10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File No. 1-6571

Merck & Co., Inc.

(Exact name of registrant as specified in its charter)

New Jersey	22-1918501
(State or other jurisdiction of incorporation)	(I.R.S Employer Identification No.)
2000 Galloping Hill Road
Kenilworth	New Jersey	07033
(Address of principal executive offices) (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.)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒

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

The number of shares of common stock outstanding as of the close of business on July 31, 2019: 2,560,374,643

Part I - Financial Information

Item 1. Financial Statements

MERCK & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited, $ in millions except per share amounts)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2019			2018			2019			2018
Sales	$	11,760		$	10,465		$	22,575		$	20,502
Costs, Expenses and Other
Cost of sales	3,401			3,417			6,453			6,601
Selling, general and administrative	2,712			2,508			5,138			5,016
Research and development	2,189			2,274			4,119			5,470
Restructuring costs	59			228			212			323
Other (income) expense, net	140			(48		)	327			(340		)
	8,501			8,379			16,249			17,070
Income Before Taxes	3,259			2,086			6,326			3,432
Taxes on Income	615			370			820			975
Net Income	2,644			1,716			5,506			2,457
Less: Net (Loss) Income Attributable to Noncontrolling Interests	(26		)	9			(79		)	14
Net Income Attributable to Merck & Co., Inc.	$	2,670		$	1,707		$	5,585		$	2,443
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders	$	1.04		$	0.64		$	2.17		$	0.91
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders	$	1.03		$	0.63		$	2.15		$	0.90

MERCK & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited, $ in millions)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2019			2018			2019			2018
Net Income Attributable to Merck & Co., Inc.	$	2,670		$	1,707		$	5,585		$	2,443
Other Comprehensive (Loss) Income Net of Taxes:
Net unrealized (loss) gain on derivatives, net of reclassifications	(52		)	266			(100		)	196
Net unrealized gain (loss) on investments, net of reclassifications	44			3			126			(96		)
Benefit plan net gain and prior service credit, net of amortization	11			30			26			66
Cumulative translation adjustment	(19		)	(361		)	131			(104		)
	(16		)	(62		)	183			62
Comprehensive Income Attributable to Merck & Co., Inc.	$	2,654		$	1,645		$	5,768		$	2,505

 The accompanying notes are an integral part of these condensed consolidated financial statements.

- 2 -

MERCK & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited, $ in millions except per share amounts)

 

	June 30, 2019			December 31, 2018
Assets
Current Assets
Cash and cash equivalents	$	6,659		$	7,965
Short-term investments	446			899
Accounts receivable (net of allowance for doubtful accounts of $122 in 2019 and $119 in 2018)	7,964			7,071
Inventories (excludes inventories of $1,464 in 2019 and $1,417 in 2018 classified in Other assets - see Note 6)	5,847			5,440
Other current assets	3,382			4,500
Total current assets	24,298			25,875
Investments	3,779			6,233
Property, Plant and Equipment, at cost, net of accumulated depreciation of $17,049 in 2019 and $16,324 in 2018	13,862			13,291
Goodwill	19,490			18,253
Other Intangibles, Net	13,381			11,431
Other Assets	9,155			7,554
	$	83,965		$	82,637
Liabilities and Equity
Current Liabilities
Loans payable and current portion of long-term debt	$	3,816		$	5,308
Trade accounts payable	3,142			3,318
Accrued and other current liabilities	11,054			10,151
Income taxes payable	634			1,971
Dividends payable	1,439			1,458
Total current liabilities	20,085			22,206
Long-Term Debt	22,771			19,806
Deferred Income Taxes	2,089			1,702
Other Noncurrent Liabilities	11,283			12,041
Merck & Co., Inc. Stockholders’ Equity
Common stock, $0.50 par value Authorized - 6,500,000,000 shares Issued - 3,577,103,522 shares in 2019 and 2018	1,788			1,788
Other paid-in capital	39,484			38,808
Retained earnings	45,295			42,579
Accumulated other comprehensive loss	(5,362		)	(5,545		)
	81,205			77,630
Less treasury stock, at cost: 1,010,308,500 shares in 2019 and 984,543,979 shares in 2018	53,570			50,929
Total Merck & Co., Inc. stockholders’ equity	27,635			26,701
Noncontrolling Interests	102			181
Total equity	27,737			26,882
	$	83,965		$	82,637

The accompanying notes are an integral part of this condensed consolidated financial statement.

- 3 -

MERCK & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited, $ in millions)

	Six Months Ended   June 30,
	2019			2018
Cash Flows from Operating Activities
Net income	$	5,506		$	2,457
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,871			2,427
Intangible asset impairment charges	252			—
Charge for future payments related to collaboration license options	—			650
Deferred income taxes	(149		)	(258		)
Share-based compensation	204			170
Other	114			365
Net changes in assets and liabilities	(3,378		)	(1,274		)
Net Cash Provided by Operating Activities	4,420			4,537
Cash Flows from Investing Activities
Capital expenditures	(1,377		)	(1,033		)
Purchases of securities and other investments	(1,810		)	(5,248		)
Proceeds from sales of securities and other investments	4,935			7,403
Acquisition of Antelliq Corporation, net of cash acquired	(3,620		)	—
Other acquisitions, net of cash acquired	(270		)	(372		)
Other	85			(274		)
Net Cash (Used in) Provided by Investing Activities	(2,057		)	476
Cash Flows from Financing Activities
Net change in short-term borrowings	(3,532		)	2,069
Payments on debt	—			(3,008		)
Proceeds from issuance of debt	4,958			—
Purchases of treasury stock	(2,325		)	(2,162		)
Dividends paid to stockholders	(2,896		)	(2,610		)
Proceeds from exercise of stock options	304			299
Other	(207		)	(277		)
Net Cash Used in Financing Activities	(3,698		)	(5,689		)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	28			(108		)
Net Decrease in Cash, Cash Equivalents and Restricted Cash	(1,307		)	(784		)
Cash, Cash Equivalents and Restricted Cash at Beginning of Year (includes restricted cash of $2 million at January 1, 2019 included in Other Assets)	7,967			6,096
Cash, Cash Equivalents and Restricted Cash at End of Period (includes restricted cash of $1 million at June 30, 2019 included in Other Assets)	$	6,660		$	5,312

The accompanying notes are an integral part of this condensed consolidated financial statement.

- 4 -

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Merck & Co., Inc. (Merck or the Company) have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements are not included herein. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in Merck’s Form 10-K filed on February 27, 2019.

The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. In the Company’s opinion, all adjustments necessary for a fair statement of these interim statements have been included and are of a normal and recurring nature. Certain reclassifications have been made to prior year amounts to conform to the current presentation.

Recently Adopted Accounting Standards

In February 2016, the FASB issued new accounting guidance for the accounting and reporting of leases (ASU 2016-02) and subsequently issued several updates to the new guidance (ASC 842 or new guidance). The new guidance requires that lessees recognize a right-of-use asset and a lease liability for each of its leases (other than leases that meet the definition of a short-term lease). Leases will be classified as either operating or finance. Operating leases will result in straight-line expense in the income statement (similar to previous operating leases), while finance leases will result in more expense being recognized in the earlier years of the lease term (similar to previous capital leases). The Company adopted the new standard on January 1, 2019 using a modified retrospective approach. Merck elected the transition method that allows for application of the standard at the adoption date rather than at the beginning of the earliest comparative period presented in the financial statements. The Company also elected available practical expedients. Upon adoption, the Company recognized $1.1 billion of additional assets and related liabilities on its consolidated balance sheet (see Note 7). The adoption of the new guidance did not impact the Company’s consolidated statements of income or cash flows.

