quarter of 2019. The decrease primarily reflects lower promotion, selling and administrative costs, including less travel and meeting expenses, due in part to the COVID-19 pandemic, and the favorable effects of foreign exchange, partially offset by higher acquisition- and divestiture-related costs, including costs related to the company’s planned spinoff of Organon.
 
Research and development expenses were $2.1 billion in the second quarter of 2020, a decrease of 3% compared with the second quarter of 2019. The decrease was primarily driven by lower acquisition- and divestiture-related costs and lower laboratory, travel and meeting expenses due to the COVID-19 pandemic, partially offset by higher expenses related to clinical development and increased investment in discovery research and early drug development.
 
Other (income) expense, net, was $390 million of income in the second quarter of 2020 compared to $140 million of expense in the second quarter of 2019, primarily due to higher income from investments in equity securities, net, which was $551 million in 2020 compared with $58 million in 2019, largely from the recognition of unrealized gains on securities.
 
The effective income tax rate was 14.5% for the second quarter of 2020 compared to 18.9% in the second quarter of 2019, reflecting the favorable impact of earnings mix.
 
GAAP EPS was $1.18 for the second quarter of 2020 compared with $1.03 for the second quarter of 2019.
 
Non-GAAP Expense, EPS and Related Information
 
Non-GAAP gross margin was 73.8% for the second quarter of 2020 compared to 75.4% for the second quarter of 2019. The decrease in non-GAAP gross margin reflects higher amortization of intangible assets related to collaborations and unfavorable manufacturing variances, partially offset by the favorable effects of foreign exchange and product mix.
 
Non-GAAP selling, general and administrative expenses were $2.2 billion in the second quarter of 2020, a decrease of 16% compared to the second quarter of 2019. The decrease primarily reflects lower promotion, selling and administrative costs, including less travel and meeting expenses, due in part to the COVID-19 pandemic and the favorable effects of foreign exchange.
 
Non-GAAP R&D expenses were $2.2 billion in the second quarter of 2020, a 1% decrease compared to the second quarter of 2019. The decrease was primarily driven by lower laboratory, travel and meetings expenses due to the COVID-19 pandemic, partially offset by higher expenses related to clinical development and increased investment in discovery research and early drug development.
 
Non-GAAP other (income) expense, net, was $437 million of income in the second quarter of 2020 compared to $56 million of income in the second quarter of 2019, primarily due to income from investments in equity securities, net, which was $541 million in 2020 compared with $58 million in 2019, largely from the recognition of unrealized gains on securities.
 
The non-GAAP effective income tax rate was 14.7% for the second quarter of 2020 compared to 18.4% for the second quarter of 2019, reflecting the favorable impact of earnings mix.
 
Non-GAAP EPS was $1.37 for the second quarter of 2020 compared with $1.30 for the second quarter of 2019.
 
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.

Page 9

$ in millions, except EPS amounts	 	Second Quarter	 	
 	 	2020	 	 	2019	 	
EPS	 	 	 	 	 	 	
GAAP EPS	 	$	1.18	 	 	$	1.03	 	
Difference	 	 	0.19	 	 	 	0.27	 	
Non-GAAP EPS that excludes items listed below2	 	$	1.37	 	 	$	1.30	 	
 	 	 	 	 	 	 	 	 	
Net Income	 	 	 	 	 	 	 	 	
GAAP net income1	 	$	3,002	 	 	$	2,670	 	
Difference	 	 	482	 	 	 	686	 	
Non-GAAP net income that excludes items listed below1,2	 	$	3,484	 	 	$	3,356	 	
 	 	 	 	 	 	 	 	 	
Decrease (Increase) in Net Income Due to Excluded Items:	 	 	 	 	 	 	 	 	
Acquisition- and divestiture-related costs3	 	$	443	 	 	$	660	 	
Restructuring costs	 	 	150	 	 	 	159	 	
Other	 	 	(16	)	 	 	48	 	
Net decrease (increase) in income before taxes	 	 	577	 	 	 	867	 	
Income tax (benefit) expense4	 	 	(95	)	 	 	(145	)	
Acquisition- and divestiture-related costs attributable to noncontrolling interests	 	 	-	 	 	 	(36	)	
Decrease (increase) in net income	 	$	482	 	 	$	686	 	
 
Financial Outlook
 
The full-year updated guidance that Merck is providing below includes its current assumption of the impact from the COVID-19 pandemic, which is expected to be partially offset by favorability from continued underlying business strength. While the company continues to expect to rely on governmental authorities to determine when operations can return to normal and is cognizant that the duration, spread and severity of the outbreak will be critical determinants, for the purposes of the full-year 2020 guidance estimates, the company has assumed the majority of the negative impact occurred during the second quarter, with a gradual recovery having commenced late in the second quarter and extending through the third quarter, with a return to normal operating levels in the fourth quarter.
 
For the full-year 2020, Merck now expects an unfavorable impact to revenue of approximately $1.95 billion (excluding the impact of foreign exchange) due to the COVID-19 pandemic, comprised of approximately $1.8 billion for pharmaceuticals and approximately $150 million for Animal Health, including the impacts in the first half of the year.
 
For the full-year 2020, Merck continues to expect a net favorable impact to operating expenses of approximately $400 million, reflecting the favorable impact of lower spending due to the COVID-19 pandemic, largely reflected in the first half of 2020, partially offset by anticipated spending on recently-initiated COVID-19-related vaccine and antiviral research programs.
 
Merck narrowed and raised its full-year 2020 revenue range to be between $47.2 billion and $48.7 billion, including a negative impact from foreign exchange of approximately 2% at mid-July exchange rates.
 
Merck narrowed and raised its full-year 2020 GAAP EPS to be between $4.58 and $4.73. Merck narrowed and raised its full-year 2020 non-GAAP EPS to be between $5.63 and $5.78, including a negative impact from foreign exchange of approximately 3% at mid-July exchange rates. The non-GAAP range excludes acquisition- and divestiture-related costs and costs related to restructuring programs.

 
 
4 Includes the estimated tax impact on the reconciling items.

Page 10

The following table summarizes the company’s full-year 2020 financial guidance.
 
 	 	GAAP	 	Non-GAAP2	
Revenue	 	$47.2 to $48.7 billion	 	$47.2 to $48.7 billion*	
Operating expenses	 	Lower than 2019 by a low-single-digit rate	 	Roughly in line with 2019	
Effective tax rate	 	15.0% to 15.5%	 	16.0% to 16.5%	
EPS**	 	$4.58 to $4.73	 	$5.63 to $5.78	
*The company does not have any non-GAAP adjustments to revenue.
**EPS guidance for 2020 assumes a share count (assuming dilution) of approximately 2.54 billion shares.
 
A reconciliation of anticipated 2020 GAAP EPS to non-GAAP EPS and the items excluded from non-GAAP EPS are provided in the table below.
 
$ in millions, except EPS amounts	 	Full-Year 2020	 	
GAAP EPS	 	 	$4.58 to $4.73	 	
Difference	 	 	1.05	 	
Non-GAAP EPS that excludes items listed below2	 	 	$5.63 to $5.78	 	
 	 	 	 	 	
Acquisition- and divestiture-related costs	 	$	2,500	 	
Restructuring costs	 	 	800	 	
Net decrease (increase) in income before taxes	 	 	3,300	 	
Estimated income tax (benefit) expense	 	 	(640	)	
Decrease (increase) in net income	 	$	2,660	 	
 
Earnings Conference Call
 
Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EDT on Merck’s website at https://investors.merck.com/events-and-presentations/default.aspx. Institutional investors and analysts can participate in the call (833) 353-0277 or toll free (469) 886-1947 and using ID code number 2753878. Members of the media are invited to monitor the call by dialing (833) 353-0277 or toll free (469) 886-1947 and using ID code number 2753878. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.
 
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 world’s 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.

Page 11

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 company’s 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 recent 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 company’s 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 company’s 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 company’s 2019 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).
 
