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) October 27, 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 October 27, 2020, regarding earnings for the third 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 October 27, 2020, regarding earnings for the third 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: October 27, 2020	By:	/s/ Kelly Grez	
 	 	KELLY GREZ	
 	 	Deputy Corporate 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 Third-Quarter 2020 Financial Results
 
	·	Third-Quarter 2020 Worldwide Sales Were $12.6 Billion, an Increase of 1%; Excluding the Impact from Foreign Exchange, Sales Grew 2%	
 
	o	KEYTRUDA Sales Grew 21% to $3.7 Billion	
 
	o	Animal Health Sales Grew 9% to $1.2 Billion; Excluding the Impact from Foreign Exchange, Sales Grew 12%	
 
	·	Third-Quarter 2020 GAAP EPS Was $1.16; Third-Quarter Non-GAAP EPS Was $1.74	
 
	·	Advanced and Expanded Broad Pipeline	
 
	o	Announced Additional Positive Phase 3 Results for Investigational Pneumococcal Conjugate Vaccine (V114) in Adults	
 
	o	Presented Phase 3 Data for Investigational Gefapixant in Development for Chronic Cough; Early Data for MK-4830 in Oncology and MK-8507 for HIV	
 
	o	Expanded Pipeline with Seagen Collaborations in Oncology	
 
	·	Company Advances Research Programs and Clinical Trials for COVID-19-Related Vaccine and Orally Available Antiviral Research Candidates	
 
	·	Company Narrows and Raises 2020 Full-Year Revenue Range to be Between $47.6 Billion and $48.6 Billion, Including a Negative Impact from Foreign Exchange of Approximately 1.5%	
 
	·	Company Narrows and Lowers 2020 Full-Year GAAP EPS Range to be Between $4.55 and $4.65; Narrows and Raises 2020 Full-Year Non-GAAP EPS Range to be Between $5.91 and $6.01, Including a Negative Impact from Foreign Exchange of Approximately 2.5%	
 
KENILWORTH, N.J., Oct. 27, 2020 – Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the third quarter of 2020.
 
“We continue to execute on our strategic priorities and remain confident we will achieve solid full-year revenue growth despite the impact of the ongoing COVID-19 pandemic. Demand for our products remains robust, and production, supply and distribution of our medicines, vaccines and animal health products are moving forward with minimal disruption,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “I am confident in our ability to advance our promising pipeline and clinical trials despite the challenging environment, and I believe that our leadership and track record of solid commercial execution will continue to drive long-term growth.”

 

Financial Summary

 	 	Third Quarter	 	
$ in millions, except EPS amounts	 	2020	 	 	2019	 	 	Change	 	 	Change Ex-
Exchange	 	
Sales	 	$	12,551	 	 	$	12,397	 	 	 	1	%	 	 	2	%	
GAAP net income1	 	 	2,941	 	 	 	1,901	 	 	 	55	%	 	 	59	%	
Non-GAAP net income that excludes certain items1,2*	 	 	4,427	 	 	 	3,873	 	 	 	14	%	 	 	17	%	
GAAP EPS	 	 	1.16	 	 	 	0.74	 	 	 	57	%	 	 	62	%	
Non-GAAP EPS that excludes certain items2*	 	 	1.74	 	 	 	1.51	 	 	 	16	%	 	 	18	%	
*Refer to table on page 11.
 
GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) was $1.16 for the third quarter of 2020. Non-GAAP EPS of $1.74 for the third quarter of 2020 excludes acquisition- and divestiture-related costs, restructuring costs, pretax charges of $1.1 billion related to certain license and collaboration agreements, and certain other items. 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 advanced its multiple scientific programs in an effort to help combat SARS-CoV-2, specifically,
 
	·	Molnupiravir (formerly known as MK-4482) -- an orally available antiviral candidate in development for the treatment of COVID-19 in collaboration with Ridgeback Bio with the initiation of two large pivotal Phase 2/3 trials: a trial anticipated to enroll approximately 1,450 non-hospitalized adult COVID-19 patients (outpatient) and another planned to enroll approximately 1,300 hospitalized adult COVID-19 patients;	
 
	·	V591 -- a SARS-CoV-2 vaccine candidate that uses a measles virus vector platform has entered Phase 1 development; and	
 
	·	V590 -- a SARS-CoV-2 vaccine candidate in development in collaboration with the International AIDS Vaccine Initiative (IAVI) that uses a recombinant vesicular stomatitis virus (rVSV) platform, the same platform used for Merck’s approved Ebola Zaire virus vaccine, will enter Phase 1 development shortly.	

 

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

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	Approval in the United States by the Food and Drug Administration (FDA) of an expanded indication as monotherapy for the treatment of adult patients with relapsed or refractory classical Hodgkin lymphoma (cHL) based on the Phase 3 KEYNOTE-204 trial and an updated pediatric indication for the treatment of pediatric patients with refractory cHL or cHL that has relapsed after two or more lines of therapy, both of which were previously approved under the FDA’s accelerated approval process; and	
 
	o	Two approvals in Japan: (1) as monotherapy for the treatment of patients whose tumors are PD-L1-positive and have radically unresectable, advanced or recurrent esophageal squamous cell carcinoma (ESCC) who have progressed after chemotherapy based on the KEYNOTE-181 trial; and (2) use at an additional recommended dosage of 400 mg every six weeks (Q6W) administered as an intravenous infusion over 30 minutes across all adult indications, including KEYTRUDA monotherapy and combination therapy.	
 
	·	Merck presented results from the pivotal Phase 3 KEYNOTE-590 trial for the first-line treatment of patients with locally advanced or metastatic esophageal and gastroesophageal junction (GEJ) cancer at the European Society for Medical Oncology (ESMO) Virtual Congress 2020. In the study, KEYTRUDA in combination with platinum-based chemotherapy (cisplatin plus 5-fluorouracil [5-FU]) significantly improved overall survival (OS) and progression-free survival (PFS) versus chemotherapy regardless of histology or PD-L1 expression status.	
 
	·	Merck presented five-year survival results from the pivotal Phase 3 KEYNOTE-024 trial at the ESMO Virtual Congress 2020, which demonstrated a sustained, long-term survival benefit and durable responses with KEYTRUDA versus chemotherapy as a first-line treatment in patients with metastatic non-small cell lung cancer (NSCLC) whose tumors express PD-L1 (tumor proportion score [TPS] ≥50%) with no EGFR or ALK genomic tumor aberrations. Results from KEYNOTE-024 represent the longest follow-up survival data for an immunotherapy in a randomized Phase 3 study for the first-line treatment of metastatic NSCLC.	
 
	·	Merck presented long-term findings from the EORTC1325/KEYNOTE-054 trial evaluating KEYTRUDA as adjuvant therapy in resected, high-risk stage III melanoma at the ESMO Virtual Congress 2020.	
 
	·	Merck presented three-year survival data from the KEYNOTE-021 (Cohort G) study that evaluated KEYTRUDA in combination with chemotherapy in patients with advanced nonsquamous NSCLC regardless of PD-L1 expression with no EGFR or ALK genomic tumor aberrations at the IASLC 2020 North America Conference on Lung Cancer (NACLC). Updated follow-up data from a Phase 1/2 study of quavonlimab (MK-1308), a novel investigational anti-CTLA-4 antibody, in combination with KEYTRUDA in patients with advanced NSCLC also was presented; a Phase 3 study of quavonlimab coformulated with KEYTRUDA in first-line advanced NSCLC is planned.	

Page 3

	·	Merck and AstraZeneca announced the adoption of two positive opinions by the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) for Lynparza:	
 
	o	As a first-line maintenance treatment with bevacizumab for homologous recombination deficient (HRD)-positive advanced ovarian cancer who are in complete or partial response following completion of first-line platinum-based chemotherapy in combination with bevacizumab based on the Phase 3 PAOLA-1 trial, and	
 
	o	As monotherapy for the treatment of BRCA1/2 metastatic castration-resistant prostate cancer (mCRPC) patients who have progressed following a prior therapy that included a new hormonal agent based on the Phase 3 PROfound trial. Final results from this study were recently presented at the ESMO Virtual Congress 2020.	
 
	·	Merck and AstraZeneca presented positive five-year follow-up data from the Phase 3 SOLO-1 trial, which demonstrated a long-term PFS benefit of Lynparza versus placebo as a first-line maintenance treatment in patients with newly diagnosed, advanced BRCA-mutated (BRCAm) ovarian cancer who were in complete or partial response to platinum-based chemotherapy.	
 
	·	Merck and Eisai presented first-time data from two studies evaluating KEYTRUDA plus Lenvima at the ESMO Virtual Congress 2020: data from the Phase 2 LEAP-004 study for the second-line treatment of patients with unresectable or advanced melanoma who progressed on anti-PD-1/PD-L1 therapy and from the Phase 2 LEAP-005 study in previously-treated patients with six tumor types, including biliary tract cancer, colorectal cancer, gastric cancer, glioblastoma multiforme, ovarian cancer and triple-negative breast cancer.	
 
	·	Merck also presented new data for three investigational medicines from its oncology pipeline at the ESMO Virtual Congress 2020:	
 
	o	New Phase 1 data for the company’s anti-TIGIT therapy vibostolimab (MK-7684) as monotherapy and in combination with KEYTRUDA in patients with metastatic NSCLC,	
 
	o	First-time Phase 1 results for the novel anti-immunoglobulin-like transcript 4 (ILT4) therapy MK-4830 in patients with advanced solid tumors, and	
 
	o	New Phase 2 data evaluating the hypoxia-inducible factor-2 alpha (HIF-2α) inhibitor MK-6482 in von Hippel-Lindau (VHL) patients with non-renal cell carcinoma (RCC) tumors and updated data in VHL patients with clear cell RCC.	

Page 4

Other Pipeline Highlights
 
	·	Merck announced that two Phase 3 adult studies [the pivotal PNEU-AGE trial (V114-019) as well as the PNEU-TRUE trial (V114-020)] and separately two other Phase 3 adult studies [the PNEU-PATH (V114-016) and PNEU-DAY (V114-017) trials], evaluating the safety, tolerability and immunogenicity of V114, the company’s investigational 15-valent pneumococcal conjugate vaccine, each met their primary immunogenicity objectives. These findings, and additional Phase 3 data from the clinical program, will form the basis of global regulatory licensure applications beginning with the FDA before the end of the year.	
 