Recently Issued Accounting Standards Not Yet Adopted

In June 2016, the FASB issued amended guidance on the accounting for credit losses on financial instruments. The guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance is effective for interim and annual periods beginning in 2020, with earlier application permitted in 2019, including adoption in any interim period. The new guidance is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings in the beginning of the period of adoption. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In April 2018, the FASB issued new guidance on the accounting for costs incurred to implement a cloud computing arrangement that is considered a service arrangement. The new guidance requires the capitalization of such costs, aligning it with the accounting for costs associated with developing or obtaining internal-use software. The new guidance is effective for interim and annual periods beginning in 2020. Early adoption is permitted, including adoption in any interim period. Prospective adoption for eligible costs incurred on or after the date of adoption or retrospective adoption is permitted. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In November 2018, the FASB issued new guidance for collaborative arrangements intended to reduce diversity in practice by clarifying whether certain transactions between collaborative arrangement participants should be accounted for under revenue recognition guidance (ASC 606). The new guidance is effective for interim and annual periods beginning in 2020. Early adoption is permitted, including adoption in any interim period. The new guidance is to be applied on a retrospective basis through a cumulative-effect adjustment directly to retained earnings. The Company does not anticipate the adoption of this standard will have a material effect on its consolidated financial statements.

2. Acquisitions, Research Collaborations and License Agreements

The Company continues to pursue acquisitions and the establishment of external alliances such as research collaborations and licensing agreements to complement its internal research capabilities. These arrangements often include upfront payments, as well as expense reimbursements or payments to the third party, and milestone, royalty or profit share arrangements, contingent upon the occurrence of certain future events linked to the success of the asset in development. The Company also reviews its marketed products and pipeline to examine candidates which may provide more value through out-licensing and, as part of its portfolio assessment process, may also divest certain assets. Pro forma financial information for acquired businesses is not presented if the historical financial results of the acquired entity are not significant when compared with the Company’s financial results.

In July 2019, Merck acquired Peloton Therapeutics, Inc. (Peloton), a clinical-stage biopharmaceutical company focused on the development of novel small molecule therapeutic candidates targeting hypoxia-inducible factor-2α (HIF-2α) for the treatment

- 5 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

of patients with cancer and other non-oncology diseases. Peloton’s lead candidate, MK-6482 (formerly PT2977), is a novel oral HIF-2α inhibitor in late-stage development for renal cell carcinoma. Merck made an upfront payment of $1.05 billion in cash; additionally, former Peloton shareholders will be eligible to receive up to an additional $1.15 billion contingent upon successful achievement of future regulatory and sales-based milestones. The acquisition will be accounted for as an acquisition of an asset.

On April 1, 2019, Merck acquired Antelliq Corporation (Antelliq), a leader in digital animal identification, traceability and monitoring solutions. These solutions help veterinarians, farmers and pet owners gather critical data to improve management, health and well-being of livestock and pets. Merck paid $2.3 billion to acquire all outstanding shares of Antelliq and spent $1.3 billion to repay Antelliq’s debt. The transaction was accounted for as an acquisition of a business.

The estimated fair value of assets acquired and liabilities assumed from Antelliq is as follows:

($ in millions)	April 1, 2019
Cash and cash equivalents	$	31
Accounts receivable	73
Inventories	97
Property, plant and equipment	62
Identifiable intangible assets (useful lives ranging from 18-24 years) (1)	2,689
Deferred income tax liabilities	(563		)
Other assets and liabilities, net	(81		)
Total identifiable net assets	2,308
Goodwill (2)	1,343
Consideration transferred	$	3,651

⁽¹⁾  The estimated fair values of identifiable intangible assets relate primarily to trade names and were determined using an income approach. The future net cash flows were discounted to present value utilizing a discount rate of 11.5%. Actual cash flows are likely to be different than those assumed.

⁽²⁾  The goodwill recognized is largely attributable to anticipated synergies expected to arise after the acquisition and was allocated to the Animal Health segment. The goodwill is not deductible for tax purposes.

The Company’s results for the second quarter of 2019 include two months of activity for Antelliq. The Company incurred $47 million of transaction costs directly related to the acquisition of Antelliq, consisting largely of advisory fees, which are reflected in Selling, general and administrative expenses in the second quarter of 2019.

Also in April 2019, Merck acquired Immune Design, a late-stage immunotherapy company employing next-generation in vivo approaches to enable the body’s immune system to fight disease, for $301 million in cash. The transaction was accounted for as an acquisition of a business. Merck recognized intangible assets for in-process research and development (IPR&D) of $156 million, cash of $83 million and other net assets of $31 million. The excess of the consideration transferred over the fair value of net assets acquired of $31 million was recorded as goodwill that was allocated to the Pharmaceutical segment and is not deductible for tax purposes. The fair values of the identifiable intangible assets related to IPR&D were determined using an income approach. Actual cash flows are likely to be different than those assumed.

In June 2018, Merck acquired Viralytics Limited (Viralytics), an Australian publicly traded company focused on oncolytic immunotherapy treatments for a range of cancers, for AUD 502 million ($378 million). The transaction provided Merck with full rights to Cavatak (V937, formerly CVA21), Viralytics’s investigational oncolytic immunotherapy. Cavatak is based on Viralytics’s proprietary formulation of an oncolytic virus (Coxsackievirus Type A21) that has been shown to preferentially infect and kill cancer cells. Cavatak is currently being evaluated in multiple Phase 1 and Phase 2 clinical trials, both as an intratumoral and intravenous agent, including in combination with Keytruda. Under a previous agreement between Merck and Viralytics, a study is investigating the use of the Keytruda and Cavatak combination in melanoma, prostate, lung and bladder cancers. The transaction was accounted for as an acquisition of an asset. Merck recorded net assets of $34 million (primarily cash) at the acquisition date and Research and development expenses of $344 million in the second quarter and first six months of 2018 related to the transaction. There are no future contingent payments associated with the acquisition.

In March 2018, Merck and Eisai Co., Ltd. (Eisai) entered into a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima, an orally available tyrosine kinase inhibitor discovered by Eisai (see Note 3).

- 6 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

3.    Collaborative Arrangements

Merck has entered into collaborative arrangements that provide the Company with varying rights to develop, produce and market products together with its collaborative partners. Both parties in these arrangements are active participants and exposed to significant risks and rewards dependent on the commercial success of the activities of the collaboration. Merck’s more significant collaborative arrangements are discussed below.

AstraZeneca

In July 2017, Merck and AstraZeneca PLC (AstraZeneca) entered into a global strategic oncology collaboration to co-develop and co-commercialize AstraZeneca’s Lynparza for multiple cancer types. Lynparza is an oral poly (ADP-ribose) polymerase (PARP) inhibitor currently approved for certain types of ovarian and breast cancer. The companies are jointly developing and commercializing Lynparza, both as monotherapy and in combination trials with other potential medicines. Independently, Merck and AstraZeneca will develop and commercialize Lynparza in combinations with their respective PD-1 and PD-L1 medicines, Keytruda and Imfinzi. The companies will also jointly develop and commercialize AstraZeneca’s selumetinib, an oral, potent, selective inhibitor of MEK, part of the mitogen-activated protein kinase (MAPK) pathway, currently being developed for multiple indications. Under the terms of the agreement, AstraZeneca and Merck will share the development and commercialization costs for Lynparza and selumetinib monotherapy and non-PD-L1/PD-1 combination therapy opportunities.

Gross profits from Lynparza and selumetinib product sales generated through monotherapies or combination therapies are shared equally. Merck will fund all development and commercialization costs of Keytruda in combination with Lynparza or selumetinib. AstraZeneca will fund all development and commercialization costs of Imfinzi in combination with Lynparza or selumetinib. AstraZeneca is the principal on Lynparza sales transactions. Merck records its share of Lynparza product sales, net of cost of sales and commercialization costs, as alliance revenue within the Pharmaceutical segment and its share of development costs associated with the collaboration as part of Research and development costs. Reimbursements received from AstraZeneca for research and development expenses are recognized as reductions to Research and development costs.

As part of the agreement, Merck made an upfront payment to AstraZeneca of $1.6 billion in 2017 and will make payments of up to $750 million over a multi-year period for certain license options (of which $250 million was paid in December 2017, $400 million was paid in December 2018 and $100 million is expected to be paid in December 2019). The Company recorded an aggregate charge of $2.35 billion in Research and development expenses in 2017 related to the upfront payment and future license option payments. In addition, the agreement provides for additional contingent payments from Merck to AstraZeneca related to the successful achievement of sales-based and regulatory milestones.