# # #

Page 12

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1
 
 	 	GAAP	 	 	 	 	 	GAAP	 	 	 	 	
 	 	2Q20	 	 	2Q19	 	 	% Change	 	 	June YTD
2020	 	 	June YTD
2019	 	 	% Change	 	
Sales	 	$	10,872	 	 	$	11,760	 	 	 	-8	%	 	$	22,929	 	 	$	22,575	 	 	 	2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Costs, Expenses and Other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales (1)	 	 	3,159	 	 	 	3,401	 	 	 	-7	%	 	 	6,471	 	 	 	6,453	 	 	 	0	%	
Selling, general and administrative (1) 	 	 	2,378	 	 	 	2,712	 	 	 	-12	%	 	 	4,933	 	 	 	5,138	 	 	 	-4	%	
Research and development (1)	 	 	2,123	 	 	 	2,189	 	 	 	-3	%	 	 	4,331	 	 	 	4,119	 	 	 	5	%	
Restructuring costs (2) 	 	 	83	 	 	 	59	 	 	 	41	%	 	 	155	 	 	 	212	 	 	 	-27	%	
Other (income) expense, net (1)	 	 	(390	)	 	 	140	 	 	 	*	 	 	 	(318	)	 	 	327	 	 	 	*	 	
Income Before Taxes	 	 	3,519	 	 	 	3,259	 	 	 	8	%	 	 	7,357	 	 	 	6,326	 	 	 	16	%	
Taxes on Income (1)	 	 	509	 	 	 	615	 	 	 	 	 	 	 	1,128	 	 	 	820	 	 	 	 	 	
Net Income	 	 	3,010	 	 	 	2,644	 	 	 	14	%	 	 	6,229	 	 	 	5,506	 	 	 	13	%	
Less: Net Income (Loss) Attributable to Noncontrolling Interests (1)	 	 	8	 	 	 	(26	)	 	 	 	 	 	 	8	 	 	 	(79	)	 	 	 	 	
Net Income Attributable to Merck & Co., Inc.	 	$	3,002	 	 	$	2,670	 	 	 	12	%	 	$	6,221	 	 	$	5,585	 	 	 	11	%	
Earnings per Common Share Assuming Dilution	 	$	1.18	 	 	$	1.03	 	 	 	15	%	 	$	2.45	 	 	$	2.15	 	 	 	14	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Shares Outstanding Assuming Dilution	 	 	2,536	 	 	 	2,588	 	 	 	 	 	 	 	2,542	 	 	 	2,596	 	 	 	 	 	
Tax Rate (3)	 	 	14.5	%	 	 	18.9	%	 	 	 	 	 	 	15.3	%	 	 	13.0	%	 	 	 	 	
 
* 100% or greater	
 	
(1) Amounts include the impact of acquisition and divestiture-related costs, restructuring costs and certain other items. See accompanying tables for details. 	
 	
(2) Represents separation and other related costs associated with restructuring activities under the company's formal restructuring programs. 	
 	
(3) The effective income tax rate for the first six months of 2019 reflects a net tax benefit of $360 million related to the settlement of certain federal income tax matters.  	

 

 
MERCK & CO., INC.
GAAP TO NON-GAAP RECONCILIATION
SECOND QUARTER 2020
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2a
 
 	 	GAAP	 	 	Acquisition and
Divestiture-Related
Costs (1)	 	 	Restructuring
Costs (2)	 	 	Certain Other
Items	 	 	Adjustment
Subtotal	 	 	Non-GAAP	 	
Cost of sales	 	$	3,159	 	 	 	282	 	 	 	25	 	 	 	 	 	 	 	307	 	 	$	2,852	 	
Selling, general and administrative	 	 	2,378	 	 	 	163	 	 	 	11	 	 	 	 	 	 	 	174	 	 	 	2,204	 	
Research and development	 	 	2,123	 	 	 	(65	)	 	 	31	 	 	 	 	 	 	 	(34	)	 	 	2,157	 	
Restructuring costs	 	 	83	 	 	 	 	 	 	 	83	 	 	 	 	 	 	 	83	 	 	 	-	 	
Other (income) expense, net	 	 	(390	)	 	 	63	 	 	 	 	 	 	 	(16	)	 	 	47	 	 	 	(437	)	
Income Before Taxes	 	 	3,519	 	 	 	(443	)	 	 	(150	)	 	 	16	 	 	 	(577	)	 	 	4,096	 	
Income Tax Provision (Benefit)	 	 	509	 	 	 	(73	)(3)	 	 	(27	)(3)	 	 	5	(3)	 	 	(95	)	 	 	604	 	
Net Income	 	 	3,010	 	 	 	(370	)	 	 	(123	)	 	 	11	 	 	 	(482	)	 	 	3,492	 	
Less: Net Income Attributable to Noncontrolling Interests	 	 	8	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-	 	 	 	8	 	
Net Income Attributable to Merck & Co., Inc.	 	 	3,002	 	 	 	(370	)	 	 	(123	)	 	 	11		 	 	(482	)	 	 	3,484	 	
Earnings per Common Share Assuming Dilution	 	$	1.18	 	 	 	(0.14	)	 	 	(0.05	)	 	 	-	 	 	 	(0.19	)	 	$	1.37	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax Rate	 	 	14.5	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	14.7	%	
 
Only the line items that are affected by non-GAAP adjustments are shown.	
 	
Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. 	
 	
(1) Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets recognized as a result of business acquisitions.  Amounts included in selling, general and administrative expenses reflect $119 million of expenses related to the company's planned spin-off of Organon & Co., and other acquisition and divestiture-related costs.  Amounts included in research and development expenses primarily reflect a reduction in expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration.  Amounts included in other (income) expense, net, primarily reflect an increase in the estimated fair value measurement of liabilities for contingent consideration related to the termination of the Sanofi-Pasteur MSD joint venture.	
 	
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs.	
 	
(3) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.	

 

MERCK & CO., INC.
GAAP TO NON-GAAP RECONCILIATION
SIX MONTHS ENDED JUNE 30, 2020
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2b
 
 	 	GAAP	 	 	Acquisition and
Divestiture-Related
Costs (1)	 	 	Restructuring
Costs (2)	 	 	Certain Other
Items	 	 	Adjustment
Subtotal	 	 	Non-GAAP	 	
Cost of sales	 	$	6,471	 	 	 	578	 	 	 	93	 	 	 	 	 	 	 	671	 	 	$	5,800	 	
Selling, general and administrative	 	 	4,933	 	 	 	441	 	 	 	22	 	 	 	 	 	 	 	463	 	 	 	4,470	 	
Research and development	 	 	4,331	 	 	 	(28	)	 	 	48	 	 	 	 	 	 	 	20	 	 	 	4,311	 	
Restructuring costs	 	 	155	 	 	 	 	 	 	 	155	 	 	 	 	 	 	 	155	 	 	 	-	 	
Other (income) expense, net	 	 	(318	)	 	 	52	 	 	 	 	 	 	 	(16	)	 	 	36	 	 	 	(354	)	
Income Before Taxes	 	 	7,357	 	 	 	(1,043	)	 	 	(318	)	 	 	16	 	 	 	(1,345	)	 	 	8,702	 	
Income Tax Provision (Benefit)	 	 	1,128	 	 	 	(231	)(3)	 	 	(34	)(3)	 	 	5	(3)	 	 	(260	)	 	 	1,388	 	
Net Income	 	 	6,229	 	 	 	(812	)	 	 	(284	)	 	 	11	 	 	 	(1,085	)	 	 	7,314	 	
Less: Net Income Attributable to Noncontrolling Interests	 	 	8	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	-	 	 	 	8	 	
Net Income Attributable to Merck & Co., Inc.	 	 	6,221	 	 	 	(812	)	 	 	(284	)	 	 	11		 	 	(1,085	)	 	 	7,306	 	
Earnings per Common Share Assuming Dilution	 	$	2.45	 	 	 	(0.32	)	 	 	(0.10	)	 	 	-	 	 	 	(0.42	)	 	$	2.87	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax Rate	 	 	15.3	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	16.0	%	
 
Only the line items that are affected by non-GAAP adjustments are shown.	
 	
Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. 	
 	
(1) Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets recognized as a result of business acquisitions.  Amounts included in selling, general and administrative expenses reflect $284 million of expenses related to the company's planned spin-off of Organon & Co., approximately $95 million of costs related to the acquisition of ArQule, Inc., and other acquisition and divestiture-related costs.  Amounts included in research and development expenses primarily reflect a reduction in expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration.  Amounts included in other (income) expense, net, primarily reflect an increase in the estimated fair value measurement of liabilities for contingent consideration related to the termination of the Sanofi-Pasteur MSD joint venture, partially offset by royalty income.	
 	