	·	Merck presented results from two pivotal Phase 3 trials (COUGH-1 and COUGH-2) evaluating gefapixant, an investigational, orally administered selective P2X3 receptor antagonist, in which gefapixant 45 mg twice daily demonstrated a statistically significant reduction in 24-hour cough frequency compared to placebo at Week 12 and 24 in adult patients with refractory or unexplained chronic cough. The gefapixant 15 mg twice daily treatment arms did not meet the primary efficacy endpoint in either Phase 3 study. The results were presented at the Virtual European Respiratory Society (ERS) International Congress 2020.	
 
	·	Merck presented Week 96 data from the Phase 2b trial that showed islatravir, the company’s investigational oral nucleoside reverse transcriptase translocation inhibitor (NRTTI), in combination with doravirine (PIFELTRO), maintained viral suppression in treatment-naïve adults with HIV-1 infection. Also presented at the virtual 2020 International Congress on Drug Therapy in HIV Infection (HIV Glasgow 2020 Virtual) were results from Phase 1/1b studies for MK-8507, the company’s investigational once-weekly, oral non-nucleoside reverse transcriptase inhibitor (NNRTI), that support further investigation for once-weekly oral administration as part of combination antiretroviral therapy.	
 
	·	The FDA has granted V181, the company’s investigational dengue vaccine in Phase 1 development, Fast Track designation.	
 
Business Developments
 
	·	Merck and Seagen Inc. (formerly known as Seattle Genetics, Inc.) announced two strategic oncology collaborations, in which Merck will make $810 million of upfront payments in the aggregate as well as acquire a $1 billion equity stake in Seagen common stock:	
 
	o	Companies to co-develop and co-commercialize Seagen’s ladiratuzumab vedotin, an investigational antibody-drug conjugate targeting LIV-1, globally; and	
 
	o	Companies enter into exclusive license and co-development agreement to accelerate global reach of Tukysa (tucatinib), a small molecule tyrosine kinase inhibitor for the treatment of HER-2 positive cancers. Merck was granted an exclusive license to commercialize Tukysa in Asia, the Middle East and Latin America and other regions outside of the U.S., Canada and Europe.	
 
	·	Merck and Hanmi Pharmaceutical announced that the companies have entered into an exclusive licensing agreement for the development, manufacture and commercialization of efinopegdutide (formerly HM12525A), Hanmi’s investigational once-weekly glucagon-like peptide-1 (GLP-1)/glucagon receptor dual agonist, for the treatment of nonalcoholic steatohepatitis (NASH);	

Page 5

	·	Merck announced the completion of its acquisition of IdentiGEN, a leader in DNA-based animal traceability solutions for livestock and aquaculture; and	
 
	·	Merck announced the completion of its acquisition of the worldwide rights to VECOXAN (diclazuril), an oral suspension for the prevention of coccidiosis in calves and lambs.	
 
Organon & Co.
 
	·	Merck continued to make progress on the Organon & Co. (Organon) spinoff, including additional leadership appointments, and expects the transaction to be completed in the second quarter of 2021.	
 
Third-Quarter Financial Impact of COVID-19
 
In the third quarter, the estimated negative impact of the COVID-19 pandemic to Merck’s pharmaceutical revenue was approximately $475 million, bringing the company’s year-to-date negative impact on revenue to approximately $2.1 billion. Lower back-to-school demand negatively impacted vaccine sales, in particular GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) in the U.S. In addition, access to health care providers remains reduced, although improved from the second quarter. The negative impact to Animal Health sales in the third quarter was immaterial.
 
Operating expenses were positively impacted in the third quarter by approximately $115 million, primarily driven by lower promotional and selling costs as well as lower research and development (R&D) expenses, net of investments in COVID-19-related antiviral and vaccine research programs.
 
Third-Quarter Revenue Performance
 
The following table reflects sales of the company’s top pharmaceutical products, as well as sales of animal health products.

Page 6

 	 	Third Quarter	 	
$ in millions	 	 2020	 	 	 2019	 	 	 Change	 	 	Change Ex-
Exchange	 	
Total Sales	 	$	12,551	 	 	$	12,397	 	 	 	1	%	 	 	2	%	
Pharmaceutical	 	 	11,320	 	 	 	11,095	 	 	 	2	%	 	 	2	%	
KEYTRUDA	 	 	3,715	 	 	 	3,070	 	 	 	21	%	 	 	21	%	
JANUVIA / JANUMET	 	 	1,327	 	 	 	1,311	 	 	 	1	%	 	 	2	%	
GARDASIL / GARDASIL 9	 	 	1,187	 	 	 	1,320	 	 	 	-10	%	 	 	-10	%	
PROQUAD, M-M-R II and VARIVAX	 	 	576	 	 	 	623	 	 	 	-8	%	 	 	-7	%	
PNEUMOVAX 23	 	 	375	 	 	 	237	 	 	 	58	%	 	 	58	%	
BRIDION	 	 	320	 	 	 	284	 	 	 	13	%	 	 	13	%	
ROTATEQ	 	 	210	 	 	 	180	 	 	 	16	%	 	 	17	%	
SIMPONI	 	 	209	 	 	 	203	 	 	 	3	%	 	 	0	%	
ISENTRESS / ISENTRESS HD	 	 	205	 	 	 	250	 	 	 	-18	%	 	 	-18	%	
Lynparza*	 	 	196	 	 	 	123	 	 	 	59	%	 	 	58	%	
IMPLANON / NEXPLANON	 	 	189	 	 	 	199	 	 	 	-5	%	 	 	-4	%	
Lenvima*	 	 	142	 	 	 	109	 	 	 	30	%	 	 	29	%	
Animal Health	 	 	1,220	 	 	 	1,122	 	 	 	9	%	 	 	12	%	
Livestock	 	 	758	 	 	 	726	 	 	 	5	%	 	 	8	%	
Companion Animals	 	 	462	 	 	 	396	 	 	 	17	%	 	 	18	%	
Other Revenues**	 	 	11	 	 	 	180	 	 	 	-94	%	 	 	-33	%	
*Alliance revenue for these products represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.
**Other revenues are comprised primarily of third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.
 
Pharmaceutical Revenue
 
Third-quarter pharmaceutical sales increased by $225 million, or 2%, to $11.3 billion. The increase was driven primarily by growth in oncology and certain hospital acute care products, partially offset by the negative impact of the COVID-19 pandemic and the ongoing impacts of the loss of market exclusivity for several products.
 
Growth in oncology was largely driven by higher sales of KEYTRUDA, which grew 21% to $3.7 billion in the quarter. In the U.S., sales of KEYTRUDA grew 24% to $2.2 billion. Global sales growth of KEYTRUDA reflects continued strong momentum from the NSCLC indications as well as continued uptake in other indications, including adjuvant melanoma, RCC, bladder, head and neck squamous cell carcinoma (HNSCC) and microsatellite instability-high (MSI-H) cancers as well as uptake following the recent launch of the Q6W dosing regimen in the U.S., partially offset by the negative impacts of the COVID-19 pandemic and pricing in Japan. 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.
 
Performance in hospital acute care reflects higher demand globally for BRIDION (sugammadex), a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery and 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.

Page 7

 
In addition, sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI) increased slightly in the quarter reflecting strong demand from certain international markets, partially offset by continued pricing pressure in the U.S.
 
Vaccine sales performance reflects higher sales of PNEUMOVAX 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, primarily driven by higher volumes in the U.S., Europe and Japan attributable in part to increased demand for pneumococcal vaccination during the COVID-19 pandemic.
 
Vaccine sales were negatively affected by declines in sales of 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 volumes in China and in Europe.
 
Combined sales of pediatric vaccines VARIVAX (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox; PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a combination vaccine to help protect against measles, mumps, rubella and varicella; and M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help prevent measles, mumps and rubella, declined in the third quarter, primarily due to lower demand in the U.S. related to the COVID-19 pandemic.
 
Pharmaceutical sales in the quarter were negatively affected by the ongoing impacts from the loss of market exclusivity, including for NUVARING (etonogestrel/ethinyl estradiol vaginal ring), NOXAFIL (posaconazole) and EMEND (aprepitant)/EMEND (fosaprepitant dimeglumine) for Injection.
 
Animal Health Revenue
 
Animal Health sales totaled $1.2 billion in the third quarter of 2020, an increase of 9% compared with the third quarter of 2019; excluding the unfavorable effect from foreign exchange, Animal Health sales grew 12%. Growth in companion animal products was driven largely by higher demand in companion animal vaccines and higher demand for the BRAVECTO (fluralaner) line of products for parasitic control. Performance in livestock products reflects higher demand globally for ruminant, poultry and swine products.
 
Third-Quarter Expense, EPS and Related Information
 
The tables below present selected expense information.

Page 8

$ in millions	 	 
 
GAAP	 	 	Acquisition- and Divestiture-Related Costs3	 	 	 
Restructuring Costs	 	 	 
Certain Other Items	 	 	 
 
Non-GAAP2	 	
Third-Quarter 2020	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	$	3,481	 	 	$	                       285	 	 	$	38	 	 	$	–	 	 	$	3,158	 	
Selling, general and administrative	 	 	2,450	 	 	 	207	 	 	 	15	 	 	 	–	 	 	 	2,228	 	
Research and development	 	 	3,390	 	 	 	16	 	 	 	19	 	 	 	1,082	 	 	 	2,273	 	
Restructuring costs	 	 	114	 	 	 	–	 	 	 	114	 	 	 	–	 	 	 	–	 	
Other (income) expense, net	 	 	(312	)	 	 	–	 	 	 	–	 	 	 	(1	)	 	 	(311	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Third-Quarter 2019	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	$	3,990	 	 	$	941	 	 	$	62	 	 	$	–	 	 	$	2,987	 	
Selling, general and administrative	 	 	2,589	 	 	 	22	 	 	 	1	 	 	 	–	 	 	 	2,566	 	
Research and development	 	 	3,204	 	 	 	6	 	 	 	1	 	 	 	982	 	 	 	2,215	 	
Restructuring costs	 	 	232	 	 	 	–	 	 	 	232	 	 	 	–	 	 	 	–	 	
Other (income) expense, net	 	 	35	 	 	 	6	 	 	 	–	 	 	 	–	 	 	 	29	 	
 
GAAP Expense, EPS and Related Information
 
Gross margin was 72.3% for the third quarter of 2020 compared to 67.8% for the third quarter of 2019. The increase reflects lower acquisition- and divestiture-related costs and the favorable effect of product mix, partially offset by the unfavorable effects of pricing pressure, inventory write-offs, higher amortization of intangible assets related to collaborations and foreign exchange.
 