In the second quarter of 2019, Merck determined it was probable that annual sales of Lynparza in the future would trigger a $300 million sales-based milestone payment from Merck to AstraZeneca. Accordingly, in the second quarter of 2019, Merck recorded a $300 million liability and a corresponding increase to the intangible asset related to Lynparza and also recognized $52 million of cumulative amortization expense within Cost of sales. Prior to 2019, Merck accrued sales-based milestone payments aggregating $700 million related to Lynparza. Of these amounts, $250 million has been paid to AstraZeneca. Potential future sales-based milestone payments of $3.1 billion have not yet been accrued as they are not deemed by the Company to be probable at this time.

In April 2019, Lynparza received regulatory approval in the European Union (EU) as a monotherapy for the treatment of certain adult patients with advanced breast cancer, triggering a $30 million capitalized milestone payment from Merck to AstraZeneca. In June 2019, Lynparza received regulatory approval in the EU as a monotherapy for the maintenance treatment of certain adult patients with BRCA-mutated advanced ovarian cancer, triggering a $30 million capitalized milestone payment from Merck to AstraZeneca. In 2018, Lynparza received regulatory approvals triggering capitalized milestone payments of $140 million in the aggregate from Merck to AstraZeneca. Potential future regulatory milestone payments of $1.7 billion remain under the agreement.

The asset balance related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) was $1.0 billion at June 30, 2019 and is included in Other Assets on the Consolidated Balance Sheet. The amount is being amortized over its estimated useful life through 2028 as supported by projected future cash flows, subject to impairment testing.

- 7 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Summarized financial information related to this collaboration is as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
Alliance revenue	$	111	$	44	$	190	$	76
Cost of sales (1)	73		24		92		36
Selling, general and administrative	33		9		59		16
Research and development	33		42		78		71
($ in millions)					June 30, 2019		December 31, 2018
Receivables from AstraZeneca included in Other current assets					$	105	$	52
Payables to AstraZeneca included in Accrued and other current liabilities (2)					605		405
Payables to AstraZeneca included in Other Noncurrent Liabilities (3)					300		250

⁽¹⁾ Represents amortization of capitalized milestone payments.

⁽²⁾ Includes accrued milestone and license option payments.

⁽³⁾ Includes accrued milestone payments.

Eisai

In March 2018, Merck and Eisai announced a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima, an orally available tyrosine kinase inhibitor discovered by Eisai. Under the agreement, Merck and Eisai will develop and commercialize Lenvima jointly, both as monotherapy and in combination with Merck’s anti-PD-1 therapy, Keytruda. Eisai records Lenvima product sales globally (Eisai is the principal on Lenvima sales transactions), and Merck and Eisai share gross profits equally. Merck records its share of Lenvima product sales, net of cost of sales and commercialization costs, as alliance revenue. Expenses incurred during co-development, including for studies evaluating Lenvima as monotherapy, are shared equally by the two companies and reflected in Research and development costs.

Under the agreement, Merck made an upfront payment to Eisai of $750 million and will make payments of up to $650 million for certain option rights through 2021 (of which $325 million was paid in March 2019, $200 million is expected to be paid in March 2020 and $125 million is expected to be paid in March 2021). The Company recorded an aggregate charge of $1.4 billion in Research and development expenses in the first quarter of 2018 related to the upfront payment and future option payments. In addition, the agreement provides for Eisai to receive up to $385 million associated with the achievement of certain clinical and regulatory milestones and up to $3.97 billion for the achievement of milestones associated with sales of Lenvima.

In the first quarter of 2019, Merck determined it was probable that annual sales of Lenvima in the future would trigger $282 million of sales-based milestone payments from Merck to Eisai. Accordingly, in the first quarter of 2019, Merck recorded $282 million of liabilities and corresponding increases to the intangible asset related to Lenvima and also recognized $35 million of cumulative amortization expense within Cost of sales. Merck previously accrued sales-based milestone payments aggregating $268 million related to Lenvima in 2018. Of these amounts, $50 million has been paid to Eisai. Potential future sales-based milestone payments of $3.42 billion have not yet been accrued as they are not deemed by the Company to be probable at this time.

In 2018, Lenvima received regulatory approvals triggering capitalized milestone payments of $250 million in the aggregate from Merck to Eisai. Potential future regulatory milestone payments of $135 million remain under the agreement.

The asset balance related to Lenvima (which includes capitalized sales-based and regulatory milestone payments) was $687 million at June 30, 2019 and is included in Other Assets on the Consolidated Balance Sheet. The amount is being amortized over its estimated useful life through 2026 as supported by projected future cash flows, subject to impairment testing.

- 8 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Summarized financial information related to this collaboration is as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
Alliance revenue	$	97	$	35	$	171	$	35
Cost of sales (1)	23		1		74		1
Selling, general and administrative	19		2		38		2
Research and development (2)	62		36		109		1,436
($ in millions)					June 30, 2019		December 31, 2018
Receivables from Eisai included in Other current assets					$	98	$	71
Payables to Eisai included in Accrued and other current liabilities (3)					709		375
Payables to Eisai included in Other Noncurrent Liabilities (3)					125		543

⁽¹⁾ Represents amortization of capitalized milestone payments.

⁽²⁾ Amount for the first six months of 2018 includes the upfront payment and future option payments.

⁽³⁾ Includes accrued milestone and option payments.

Bayer AG

In 2014, the Company entered into a worldwide clinical development collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators including Bayer’s Adempas, which is approved to treat pulmonary arterial hypertension and chronic thromboembolic pulmonary hypertension. The two companies have implemented a joint development and commercialization strategy. The collaboration also includes clinical development of Bayer’s vericiguat, which is in Phase 3 trials for worsening heart failure, as well as opt-in rights for other early-stage sGC compounds in development by Bayer. Merck in turn made available its early-stage sGC compounds under similar terms. Under the agreement, Bayer leads commercialization of Adempas in the Americas, while Merck leads commercialization in the rest of the world. For vericiguat and other potential opt-in products, Bayer will lead commercialization in the rest of world and Merck will lead in the Americas. For all products and candidates included in the agreement, both companies will share in development costs and profits on sales and will have the right to co-promote in territories where they are not the lead. Revenue from Adempas includes sales in Merck’s marketing territories, as well as Merck’s share of profits from the sale of Adempas in Bayer’s marketing territories.

In the first quarter of 2018, Merck made a $350 million sales-based milestone payment to Bayer, which was accrued for in 2016 when Merck deemed the payment to be probable. In the second quarter of 2018, Merck determined it was probable that annual worldwide sales of Adempas in the future would trigger a $375 million sales-based milestone payment from Merck to Bayer; accordingly, Merck recorded a $375 million liability and a corresponding increase to the intangible asset related to Adempas and also recognized $106 million of cumulative amortization expense within Cost of sales. There is an additional $400 million potential future sales-based milestone payment that has not yet been accrued as it is not deemed by the Company to be probable at this time.

The intangible asset balance related to Adempas (which includes the acquired intangible asset balance, as well as capitalized sales-based milestone payments) was $956 million at June 30, 2019 and is included in Other Intangibles, Net on the Consolidated Balance Sheet. The amount is being amortized over its estimated useful life through 2027 as supported by projected future cash flows, subject to impairment testing.

- 9 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Summarized financial information related to this collaboration is as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
Net product sales recorded by Merck	$	53	$	47	$	100	$	90
Merck’s profit share from sales in Bayer’s marketing territories	51		28		94		53
Total sales	104		75		194		143
Cost of sales (1)	29		132		58		159
Selling, general and administrative	11		10		20		17
Research and development	32		28		62		56
($ in millions)					June 30, 2019		December 31, 2018
Receivables from Bayer included in Other current assets					$	41	$	32
Payables to Bayer included in Other Noncurrent Liabilities (2)					375		375

⁽¹⁾ Includes amortization of intangible assets.

⁽²⁾ Represents accrued milestone payment.