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs.	
 	
(3) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.	

 

MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3
 
 	 	 	2020	 	 	 	2019	 	 	 	2Q	 	 	 	June YTD	 	
 	 	 	1Q	 	 	 	2Q	 	 	 	June YTD	 	 	 	1Q	 	 	 	2Q	 	 	 	June YTD	 	 	 	3Q	 	 	 	4Q	 	 	 	Full Year	 	 	 	Nom %	 	 	 	Ex-Exch %	 	 	 	Nom %	 	 	 	Ex-Exch %	 	
TOTAL SALES (1)	 	$	12,057	 	 	$	10,872	 	 	$	22,929	 	 	$	10,816	 	 	$	11,760	 	 	$	22,575	 	 	$	12,397	 	 	$	11,868	 	 	$	46,840	 	 	 	-8	 	 	 	-5	 	 	 	2	 	 	 	4	 	
PHARMACEUTICAL	 	 	10,655	 	 	 	9,679	 	 	 	20,334	 	 	 	9,663	 	 	 	10,460	 	 	 	20,123	 	 	 	11,095	 	 	 	10,533	 	 	 	41,751	 	 	 	-7	 	 	 	-6	 	 	 	1	 	 	 	3	 	
Oncology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Keytruda	 	 	3,284	 	 	 	3,388	 	 	 	6,672	 	 	 	2,269	 	 	 	2,634	 	 	 	4,903	 	 	 	3,070	 	 	 	3,111	 	 	 	11,084	 	 	 	29	 	 	 	31	 	 	 	36	 	 	 	38	 	
Alliance Revenue – Lynparza (2)	 	 	145	 	 	 	178	 	 	 	323	 	 	 	79	 	 	 	111	 	 	 	190	 	 	 	123	 	 	 	132	 	 	 	444	 	 	 	61	 	 	 	62	 	 	 	70	 	 	 	72	 	
Alliance Revenue – Lenvima (2)	 	 	128	 	 	 	151	 	 	 	279	 	 	 	74	 	 	 	97	 	 	 	171	 	 	 	109	 	 	 	124	 	 	 	404	 	 	 	57	 	 	 	57	 	 	 	63	 	 	 	64	 	
Emend	 	 	43	 	 	 	33	 	 	 	76	 	 	 	117	 	 	 	121	 	 	 	237	 	 	 	98	 	 	 	53	 	 	 	388	 	 	 	-72	 	 	 	-71	 	 	 	-68	 	 	 	-67	 	
Vaccines (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gardasil / Gardasil 9	 	 	1,097	 	 	 	656	 	 	 	1,753	 	 	 	838	 	 	 	886	 	 	 	1,724	 	 	 	1,320	 	 	 	693	 	 	 	3,737	 	 	 	-26	 	 	 	-24	 	 	 	2	 	 	 	4	 	
ProQuad / M-M-R II / Varivax	 	 	435	 	 	 	378	 	 	 	813	 	 	 	496	 	 	 	675	 	 	 	1,171	 	 	 	623	 	 	 	481	 	 	 	2,275	 	 	 	-44	 	 	 	-43	 	 	 	-31	 	 	 	-30	 	
RotaTeq	 	 	222	 	 	 	168	 	 	 	391	 	 	 	211	 	 	 	172	 	 	 	383	 	 	 	180	 	 	 	227	 	 	 	791	 	 	 	-2	 	 	 	-1	 	 	 	2	 	 	 	3	 	
Pneumovax 23	 	 	256	 	 	 	117	 	 	 	373	 	 	 	185	 	 	 	170	 	 	 	355	 	 	 	237	 	 	 	334	 	 	 	926	 	 	 	-31	 	 	 	-29	 	 	 	5	 	 	 	7	 	
Vaqta	 	 	60	 	 	 	28	 	 	 	88	 	 	 	47	 	 	 	58	 	 	 	105	 	 	 	62	 	 	 	71	 	 	 	238	 	 	 	-52	 	 	 	-51	 	 	 	-17	 	 	 	-14	 	
Hospital Acute Care	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Bridion	 	 	299	 	 	 	224	 	 	 	524	 	 	 	255	 	 	 	278	 	 	 	533	 	 	 	284	 	 	 	313	 	 	 	1,131	 	 	 	-19	 	 	 	-18	 	 	 	-2	 	 	 	 	 	
Noxafil	 	 	94	 	 	 	73	 	 	 	168	 	 	 	190	 	 	 	193	 	 	 	383	 	 	 	177	 	 	 	103	 	 	 	662	 	 	 	-62	 	 	 	-60	 	 	 	-56	 	 	 	-55	 	
Prevymis	 	 	60	 	 	 	63	 	 	 	123	 	 	 	32	 	 	 	38	 	 	 	70	 	 	 	45	 	 	 	50	 	 	 	165	 	 	 	66	 	 	 	67	 	 	 	76	 	 	 	78	 	
Primaxin	 	 	51	 	 	 	64	 	 	 	115	 	 	 	59	 	 	 	71	 	 	 	130	 	 	 	77	 	 	 	67	 	 	 	273	 	 	 	-10	 	 	 	-6	 	 	 	-11	 	 	 	-8	 	
Invanz	 	 	64	 	 	 	43	 	 	 	108	 	 	 	72	 	 	 	78	 	 	 	150	 	 	 	57	 	 	 	57	 	 	 	263	 	 	 	-45	 	 	 	-39	 	 	 	-28	 	 	 	-24	 	
Cancidas	 	 	55	 	 	 	43	 	 	 	98	 	 	 	61	 	 	 	67	 	 	 	129	 	 	 	62	 	 	 	58	 	 	 	249	 	 	 	-36	 	 	 	-33	 	 	 	-23	 	 	 	-21	 	
Cubicin	 	 	46	 	 	 	32	 	 	 	78	 	 	 	88	 	 	 	67	 	 	 	155	 	 	 	52	 	 	 	50	 	 	 	257	 	 	 	-53	 	 	 	-51	 	 	 	-50	 	 	 	-48	 	
Zerbaxa	 	 	37	 	 	 	32	 	 	 	69	 	 	 	26	 	 	 	27	 	 	 	53	 	 	 	35	 	 	 	32	 	 	 	121	 	 	 	19	 	 	 	23	 	 	 	30	 	 	 	33	 	
Immunology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Simponi	 	 	215	 	 	 	191	 	 	 	406	 	 	 	208	 	 	 	214	 	 	 	422	 	 	 	203	 	 	 	205	 	 	 	830	 	 	 	-11	 	 	 	-8	 	 	 	-4	 	 	 	-1	 	
Remicade	 	 	88	 	 	 	73	 	 	 	160	 	 	 	123	 	 	 	98	 	 	 	221	 	 	 	101	 	 	 	89	 	 	 	411	 	 	 	-26	 	 	 	-25	 	 	 	-28	 	 	 	-26	 	
Neuroscience	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Belsomra	 	 	79	 	 	 	84	 	 	 	163	 	 	 	67	 	 	 	76	 	 	 	143	 	 	 	80	 	 	 	83	 	 	 	306	 	 	 	10	 	 	 	8	 	 	 	14	 	 	 	13	 	
Virology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Isentress / Isentress HD	 	 	245	 	 	 	196	 	 	 	441	 	 	 	255	 	 	 	247	 	 	 	502	 	 	 	250	 	 	 	223	 	 	 	975	 	 	 	-21	 	 	 	-17	 	 	 	-12	 	 	 	-9	 	
Zepatier	 	 	55	 	 	 	39	 	 	 	94	 	 	 	114	 	 	 	108	 	 	 	221	 	 	 	83	 	 	 	66	 	 	 	370	 	 	 	-63	 	 	 	-62	 	 	 	-57	 	 	 	-56	 	
Cardiovascular	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Zetia	 	 	145	 	 	 	137	 	 	 	282	 	 	 	140	 	 	 	156	 	 	 	296	 	 	 	147	 	 	 	146	 	 	 	590	 	 	 	-12	 	 	 	-12	 	 	 	-5	 	 	 	-4	 	
Vytorin	 	 	53	 	 	 	39	 	 	 	92	 	 	 	97	 	 	 	76	 	 	 	174	 	 	 	57	 	 	 	54	 	 	 	285	 	 	 	-49	 	 	 	-46	 	 	 	-47	 	 	 	-45	 	
Atozet	 	 	122	 	 	 	115	 	 	 	238	 	 	 	94	 	 	 	92	 	 	 	186	 	 	 	97	 	 	 	108	 	 	 	391	 	 	 	25	 	 	 	28	 	 	 	28	 	 	 	31	 	
Alliance Revenue - Adempas (4)	 	 	53	 	 	 	79	 	 	 	133	 	 	 	42	 	 	 	51	 	 	 	94	 	 	 	50	 	 	 	60	 	 	 	204	 	 	 	54	 	 	 	54	 	 	 	41	 	 	 	41	 	
Adempas (5)	 	 	56	 	 	 	57	 	 	 	113	 	 	 	48	 	 	 	53	 	 	 	100	 	 	 	57	 	 	 	57	 	 	 	215	 	 	 	8	 	 	 	9	 	 	 	12	 	 	 	14	 	
Diabetes (6)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Januvia	 	 	774	 	 	 	854	 	 	 	1,628	 	 	 	824	 	 	 	908	 	 	 	1,732	 	 	 	807	 	 	 	943	 	 	 	3,482	 	 	 	-6	 	 	 	-5	 	 	 	-6	 	 	 	-5	 	
Janumet	 	 	503	 	 	 	490	 	 	 	993	 	 	 	530	 	 	 	533	 	 	 	1,063	 	 	 	503	 	 	 	475	 	 	 	2,041	 	 	 	-8	 	 	 	-5	 	 	 	-7	 	 	 	-4	 	
Women's Health	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Implanon / Nexplanon	 	 	195	 	 	 	132	 	 	 	326	 	 	 	199	 	 	 	183	 	 	 	382	 	 	 	199	 	 	 	206	 	 	 	787	 	 	 	-28	 	 	 	-26	 	 	 	-15	 	 	 	-13	 	
NuvaRing	 	 	63	 	 	 	63	 	 	 	126	 	 	 	219	 	 	 	240	 	 	 	459	 	 	 	241	 	 	 	179	 	 	 	879	 	 	 	-74	 	 	 	-73	 	 	 	-73	 	 	 	-72	 	
Diversified Brands	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Singulair	 	 	155	 	 	 	100	 	 	 	255	 	 	 	191	 	 	 	160	 	 	 	352	 	 	 	152	 	 	 	195	 	 	 	698	 	 	 	-38	 	 	 	-37	 	 	 	-27	 	 	 	-26	 	
Cozaar / Hyzaar	 	 	102	 	 	 	98	 	 	 	200	 	 	 	103	 	 	 	109	 	 	 	213	 	 	 	116	 	 	 	113	 	 	 	442	 	 	 	-10	 	 	 	-7	 	 	 	-6	 	 	 	-3	 	
Arcoxia	 	 	70	 	 	 	65	 	 	 	135	 	 	 	75	 	 	 	75	 	 	 	149	 	 	 	72	 	 	 	67	 	 	 	288	 	 	 	-13	 	 	 	-9	 	 	 	-9	 	 	 	-7	 	
Nasonex	 	 	71	 	 	 	49	 	 	 	120	 	 	 	96	 	 	 	72	 	 	 	168	 	 	 	58	 	 	 	67	 	 	 	293	 	 	 	-32	 	 	 	-28	 	 	 	-29	 	 	 	-26	 	
Follistim AQ	 	 	41	 	 	 	44	 	 	 	85	 	 	 	57	 	 	 	63	 	 	 	121	 	 	 	62	 	 	 	58	 	 	 	241	 	 	 	-31	 	 	 	-30	 	 	 	-29	 	 	 	-28	 	
Other Pharmaceutical (7)	 	 	1,194	 	 	 	1,103	 	 	 	2,293	 	 	 	1,082	 	 	 	1,203	 	 	 	2,283	 	 	 	1,149	 	 	 	1,183	 	 	 	4,615	 	 	 	-8	 	 	 	-6	 	 	 	 	 	 	 	2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ANIMAL HEALTH	 	 	1,214	 	 	 	1,101	 	 	 	2,314	 	 	 	1,025	 	 	 	1,124	 	 	 	2,149	 	 	 	1,122	 	 	 	1,122	 	 	 	4,393	 	 	 	-2	 	 	 	3	 	 	 	8	 	 	 	12	 	
Livestock	 	 	739	 	 	 	648	 	 	 	1,386	 	 	 	611	 	 	 	671	 	 	 	1,282	 	 	 	726	 	 	 	777	 	 	 	2,784	 	 	 	-3	 	 	 	3	 	 	 	8	 	 	 	13	 	
Companion Animals	 	 	475	 	 	 	453	 	 	 	928	 	 	 	414	 	 	 	453	 	 	 	867	 	 	 	396	 	 	 	345	 	 	 	1,609	 	 	 	 	 	 	 	3	 	 	 	7	 	 	 	9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Revenues (8)	 	 	188	 	 	 	92	 	 	 	281	 	 	 	128	 	 	 	176	 	 	 	303	 	 	 	180	 	 	 	213	 	 	 	696	 	 	 	-47	 	 	 	-23	 	 	 	-8	 	 	 	 	 	
                   