Selling, general and administrative expenses were $2.5 billion in the third quarter of 2020, a decrease of 5% compared to the third quarter of 2019. The decrease primarily reflects lower administrative and selling costs, including less travel and meeting expenses, due in part to the COVID-19 pandemic, partially offset by higher acquisition- and divestiture-related costs, primarily reflecting costs related to the company’s planned spinoff of Organon.
 
Research and development expenses were $3.4 billion in the third quarter of 2020, an increase of 6% compared with the third quarter of 2019. The increase was primarily driven by higher upfront payments related to collaborations and license agreements, higher expenses related to clinical development and increased investment in discovery research and early drug development, partially offset by lower charges for the acquisitions of businesses, as well as lower laboratory, travel and meeting expenses due to the COVID-19 pandemic.
 
Other (income) expense, net, was $312 million of income in the third quarter of 2020 compared to $35 million of expense in the third quarter of 2019, primarily due to higher income from investments in equity securities, net, which was $360 million in 2020 compared with $16 million in 2019, largely from the recognition of unrealized gains on securities.

 

	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 9

The effective income tax rate was 14.1% for the third quarter of 2020 compared to 18.7% in the third quarter of 2019. The effective income tax rate in 2019 reflects the unfavorable impact of a charge for the acquisition of Peloton Therapeutics, Inc. (Peloton) for which no tax benefit was recognized.
 
GAAP EPS was $1.16 for the third quarter of 2020 compared with $0.74 for the third quarter of 2019.
 
Non-GAAP Expense, EPS and Related Information
 
Non-GAAP gross margin was 74.8% for the third quarter of 2020 compared to 75.9% for the third quarter of 2019. The decrease in non-GAAP gross margin reflects the unfavorable effects of pricing pressure, inventory write-offs, higher amortization of intangible assets related to collaborations and foreign exchange, partially offset by the favorable effect of product mix.
 
Non-GAAP selling, general and administrative expenses were $2.2 billion in the third quarter of 2020, a decrease of 13% compared to the third quarter of 2019. The decrease primarily reflects lower administrative and selling costs, including less travel and meeting expenses, due in part to the COVID-19 pandemic.
 
Non-GAAP R&D expenses were $2.3 billion in the third quarter of 2020, a 3% increase compared to the third quarter of 2019. The increase was primarily driven by higher expenses related to clinical development and increased investment in discovery research and early drug development, partially offset by lower laboratory, travel and meeting expenses due to the COVID-19 pandemic.
 
Non-GAAP other (income) expense, net, was $311 million of income in the third quarter of 2020 compared to $29 million of expense in the third quarter of 2019, primarily due to higher income from investments in equity securities, net, which was $360 million in 2020 compared with $16 million in 2019, largely from the recognition of unrealized gains on securities.
 
The non-GAAP effective income tax rate was 14.8% for the third quarter of 2020 compared to 15.7% for the third quarter of 2019, reflecting the favorable impact of earnings mix.
 
Non-GAAP EPS was $1.74 for the third quarter of 2020 compared with $1.51 for the third quarter of 2019.
 
A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.

Page 10

 	 	Third Quarter	 	
$ in millions, except EPS amounts	 	2020	 	 	2019	 	
EPS	 	 	 	 	 	 	
GAAP EPS	 	$	1.16	 	 	$	0.74	 	
Difference	 	 	0.58	 	 	 	0.77	 	
Non-GAAP EPS that excludes items listed below2	 	$	1.74	 	 	$	1.51	 	
 	 	 	 	 	 	 	 	 	
Net Income	 	 	 	 	 	 	 	 	
GAAP net income1	 	$	2,941	 	 	$	1,901	 	
Difference	 	 	1,486	 	 	 	1,972	 	
Non-GAAP net income that excludes items listed below1,2	 	$	4,427	 	 	$	3,873	 	
 	 	 	 	 	 	 	 	 	
Decrease (Increase) in Net Income Due to Excluded Items:	 	 	 	 	 	 	 	 	
Acquisition- and divestiture-related costs3	 	$	508	 	 	$	975	 	
Restructuring costs	 	 	186	 	 	 	296	 	
Charges for acquisitions and collaborations4	 	 	1,082	 	 	 	982	 	
Other	 	 	(1	)	 	 	–	 	
Net decrease (increase) in income before taxes	 	 	1,775	 	 	 	2,253	 	
Income tax (benefit) expense5	 	 	(289	)	 	 	(281	)	
Decrease (increase) in net income	 	$	1,486	 	 	$	1,972	 	
 
Financial Outlook
 
The updated full-year guidance that Merck is providing below includes its current assumption of the impact from the COVID-19 pandemic, which is expected to continue to be offset by favorability from underlying business strength. The company continues to assume that the majority of the negative impact occurred during the second quarter. However, it now expects some residual negative impacts in the fourth quarter, largely in Europe and certain emerging markets. In addition, the phasing of the recovery of GARDASIL 9 demand is slower than originally anticipated, in particular in the U.S.
 
For the full-year 2020, Merck now expects an unfavorable impact to revenue of approximately $2.35 billion (excluding the impact of foreign exchange) due to the COVID-19 pandemic, comprised of approximately $2.3 billion for pharmaceuticals and approximately $50 million for Animal Health, including the impacts in the first three quarters of the year.
 
For the full-year 2020, Merck now expects a net favorable impact to operating expenses of approximately $625 million, reflecting continued lower spending due to the COVID-19 pandemic, partially offset by spending on its COVID-19-related antiviral and vaccine research programs.

 

	4	2020 includes $832 million related to the Seagen collaborations; 2019 represents a charge for the acquisition of Peloton.	
	5	Includes the estimated tax impact on the reconciling items, as well as a tax cost of $67 million, representing an adjustment to the tax benefits recorded in conjunction with the 2015 acquisition of Cubist Pharmaceuticals, Inc.	
 
Page 11

Merck narrowed and raised its full-year 2020 revenue range to be between $47.6 billion and $48.6 billion, including a negative impact from foreign exchange of approximately 1.5% at mid-October exchange rates. The company’s guidance assumes $120 million of revenue for the replenishment of doses of GARDASIL 9 that were borrowed from the U.S. Centers for Disease Control and Prevention (CDC) Pediatric Vaccine Stockpile in the fourth quarter of 2019.
 
Merck narrowed and lowered its full-year 2020 GAAP EPS range to be between $4.55 and $4.65. Merck narrowed and raised its full-year 2020 non-GAAP EPS range to be between $5.91 and $6.01, including a negative impact from foreign exchange of approximately 2.5% at mid-October exchange rates. The non-GAAP range excludes acquisition- and divestiture-related costs, costs related to restructuring programs and certain other items.
 
The following table summarizes the company’s full-year 2020 financial guidance.
 
 	 	GAAP	 	Non-GAAP2	
Revenue	 	$47.6 to $48.6 billion	 	$47.6 to $48.6 billion*	
Operating expenses	 	Higher than 2019 by a low-single-digit rate	 	Lower than 2019 by a low-single-digit rate	
Effective tax rate	 	Approximately 15%	 	Approximately 15.5%	
EPS**	 	$4.55 to $4.65	 	$5.91 to $6.01	
*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	 	 	$4.55 to $4.65	 	
Difference	 	 	1.36	 	
Non-GAAP EPS that excludes items listed below2	 	 	$5.91 to $6.01	 	
 	 	 	 	 	
Acquisition- and divestiture-related costs	 	 	$2,300	 	
Restructuring costs	 	 	800	 	
Charges for collaborations	 	 	1,082	 	
Net decrease (increase) in income before taxes	 	 	4,182	 	
Income tax (benefit) expense5	 	 	(715	)	
Decrease (increase) in net income	 	 	$3,467	 	
 
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://www.merck.com/investor-relations/events-and-presentations/. Institutional investors and analysts can participate in the call (833) 353-0277 or toll free (469) 886-1947 and using ID code number 4664137. 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 4664137. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

Page 12

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.
 
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 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 13

MERCK & CO., INC.
CONSOLIDATED STATEMENT OF INCOME - GAAP
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
Table 1
 
 	 	GAAP	 	 		 	 	GAAP	 	 		 	
 	 	3Q20	 	 	3Q19	 	 	% Change	 	 	Sep YTD 2020	 	 	Sep YTD 2019	 	 	% Change	 	
Sales	 	$	12,551	 	 	$	12,397	 	 	 	1	%	 	$	35,479	 	 	$	34,972	 	 	 	1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Costs, Expenses and Other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales (1)	 	 	3,481	 	 	 	3,990	 	 	 	-13	%	 	 	9,952	 	 	 	10,443	 	 	 	-5	%	
Selling, general and administrative (1)	 	 	2,450	 	 	 	2,589	 	 	 	-5	%	 	 	7,383	 	 	 	7,726	 	 	 	-4	%	
Research and development (1)	 	 	3,390	 	 	 	3,204	 	 	 	6	%	 	 	7,721	 	 	 	7,324	 	 	 	5	%	
Restructuring costs (2)	 	 	114	 	 	 	232	 	 	 	-51	%	 	 	269	 	 	 	444	 	 	 	-39	%	
Other (income) expense, net (1)	 	 	(312	)	 	 	35	 	 	 	*	 	 	 	(630	)	 	 	362	 	 	 	*	 	
Income Before Taxes	 	 	3,428	 	 	 	2,347	 	 	 	46	%	 	 	10,784	 	 	 	8,673	 	 	 	24	%	
Taxes on Income (1)	 	 	483	 	 	 	440	 	 	 	 	 	 	 	1,611	 	 	 	1,259	 	 	 	 	 	
Net Income	 	 	2,945	 	 	 	1,907	 	 	 	54	%	 	 	9,173	 	 	 	7,414	 	 	 	24	%	
Less: Net Income (Loss) Attributable to Noncontrolling Interests (1)	 	 	4	 	 	 	6	 	 	 	 	 	 	 	12	 	 	 	(73	)	 	 	 	 	
Net Income Attributable to Merck & Co., Inc.	 	$	2,941	 	 	$	1,901	 	 	 	55	%	 	$	9,161	 	 	$	7,487	 	 	 	22	%	
Earnings per Common Share Assuming Dilution	 	$	1.16	 	 	$	0.74	 	 	 	57	%	 	$	3.61	 	 	$	2.89	 	 	 	25	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Shares Outstanding Assuming Dilution	 	 	2,538	 	 	 	2,572	 	 	 	 	 	 	 	2,541	 	 	 	2,587	 	 	 	 	 	
Tax Rate (3)	 	 	14.1	%	 	 	18.7	%	 	 	 	 	 	 	14.9	%	 	 	14.5	%	 	 	 	 	