4. Restructuring

Merck recently approved a new global restructuring program (2019 Restructuring Program) as part of a worldwide initiative focused primarily on further optimizing the Company’s manufacturing and supply network, as well as reducing its global real estate footprint. This program is a continuation of the Company’s plant rationalization and builds on prior restructuring programs. The Company will continue to evaluate its global footprint and overall operating model, which could result in the identification of additional actions over time. The actions contemplated under the 2019 Restructuring Program are expected to be substantially completed by the end of 2023, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $800 million to $1.2 billion. The Company estimates that approximately 55% of the cumulative pretax costs will result in cash outlays, primarily related to employee separation expense and facility shut-down costs. Approximately 45% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. The Company expects to record charges of approximately $500 million in 2019 related to the program. Actions under previous global restructuring programs have been substantially completed.

The Company recorded total pretax costs of $159 million and $235 million in the second quarter of 2019 and 2018, respectively, and $346 million and $339 million for the first six months of 2019 and 2018, respectively, related to restructuring program activities. For segment reporting, restructuring charges are unallocated expenses.

The following tables summarize the charges related to restructuring program activities by type of cost:

	Three Months Ended June 30, 2019								Six Months Ended June 30, 2019
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation		Other		Total
Cost of sales	$	—	$	64	$	1	$	65	$	—	$	98	$	1	$	99
Selling, general and administrative	—		32		—		32		—		32		—		32
Research and development	—		2		1		3		—		2		1		3
Restructuring costs	25		—		34		59		153		—		59		212
	$	25	$	98	$	36	$	159	$	153	$	132	$	61	$	346

	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation			Other		Total
Cost of sales	$	—	$	—	$	3	$	3	$	—	$	—		$	9	$	9
Selling, general and administrative	—		—		1		1		—		1			1		2
Research and development	—		—		3		3		—		(3		)	8		5
Restructuring costs	200		—		28		228		255		—			68		323
	$	200	$	—	$	35	$	235	$	255	$	(2	)	$	86	$	339

Separation costs are associated with actual headcount reductions, as well as those headcount reductions which were probable and could be reasonably estimated.

- 10 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Accelerated depreciation costs primarily relate to manufacturing, research and administrative facilities and equipment to be sold or closed as part of the programs. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. All the sites have and will continue to operate up through the respective closure dates and, since future undiscounted cash flows are sufficient to recover the respective book values, Merck is recording accelerated depreciation over the revised useful life of the site assets. Anticipated site closure dates, particularly related to manufacturing locations, have been and may continue to be adjusted to reflect changes resulting from regulatory or other factors.

Other activity in 2019 and 2018 includes asset abandonment, shut-down and other related costs, as well as pretax gains and losses resulting from sales of facilities and related assets. Additionally, other activity includes certain employee-related costs associated with pension and other postretirement benefit plans (see Note 11) and share-based compensation.

The following table summarizes the charges and spending relating to restructuring program activities for the six months ended June 30, 2019:

($ in millions)	Separation Costs			Accelerated Depreciation			Other			Total
Restructuring reserves January 1, 2019	$	443		$	—		$	91		$	534
Expense	153			132			61			346
(Payments) receipts, net	(126		)	—			(77		)	(203		)
Non-cash activity	—			(132		)	(2		)	(134		)
Restructuring reserves June 30, 2019 (1)	$	470		$	—		$	73		$	543

⁽¹⁾  The remaining cash outlays are expected to be substantially completed by the end of 2023.

5. Financial Instruments

Derivative Instruments and Hedging Activities

The Company manages the impact of foreign exchange rate movements and interest rate movements on its earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments.

A significant portion of the Company’s revenues and earnings in foreign affiliates is exposed to changes in foreign exchange rates. The objectives and accounting related to the Company’s foreign currency risk management program, as well as its interest rate risk management activities are discussed below.

Foreign Currency Risk Management

The Company has established revenue hedging, balance sheet risk management and net investment hedging programs to protect against volatility of future foreign currency cash flows and changes in fair value caused by volatility in foreign exchange rates.

The objective of the revenue hedging program is to reduce the variability caused by changes in foreign exchange rates that would affect the U.S. dollar value of future cash flows derived from foreign currency denominated sales, primarily the euro and Japanese yen. To achieve this objective, the Company will hedge a portion of its forecasted foreign currency denominated third-party and intercompany distributor entity sales (forecasted sales) that are expected to occur over its planning cycle, typically no more than two years into the future. The Company will layer in hedges over time, increasing the portion of forecasted sales hedged as it gets closer to the expected date of the forecasted sales. The portion of forecasted sales hedged is based on assessments of cost-benefit profiles that consider natural offsetting exposures, revenue and exchange rate volatilities and correlations, and the cost of hedging instruments. The Company manages its anticipated transaction exposure principally with purchased local currency put options, forward contracts and purchased collar options.

The fair values of these derivative contracts are recorded as either assets (gain positions) or liabilities (loss positions) in the Condensed Consolidated Balance Sheet. Changes in the fair value of derivative contracts are recorded each period in either current earnings or Other comprehensive income (OCI), depending on whether the derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. For derivatives that are designated as cash flow hedges, the unrealized gains or losses on these contracts is recorded in Accumulated other comprehensive income (AOCI) and reclassified into Sales when the hedged anticipated revenue is recognized. For those derivatives which are not designated as cash flow hedges, but serve as economic hedges of forecasted sales, unrealized gains or losses are recorded in Sales each period. The cash flows from both designated and non-designated contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows. The Company does not enter into derivatives for trading or speculative purposes.

- 11 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

The Company manages operating activities and net asset positions at each local subsidiary in order to mitigate the effects of exchange on monetary assets and liabilities. The Company also uses a balance sheet risk management program to mitigate the exposure of net monetary assets that are denominated in a currency other than a subsidiary’s functional currency from the effects of volatility in foreign exchange. In these instances, Merck principally utilizes forward exchange contracts to offset the effects of exchange on exposures denominated in developed country currencies, primarily the euro and Japanese yen. For exposures in developing country currencies, the Company will enter into forward contracts to partially offset the effects of exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the exchange rate and the cost of the hedging instrument. The cash flows from these contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows.

Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Other (income) expense, net. The forward contracts are not designated as hedges and are marked to market through Other (income) expense, net. Accordingly, fair value changes in the forward contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency exchange rates, except to the extent of the spot-forward differences. These differences are not significant due to the short-term nature of the contracts, which typically have average maturities at inception of less than one year.

The Company also uses forward exchange contracts to hedge its net investment in foreign operations against movements in exchange rates. The forward contracts are designated as hedges of the net investment in a foreign operation. The Company hedges a portion of the net investment in certain of its foreign operations. The unrealized gains or losses on these contracts are recorded in foreign currency translation adjustment within OCI and remain in AOCI until either the sale or complete or substantially complete liquidation of the subsidiary. The Company excludes certain portions of the change in fair value of its derivative instruments from the assessment of hedge effectiveness (excluded component). Changes in fair value of the excluded components are recognized in OCI. The Company recognizes in earnings the initial value of the excluded component on a straight-line basis over the life of the derivative instrument, rather than using the mark-to-market approach. The cash flows from these contracts are reported as investing activities in the Condensed Consolidated Statement of Cash Flows.

Foreign exchange risk is also managed through the use of foreign currency debt. The Company’s senior unsecured euro-denominated notes have been designated as, and are effective as, economic hedges of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the euro-denominated debt instruments are included in foreign currency translation adjustment within OCI.

The effects of the Company’s net investment hedges on OCI and the Consolidated Statement of Income are shown below:

	Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1)											Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing
	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2019		2018			2019			2018			2019			2018			2019			2018
Net Investment Hedging Relationships
Foreign exchange contracts	$	17	$	(12	)	$	7		$	(14	)	$	(8	)	$	(3	)	$	(15	)	$	(3	)
Euro-denominated notes	28		(271		)	(2		)	(92		)	—			—			—			—

⁽¹⁾ No amounts were reclassified from AOCI into income related to the sale of a subsidiary.

Interest Rate Risk Management

The Company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rate changes and to reduce its overall cost of borrowing. The Company does not use leveraged swaps and, in general, does not leverage any of its investment activities that would put principal capital at risk.

At June 30, 2019, the Company was a party to 19 pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of fixed-rate notes in which the notional amounts match the amount of the hedged fixed-rate notes as detailed in the table below.