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.
                   
(1) Only select products are shown.            
(2) Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.          
(3) Total Vaccines sales were $2,155 million and $1,418 million in the first and second quarters of 2020 and $1,887 million, $2,037 million, $2,517 million and $1,928 million for the first, second, third and fourth quarters of 2019, respectively.
(4) Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs.
(5) Net product sales in Merck's marketing territories.           
(6) Total Diabetes sales were $1,353 million and $1,418 million in the first and second quarters of 2020 and $1,402 million, $1,480 million, $1,360 million and $1,472 million for the first, second, third and fourth quarters of 2019, respectively.
(7) Includes Pharmaceutical products not individually shown above.
(8) Other Revenues are comprised primarily of Healthcare Services segment revenues, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.

 

Exhibit 99.2
 
MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1a
 
 	 	2020	 	2019	 	% Change	 	
 	 	1Q	 	2Q	 	June YTD	 	1Q	 	2Q	 	June YTD	 	3Q	 	4Q	 	Full Year	 	2Q	 	 	June YTD	 	
Sales	 	$	12,057	 	$	10,872	 	$	22,929	 	$	10,816	 	$	11,760	 	$	22,575	 	$	12,397	 	$	11,868	 	$	46,840	 	 	-8	%	 	 	2	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Costs, Expenses and Other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	 	3,312	 	 	3,159	 	 	6,471	 	 	3,052	 	 	3,401	 	 	6,453	 	 	3,990	 	 	3,669	 	 	14,112	 	 	-7	%	 	 	0	%	
Selling, general and administrative	 	 	2,555	 	 	2,378	 	 	4,933	 	 	2,425	 	 	2,712	 	 	5,138	 	 	2,589	 	 	2,888	 	 	10,615	 	 	-12	%	 	 	-4	%	
Research and development	 	 	2,209	 	 	2,123	 	 	4,331	 	 	1,931	 	 	2,189	 	 	4,119	 	 	3,204	 	 	2,548	 	 	9,872	 	 	-3	%	 	 	5	%	
Restructuring costs	 	 	72	 	 	83	 	 	155	 	 	153	 	 	59	 	 	212	 	 	232	 	 	194	 	 	638	 	 	41	%	 	 	-27	%	
Other (income) expense, net	 	 	71	 	 	(390	)	 	(318	)	 	188	 	 	140	 	 	327	 	 	35	 	 	(223	)	 	139	 	 	*	 	 	 	*	 	
Income Before Taxes	 	 	3,838	 	 	3,519	 	 	7,357	 	 	3,067	 	 	3,259	 	 	6,326	 	 	2,347	 	 	2,792	 	 	11,464	 	 	8	%	 	 	16	%	
Taxes on Income	 	 	619	 	 	509	 	 	1,128	 	 	205	 	 	615	 	 	820	 	 	440	 	 	428	 	 	1,687	 	 	 	 	 	 	 	 	
Net Income	 	 	3,219	 	 	3,010	 	 	6,229	 	 	2,862	 	 	2,644	 	 	5,506	 	 	1,907	 	 	2,364	 	 	9,777	 	 	14	%	 	 	13	%	
Less: Net Income (Loss) Attributable to Noncontrolling Interests	 	 	-	 	 	8	 	 	8	 	 	(53	)	 	(26	)	 	(79	)	 	6	 	 	7	 	 	(66	)	 	 	 	 	 	 	 	
Net Income Attributable to Merck & Co., Inc.	 	$	3,219	 	$	3,002	 	$	6,221	 	$	2,915	 	$	2,670	 	$	5,585	 	$	1,901	 	$	2,357	 	$	9,843	 	 	12	%	 	 	11	%	
Earnings per Common Share Assuming Dilution	 	$	1.26	 	$	1.18	 	$	2.45	 	$	1.12	 	$	1.03	 	$	2.15	 	$	0.74	 	$	0.92	 	$	3.81	 	 	15	%	 	 	14	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Shares Outstanding Assuming Dilution	 	 	2,547	 	 	2,536	 	 	2,542	 	 	2,603	 	 	2,588	 	 	2,596	 	 	2,572	 	 	2,559	 	 	2,580	 	 	 	 	 	 	 	 	
Tax Rate	 	 	16.1	%	 	14.5	%	 	15.3	%	 	6.7	%	 	18.9	%	 	13.0	%	 	18.7	%	 	15.3	%	 	14.7	%	 	 	 	 	 	 	 	
 