* 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 rates for the third quarter and the first nine months of 2019 include the unfavorable impact of a charge for the acquisition of Peloton Therapeutics, Inc. for which no tax benefit was recognized and the favorable impact of product mix.  The effective income tax rate for the first nine 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
THIRD 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 (4)	 	 	Adjustment
Subtotal	 	 	Non-GAAP	 	
Cost of sales	 	$	3,481	 	 	 	285	 	 	 	38	 	 	 	 	 	 	 	323	 	 	$	3,158	 	
Selling, general and administrative	 	 	2,450	 	 	 	207	 	 	 	15	 	 	 	 	 	 	 	222	 	 	 	2,228	 	
Research and development	 	 	3,390	 	 	 	16	 	 	 	19	 	 	 	1,082	 	 	 	1,117	 	 	 	2,273	 	
Restructuring costs	 	 	114	 	 	 	 	 	 	 	114	 	 	 	 	 	 	 	114	 	 	 	-	 	
Other (income) expense, net	 	 	(312	)	 	 	 	 	 	 	 	 	 	 	(1	)	 	 	(1	)	 	 	(311	)	
Income Before Taxes	 	 	3,428	 	 	 	(508	)	 	 	(186	)	 	 	(1,081	)	 	 	(1,775	)	 	 	5,203	 	
Income Tax Provision (Benefit)	 	 	483	 	 	 	(17	)(3)	 	 	(25	)(3)	 	 	(247	)(3)	 	 	(289	)	 	 	772	 	
Net Income	 	 	2,945	 	 	 	(491	)	 	 	(161	)	 	 	(834	)	 	 	(1,486	)	 	 	4,431	 	
Net Income Attributable to Merck & Co., Inc.	 	 	2,941	 	 	 	(491	)	 	 	(161	)	 	 	(834	)	 	 	(1,486	)	 	 	4,427	 	
Earnings per Common Share Assuming Dilution	 	$	1.16	 	 	 	(0.19	)	 	 	(0.06	)	 	 	(0.33	)	 	 	(0.58	)	 	$	1.74	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax Rate	 	 	14.1	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	14.8	%	

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 expenses for the amortization of intangible assets recognized as a result of business acquisitions.  Amount included in selling, general and administrative expenses reflects $182 million related to the company's planned spin-off of Organon & Co., and other acquisition and divestiture-related costs.  	
 	
(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.  Acquisition and divestiture-related costs also includes a tax cost of $67 million, representing an adjustment to the tax benefits recorded in conjunction with the 2015 Cubist Pharmaceuticals, Inc. acquisition.	
 	
(4) Amount included in research and development reflects expenses for upfront payments related to license and collaboration agreements.	

 

MERCK & CO., INC.
GAAP TO NON-GAAP RECONCILIATION
NINE MONTHS ENDED SEPTEMBER 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 (4)	 	 	Adjustment
Subtotal	 	 	Non-GAAP	 	
Cost of sales	 	$	9,952	 	 	 	863	 	 	 	131	 	 	 	 	 	 	 	994	 	 	$	8,958	 	
Selling, general and administrative	 	 	7,383	 	 	 	648	 	 	 	37	 	 	 	 	 	 	 	685	 	 	 	6,698	 	
Research and development	 	 	7,721	 	 	 	(12	)	 	 	67	 	 	 	1,082	 	 	 	1,137	 	 	 	6,584	 	
Restructuring costs	 	 	269	 	 	 	 	 	 	 	269	 	 	 	 	 	 	 	269	 	 	 	-	 	
Other (income) expense, net	 	 	(630	)	 	 	52	 	 	 	 	 	 	 	(17	)	 	 	35	 	 	 	(665	)	
Income Before Taxes	 	 	10,784	 	 	 	(1,551	)	 	 	(504	)	 	 	(1,065	)	 	 	(3,120	)	 	 	13,904	 	
Income Tax Provision (Benefit)	 	 	1,611	 	 	 	(248	)(3)	 	 	(59	)(3)	 	 	(242	)(3)	 	 	(549	)	 	 	2,160	 	
Net Income	 	 	9,173	 	 	 	(1,303	)	 	 	(445	)	 	 	(823	)	 	 	(2,571	)	 	 	11,744	 	
Net Income Attributable to Merck & Co., Inc.	 	 	9,161	 	 	 	(1,303	)	 	 	(445	)	 	 	(823	)	 	 	(2,571	)	 	 	11,732	 	
Earnings per Common Share Assuming Dilution	 	$	3.61	 	 	 	(0.51	)	 	 	(0.18	)	 	 	(0.32	)	 	 	(1.01	)	 	$	4.62	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax Rate	 	 	14.9	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	15.5	%	
 
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 expenses for the amortization of intangible assets recognized as a result of business acquisitions.  Amount included in selling, general and administrative expenses reflects $466 million 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.  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 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.  Acquisition and divestiture-related costs also includes a tax cost of $67 million, representing an adjustment to the tax benefits recorded in conjunction with the 2015 Cubist Pharmaceuticals, Inc. acquisition.	
 	
(4) Amount included in research and development reflects expenses for upfront payments related to license and collaboration agreements.	

 

MERCK & CO., INC.
FRANCHISE / KEY PRODUCT SALES
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3
 