- 12 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

	June 30, 2019
($ in millions)	Par Value of Debt	Number of Interest Rate Swaps Held	Total Swap Notional Amount
1.85% notes due 2020	1,250	5	1,250
3.875% notes due 2021	1,150	5	1,150
2.40% notes due 2022	1,000	4	1,000
2.35% notes due 2022	1,250	5	1,250

The interest rate swap contracts are designated hedges of the fair value changes in the notes attributable to changes in the benchmark London Interbank Offered Rate (LIBOR) swap rate. The fair value changes in the notes attributable to changes in the LIBOR swap rate are recorded in interest expense along with the offsetting fair value changes in the swap contracts. The cash flows from these contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows.

The table below presents the location of amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:

	Carrying Amount of Hedged Liabilities				Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount
($ in millions)	June 30, 2019		December 31, 2018		June 30, 2019			December 31, 2018
Balance Sheet Line Item in which Hedged Item is Included
Loans payable and current portion of long-term debt	$	1,244	$	—	$	(6	)	$	—
Long-Term Debt	3,406		4,560		11			(82		)

Presented in the table below is the fair value of derivatives on a gross basis segregated between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:

		June 30, 2019						December 31, 2018
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
($ in millions)	Balance Sheet Caption	Asset		Liability				Asset		Liability
Derivatives Designated as Hedging Instruments
Interest rate swap contracts	Other Assets	$	14	$	—	$	2,150	$	—	$	—	$	—
Interest rate swap contracts	Accrued and other current liabilities	—		6		1,250		—		—		—
Interest rate swap contracts	Other Noncurrent Liabilities	—		2		1,250		—		81		4,650
Foreign exchange contracts	Other current assets	168		—		6,389		263		—		6,222
Foreign exchange contracts	Other Assets	49		—		2,790		75		—		2,655
Foreign exchange contracts	Accrued and other current liabilities	—		13		1,252		—		7		774
Foreign exchange contracts	Other Noncurrent Liabilities	—		—		—		—		1		89
		$	231	$	21	$	15,081	$	338	$	89	$	14,390
Derivatives Not Designated as Hedging Instruments
Foreign exchange contracts	Other current assets	$	70	$	—	$	6,665	$	116	$	—	$	5,430
Foreign exchange contracts	Accrued and other current liabilities	—		63		4,982		—		71		9,922
		$	70	$	63	$	11,647	$	116	$	71	$	15,352
		$	301	$	84	$	26,728	$	454	$	160	$	29,742

As noted above, the Company records its derivatives on a gross basis in the Condensed Consolidated Balance Sheet. The Company has master netting agreements with several of its financial institution counterparties (see Concentrations of Credit Risk below). The following table provides information on the Company’s derivative positions subject to these master netting arrangements as if they were presented on a net basis, allowing for the right of offset by counterparty and cash collateral exchanged per the master agreements and related credit support annexes:

	June 30, 2019						December 31, 2018
($ in millions)	Asset			Liability			Asset			Liability
Gross amounts recognized in the consolidated balance sheet	$	301		$	84		$	454		$	160
Gross amounts subject to offset in master netting arrangements not offset in the consolidated balance sheet	(69		)	(69		)	(121		)	(121		)
Cash collateral received	(32		)	—			(107		)	—
Net amounts	$	200		$	15		$	226		$	39

- 13 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

The table below provides information regarding the location and amount of pretax (gains) losses of derivatives designated in fair value or cash flow hedging relationships:

	Sales					Other (income) expense, net (1)					Other comprehensive income (loss)						Sales				Other (income) expense, net (1)						Other comprehensive income (loss)
	Three Months Ended June 30,					Three Months Ended June 30,					Three Months Ended June 30,						Six Months Ended June 30,				Six Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2019		2018			2019			2018		2019			2018			2019	2018			2019			2018			2019			2018
Financial Statement Line Items in which Effects of Fair Value or Cash Flow Hedges are Recorded	$	11,760	$	10,465		$	140		(48	)	$	(16	)	$	(62	)	22,575	$	20,502		$	327		$	(340	)	$	183		$	62
(Gain) loss on fair value hedging relationships
Interest rate swap contracts
Hedged items	—		—			55			(15	)	—			—			—	—			88			(77		)	—			—
Derivatives designated as hedging instruments	—		—			(45		)	22		—			—			—	—			(68		)	84			—			—
Impact of cash flow hedging relationships
Foreign exchange contracts
Amount of income (loss) recognized in OCI on derivatives	—		—			—			—		10			264			—	—			—			—			(2		)	84
Increase (decrease) in Sales as a result of AOCI reclassifications	75		(73		)	—			—		(75		)	73			119	(166		)	—			—			(119		)	166
Interest rate contracts
Amount of gain recognized in Other (income) expense, net on derivatives	—		—			(1		)	(1	)	—			—			—	—			(2		)	(2		)	—			—
Amount of loss recognized in OCI on derivatives	—		—			—			—		(1		)	(1		)	—	—			—			—			(5		)	(2		)

⁽¹⁾ Interest expense is a component of Other (income) expense, net.

The table below provides information regarding the income statement effects of derivatives not designated as hedging instruments:

		Amount of Derivative Pretax (Gain) Loss Recognized in Income
		Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	Income Statement Caption	2019			2018			2019		2018
Derivatives Not Designated as Hedging Instruments
Foreign exchange contracts (1)	Other (income) expense, net	$	2		$	(195	)	$	120	$	(167	)
Foreign exchange contracts (2)	Sales	(6		)	(14		)	4		(5		)

⁽¹⁾ These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates.

⁽²⁾ These derivative contracts serve as economic hedges of forecasted transactions.

At June 30, 2019, the Company estimates $76 million of pretax net unrealized gains on derivatives maturing within the next 12 months that hedge foreign currency denominated sales over that same period will be reclassified from AOCI to Sales. The amount ultimately reclassified to Sales may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity.

- 14 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Investments in Debt and Equity Securities

Information on investments in debt and equity securities is as follows:

	June 30, 2019									December 31, 2018
	Amortized Cost		Gross Unrealized					Fair Value		Amortized Cost		Gross Unrealized					Fair Value
($ in millions)			Gains		Losses							Gains		Losses
Corporate notes and bonds	$	2,666	$	36	$	(2	)	$	2,700	$	4,985	$	3	$	(68	)	$	4,920
Asset-backed securities	789		4		(1		)	792		1,285		1		(11		)	1,275
U.S. government and agency securities	575		10		—			585		895		2		(5		)	892
Foreign government bonds	41		—		—			41		167		—		(1		)	166
Mortgage-backed securities	5		—		—			5		8		—		—			8
Total debt securities	$	4,076	$	50	$	(3	)	$	4,123	$	7,340	$	6	$	(85	)	$	7,261
Publicly traded equity securities (1)								756									456
Total debt and publicly traded equity securities								$	4,879								$	7,717

⁽¹⁾ Unrealized net (losses) gains recognized in Other (income) expense, net on equity securities still held at June 30, 2019 were $(39) million and $7 million, for the second quarter of 2019 and 2018, respectively, and were $75 million and $50 million for the first six months of 2019 and 2018, respectively.

At June 30, 2019, the Company also had $465 million of equity investments without readily determinable fair values included in Other Assets. During the first six months of 2019, the Company recognized unrealized gains of $4 million on certain of these equity investments recorded in Other (income) expense, net based on favorable observable price changes from transactions involving similar investments of the same investee. In addition, during the first six months of 2019, the Company recognized unrealized losses of $10 million in Other (income) expense, net related to certain of these investments based on unfavorable observable price changes. Since January 1, 2018, cumulative unrealized gains and cumulative unrealized losses based on observable prices changes for investments in equity investments without readily determinable fair values were $172 million and $21 million, respectively.