* 100% or greater	
 	
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.  	

 

MERCK & CO., INC.
GAAP TO NON-GAAP RECONCILIATION
SECOND QUARTER 2019
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2c
 
 	 	GAAP	 	 	Acquisition and Divestiture-Related Costs (1)	 	 	Restructuring Costs (2)	 	 	Certain Other Items	 	 	Adjustment Subtotal	 	 	Non-GAAP	 	
Cost of sales	 	$	3,401	 	 	 	447	 	 	 	65	 	 	 	 	 	 	 	512	 	 	$	2,889	 	
Selling, general and administrative	 	 	2,712	 	 	 	61	 	 	 	32	 	 	 	 	 	 	 	93	 	 	 	2,619	 	
Research and development	 	 	2,189	 	 	 	4	 	 	 	3	 	 	 	 	 	 	 	7	 	 	 	2,182	 	
Restructuring costs	 	 	59	 	 	 	 	 	 	 	59	 	 	 	 	 	 	 	59	 	 	 	-	 	
Other (income) expense, net	 	 	140	 	 	 	148	 	 	 	 	 	 	 	48	 	 	 	196	 	 	 	(56	)	
Income Before Taxes	 	 	3,259	 	 	 	(660	)	 	 	(159	)	 	 	(48	)	 	 	(867	)	 	 	4,126	 	
Income Tax Provision (Benefit)	 	 	615	 	 	 	(109	)(3)	 	 	(25	)(3)	 	 	(11	)(3)	 	 	(145	)	 	 	760	 	
Net Income	 	 	2,644	 	 	 	(551	)	 	 	(134	)	 	 	(37	)	 	 	(722	)	 	 	3,366	 	
Less: Net (Loss) Income Attributable to Noncontrolling Interests	 	 	(26	)	 	 	(36	)	 	 	 	 	 	 	 	 	 	 	(36	)	 	 	10	 	
Net Income Attributable to Merck & Co., Inc.	 	 	2,670	 	 	 	(515	)	 	 	(134	)	 	 	(37	)	 	 	(686	)	 	 	3,356	 	
Earnings per Common Share Assuming Dilution	 	$	1.03	 	 	 	(0.20	)	 	 	(0.05	)	 	 	(0.02	)	 	 	(0.27	)	 	$	1.30	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax Rate	 	 	18.9	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	18.4	%	
 
Only the line items that are affected by non-GAAP adjustments are shown.
 
Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.
 
(1) Amount included in cost of sales primarily reflects $373 million of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as $69 million of intangible asset impairment charges.  Amount included in selling, general and administrative expenses primarily reflects integration, transaction and certain other costs related to business acquisitions and divestitures, including costs related to the acquisition of Antelliq Corporation.  Amount included in other (income) expense, net primarily reflects goodwill impairment charges related to certain businesses in the Healthcare Services segment and expenses related to an increase in the estimated fair value of liabilities for contingent consideration related to the termination of the Sanofi-Pasteur MSD joint venture.
 
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs.
 
(3) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

 

MERCK & CO., INC.
GAAP TO NON-GAAP RECONCILIATION
SIX MONTHS ENDED JUNE 30, 2019
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 2d
 
 	 	GAAP	 	 	Acquisition and
Divestiture-Related
Costs (1)	 	 	Restructuring
Costs (2)	 	 	Certain Other
Items	 	 	Adjustment
Subtotal	 	 	Non-GAAP	 	
Cost of sales	 	$	6,453	 	 	 	860	 	 	 	99	 	 	 	 	 	 	 	959	 	 	$	5,494	 	
Selling, general and administrative	 	 	5,138	 	 	 	60	 	 	 	32	 	 	 	 	 	 	 	92	 	 	 	5,046	 	
Research and development	 	 	4,119	 	 	 	(27	)	 	 	3	 	 	 	 	 	 	 	(24	)	 	 	4,143	 	
Restructuring costs	 	 	212	 	 	 	 	 	 	 	212	 	 	 	 	 	 	 	212	 	 	 	-	 	
Other (income) expense, net	 	 	327	 	 	 	315	 	 	 	 	 	 	 	48	 	 	 	363	 	 	 	(36	)	
Income Before Taxes	 	 	6,326	 	 	 	(1,208	)	 	 	(346	)	 	 	(48	)	 	 	(1,602	)	 	 	7,928	 	
Income Tax Provision (Benefit)	 	 	820	 	 	 	(207	)(3)	 	 	(56	)(3)	 	 	(304	)(4)	 	 	(567	)	 	 	1,387	 	
Net Income	 	 	5,506	 	 	 	(1,001	)	 	 	(290	)	 	 	256	 	 	 	(1,035	)	 	 	6,541	 	
Less: Net (Loss) Income Attributable to Noncontrolling Interests	 	 	(79	)	 	 	(89	)	 	 	 	 	 	 	 	 	 	 	(89	)	 	 	10	 	
Net Income Attributable to Merck & Co., Inc.	 	 	5,585	 	 	 	(912	)	 	 	(290	)	 	 	256	 	 	 	(946	)	 	 	6,531	 	
Earnings per Common Share Assuming Dilution	 	$	2.15	 	 	 	(0.36	)	 	 	(0.11	)	 	 	0.10	 	 	 	(0.37	)	 	$	2.52	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax Rate	 	 	13.0	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	17.5	%	
 
Only the line items that are affected by non-GAAP adjustments are shown.	
 	
Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using non-GAAP pretax income. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.	
 	
(1) Amount included in cost of sales primarily reflects $771 million of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as $81 million of intangible asset impairment charges.  Amount included in selling, general and administrative expenses primarily reflects integration, transaction and certain other costs related to business acquisitions and divestitures, including costs related to the acquisition of Antelliq Corporation.  Amount included in research and development expenses primarily reflects a reduction in expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration.  Amount included in other (income) expense, net, primarily reflects goodwill and intangible asset impairment charges related to certain businesses in the Healthcare Services segment and expenses related to an increase in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD joint venture.	
 	
(2) Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs.	
 	
(3) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.	
 	
(4) Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. Also includes a $360 million net tax benefit related to the settlement of certain federal income tax matters and a $67 million tax charge related to the finalization of treasury regulations associated with the 2017 enactment of U.S. tax legislation.	