 	 	2020	 	 	2019	 	 	3Q	 	 	Sep YTD	 	
 	 	1Q	 	2Q	 	3Q	 	Sep YTD	 	 	1Q	 	2Q	 	3Q	 	Sep YTD	 	4Q	 	Full Year	 	 	Nom %	 	Ex-Exch %	 	 	Nom %	 	Ex-Exch %	 	
TOTAL SALES (1) 	 	$	12,057	 	$	10,872	 	$	12,551	 	$	35,479	 	 	$	10,816	 	$	11,760	 	$	12,397	 	$	34,972	 	$	11,868	 	$	46,840	 	 	 	1	 	 	2	 	 	 	1	 	 	3	 	
PHARMACEUTICAL	 	 	10,655	 	 	9,679	 	 	11,320	 	 	31,654	 	 	 	9,663	 	 	10,460	 	 	11,095	 	 	31,218	 	 	10,533	 	 	41,751	 	 	 	2	 	 	2	 	 	 	1	 	 	3	 	
Oncology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Keytruda	 	 	3,284	 	 	3,388	 	 	3,715	 	 	10,387	 	 	 	2,269	 	 	2,634	 	 	3,070	 	 	7,973	 	 	3,111	 	 	11,084	 	 	 	21	 	 	21	 	 	 	30	 	 	31	 	
Alliance Revenue – Lynparza (2)	 	 	145	 	 	178	 	 	196	 	 	519	 	 	 	79	 	 	111	 	 	123	 	 	313	 	 	132	 	 	444	 	 	 	59	 	 	58	 	 	 	66	 	 	67	 	
Alliance Revenue – Lenvima (2)	 	 	128	 	 	151	 	 	142	 	 	421	 	 	 	74	 	 	97	 	 	109	 	 	280	 	 	124	 	 	404	 	 	 	30	 	 	29	 	 	 	50	 	 	50	 	
Emend	 	 	43	 	 	33	 	 	39	 	 	115	 	 	 	117	 	 	121	 	 	98	 	 	336	 	 	53	 	 	388	 	 	 	-60	 	 	-59	 	 	 	-66	 	 	-65	 	
Vaccines (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gardasil / Gardasil 9	 	 	1,097	 	 	656	 	 	1,187	 	 	2,941	 	 	 	838	 	 	886	 	 	1,320	 	 	3,044	 	 	693	 	 	3,737	 	 	 	-10	 	 	-10	 	 	 	-3	 	 	-2	 	
ProQuad / M-M-R II / Varivax	 	 	435	 	 	378	 	 	576	 	 	1,390	 	 	 	496	 	 	675	 	 	623	 	 	1,794	 	 	481	 	 	2,275	 	 	 	-8	 	 	-7	 	 	 	-23	 	 	-22	 	
Pneumovax 23	 	 	256	 	 	117	 	 	375	 	 	748	 	 	 	185	 	 	170	 	 	237	 	 	592	 	 	334	 	 	926	 	 	 	58	 	 	58	 	 	 	26	 	 	27	 	
RotaTeq	 	 	222	 	 	168	 	 	210	 	 	601	 	 	 	211	 	 	172	 	 	180	 	 	564	 	 	227	 	 	791	 	 	 	16	 	 	17	 	 	 	7	 	 	8	 	
Vaqta	 	 	60	 	 	28	 	 	51	 	 	139	 	 	 	47	 	 	58	 	 	62	 	 	167	 	 	71	 	 	238	 	 	 	-18	 	 	-17	 	 	 	-17	 	 	-15	 	
Hospital Acute Care	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Bridion	 	 	299	 	 	224	 	 	320	 	 	843	 	 	 	255	 	 	278	 	 	284	 	 	817	 	 	313	 	 	1,131	 	 	 	13	 	 	13	 	 	 	3	 	 	4	 	
Noxafil	 	 	94	 	 	73	 	 	79	 	 	247	 	 	 	190	 	 	193	 	 	177	 	 	560	 	 	103	 	 	662	 	 	 	-55	 	 	-55	 	 	 	-56	 	 	-55	 	
Prevymis	 	 	60	 	 	63	 	 	77	 	 	200	 	 	 	32	 	 	38	 	 	45	 	 	115	 	 	50	 	 	165	 	 	 	72	 	 	69	 	 	 	74	 	 	74	 	
Primaxin	 	 	51	 	 	64	 	 	74	 	 	189	 	 	 	59	 	 	71	 	 	77	 	 	207	 	 	67	 	 	273	 	 	 	-4	 	 	-4	 	 	 	-9	 	 	-7	 	
Invanz	 	 	64	 	 	43	 	 	51	 	 	159	 	 	 	72	 	 	78	 	 	57	 	 	206	 	 	57	 	 	263	 	 	 	-10	 	 	-6	 	 	 	-23	 	 	-19	 	
Cancidas	 	 	55	 	 	43	 	 	50	 	 	148	 	 	 	61	 	 	67	 	 	62	 	 	191	 	 	58	 	 	249	 	 	 	-20	 	 	-19	 	 	 	-22	 	 	-20	 	
Cubicin	 	 	46	 	 	32	 	 	39	 	 	116	 	 	 	88	 	 	67	 	 	52	 	 	207	 	 	50	 	 	257	 	 	 	-26	 	 	-25	 	 	 	-44	 	 	-43	 	
Zerbaxa	 	 	37	 	 	32	 	 	43	 	 	112	 	 	 	26	 	 	27	 	 	35	 	 	88	 	 	32	 	 	121	 	 	 	22	 	 	24	 	 	 	27	 	 	29	 	
Immunology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Simponi	 	 	215	 	 	191	 	 	209	 	 	615	 	 	 	208	 	 	214	 	 	203	 	 	625	 	 	205	 	 	830	 	 	 	3	 	 	 	 	 	 	-2	 	 	-1	 	
Remicade	 	 	88	 	 	73	 	 	82	 	 	242	 	 	 	123	 	 	98	 	 	101	 	 	322	 	 	89	 	 	411	 	 	 	-19	 	 	-20	 	 	 	-25	 	 	-24	 	
Neuroscience	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Belsomra	 	 	79	 	 	84	 	 	81	 	 	244	 	 	 	67	 	 	76	 	 	80	 	 	223	 	 	83	 	 	306	 	 	 	1	 	 	 	 	 	 	9	 	 	8	 	
Virology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Isentress / Isentress HD	 	 	245	 	 	196	 	 	205	 	 	646	 	 	 	255	 	 	247	 	 	250	 	 	752	 	 	223	 	 	975	 	 	 	-18	 	 	-18	 	 	 	-14	 	 	-12	 	
Zepatier	 	 	55	 	 	39	 	 	28	 	 	122	 	 	 	114	 	 	108	 	 	83	 	 	304	 	 	66	 	 	370	 	 	 	-67	 	 	-67	 	 	 	-60	 	 	-59	 	
Cardiovascular	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Zetia	 	 	145	 	 	137	 	 	103	 	 	384	 	 	 	140	 	 	156	 	 	147	 	 	443	 	 	146	 	 	590	 	 	 	-30	 	 	-30	 	 	 	-13	 	 	-13	 	
Vytorin	 	 	53	 	 	39	 	 	47	 	 	139	 	 	 	97	 	 	76	 	 	57	 	 	231	 	 	54	 	 	285	 	 	 	-17	 	 	-16	 	 	 	-40	 	 	-38	 	
Atozet	 	 	122	 	 	115	 	 	111	 	 	348	 	 	 	94	 	 	92	 	 	97	 	 	283	 	 	108	 	 	391	 	 	 	14	 	 	12	 	 	 	23	 	 	25	 	
Alliance Revenue - Adempas (4)	 	 	53	 	 	79	 	 	83	 	 	216	 	 	 	42	 	 	51	 	 	50	 	 	144	 	 	60	 	 	204	 	 	 	67	 	 	67	 	 	 	50	 	 	50	 	
Adempas (5)	 	 	56	 	 	57	 	 	55	 	 	167	 	 	 	48	 	 	53	 	 	57	 	 	158	 	 	57	 	 	215	 	 	 	-5	 	 	-7	 	 	 	6	 	 	6	 	
Diabetes (6)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Januvia	 	 	774	 	 	854	 	 	821	 	 	2,449	 	 	 	824	 	 	908	 	 	807	 	 	2,539	 	 	943	 	 	3,482	 	 	 	2	 	 	2	 	 	 	-4	 	 	-3	 	
Janumet	 	 	503	 	 	490	 	 	506	 	 	1,499	 	 	 	530	 	 	533	 	 	503	 	 	1,567	 	 	475	 	 	2,041	 	 	 	 	 	 	2	 	 	 	-4	 	 	-2	 	
Women's Health	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Implanon / Nexplanon	 	 	195	 	 	132	 	 	189	 	 	515	 	 	 	199	 	 	183	 	 	199	 	 	581	 	 	206	 	 	787	 	 	 	-5	 	 	-4	 	 	 	-11	 	 	-10	 	
NuvaRing	 	 	63	 	 	63	 	 	58	 	 	184	 	 	 	219	 	 	240	 	 	241	 	 	700	 	 	179	 	 	879	 	 	 	-76	 	 	-76	 	 	 	-74	 	 	-73	 	
Diversified Brands	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Singulair	 	 	155	 	 	100	 	 	82	 	 	338	 	 	 	191	 	 	160	 	 	152	 	 	503	 	 	195	 	 	698	 	 	 	-46	 	 	-46	 	 	 	-33	 	 	-32	 	
Cozaar / Hyzaar	 	 	102	 	 	98	 	 	91	 	 	292	 	 	 	103	 	 	109	 	 	116	 	 	329	 	 	113	 	 	442	 	 	 	-21	 	 	-20	 	 	 	-11	 	 	-9	 	
Arcoxia	 	 	70	 	 	65	 	 	68	 	 	204	 	 	 	75	 	 	75	 	 	72	 	 	221	 	 	67	 	 	288	 	 	 	-5	 	 	-2	 	 	 	-8	 	 	-5	 	
Nasonex	 	 	71	 	 	49	 	 	41	 	 	161	 	 	 	96	 	 	72	 	 	58	 	 	226	 	 	67	 	 	293	 	 	 	-30	 	 	-29	 	 	 	-29	 	 	-27	 	
Follistim AQ	 	 	41	 	 	44	 	 	50	 	 	136	 	 	 	57	 	 	63	 	 	62	 	 	182	 	 	58	 	 	241	 	 	 	-18	 	 	-18	 	 	 	-26	 	 	-25	 	
Other Pharmaceutical (7)	 	 	1,194	 	 	1,103	 	 	1,186	 	 	3,478	 	 	 	1,082	 	 	1,203	 	 	1,149	 	 	3,431	 	 	1,183	 	 	4,615	 	 	 	3	 	 	4	 	 	 	1	 	 	3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ANIMAL HEALTH	 	 	1,214	 	 	1,101	 	 	1,220	 	 	3,535	 	 	 	1,025	 	 	1,124	 	 	1,122	 	 	3,271	 	 	1,122	 	 	4,393	 	 	 	9	 	 	12	 	 	 	8	 	 	12	 	
Livestock	 	 	739	 	 	648	 	 	758	 	 	2,145	 	 	 	611	 	 	671	 	 	726	 	 	2,007	 	 	777	 	 	2,784	 	 	 	5	 	 	8	 	 	 	7	 	 	11	 	
Companion Animals	 	 	475	 	 	453	 	 	462	 	 	1,390	 	 	 	414	 	 	453	 	 	396	 	 	1,264	 	 	345	 	 	1,609	 	 	 	17	 	 	18	 	 	 	10	 	 	12	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Revenues (8)	 	 	188	 	 	92	 	 	11	 	 	290	 	 	 	128	 	 	176	 	 	180	 	 	483	 	 	213	 	 	696	 	 	 	-94	 	 	-33	 	 	 	-40	 	 	-12	 	
 
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, $1,418 million and $2,521 million in the first, second and third quarters of 2020 and $1,887 million, $2,037 million, $2,517 million and $1,928 million in 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, $1,418 million and $1,405 million in the first, second and third quarters of 2020 and $1,402 million, $1,480 million, $1,360 million and $1,472 million in 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		 	 	3Q		 	 	Sep YTD	 	 	 	1Q		 	 	2Q		 	 	3Q		 	 	Sep YTD	 	 	 	4Q		 	 	Full Year	 	 	 	3Q		 	 	Sep YTD	 	
Sales	 	$	12,057	 	 	$	10,872	 	 	$	12,551	 	 	$	35,479	 	 	$	10,816	 	 	$	11,760	 	 	$	12,397	 	 	$	34,972	 	 	$	11,868	 	 	$	46,840	 	 	 	1	%	 	 	1	%	
Costs, Expenses and Other	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	 	3,312	 	 	 	3,159	 	 	 	3,481	 	 	 	9,952	 	 	 	3,052	 	 	 	3,401	 	 	 	3,990	 	 	 	10,443	 	 	 	3,669	 	 	 	14,112	 	 	 	-13	%	 	 	-5	%	
Selling, general and administrative	 	 	2,555	 	 	 	2,378	 	 	 	2,450	 	 	 	7,383	 	 	 	2,425	 	 	 	2,712	 	 	 	2,589	 	 	 	7,726	 	 	 	2,888	 	 	 	10,615	 	 	 	-5	%	 	 	-4	%	
Research and development	 	 	2,209	 	 	 	2,123	 	 	 	3,390	 	 	 	7,721	 	 	 	1,931	 	 	 	2,189	 	 	 	3,204	 	 	 	7,324	 	 	 	2,548	 	 	 	9,872	 	 	 	6	%	 	 	5	%	
Restructuring costs	 	 	72	 	 	 	83	 	 	 	114	 	 	 	269	 	 	 	153	 	 	 	59	 	 	 	232	 	 	 	444	 	 	 	194	 	 	 	638	 	 	 	-51	%	 	 	-39	%	
Other (income) expense, net	 	 	71	 	 	 	(390	)	 	 	(312	)	 	 	(630	)	 	 	188	 	 	 	140	 	 	 	35	 	 	 	362	 	 	 	(223	)	 	 	139	 	 	 	*	 	 	 	*	 	
Income Before Taxes	 	 	3,838	 	 	 	3,519	 	 	 	3,428	 	 	 	10,784	 	 	 	3,067	 	 	 	3,259	 	 	 	2,347	 	 	 	8,673	 	 	 	2,792	 	 	 	11,464	 	 	 	46	%	 	 	24	%	
Taxes on Income	 	 	619	 	 	 	509	 	 	 	483	 	 	 	1,611	 	 	 	205	 	 	 	615	 	 	 	440	 	 	 	1,259	 	 	 	428	 	 	 	1,687	 	 	 	 	 	 	 	 	 	
Net Income	 	 	3,219	 	 	 	3,010	 	 	 	2,945	 	 	 	9,173	 	 	 	2,862	 	 	 	2,644	 	 	 	1,907	 	 	 	7,414	 	 	 	2,364	 	 	 	9,777	 	 	 	54	%	 	 	24	%	
Less: Net Income (Loss) Attributable to Noncontrolling Interests	 	 	-	 	 	 	8	 	 	 	4	 	 	 	12	 	 	 	(53	)	 	 	(26	)	 	 	6	 	 	 	(73	)	 	 	7	 	 	 	(66	)	 	 	 	 	 	 	 	 	
Net Income Attributable to Merck & Co., Inc.	 	$	3,219	 	 	$	3,002	 	 	$	2,941	 	 	$	9,161	 	 	$	2,915	 	 	$	2,670	 	 	$	1,901	 	 	$	7,487	 	 	$	2,357	 	 	$	9,843	 	 	 	55	%	 	 	22	%	
Earnings per Common Share Assuming Dilution	 	$	1.26	 	 	$	1.18	 	 	$	1.16	 	 	$	3.61	 	 	$	1.12	 	 	$	1.03	 	 	$	0.74	 	 	$	2.89	 	 	$	0.92	 	 	$	3.81	 	 	 	57	%	 	 	25	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Average Shares Outstanding Assuming Dilution	 	 	2,547	 	 	 	2,536	 	 	 	2,538	 	 	 	2,541	 	 	 	2,603	 	 	 	2,588	 	 	 	2,572	 	 	 	2,587	 	 	 	2,559	 	 	 	2,580	 	 	 	 	 	 	 	 	 	
Tax Rate	 	 	16.1	%	 	 	14.5	%	 	 	14.1	%	 	 	14.9	%	 	 	6.7	%	 	 	18.9	%	 	 	18.7	%	 	 	14.5	%	 	 	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
THIRD 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 (4)	 	 	Adjustment
Subtotal	 	 	Non-GAAP	 	
Cost of sales	 	$	3,990	 	 	 	941	 	 	 	62	 	 	 	 	 	 	 	1,003	 	 	$	2,987	 	
Selling, general and administrative	 	 	2,589	 	 	 	22	 	 	 	1	 	 	 	 	 	 	 	23	 	 	 	2,566	 	
Research and development	 	 	3,204	 	 	 	6	 	 	 	1	 	 	 	982	 	 	 	989	 	 	 	2,215	 	
Restructuring costs	 	 	232	 	 	 	 	 	 	 	232	 	 	 	 	 	 	 	232	 	 	 	-	 	
Other (income) expense, net	 	 	35	 	 	 	6	 	 	 	 	 	 	 	 	 	 	 	6	 	 	 	29	 	
Income Before Taxes	 	 	2,347	 	 	 	(975	)	 	 	(296	)	 	 	(982	)	 	 	(2,253	)	 	 	4,600	 	
Income Tax Provision (Benefit)	 	 	440	 	 	 	(231	)(3)	 	 	(50	)(3)	 	 	-	 	 	 	(281	)	 	 	721	 	
Net Income	 	 	1,907	 	 	 	(744	)	 	 	(246	)	 	 	(982	)	 	 	(1,972	)	 	 	3,879	 	
Net Income Attributable to Merck & Co., Inc.	 	 	1,901	 	 	 	(744	)	 	 	(246	)	 	 	(982	)	 	 	(1,972	)	 	 	3,873	 	
Earnings per Common Share Assuming Dilution	 	$	0.74	 	 	 	(0.29	)	 	 	(0.10	)	 	 	(0.38	)	 	 	(0.77	)	 	$	1.51	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax Rate	 	 	18.7	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	15.7	%	
 