Available-for-sale debt securities included in Short-term investments totaled $398 million at June 30, 2019. Of the remaining debt securities, $3.4 billion mature within five years. At June 30, 2019 and December 31, 2018, there were no debt securities pledged as collateral.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value with Level 1 having the highest priority and Level 3 having the lowest: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities, Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities, Level 3 - Unobservable inputs that are supported by little or no market activity. Level 3 assets or liabilities are those whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques with significant unobservable inputs, as well as assets or liabilities for which the determination of fair value requires significant judgment or estimation. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

- 15 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements Using								Fair Value Measurements Using
	Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
($ in millions)	June 30, 2019								December 31, 2018
Assets
Investments
Corporate notes and bonds	$	—	$	2,660	$	—	$	2,660	$	—	$	4,835	$	—	$	4,835
Asset-backed securities (1)	—		788		—		788		—		1,253		—		1,253
U.S. government and agency securities	—		508		—		508		—		731		—		731
Foreign government bonds	—		41		—		41		—		166		—		166
Publicly traded equity securities	228		—		—		228		147		—		—		147
	228		3,997		—		4,225		147		6,985		—		7,132
Other assets (2)
U.S. government and agency securities	58		19		—		77		55		106		—		161
Corporate notes and bonds	—		40		—		40		—		85		—		85
Mortgage-backed securities	—		5		—		5		—		8		—		8
Asset-backed securities (1)	—		4		—		4		—		22		—		22
Publicly traded equity securities	528		—		—		528		309		—		—		309
	586		68		—		654		364		221		—		585
Derivative assets (3)
Purchased currency options	—		158		—		158		—		213		—		213
Forward exchange contracts	—		129		—		129		—		241		—		241
Interest rate swaps	—		14		—		14		—		—		—		—
	—		301		—		301		—		454		—		454
Total assets	$	814	$	4,366	$	—	$	5,180	$	511	$	7,660	$	—	$	8,171
Liabilities
Other liabilities
Contingent consideration	$	—	$	—	$	753	$	753	$	—	$	—	$	788	$	788
Derivative liabilities (3)
Forward exchange contracts	—		73		—		73		—		74		—		74
Interest rate swaps	—		8		—		8		—		81		—		81
Written currency options	—		3		—		3		—		5		—		5
	—		84		—		84		—		160		—		160
Total liabilities	$	—	$	84	$	753	$	837	$	—	$	160	$	788	$	948

⁽¹⁾  Primarily all of the asset-backed securities are highly-rated (Standard & Poor’s rating of AAA and Moody’s Investors Service rating of Aaa), secured primarily by auto loan, credit card and student loan receivables, with weighted-average lives of primarily 5 years or less.

⁽²⁾  Investments included in other assets are restricted as to use, primarily for the payment of benefits under employee benefit plans.

⁽³⁾  The fair value determination of derivatives includes the impact of the credit risk of counterparties to the derivatives and the Company’s own credit risk, the effects of which were not significant.

There were no transfers between Level 1 and Level 2 during the first six months of 2019. As of June 30, 2019, Cash and cash equivalents of $6.7 billion included $5.9 billion of cash equivalents (which would be considered Level 2 in the fair value hierarchy).

- 16 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Contingent Consideration

Summarized information about the changes in liabilities for contingent consideration is as follows:

	Six Months Ended June 30,
($ in millions)	2019			2018
Fair value January 1	$	788		$	935
Changes in estimated fair value (1)	50			122
Additions	—			8
Payments	(85		)	(235		)
Fair value June 30 (2)	$	753		$	830

⁽¹⁾ Recorded in Cost of sales, Research and development expenses, and Other (income) expense, net. Includes cumulative translation adjustments.

⁽²⁾ Balance at June 30, 2019 includes $114 million recorded as a current liability for amounts expected to be paid within the next 12 months.

The payments of contingent consideration in both periods include payments related to liabilities recorded in connection with the 2016 termination of the Sanofi-Pasteur MSD joint venture. The payments of contingent consideration in the first six months of 2018 also include $175 million related to the achievement of a clinical development milestone for MK-7264 (gefapixant), a program obtained in connection with the acquisition of Afferent Pharmaceuticals.

Other Fair Value Measurements

Some of the Company’s financial instruments, such as cash and cash equivalents, receivables and payables, are reflected in the balance sheet at carrying value, which approximates fair value due to their short-term nature.

The estimated fair value of loans payable and long-term debt (including current portion) at June 30, 2019, was $28.6 billion compared with a carrying value of $26.6 billion and at December 31, 2018, was $25.6 billion compared with a carrying value of $25.1 billion. Fair value was estimated using recent observable market prices and would be considered Level 2 in the fair value hierarchy.

Concentrations of Credit Risk

On an ongoing basis, the Company monitors concentrations of credit risk associated with corporate and government issuers of securities and financial institutions with which it conducts business. Credit exposure limits are established to limit a concentration with any single issuer or institution. Cash and investments are placed in instruments that meet high credit quality standards as specified in the Company’s investment policy guidelines.

The majority of the Company’s accounts receivable arise from product sales in the United States and Europe and are primarily due from drug wholesalers and retailers, hospitals, government agencies, managed health care providers and pharmacy benefit managers. The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in their credit profile. The Company also continues to monitor global economic conditions, including the volatility associated with international sovereign economies, and associated impacts on the financial markets and its business. The Company does not expect to have write-offs or adjustments to accounts receivable which would have a material adverse effect on its financial position, liquidity or results of operations.

Derivative financial instruments are executed under International Swaps and Derivatives Association master agreements. The master agreements with several of the Company’s financial institution counterparties also include credit support annexes. These annexes contain provisions that require collateral to be exchanged depending on the value of the derivative assets and liabilities, the Company’s credit rating, and the credit rating of the counterparty. Cash received by the Company from various counterparties was $32 million and $107 million at June 30, 2019 and December 31, 2018, respectively. The obligation to return such collateral is recorded in Accrued and other current liabilities. No cash collateral was advanced by the Company to counterparties as of June 30, 2019 or December 31, 2018.

- 17 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

6. Inventories

Inventories consisted of:

($ in millions)	June 30, 2019			December 31, 2018
Finished goods	$	1,750		$	1,658
Raw materials and work in process	5,388			5,004
Supplies	202			194
Total (approximates current cost)	7,340			6,856
(Decrease) increase to LIFO costs	(29		)	1
	$	7,311		$	6,857
Recognized as:
Inventories	$	5,847		$	5,440
Other assets	1,464			1,417

Amounts recognized as Other assets are comprised almost entirely of raw materials and work in process inventories. At June 30, 2019 and December 31, 2018, these amounts included $1.3 billion and $1.4 billion, respectively, of inventories not expected to be sold within one year. In addition, these amounts included $118 million and $7 million at June 30, 2019 and December 31, 2018, respectively, of inventories produced in preparation for product launches.

7. Loans Payable, Long-Term Debt and Leases

Long-Term Debt

In March 2019, the Company issued $5.0 billion principal amount of senior unsecured notes consisting of $750 million of 2.90% notes due 2024, $1.75 billion of 3.40% notes due 2029, $1.0 billion of 3.90% notes due 2039, and $1.5 billion of 4.00% notes due 2049. The Company used the net proceeds from the offering of $5.0 billion for general corporate purposes, including the repayment of outstanding commercial paper borrowings.

Leases

As discussed in Note 1, on January 1, 2019, Merck adopted new guidance for the accounting and reporting of leases. The Company has operating leases primarily for manufacturing facilities, research and development facilities, corporate offices, employee housing, vehicles and certain equipment. As permitted under the transition guidance in ASC 842, the Company elected a package of practical expedients which, among other provisions, allowed the Company to carry forward historical lease classifications. The Company determines if an arrangement is a lease at inception. When evaluating contracts for embedded leases, the Company exercises judgment to determine if there is an explicit or implicit identified asset in the contract and if Merck controls the use of that asset. Embedded leases, primarily associated with contract manufacturing organizations, are immaterial.

Under ASC 842 transition guidance, Merck elected the hindsight practical expedient to determine the lease term for existing leases, which permits companies to consider available information prior to the effective date of the new guidance as to the actual or likely exercise of options to extend or terminate the lease. The lease term includes options to extend or terminate the lease when it is reasonably certain that Merck will exercise that option. Real estate leases for facilities have an average remaining lease term of eight years, which include options to extend the leases for up to four years where applicable. Vehicle leases are generally in effect for four years. The Company has made an accounting policy election not to record short-term leases (leases with an initial term of 12 months or less) on the balance sheet; however, Merck currently has no short-term leases.

Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term. Since most of the Company’s leases do not have a readily determinable implicit discount rate, the Company uses its incremental borrowing rate to calculate the present value of lease payments. As a practical expedient, the Company has made an accounting policy election not to separate lease components (e.g. payments for rent, real estate taxes and insurance costs) from non-lease components (e.g. common-area maintenance costs) in the event that the agreement contains both. Merck includes both the lease and non-lease components for purposes of calculating the right-of-use asset and related lease liability (if the non-lease components are fixed). For vehicle leases and employee housing, the Company applies a portfolio approach to effectively account for the operating lease assets and liabilities.

Certain of the Company’s lease agreements contain variable lease payments that are adjusted periodically for inflation or for actual operating expense true-ups compared with estimated amounts; however, these amounts are immaterial. Sublease income and activity related to sale and leaseback transactions are immaterial. Merck’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

- 18 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Operating lease cost was $82 million and $165 million for the second quarter and first six months of 2019, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $65 million and $138 million for the second quarter and first six months of 2019, respectively.

Supplemental balance sheet information related to operating leases is as follows:

($ in millions)	June 30, 2019
Assets
Other Assets (1)	$	1,063
Liabilities
Accrued and other current liabilities	$	241
Other Noncurrent Liabilities	752
	$	993
Weighted-average remaining lease term (years)	7.5
Weighted-average discount rate	3.4		%

⁽¹⁾ Includes prepaid leases that have no related lease liability.

Maturities of operating leases liabilities are as follows:

($ in millions)	June 30, 2019
2019 (excluding the six months ended June 30, 2019)	$	138
2020	232
2021	172
2022	146
2023	98
Thereafter	339
Total lease payments	1,125
Less: imputed interest	(132		)
	$	993

As of June 30, 2019, the Company had entered into additional real estate operating leases that had not yet commenced. The obligations associated with these leases totaled $127 million, of which $72 million related to a lease that commenced in July 2019 and has a lease term of 10 years.

As of December 31, 2018, prior to the adoption of ASC 842, the minimum aggregate rental commitments under noncancellable leases were as follows: 2019, $188 million; 2020, $198 million; 2021, $150 million; 2022, $134 million; 2023, $84 million and thereafter, $243 million.

8. Contingencies

The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters. In the opinion of the Company, it is unlikely that the resolution of these matters will be material to the Company’s financial position, results of operations or cash flows.

Given the nature of the litigation discussed below and the complexities involved in these matters, the Company is unable to reasonably estimate a possible loss or range of possible loss for such matters until the Company knows, among other factors, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, including the size of any potential class, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation and (v) any other factors that may have a material effect on the litigation.

The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. For product liability claims, a portion of the overall accrual is actuarially determined and considers such factors as past experience, number of claims reported and estimates of claims incurred but not yet reported. Individually significant contingent

- 19 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

losses are accrued when probable and reasonably estimable. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.

The Company’s decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such decisions are made. The Company has evaluated its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, has no insurance for most product liabilities effective August 1, 2004.

Product Liability Litigation

Fosamax

As previously disclosed, Merck is a defendant in product liability lawsuits in the United States involving Fosamax (Fosamax Litigation). As of June 30, 2019, approximately 3,900 cases have been filed and either are pending or conditionally dismissed (as noted below) against Merck in either federal or state court. Plaintiffs in the vast majority of these cases generally allege that they sustained femur fractures and/or other bone injuries (Femur Fractures) in association with the use of Fosamax.

In March 2011, Merck submitted a Motion to Transfer to the Judicial Panel on Multidistrict Litigation (JPML) seeking to have all federal cases alleging Femur Fractures consolidated into one multidistrict litigation for coordinated pre-trial proceedings. All federal cases involving allegations of Femur Fracture have been or will be transferred to a multidistrict litigation in the District of New Jersey (Femur Fracture MDL). In the only bellwether case tried to date in the Femur Fracture MDL, Glynn v. Merck, the jury returned a verdict in Merck’s favor. In addition, in June 2013, the Femur Fracture MDL court granted Merck’s motion for judgment as a matter of law in the Glynn case and held that the plaintiff’s failure to warn claim was preempted by federal law.

In August 2013, the Femur Fracture MDL court entered an order requiring plaintiffs in the Femur Fracture MDL to show cause why those cases asserting claims for a femur fracture injury that took place prior to September 14, 2010, should not be dismissed based on the court’s preemption decision in the Glynn case. Pursuant to the show cause order, in March 2014, the Femur Fracture MDL court dismissed with prejudice approximately 650 cases on preemption grounds. Plaintiffs in approximately 515 of those cases appealed that decision to the U.S. Court of Appeals for the Third Circuit (Third Circuit). In March 2017, the Third Circuit issued a decision reversing the Femur Fracture MDL court’s preemption ruling and remanding the appealed cases back to the Femur Fracture MDL court. Merck filed a petition for a writ of certiorari to the U.S. Supreme Court in August 2017 seeking review of the Third Circuit’s decision. In December 2017, the Supreme Court invited the Solicitor General to file a brief in the case expressing the views of the United States, and in May 2018, the Solicitor General submitted a brief stating that the Third Circuit’s decision was wrongly decided and recommended that the Supreme Court grant Merck’s cert petition. The Supreme Court granted Merck’s petition in June 2018, and an oral argument before the Supreme Court was held on January 7, 2019. On May 20, 2019, the Supreme Court issued its opinion and decided that the Third Circuit had incorrectly concluded that the issue of preemption should be resolved by a jury, and accordingly vacated the judgment of the Third Circuit and remanded the proceedings back to the Third Circuit to address the issue in a manner consistent with the Supreme Court’s opinion. The Third Circuit has requested, by August 6, 2019, ten page letters from each side addressing two specific issues central to the appeal.

Accordingly, as of June 30, 2019, 11 cases were actively pending in the Femur Fracture MDL, and approximately 1,060 cases have either been dismissed without prejudice or administratively closed pending final resolution by the Supreme Court of the appeal of the Femur Fracture MDL court’s preemption order.

As of June 30, 2019, approximately 2,555 cases alleging Femur Fractures have been filed in New Jersey state court and are pending before Judge James Hyland in Middlesex County. The parties selected an initial group of cases to be reviewed through fact discovery. Merck has continued to select additional cases to be reviewed through fact discovery from 2016 to the present.

As of June 30, 2019, approximately 275 cases alleging Femur Fractures have been filed and are pending in California state court. All of the Femur Fracture cases filed in California state court have been coordinated before a single judge in Orange County, California.

Additionally, there are four Femur Fracture cases pending in other state courts.

Discovery is presently stayed in the Femur Fracture MDL and in the state court cases in California. Merck intends to defend against these lawsuits.

Januvia/Janumet

As previously disclosed, Merck is a defendant in product liability lawsuits in the United States involving Januvia and/or Janumet. As of June 30, 2019, Merck is aware of approximately 1,350 product users alleging that Januvia and/or Janumet caused the development of pancreatic cancer and other injuries.

- 20 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Most claims have been filed in multidistrict litigation before the U.S. District Court for the Southern District of California (MDL). Outside of the MDL, the majority of claims have been filed in coordinated proceedings before the Superior Court of California, County of Los Angeles (California State Court).

In November 2015, the MDL and California State Court-in separate opinions-granted summary judgment to defendants on grounds of federal preemption.

Plaintiffs appealed in both forums. In November 2017, the U.S. Court of Appeals for the Ninth Circuit vacated the judgment and remanded for further discovery, which is ongoing. In November 2018, the California state appellate court reversed and remanded on similar grounds. In March 2019, the parties in the MDL and the California coordinated proceeding agreed to coordinate and adopt a schedule for completing discovery on general causation and preemption issues and for renewing summary judgment and Daubert motions. Under the stipulated case management schedule, the filing deadline for Daubert and summary judgment motions will take place in May 2020.