 

 
MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
SECOND QUARTER 2020
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3a
 
 	 	Global	 	U.S.	 	International	 	
 	 	2Q 2020	 	2Q 2019	 	% Change	 	2Q 2020	 	2Q 2019	 	% Change	 	2Q 2020	 	2Q 2019	 	% Change	 	
TOTAL SALES (1)	 	$	10,872	 	$	11,760	 	 	-8	 	$	4,634	 	$	5,193	 	 	-11	 	$	6,238	 	$	6,567	 	 	-5	 	
PHARMACEUTICAL	 	 	9,679	 	 	10,460	 	 	-7	 	 	4,270	 	 	4,807	 	 	-11	 	 	5,409	 	 	5,653	 	 	-4	 	
Oncology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Keytruda	 	 	3,388	 	 	2,634	 	 	29	 	 	2,043	 	 	1,498	 	 	36	 	 	1,345	 	 	1,136	 	 	18	 	
Alliance Revenue - Lynparza (2)	 	 	178	 	 	111	 	 	61	 	 	105	 	 	66	 	 	60	 	 	73	 	 	45	 	 	61	 	
Alliance Revenue - Lenvima (2)	 	 	151	 	 	97	 	 	57	 	 	98	 	 	54	 	 	83	 	 	53	 	 	43	 	 	23	 	
Emend	 	 	33	 	 	121	 	 	-72	 	 	6	 	 	67	 	 	-91	 	 	27	 	 	54	 	 	-49	 	
Vaccines (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gardasil / Gardasil 9	 	 	656	 	 	886	 	 	-26	 	 	168	 	 	456	 	 	-63	 	 	488	 	 	430	 	 	13	 	
ProQuad / M-M-R II / Varivax	 	 	378	 	 	675	 	 	-44	 	 	263	 	 	500	 	 	-47	 	 	115	 	 	174	 	 	-34	 	
RotaTeq	 	 	168	 	 	172	 	 	-2	 	 	100	 	 	104	 	 	-3	 	 	68	 	 	68	 	 	 	 	
Pneumovax 23	 	 	117	 	 	170	 	 	-31	 	 	21	 	 	123	 	 	-83	 	 	96	 	 	47	 	 	103	 	
Vaqta	 	 	28	 	 	58	 	 	-52	 	 	17	 	 	38	 	 	-56	 	 	11	 	 	20	 	 	-45	 	
Hospital Acute Care	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Bridion	 	 	224	 	 	278	 	 	-19	 	 	107	 	 	129	 	 	-17	 	 	117	 	 	149	 	 	-21	 	
Noxafil	 	 	73	 	 	193	 	 	-62	 	 	6	 	 	100	 	 	-94	 	 	67	 	 	93	 	 	-27	 	
Primaxin	 	 	64	 	 	71	 	 	-10	 	 	1	 	 	 	 	 	81	 	 	63	 	 	70	 	 	-10	 	
Prevymis	 	 	63	 	 	38	 	 	66	 	 	28	 	 	19	 	 	46	 	 	35	 	 	18	 	 	89	 	
Cancidas	 	 	43	 	 	67	 	 	-36	 	 	(2	)	 	3	 	 	-164	 	 	45	 	 	64	 	 	-30	 	
Invanz	 	 	43	 	 	78	 	 	-45	 	 	 	 	 	18	 	 	-99	 	 	43	 	 	60	 	 	-29	 	
Zerbaxa	 	 	32	 	 	27	 	 	19	 	 	17	 	 	13	 	 	30	 	 	15	 	 	14	 	 	10	 	
Cubicin	 	 	32	 	 	67	 	 	-53	 	 	10	 	 	22	 	 	-53	 	 	21	 	 	45	 	 	-52	 	
Immunology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Simponi	 	 	191	 	 	214	 	 	-11	 	 	 	 	 	 	 	 	 	 	 	191	 	 	214	 	 	-11	 	
Remicade	 	 	73	 	 	98	 	 	-26	 	 	 	 	 	 	 	 	 	 	 	73	 	 	98	 	 	-26	 	
Neuroscience	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Belsomra	 	 	84	 	 	76	 	 	10	 	 	22	 	 	21	 	 	4	 	 	61	 	 	55	 	 	12	 	
Virology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Isentress / Isentress HD	 	 	196	 	 	247	 	 	-21	 	 	76	 	 	94	 	 	-19	 	 	120	 	 	153	 	 	-21	 	
Zepatier	 	 	39	 	 	108	 	 	-63	 	 	15	 	 	39	 	 	-62	 	 	24	 	 	68	 	 	-64	 	
Cardiovascular	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Zetia	 	 	137	 	 	156	 	 	-12	 	 	(1	)	 	6	 	 	-123	 	 	138	 	 	150	 	 	-8	 	
Vytorin	 	 	39	 	 	76	 	 	-49	 	 	2	 	 	3	 	 	-42	 	 	37	 	 	73	 	 	-50	 	
Atozet	 	 	115	 	 	92	 	 	25	 	 	 	 	 	 	 	 	 	 	 	115	 	 	92	 	 	25	 	
Alliance Revenue - Adempas (4)	 	 	79	 	 	51	 	 	54	 	 	73	 	 	49	 	 	50	 	 	6	 	 	2	 	 	141	 	
Adempas (5)	 	 	57	 	 	53	 	 	8	 	 	 	 	 	 	 	 	 	 	 	57	 	 	53	 	 	8	 	
Diabetes (6)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Januvia	 	 	854	 	 	908	 	 	-6	 	 	413	 	 	471	 	 	-12	 	 	441	 	 	437	 	 	1	 	
Janumet	 	 	490	 	 	533	 	 	-8	 	 	143	 	 	166	 	 	-14	 	 	348	 	 	366	 	 	-5	 	
Women's Health	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Implanon / Nexplanon	 	 	132	 	 	183	 	 	-28	 	 	87	 	 	136	 	 	-36	 	 	44	 	 	48	 	 	-7	 	
NuvaRing	 	 	63	 	 	240	 	 	-74	 	 	35	 	 	206	 	 	-83	 	 	28	 	 	34	 	 	-18	 	
Diversified Brands	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Singulair	 	 	100	 	 	160	 	 	-38	 	 	4	 	 	8	 	 	-45	 	 	96	 	 	153	 	 	-37	 	
Cozaar / Hyzaar	 	 	98	 	 	109	 	 	-10	 	 	4	 	 	6	 	 	-29	 	 	94	 	 	103	 	 	-9	 	
Arcoxia	 	 	65	 	 	75	 	 	-13	 	 	 	 	 	 	 	 	 	 	 	65	 	 	75	 	 	-13	 	
Nasonex	 	 	49	 	 	72	 	 	-32	 	 	4	 	 	(1	)	 	*	 	 	45	 	 	73	 	 	-38	 	
Follistim AQ	 	 	44	 	 	63	 	 	-31	 	 	20	 	 	24	 	 	-18	 	 	24	 	 	39	 	 	-39	 	
Other Pharmaceutical (7)	 	 	1,103	 	 	1,203	 	 	-8	 	 	385	 	 	369	 	 	4	 	 	720	 	 	837	 	 	-14	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ANIMAL HEALTH	 	 	1,101	 	 	1,124	 	 	-2	 	 	342	 	 	335	 	 	2	 	 	759	 	 	789	 	 	-4	 	
Livestock	 	 	648	 	 	671	 	 	-3	 	 	122	 	 	145	 	 	-15	 	 	526	 	 	526	 	 	 	 	
Companion Animals	 	 	453	 	 	453	 	 	 	 	 	220	 	 	190	 	 	16	 	 	233	 	 	263	 	 	-11	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Revenues (8)	 	 	92	 	 	176	 	 	-47	 	 	22	 	 	51	 	 	-57	 	 	70	 	 	125	 	 	-44	 	
 
*    200% or greater
 
(1) Only select products are shown.  
 
(2) Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.
 
(3) Total Vaccines sales were $1,418 million and $2,037 million on a global basis for second quarter 2020 and 2019, respectively.
 
(4) Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs.
 
(5) Net product sales in Merck's marketing territories.
 
(6) Total Diabetes sales were $1,418 million and $1,480 million on a global basis for second quarter 2020 and 2019, respectively.
 
(7) Includes Pharmaceutical products not individually shown above.
 
(8) Other Revenues are comprised primarily of Healthcare Services segment revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.