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) Amount included in cost of sales primarily reflects $320 million of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as $612 million of intangible asset impairment charges related to SIVEXTRO.  Amount included in selling, general and administrative expenses primarily reflects integration, transaction and certain other costs related to business acquisitions and divestitures.  
 
(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) Amount included in research and development represents the charge related to the acquisition of Peloton Therapeutics, Inc.

 

MERCK & CO., INC.
GAAP TO NON-GAAP RECONCILIATION
NINE MONTHS ENDED SEPTEMBER 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 (4)	 	 	Adjustment
Subtotal	 	 	Non-GAAP	 	
Cost of sales	 	$	10,443	 	 	 	1,801	 	 	 	161	 	 	 	 	 	 	 	1,962	 	 	$	8,481	 	
Selling, general and administrative	 	 	7,726	 	 	 	82	 	 	 	33	 	 	 	 	 	 	 	115	 	 	 	7,611	 	
Research and development	 	 	7,324	 	 	 	(21	)	 	 	4	 	 	 	982	 	 	 	965	 	 	 	6,359	 	
Restructuring costs	 	 	444	 	 	 	 	 	 	 	444	 	 	 	 	 	 	 	444	 	 	 	-	 	
Other (income) expense, net	 	 	362	 	 	 	321	 	 	 	 	 	 	 	48	 	 	 	369	 	 	 	(7	)	
Income Before Taxes	 	 	8,673	 	 	 	(2,183	)	 	 	(642	)	 	 	(1,030	)	 	 	(3,855	)	 	 	12,528	 	
Income Tax Provision (Benefit)	 	 	1,259	 	 	 	(438	)(3)	 	 	(106	)(3)	 	 	(304	)(5)	 	 	(848	)	 	 	2,107	 	
Net Income	 	 	7,414	 	 	 	(1,745	)	 	 	(536	)	 	 	(726	)	 	 	(3,007	)	 	 	10,421	 	
Less: Net (Loss) Income Attributable to Noncontrolling Interests	 	 	(73	)	 	 	(89	)	 	 	 	 	 	 	 	 	 	 	(89	)	 	 	16	 	
Net Income Attributable to Merck & Co., Inc.	 	 	7,487	 	 	 	(1,656	)	 	 	(536	)	 	 	(726	)	 	 	(2,918	)	 	 	10,405	 	
Earnings per Common Share Assuming Dilution	 	$	2.89	 	 	 	(0.64	)	 	 	(0.21	)	 	 	(0.28	)	 	 	(1.13	)	 	$	4.02	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tax Rate	 	 	14.5	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	16.8	%	
 
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 $1.1 billion of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as $693 million of intangible asset impairment charges, including $612 million related to SIVEXTRO.  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) Amount included in research and development represents the charge related to the acquisition of Peloton Therapeutics, Inc.
 
(5) Primarily reflects 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
THIRD QUARTER 2020
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3a
 
 	 	Global	 	 	U.S.	 	 	International	 	
 	 	3Q 2020	 	 	3Q 2019	 	 	% Change	 	 	3Q 2020	 	 	3Q 2019	 	 	% Change	 	 	3Q 2020	 	 	3Q 2019	 	 	% Change	 	
TOTAL SALES (1)	 	$	12,551	 	 	$	12,397	 	 	 	1	 	 	$	5,625	 	 	$	5,573	 	 	 	1	 	 	$	6,926	 	 	$	6,824	 	 	 	1	 	
PHARMACEUTICAL	 	 	11,320	 	 	 	11,095	 	 	 	2	 	 	 	5,218	 	 	 	5,180	 	 	 	1	 	 	 	6,102	 	 	 	5,914	 	 	 	3	 	
Oncology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Keytruda	 	 	3,715	 	 	 	3,070	 	 	 	21	 	 	 	2,157	 	 	 	1,743	 	 	 	24	 	 	 	1,559	 	 	 	1,327	 	 	 	17	 	
Alliance Revenue - Lynparza (2)	 	 	196	 	 	 	123	 	 	 	59	 	 	 	107	 	 	 	71	 	 	 	52	 	 	 	89	 	 	 	53	 	 	 	70	 	
Alliance Revenue - Lenvima (2)	 	 	142	 	 	 	109	 	 	 	30	 	 	 	82	 	 	 	65	 	 	 	26	 	 	 	60	 	 	 	44	 	 	 	36	 	
Emend	 	 	39	 	 	 	98	 	 	 	-60	 	 	 	8	 	 	 	42	 	 	 	-82	 	 	 	31	 	 	 	56	 	 	 	-44	 	
Vaccines (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gardasil / Gardasil 9	 	 	1,187	 	 	 	1,320	 	 	 	-10	 	 	 	579	 	 	 	761	 	 	 	-24	 	 	 	608	 	 	 	558	 	 	 	9	 	
ProQuad / M-M-R II / Varivax	 	 	576	 	 	 	623	 	 	 	-8	 	 	 	437	 	 	 	482	 	 	 	-9	 	 	 	139	 	 	 	141	 	 	 	-2	 	
Pneumovax 23	 	 	375	 	 	 	237	 	 	 	58	 	 	 	276	 	 	 	179	 	 	 	54	 	 	 	99	 	 	 	58	 	 	 	72	 	
RotaTeq	 	 	210	 	 	 	180	 	 	 	16	 	 	 	114	 	 	 	102	 	 	 	11	 	 	 	96	 	 	 	78	 	 	 	23	 	
Vaqta	 	 	51	 	 	 	62	 	 	 	-18	 	 	 	32	 	 	 	36	 	 	 	-11	 	 	 	19	 	 	 	26	 	 	 	-26	 	
Hospital Acute Care	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Bridion	 	 	320	 	 	 	284	 	 	 	13	 	 	 	162	 	 	 	133	 	 	 	22	 	 	 	157	 	 	 	151	 	 	 	4	 	
Noxafil	 	 	79	 	 	 	177	 	 	 	-55	 	 	 	13	 	 	 	77	 	 	 	-83	 	 	 	66	 	 	 	100	 	 	 	-34	 	
Prevymis	 	 	77	 	 	 	45	 	 	 	72	 	 	 	32	 	 	 	22	 	 	 	42	 	 	 	46	 	 	 	23	 	 	 	101	 	
Primaxin	 	 	74	 	 	 	77	 	 	 	-4	 	 	 	1	 	 	 	2	 	 	 	-34	 	 	 	73	 	 	 	75	 	 	 	-3	 	
Invanz	 	 	51	 	 	 	57	 	 	 	-10	 	 	 	1	 	 	 	(1	)	 	 	*	 	 	 	50	 	 	 	58	 	 	 	-14	 	
Cancidas	 	 	50	 	 	 	62	 	 	 	-20	 	 	 	1	 	 	 	0	 	 	 	80	 	 	 	49	 	 	 	62	 	 	 	-21	 	
Zerbaxa	 	 	43	 	 	 	35	 	 	 	22	 	 	 	20	 	 	 	20	 	 	 	4	 	 	 	23	 	 	 	15	 	 	 	47	 	
Cubicin	 	 	39	 	 	 	52	 	 	 	-26	 	 	 	11	 	 	 	14	 	 	 	-22	 	 	 	28	 	 	 	38	 	 	 	-28	 	
Immunology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Simponi	 	 	209	 	 	 	203	 	 	 	3	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	209	 	 	 	203	 	 	 	3	 	
Remicade	 	 	82	 	 	 	101	 	 	 	-19	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	82	 	 	 	101	 	 	 	-19	 	
Neuroscience	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Belsomra	 	 	81	 	 	 	80	 	 	 	1	 	 	 	18	 	 	 	23	 	 	 	-24	 	 	 	63	 	 	 	57	 	 	 	11	 	
Virology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Isentress / Isentress HD	 	 	205	 	 	 	250	 	 	 	-18	 	 	 	92	 	 	 	102	 	 	 	-10	 	 	 	113	 	 	 	149	 	 	 	-24	 	
Zepatier	 	 	28	 	 	 	83	 	 	 	-67	 	 	 	6	 	 	 	24	 	 	 	-76	 	 	 	22	 	 	 	59	 	 	 	-63	 	
Cardiovascular	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Zetia	 	 	103	 	 	 	147	 	 	 	-30	 	 	 	(1	)	 	 	5	 	 	 	-115	 	 	 	103	 	 	 	142	 	 	 	-27	 	
Vytorin	 	 	47	 	 	 	57	 	 	 	-17	 	 	 	3	 	 	 	5	 	 	 	-34	 	 	 	44	 	 	 	52	 	 	 	-16	 	
Atozet	 	 	111	 	 	 	97	 	 	 	14	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	111	 	 	 	97	 	 	 	14	 	
Alliance Revenue - Adempas (4)	 	 	83	 	 	 	50	 	 	 	67	 	 	 	78	 	 	 	48	 	 	 	64	 	 	 	5	 	 	 	2	 	 	 	117	 	
Adempas (5)	 	 	55	 	 	 	57	 	 	 	-5	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	55	 	 	 	57	 	 	 	-5	 	
Diabetes (6)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Januvia	 	 	821	 	 	 	807	 	 	 	2	 	 	 	342	 	 	 	367	 	 	 	-7	 	 	 	479	 	 	 	440	 	 	 	9	 	
Janumet	 	 	506	 	 	 	503	 	 	 	 	 	 	 	105	 	 	 	129	 	 	 	-18	 	 	 	400	 	 	 	375	 	 	 	7	 	
Women's Health	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Implanon / Nexplanon	 	 	189	 	 	 	199	 	 	 	-5	 	 	 	137	 	 	 	136	 	 	 	1	 	 	 	52	 	 	 	62	 	 	 	-17	 	
NuvaRing	 	 	58	 	 	 	241	 	 	 	-76	 	 	 	24	 	 	 	202	 	 	 	-88	 	 	 	34	 	 	 	39	 	 	 	-13	 	
Diversified Brands	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cozaar / Hyzaar	 	 	91	 	 	 	116	 	 	 	-21	 	 	 	5	 	 	 	6	 	 	 	-7	 	 	 	86	 	 	 	110	 	 	 	-22	 	
Singulair	 	 	82	 	 	 	152	 	 	 	-46	 	 	 	4	 	 	 	11	 	 	 	-61	 	 	 	78	 	 	 	140	 	 	 	-44	 	
Arcoxia	 	 	68	 	 	 	72	 	 	 	-5	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	68	 	 	 	72	 	 	 	-5	 	
Follistim AQ	 	 	50	 	 	 	62	 	 	 	-18	 	 	 	20	 	 	 	27	 	 	 	-28	 	 	 	31	 	 	 	35	 	 	 	-11	 	
Nasonex	 	 	41	 	 	 	58	 	 	 	-30	 	 	 	 	 	 	 	4	 	 	 	-110	 	 	 	41	 	 	 	55	 	 	 	-24	 	
Other Pharmaceutical (7)	 	 	1,186	 	 	 	1,149	 	 	 	3	 	 	 	352	 	 	 	343	 	 	 	3	 	 	 	834	 	 	 	804	 	 	 	4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ANIMAL HEALTH	 	 	1,220	 	 	 	1,122	 	 	 	9	 	 	 	398	 	 	 	337	 	 	 	18	 	 	 	822	 	 	 	785	 	 	 	5	 	
Livestock	 	 	758	 	 	 	726	 	 	 	5	 	 	 	164	 	 	 	144	 	 	 	14	 	 	 	594	 	 	 	582	 	 	 	2	 	
Companion Animals	 	 	462	 	 	 	396	 	 	 	17	 	 	 	234	 	 	 	193	 	 	 	22	 	 	 	228	 	 	 	203	 	 	 	12	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Revenues (8)	 	 	11	 	 	 	180	 	 	 	-94	 	 	 	9	 	 	 	56	 	 	 	-85	 	 	 	2	 	 	 	125	 	 	 	-99	 	
 