 

 
MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
JUNE YEAR-TO-DATE 2020
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3b
 
 	 	Global	 	 	U.S.	 	 	International	 	
 	 	June YTD
2020	 	 	June YTD
2019	 	 	% Change	 	 	June YTD
2020	 	 	June YTD
2019	 	 	% Change	 	 	June YTD
2020	 	 	June YTD
2019	 	 	% Change	 	
TOTAL SALES (1)	 	$	22,929	 	 	$	22,575	 	 	 	2	 	 	$	9,771	 	 	$	9,748	 	 	 	 	 	 	$	13,158	 	 	$	12,828	 	 	 	3	 	
PHARMACEUTICAL	 	 	20,334	 	 	 	20,123	 	 	 	1	 	 	 	8,984	 	 	 	9,022	 	 	 	 	 	 	 	11,350	 	 	 	11,101	 	 	 	2	 	
Oncology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Keytruda	 	 	6,672	 	 	 	4,903	 	 	 	36	 	 	 	3,949	 	 	 	2,782	 	 	 	42	 	 	 	2,722	 	 	 	2,121	 	 	 	28	 	
Alliance Revenue - Lynparza (2)	 	 	323	 	 	 	190	 	 	 	70	 	 	 	190	 	 	 	116	 	 	 	64	 	 	 	133	 	 	 	74	 	 	 	81	 	
Alliance Revenue - Lenvima (2)	 	 	279	 	 	 	171	 	 	 	63	 	 	 	188	 	 	 	104	 	 	 	81	 	 	 	91	 	 	 	67	 	 	 	36	 	
Emend	 	 	76	 	 	 	237	 	 	 	-68	 	 	 	11	 	 	 	130	 	 	 	-92	 	 	 	65	 	 	 	107	 	 	 	-39	 	
Vaccines (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gardasil / Gardasil 9	 	 	1,753	 	 	 	1,724	 	 	 	2	 	 	 	629	 	 	 	818	 	 	 	-23	 	 	 	1,124	 	 	 	906	 	 	 	24	 	
ProQuad / M-M-R II / Varivax	 	 	813	 	 	 	1,171	 	 	 	-31	 	 	 	596	 	 	 	843	 	 	 	-29	 	 	 	217	 	 	 	328	 	 	 	-34	 	
RotaTeq	 	 	391	 	 	 	383	 	 	 	2	 	 	 	241	 	 	 	258	 	 	 	-7	 	 	 	150	 	 	 	125	 	 	 	20	 	
Pneumovax 23	 	 	373	 	 	 	355	 	 	 	5	 	 	 	203	 	 	 	248	 	 	 	-18	 	 	 	170	 	 	 	107	 	 	 	60	 	
Vaqta	 	 	88	 	 	 	105	 	 	 	-17	 	 	 	47	 	 	 	67	 	 	 	-30	 	 	 	41	 	 	 	39	 	 	 	7	 	
Hospital Acute Care	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Bridion	 	 	524	 	 	 	533	 	 	 	-2	 	 	 	250	 	 	 	248	 	 	 	1	 	 	 	274	 	 	 	285	 	 	 	-4	 	
Noxafil	 	 	168	 	 	 	383	 	 	 	-56	 	 	 	14	 	 	 	191	 	 	 	-93	 	 	 	154	 	 	 	192	 	 	 	-20	 	
Prevymis	 	 	123	 	 	 	70	 	 	 	76	 	 	 	55	 	 	 	37	 	 	 	47	 	 	 	68	 	 	 	33	 	 	 	109	 	
Primaxin	 	 	115	 	 	 	130	 	 	 	-11	 	 	 	1	 	 	 	1	 	 	 	81	 	 	 	114	 	 	 	129	 	 	 	-12	 	
Invanz	 	 	108	 	 	 	150	 	 	 	-28	 	 	 	6	 	 	 	31	 	 	 	-81	 	 	 	102	 	 	 	118	 	 	 	-14	 	
Cancidas	 	 	98	 	 	 	129	 	 	 	-23	 	 	 	1	 	 	 	4	 	 	 	-80	 	 	 	98	 	 	 	125	 	 	 	-22	 	
Cubicin	 	 	78	 	 	 	155	 	 	 	-50	 	 	 	25	 	 	 	64	 	 	 	-61	 	 	 	53	 	 	 	91	 	 	 	-42	 	
Zerbaxa	 	 	69	 	 	 	53	 	 	 	30	 	 	 	37	 	 	 	25	 	 	 	46	 	 	 	32	 	 	 	28	 	 	 	15	 	
Immunology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Simponi	 	 	406	 	 	 	422	 	 	 	-4	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	406	 	 	 	422	 	 	 	-4	 	
Remicade	 	 	160	 	 	 	221	 	 	 	-28	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	160	 	 	 	221	 	 	 	-28	 	
Neuroscience	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Belsomra	 	 	163	 	 	 	143	 	 	 	14	 	 	 	49	 	 	 	45	 	 	 	9	 	 	 	114	 	 	 	98	 	 	 	16	 	
Virology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Isentress / Isentress HD	 	 	441	 	 	 	502	 	 	 	-12	 	 	 	151	 	 	 	202	 	 	 	-25	 	 	 	290	 	 	 	300	 	 	 	-3	 	
Zepatier	 	 	94	 	 	 	221	 	 	 	-57	 	 	 	33	 	 	 	72	 	 	 	-55	 	 	 	62	 	 	 	149	 	 	 	-59	 	
Cardiovascular	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Zetia	 	 	282	 	 	 	296	 	 	 	-5	 	 	 	(4	)	 	 	6	 	 	 	-161	 	 	 	285	 	 	 	290	 	 	 	-1	 	
Vytorin	 	 	92	 	 	 	174	 	 	 	-47	 	 	 	5	 	 	 	6	 	 	 	-14	 	 	 	86	 	 	 	167	 	 	 	-48	 	
Atozet	 	 	238	 	 	 	186	 	 	 	28	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	238	 	 	 	186	 	 	 	28	 	
Alliance Revenue - Adempas (4)	 	 	133	 	 	 	94	 	 	 	41	 	 	 	122	 	 	 	89	 	 	 	37	 	 	 	11	 	 	 	5	 	 	 	132	 	
Adempas (5)	 	 	113	 	 	 	100	 	 	 	12	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	113	 	 	 	100	 	 	 	12	 	
Diabetes (6)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Januvia	 	 	1,628	 	 	 	1,732	 	 	 	-6	 	 	 	768	 	 	 	855	 	 	 	-10	 	 	 	860	 	 	 	877	 	 	 	-2	 	
Janumet	 	 	993	 	 	 	1,063	 	 	 	-7	 	 	 	256	 	 	 	333	 	 	 	-23	 	 	 	737	 	 	 	730	 	 	 	1	 	
Women's Health	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Implanon / Nexplanon	 	 	326	 	 	 	382	 	 	 	-15	 	 	 	237	 	 	 	285	 	 	 	-17	 	 	 	90	 	 	 	98	 	 	 	-8	 	
NuvaRing	 	 	126	 	 	 	459	 	 	 	-73	 	 	 	61	 	 	 	391	 	 	 	-84	 	 	 	65	 	 	 	68	 	 	 	-5	 	
Diversified Brands	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Singulair	 	 	255	 	 	 	352	 	 	 	-27	 	 	 	9	 	 	 	13	 	 	 	-31	 	 	 	246	 	 	 	338	 	 	 	-27	 	
Cozaar / Hyzaar	 	 	200	 	 	 	213	 	 	 	-6	 	 	 	12	 	 	 	10	 	 	 	13	 	 	 	189	 	 	 	202	 	 	 	-7	 	
Arcoxia	 	 	135	 	 	 	149	 	 	 	-9	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	135	 	 	 	149	 	 	 	-9	 	
Nasonex	 	 	120	 	 	 	168	 	 	 	-29	 	 	 	10	 	 	 	(2	)	 	 	*	 	 	 	110	 	 	 	170	 	 	 	-35	 	
Follistim AQ	 	 	85	 	 	 	121	 	 	 	-29	 	 	 	40	 	 	 	53	 	 	 	-25	 	 	 	45	 	 	 	67	 	 	 	-33	 	
Other Pharmaceutical (7)	 	 	2,293	 	 	 	2,283	 	 	 	 	 	 	 	792	 	 	 	697	 	 	 	14	 	 	 	1,500	 	 	 	1,589	 	 	 	-6	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ANIMAL HEALTH	 	 	2,314	 	 	 	2,149	 	 	 	8	 	 	 	726	 	 	 	628	 	 	 	16	 	 	 	1,588	 	 	 	1,521	 	 	 	4	 	
Livestock	 	 	1,386	 	 	 	1,282	 	 	 	8	 	 	 	284	 	 	 	261	 	 	 	9	 	 	 	1,102	 	 	 	1,021	 	 	 	8	 	
Companion Animals	 	 	928	 	 	 	867	 	 	 	7	 	 	 	442	 	 	 	367	 	 	 	20	 	 	 	486	 	 	 	500	 	 	 	-3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Revenues (8)	 	 	281	 	 	 	303	 	 	 	-8	 	 	 	61	 	 	 	98	 	 	 	-38	 	 	 	220	 	 	 	206	 	 	 	7	 	
 
* 200% or greater
 
(1) Only select products are shown.	
 	
(2) Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.	
 	
(3) Total Vaccines sales were $3,574 million and $3,924 million on a global basis for June YTD 2020 and 2019, respectively.	
 	
(4) Alliance Revenue represents Merck's share of profits from sales in Bayer's marketing territories, which are product sales net of cost of sales and commercialization costs.	
 	
(5) Net product sales in Merck's marketing territories.	
 	
(6) Total Diabetes sales were $2,772 million and $2,882 million on a global basis for June YTD 2020 and 2019, respectively.	
 	
(7) Includes Pharmaceutical products not individually shown above.	
 	
(8) Other Revenues are comprised primarily of Healthcare Services segment revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.	

 

 
MERCK & CO., INC.
PHARMACEUTICAL GEOGRAPHIC SALES
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3c
 
 	 	2020	 	 	2019	 	 	% Change	 	
 	 	1Q	 	 	2Q	 	 	June YTD	 	 	1Q	 	 	2Q	 	 	June YTD	 	 	3Q	 	 	4Q	 	 	Full Year	 	 	2Q	 	
TOTAL PHARMACEUTICAL	 	$	10,655	 	 	$	9,679	 	 	$	20,334	 	 	$	9,663	 	 	$	10,460	 	 	$	20,123	 	 	$	11,095	 	 	$	10,533	 	 	$	41,751	 	 	 	-7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
United States (1)	 	 	4,714	 	 	 	4,270	 	 	 	8,984	 	 	 	4,215	 	 	 	4,807	 	 	 	9,022	 	 	 	5,180	 	 	 	4,751	 	 	 	18,953	 	 	 	-11	 	
% Pharmaceutical Sales	 	 	44.2	%	 	 	44.1	%	 	 	44.2	%	 	 	43.6	%	 	 	46.0	%	 	 	44.8	%	 	 	46.7	%	 	 	45.1	%	 	 	45.4	%	 	 	 	 	
Europe (2)	 	 	2,543	 	 	 	2,196	 	 	 	4,739	 	 	 	2,335	 	 	 	2,301	 	 	 	4,636	 	 	 	2,304	 	 	 	2,373	 	 	 	9,314	 	 	 	-5	 	
% Pharmaceutical Sales	 	 	23.9	%	 	 	22.7	%	 	 	23.3	%	 	 	24.2	%	 	 	22.0	%	 	 	23.0	%	 	 	20.8	%	 	 	22.5	%	 	 	22.3	%	 	 	 	 	
China	 	 	846	 	 	 	811	 	 	 	1,657	 	 	 	725	 	 	 	745	 	 	 	1,470	 	 	 	898	 	 	 	773	 	 	 	3,141	 	 	 	9	 	
% Pharmaceutical Sales	 	 	7.9	%	 	 	8.4	%	 	 	8.1	%	 	 	7.5	%	 	 	7.1	%	 	 	7.3	%	 	 	8.1	%	 	 	7.3	%	 	 	7.5	%	 	 	 	 	
Japan	 	 	789	 	 	 	847	 	 	 	1,636	 	 	 	779	 	 	 	900	 	 	 	1,679	 	 	 	894	 	 	 	921	 	 	 	3,494	 	 	 	-6	 	
% Pharmaceutical Sales	 	 	7.4	%	 	 	8.8	%	 	 	8.0	%	 	 	8.1	%	 	 	8.6	%	 	 	8.3	%	 	 	8.1	%	 	 	8.7	%	 	 	8.4	%	 	 	 	 	
Asia Pacific (other than China and Japan)	 	 	613	 	 	 	555	 	 	 	1,168	 	 	 	642	 	 	 	606	 	 	 	1,248	 	 	 	638	 	 	 	614	 	 	 	2,500	 	 	 	-9	 	
% Pharmaceutical Sales	 	 	5.8	%	 	 	5.7	%	 	 	5.7	%	 	 	6.6	%	 	 	5.8	%	 	 	6.2	%	 	 	5.8	%	 	 	5.8	%	 	 	6.0	%	 	 	 	 	
Eastern Europe/Middle East/Africa	 	 	490	 	 	 	416	 	 	 	905	 	 	 	343	 	 	 	388	 	 	 	731	 	 	 	423	 	 	 	423	 	 	 	1,577	 	 	 	7	 	
% Pharmaceutical Sales	 	 	4.6	%	 	 	4.3	%	 	 	4.5	%	 	 	3.6	%	 	 	3.7	%	 	 	3.6	%	 	 	3.8	%	 	 	4.0	%	 	 	3.8	%	 	 	 	 	
Latin America	 	 	419	 	 	 	399	 	 	 	818	 	 	 	427	 	 	 	523	 	 	 	950	 	 	 	534	 	 	 	429	 	 	 	1,914	 	 	 	-24	 	
% Pharmaceutical Sales	 	 	3.9	%	 	 	4.1	%	 	 	4.0	%	 	 	4.4	%	 	 	5.0	%	 	 	4.7	%	 	 	4.8	%	 	 	4.1	%	 	 	4.6	%	 	 	 	 	
Canada	 	 	212	 	 	 	160	 	 	 	372	 	 	 	177	 	 	 	179	 	 	 	356	 	 	 	211	 	 	 	216	 	 	 	783	 	 	 	-11	 	
% Pharmaceutical Sales	 	 	2.0	%	 	 	1.7	%	 	 	1.8	%	 	 	1.8	%	 	 	1.7	%	 	 	1.8	%	 	 	1.9	%	 	 	2.0	%	 	 	1.9	%	 	 	 	 	
Other (1)	 	 	29	 	 	 	25	 	 	 	55	 	 	 	20	 	 	 	11	 	 	 	31	 	 	 	13	 	 	 	33	 	 	 	75	 	 	 	127	 	
% Pharmaceutical Sales	 	 	0.3	%	 	 	0.3	%	 	 	0.3	%	 	 	0.2	%	 	 	0.1	%	 	 	0.2	%	 	 	0.1	%	 	 	0.3	%	 	 	0.2	%	 	 	 	 	
 
Sum of quarterly amounts may not equal year-to-date amounts due to rounding.	
 	
(1) Alliance revenue related to Adempas attributable to the United States has been reclassified from Other.	
 	
(2) Europe primarily represents all European Union countries and the European Union accession markets.	

 

MERCK & CO., INC.
OTHER (INCOME) EXPENSE, NET - GAAP
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 4
 
OTHER (INCOME) EXPENSE, NET	 	 	2Q20	2Q19	 	June YTD
2020	 	 	June YTD
2019	 	
Interest income	 	$	(14	)	$	(75	)	$	(39	)	$	(164	)	
Interest expense	 	 	209	 	 	233	 	 	421	 	 	442	 	
Exchange losses	 	 	24	 	 	27	 	 	78	 	 	128	 	
Income from investments in equity securities, net (1)	 	 	(551	)	 	(58	)	 	(603	)	 	(32	)	
Net periodic defined benefit plan (credit) cost other than service cost	 	 	(80	)	 	(140	)	 	(170	)	 	(281	)	
Other, net	 	 	22	 	 	153	 	 	(5	)	 	234	 	
Total	 	$	(390	)	$	140	 	$	(318	)	$	327	 	
 
(1) Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds. Unrealized gains and losses from investments that are directly owned are determined at the end of the reporting period, while ownership interests in investment funds are accounted for on a one quarter lag.