* 200% or greater
 
Sum of U.S. plus international may not equal global 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 $2,521 million and $2,517 million on a global basis in the third quarter of 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 $1,405 million and $1,360 million on a global basis in the third quarter of 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
SEPTEMBER YEAR-TO-DATE 2020
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3b
 
 	 	Global	 	 	U.S.	 	 	International	 	
 	 	Sep YTD 2020	 	 	Sep YTD 2019	 	 	% Change	 	 	Sep YTD 2020	 	 	Sep YTD 2019	 	 	% Change	 	 	Sep YTD 2020	 	 	Sep YTD 2019	 	 	% Change	 	
TOTAL SALES (1)	 	$	35,479	 	 	$	34,972	 	 	 	1	 	 	$	15,396	 	 	$	15,320	 	 	 	 	 	 	$	20,084	 	 	$	19,652	 	 	 	2	 	
PHARMACEUTICAL	 	 	31,654	 	 	 	31,218	 	 	 	1	 	 	 	14,202	 	 	 	14,202	 	 	 	 	 	 	 	17,452	 	 	 	17,016	 	 	 	3	 	
Oncology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Keytruda	 	 	10,387	 	 	 	7,973	 	 	 	30	 	 	 	6,106	 	 	 	4,525	 	 	 	35	 	 	 	4,281	 	 	 	3,448	 	 	 	24	 	
Alliance Revenue - Lynparza (2)	 	 	519	 	 	 	313	 	 	 	66	 	 	 	297	 	 	 	186	 	 	 	59	 	 	 	223	 	 	 	126	 	 	 	76	 	
Alliance Revenue - Lenvima (2)	 	 	421	 	 	 	280	 	 	 	50	 	 	 	270	 	 	 	169	 	 	 	60	 	 	 	152	 	 	 	112	 	 	 	36	 	
Emend	 	 	115	 	 	 	336	 	 	 	-66	 	 	 	18	 	 	 	173	 	 	 	-89	 	 	 	96	 	 	 	163	 	 	 	-41	 	
Vaccines (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gardasil / Gardasil 9	 	 	2,941	 	 	 	3,044	 	 	 	-3	 	 	 	1,209	 	 	 	1,579	 	 	 	-23	 	 	 	1,732	 	 	 	1,464	 	 	 	18	 	
ProQuad / M-M-R II / Varivax	 	 	1,390	 	 	 	1,794	 	 	 	-23	 	 	 	1,033	 	 	 	1,325	 	 	 	-22	 	 	 	356	 	 	 	469	 	 	 	-24	 	
Pneumovax 23	 	 	748	 	 	 	592	 	 	 	26	 	 	 	478	 	 	 	428	 	 	 	12	 	 	 	270	 	 	 	164	 	 	 	64	 	
RotaTeq	 	 	601	 	 	 	564	 	 	 	7	 	 	 	355	 	 	 	360	 	 	 	-2	 	 	 	246	 	 	 	203	 	 	 	21	 	
Vaqta	 	 	139	 	 	 	167	 	 	 	-17	 	 	 	79	 	 	 	103	 	 	 	-23	 	 	 	60	 	 	 	65	 	 	 	-7	 	
Hospital Acute Care	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Bridion	 	 	843	 	 	 	817	 	 	 	3	 	 	 	412	 	 	 	381	 	 	 	8	 	 	 	431	 	 	 	437	 	 	 	-1	 	
Noxafil	 	 	247	 	 	 	560	 	 	 	-56	 	 	 	27	 	 	 	268	 	 	 	-90	 	 	 	220	 	 	 	291	 	 	 	-25	 	
Prevymis	 	 	200	 	 	 	115	 	 	 	74	 	 	 	87	 	 	 	60	 	 	 	45	 	 	 	113	 	 	 	55	 	 	 	106	 	
Primaxin	 	 	189	 	 	 	207	 	 	 	-9	 	 	 	2	 	 	 	2	 	 	 	 	 	 	 	187	 	 	 	204	 	 	 	-9	 	
Invanz	 	 	159	 	 	 	206	 	 	 	-23	 	 	 	7	 	 	 	30	 	 	 	-77	 	 	 	152	 	 	 	176	 	 	 	-14	 	
Cancidas	 	 	148	 	 	 	191	 	 	 	-22	 	 	 	2	 	 	 	5	 	 	 	-63	 	 	 	147	 	 	 	187	 	 	 	-21	 	
Cubicin	 	 	116	 	 	 	207	 	 	 	-44	 	 	 	36	 	 	 	78	 	 	 	-54	 	 	 	80	 	 	 	129	 	 	 	-37	 	
Zerbaxa	 	 	112	 	 	 	88	 	 	 	27	 	 	 	57	 	 	 	45	 	 	 	27	 	 	 	54	 	 	 	43	 	 	 	26	 	
Immunology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Simponi	 	 	615	 	 	 	625	 	 	 	-2	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	615	 	 	 	625	 	 	 	-2	 	
Remicade	 	 	242	 	 	 	322	 	 	 	-25	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	242	 	 	 	322	 	 	 	-25	 	
Neuroscience	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Belsomra	 	 	244	 	 	 	223	 	 	 	9	 	 	 	67	 	 	 	68	 	 	 	-2	 	 	 	177	 	 	 	155	 	 	 	14	 	
Virology	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Isentress / Isentress HD	 	 	646	 	 	 	752	 	 	 	-14	 	 	 	243	 	 	 	304	 	 	 	-20	 	 	 	403	 	 	 	449	 	 	 	-10	 	
Zepatier	 	 	122	 	 	 	304	 	 	 	-60	 	 	 	38	 	 	 	96	 	 	 	-60	 	 	 	83	 	 	 	208	 	 	 	-60	 	
Cardiovascular	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Zetia	 	 	384	 	 	 	443	 	 	 	-13	 	 	 	(4	)	 	 	11	 	 	 	-140	 	 	 	389	 	 	 	432	 	 	 	-10	 	
Vytorin	 	 	139	 	 	 	231	 	 	 	-40	 	 	 	9	 	 	 	11	 	 	 	-23	 	 	 	130	 	 	 	219	 	 	 	-41	 	
Atozet	 	 	348	 	 	 	283	 	 	 	23	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	348	 	 	 	283	 	 	 	23	 	
Alliance Revenue - Adempas (4)	 	 	216	 	 	 	144	 	 	 	50	 	 	 	200	 	 	 	137	 	 	 	46	 	 	 	16	 	 	 	7	 	 	 	130	 	
Adempas (5)	 	 	167	 	 	 	158	 	 	 	6	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	167	 	 	 	158	 	 	 	6	 	
Diabetes (6)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Januvia	 	 	2,449	 	 	 	2,539	 	 	 	-4	 	 	 	1,110	 	 	 	1,223	 	 	 	-9	 	 	 	1,339	 	 	 	1,317	 	 	 	2	 	
Janumet	 	 	1,499	 	 	 	1,567	 	 	 	-4	 	 	 	361	 	 	 	462	 	 	 	-22	 	 	 	1,138	 	 	 	1,105	 	 	 	3	 	
Women's Health	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Implanon / Nexplanon	 	 	515	 	 	 	581	 	 	 	-11	 	 	 	374	 	 	 	421	 	 	 	-11	 	 	 	142	 	 	 	160	 	 	 	-12	 	
NuvaRing	 	 	184	 	 	 	700	 	 	 	-74	 	 	 	85	 	 	 	593	 	 	 	-86	 	 	 	98	 	 	 	107	 	 	 	-8	 	
Diversified Brands	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Singulair	 	 	338	 	 	 	503	 	 	 	-33	 	 	 	14	 	 	 	24	 	 	 	-44	 	 	 	324	 	 	 	479	 	 	 	-32	 	
Cozaar / Hyzaar	 	 	292	 	 	 	329	 	 	 	-11	 	 	 	17	 	 	 	16	 	 	 	6	 	 	 	275	 	 	 	313	 	 	 	-12	 	
Arcoxia	 	 	204	 	 	 	221	 	 	 	-8	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	204	 	 	 	221	 	 	 	-8	 	
Nasonex	 	 	161	 	 	 	226	 	 	 	-29	 	 	 	9	 	 	 	2	 	 	 	*	 	 	 	152	 	 	 	224	 	 	 	-32	 	
Follistim AQ	 	 	136	 	 	 	182	 	 	 	-26	 	 	 	60	 	 	 	80	 	 	 	-26	 	 	 	76	 	 	 	102	 	 	 	-26	 	
Other Pharmaceutical (7)	 	 	3,478	 	 	 	3,431	 	 	 	1	 	 	 	1,144	 	 	 	1,037	 	 	 	10	 	 	 	2,334	 	 	 	2,394	 	 	 	-3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ANIMAL HEALTH	 	 	3,535	 	 	 	3,271	 	 	 	8	 	 	 	1,124	 	 	 	966	 	 	 	16	 	 	 	2,411	 	 	 	2,305	 	 	 	5	 	
Livestock	 	 	2,145	 	 	 	2,007	 	 	 	7	 	 	 	448	 	 	 	406	 	 	 	10	 	 	 	1,697	 	 	 	1,601	 	 	 	6	 	
Companion Animals	 	 	1,390	 	 	 	1,264	 	 	 	10	 	 	 	676	 	 	 	560	 	 	 	21	 	 	 	714	 	 	 	704	 	 	 	2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other Revenues (8)	 	 	290	 	 	 	483	 	 	 	-40	 	 	 	70	 	 	 	152	 	 	 	-54	 	 	 	221	 	 	 	331	 	 	 	-33	 	
 
* 200% or greater
 
Sum of U.S. plus international may not equal global 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 $6,094 million and $6,441 million on a global basis for September 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 $4,177 million and $4,242 million on a global basis for September YTD 2020 and 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.

 

MERCK & CO., INC.
PHARMACEUTICAL GEOGRAPHIC SALES
(AMOUNTS IN MILLIONS)
(UNAUDITED)
Table 3c
 
 	 	2020	 	 	2019	 	 	% Change	 	
 	 	1Q	 	 	2Q	 	 	3Q	 	 	Sep YTD	 	 	1Q	 	 	2Q	 	 	3Q	 	 	Sep YTD	 	 	4Q	 	 	Full Year	 	 	3Q	 	
TOTAL PHARMACEUTICAL	 	$	10,655	 	 	$	9,679	 	 	$	11,320	 	 	$	31,654	 	 	$	9,663	 	 	$	10,460	 	 	$	11,095	 	 	$	31,218	 	 	$	10,533	 	 	$	41,751	 	 	 	2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
United States (1)	 	 	4,714	 	 	 	4,270	 	 	 	5,218	 	 	 	14,202	 	 	 	4,215	 	 	 	4,807	 	 	 	5,180	 	 	 	14,202	 	 	 	4,751	 	 	 	18,953	 	 	 	1	 	
% Pharmaceutical Sales	 	 	44.2	%	 	 	44.1	%	 	 	46.1	%	 	 	44.9	%	 	 	43.6	%	 	 	46.0	%	 	 	46.7	%	 	 	45.5	%	 	 	45.1	%	 	 	45.4	%	 	 	 	 	
Europe (2)	 	 	2,543	 	 	 	2,196	 	 	 	2,549	 	 	 	7,288	 	 	 	2,335	 	 	 	2,301	 	 	 	2,304	 	 	 	6,941	 	 	 	2,373	 	 	 	9,314	 	 	 	11	 	
% Pharmaceutical Sales	 	 	23.9	%	 	 	22.7	%	 	 	22.5	%	 	 	23.0	%	 	 	24.2	%	 	 	22.0	%	 	 	20.8	%	 	 	22.2	%	 	 	22.5	%	 	 	22.3	%	 	 	 	 	
China	 	 	846	 	 	 	811	 	 	 	990	 	 	 	2,646	 	 	 	725	 	 	 	745	 	 	 	898	 	 	 	2,368	 	 	 	773	 	 	 	3,141	 	 	 	10	 	
% Pharmaceutical Sales	 	 	7.9	%	 	 	8.4	%	 	 	8.7	%	 	 	8.4	%	 	 	7.5	%	 	 	7.1	%	 	 	8.1	%	 	 	7.6	%	 	 	7.3	%	 	 	7.5	%	 	 	 	 	
Japan	 	 	789	 	 	 	847	 	 	 	805	 	 	 	2,441	 	 	 	779	 	 	 	900	 	 	 	894	 	 	 	2,573	 	 	 	921	 	 	 	3,494	 	 	 	-10	 	
% Pharmaceutical Sales	 	 	7.4	%	 	 	8.8	%	 	 	7.1	%	 	 	7.7	%	 	 	8.1	%	 	 	8.6	%	 	 	8.1	%	 	 	8.2	%	 	 	8.7	%	 	 	8.4	%	 	 	 	 	
Asia Pacific (other than China and Japan)	 	 	613	 	 	 	555	 	 	 	601	 	 	 	1,769	 	 	 	642	 	 	 	606	 	 	 	638	 	 	 	1,886	 	 	 	614	 	 	 	2,500	 	 	 	-6	 	
% Pharmaceutical Sales	 	 	5.8	%	 	 	5.7	%	 	 	5.3	%	 	 	5.6	%	 	 	6.6	%	 	 	5.8	%	 	 	5.8	%	 	 	6.0	%	 	 	5.8	%	 	 	6.0	%	 	 	 	 	
Eastern Europe/Middle East/Africa	 	 	490	 	 	 	416	 	 	 	419	 	 	 	1,325	 	 	 	343	 	 	 	388	 	 	 	423	 	 	 	1,154	 	 	 	423	 	 	 	1,577	 	 	 	-1	 	
% Pharmaceutical Sales	 	 	4.6	%	 	 	4.3	%	 	 	3.7	%	 	 	4.2	%	 	 	3.6	%	 	 	3.7	%	 	 	3.8	%	 	 	3.7	%	 	 	4.0	%	 	 	3.8	%	 	 	 	 	
Latin America	 	 	419	 	 	 	399	 	 	 	477	 	 	 	1,294	 	 	 	427	 	 	 	523	 	 	 	534	 	 	 	1,484	 	 	 	429	 	 	 	1,914	 	 	 	-11	 	
% Pharmaceutical Sales	 	 	3.9	%	 	 	4.1	%	 	 	4.2	%	 	 	4.1	%	 	 	4.4	%	 	 	5.0	%	 	 	4.8	%	 	 	4.8	%	 	 	4.1	%	 	 	4.6	%	 	 	 	 	
Canada	 	 	212	 	 	 	160	 	 	 	216	 	 	 	589	 	 	 	177	 	 	 	179	 	 	 	211	 	 	 	568	 	 	 	216	 	 	 	783	 	 	 	2	 	
% Pharmaceutical Sales	 	 	2.0	%	 	 	1.7	%	 	 	1.9	%	 	 	1.9	%	 	 	1.8	%	 	 	1.7	%	 	 	1.9	%	 	 	1.8	%	 	 	2.0	%	 	 	1.9	%	 	 	 	 	
Other (1)	 	 	29	 	 	 	25	 	 	 	45	 	 	 	100	 	 	 	20	 	 	 	11	 	 	 	13	 	 	 	42	 	 	 	33	 	 	 	75	 	 	 	246	 	
% Pharmaceutical Sales	 	 	0.3	%	 	 	0.3	%	 	 	0.4	%	 	 	0.3	%	 	 	0.2	%	 	 	0.1	%	 	 	0.1	%	 	 	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
 
 	 	3Q20	 	 	3Q19	 	 	Sep YTD 2020	 	 	Sep YTD 2019	 	
Interest income	 	$	(9	)	 	$	(61	)	 	$	(48	)	 	$	(225	)	
Interest expense	 	 	203	 	 	 	231	 	 	 	624	 	 	 	674	 	
Exchange losses	 	 	10	 	 	 	38	 	 	 	89	 	 	 	166	 	
Income from investments in equity securities, net (1)	 	 	(360	)	 	 	(16	)	 	 	(964	)	 	 	(50	)	
Net periodic defined benefit plan (credit) cost other than service cost	 	 	(88	)	 	 	(128	)	 	 	(259	)	 	 	(409	)	
Other, net	 	 	(68	)	 	 	(29	)	 	 	(72	)	 	 	206	 	
Total	 	$	(312	)	 	$	35	 	 	$	(630	)	 	$	362	 	
 
(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.