As of June 30, 2019, seven product users have claims pending against Merck in state courts other than California, including Illinois. In June 2017, the Illinois trial court denied Merck’s motion for summary judgment based on federal preemption. Merck appealed, and the Illinois appellate court affirmed in December 2018. Merck filed a petition for leave to appeal to the Illinois Supreme Court in February 2019. In April 2019, the Illinois Supreme Court stayed consideration of the pending petition to appeal until the United States Supreme Court issued its opinion in Merck Sharp & Dohme Corp. v. Albrecht, No. 17-290. Merck filed the opinion in Albrecht with the Illinois Supreme Court in June 2019. The petition for leave to appeal remains pending.

In addition to the claims noted above, the Company has agreed to toll the statute of limitations for approximately 50 additional claims. The Company intends to continue defending against these lawsuits.

Governmental Proceedings

In the fall of 2018, the Company received a records subpoena from the U.S. Attorney’s Office for the District of Vermont (VT USAO) pursuant to Section 248 of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) relating to an investigation of potential health care offenses. The subpoena sought information relating to any actual or potential business relationship or arrangement Merck has had with Practice Fusion, Inc. (PFI), a cloud-based, electronic health records (EHR) company that was acquired by Allscripts in January 2018. The Company cooperated with the government and responded to that subpoena. Subsequently, on May 21, 2019, Merck received a second records subpoena from the VT USAO that broadened the government’s information request by seeking information relating to Merck’s relationship with any EHR company. Shortly thereafter, the VT USAO served a Civil Investigation Demand (CID) upon Merck similarly seeking information on the Company’s relationships with EHR vendors. The CID explains that the government is conducting a False Claims Act investigation concerning whether Merck and/or PFI submitted claims to federal healthcare programs that violate the Federal Anti-Kickback Statute. Merck is cooperating with the government’s investigation.

On April 15, 2019, Merck received a set of investigative interrogatories from the California Attorney General’s Office pursuant to its investigation of conduct and agreements that allegedly affected or delayed competition to Lantus in the insulin market. The interrogatories seek information concerning Merck’s development of an insulin glargine product, and its subsequent termination, as well as Merck’s patent litigation against Sanofi S.A. concerning Lantus and the resolution of that litigation. Merck is cooperating with the California Attorney General’s investigation.

As previously disclosed, the Company’s subsidiaries in China have, in the past, received and may continue to receive inquiries regarding their operations from various Chinese governmental agencies. Some of these inquiries may be related to matters involving other multinational pharmaceutical companies, as well as Chinese entities doing business with such companies. The Company’s policy is to cooperate with these authorities and to provide responses as appropriate.

As previously disclosed, from time to time, the Company receives inquiries and is the subject of preliminary investigation activities from competition and other governmental authorities in markets outside the United States. These authorities may include regulators, administrative authorities, and law enforcement and other similar officials, and these preliminary investigation activities may include site visits, formal or informal requests or demands for documents or materials, inquiries or interviews and similar matters. Certain of these preliminary inquiries or activities may lead to the commencement of formal proceedings. Should those proceedings be determined adversely to the Company, monetary fines and/or remedial undertakings may be required.

- 21 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Commercial and Other Litigation

Zetia Antitrust Litigation

As previously disclosed, Merck, MSD, Schering Corporation and MSP Singapore Company LLC (collectively, the Merck Defendants) are defendants in putative class action and opt-out lawsuits filed in 2018 on behalf of direct and indirect purchasers of Zetia alleging violations of federal and state antitrust laws, as well as other state statutory and common law causes of action. The cases have been consolidated for pretrial purposes in a federal multidistrict litigation before Judge Rebecca Beach Smith in the Eastern District of Virginia. In December 2018, the court denied the Merck Defendants’ motions to dismiss or stay the direct purchaser putative class actions pending bilateral arbitration. On February 6, 2019, the magistrate judge issued a report and recommendation recommending that the district judge grant in part and deny in part defendants’ motions to dismiss on non-arbitration issues. On February 20, 2019, defendants and retailer opt-out plaintiffs filed objections to the report and recommendation. The parties await a decision from the district judge. Trial is currently scheduled to begin on September 30, 2020.

Merck KGaA Litigation

As previously disclosed, in January 2016, to protect its long-established brand rights in the United States, the Company filed a lawsuit against Merck KGaA, Darmstadt, Germany (KGaA), historically operating as the EMD Group in the United States, alleging it improperly uses the name “Merck” in the United States. KGaA has filed suit against the Company in France, the UK, Germany, Switzerland, Mexico, India, Australia, Singapore, Hong Kong, and China alleging, among other things, unfair competition, trademark infringement and/or corporate name infringement. In the UK, Australia, Singapore, Hong Kong, and India, KGaA also alleges breach of the parties’ coexistence agreement. The litigation is ongoing in the United States with no trial date set, and also ongoing in numerous jurisdictions outside of the United States; the Company is defending those suits in each jurisdiction.

Patent Litigation

From time to time, generic manufacturers of pharmaceutical products file abbreviated New Drug Applications (NDAs) with the U.S. Food and Drug Administration (FDA) seeking to market generic forms of the Company’s products prior to the expiration of relevant patents owned by the Company. To protect its patent rights, the Company may file patent infringement lawsuits against such generic companies. Similar lawsuits defending the Company’s patent rights may exist in other countries. The Company intends to vigorously defend its patents, which it believes are valid, against infringement by companies attempting to market products prior to the expiration of such patents. As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products and, with respect to products acquired through acquisitions, potentially significant intangible asset impairment charges.

Inegy — The patents protecting Inegy in Europe expired; supplemental protection certificates (SPCs) in many European countries expired in April 2019. The Company filed actions for patent infringement seeking damages against those companies that launched generic products before April 2019.

Januvia, Janumet, Janumet XR — In February 2019, Par Pharmaceutical, Inc. (Par Pharmaceutical) filed suit against the Company in the U.S. District Court for the District of New Jersey, seeking a declaratory judgment of invalidity of a patent owned by the Company covering certain salt and polymorphic forms of sitagliptin that expires in 2026. In response, the Company filed a patent infringement lawsuit in the U.S. District Court for the District of Delaware against Par Pharmaceutical and additional companies that also indicated an intent to market generic versions of Januvia, Janumet, and Janumet XR following expiration of key patent protection in 2022, but prior to the expiration of the later-granted patent owned by the Company covering certain salt and polymorphic forms of sitagliptin that expires in 2026, and a later granted patent owned by the Company covering the Janumet formulation which expires in 2028. Par Pharmaceutical dismissed its case in the U.S. District Court for the District of New Jersey against the Company and will litigate the action in the U.S. District Court for the District of Delaware. The Company filed a patent infringement lawsuit against Mylan Pharmaceuticals Inc. and Mylan Inc. (Mylan) in the Northern District of West Virginia. The Company has a pending, unopposed motion before the Judicial Panel of Multidistrict Litigation to transfer the Company’s lawsuit against Mylan to the U.S. District Court for the District of Delaware for coordinated and consolidated pretrial proceedings with the other cases pending in that district. The U.S. District Court for the District of Delaware has scheduled the lawsuits for a single 3-day trial on invalidity issues beginning October 4, 2021. The Court will schedule separate 1-day trials on infringement issues if necessary.

Other Litigation

There are various other pending legal proceedings involving the Company, principally product liability and intellectual property lawsuits. While it is not feasible to predict the outcome of such proceedings, in the opinion of the Company, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to the Company’s financial position, results of operations or cash flows either individually or in the aggregate.

- 22 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Legal Defense Reserves

Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the significant factors considered in the review of these legal defense reserves are as follows: the actual costs incurred by the Company; the development of the Company’s legal defense strategy and structure in light of the scope of its litigation; the number of cases being brought against the Company; the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated litigation. The amount of legal defense reserves as of June 30, 2019 and December 31, 2018 of approximately $260 million and $245 million, respectively, represents the Company’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation; however, events such as additional trials and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by the Company. The Company will continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if, based upon the factors set forth, it believes it would be appropriate to do so.

9. Equity

	Three Months Ended June 30,
	Common Stock			Other Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock					Non- Controlling Interests			Total
($ and shares in millions except per share amounts)	Shares	Par Value											Shares		Cost
Balance at April 1, 2018	3,577	$	1,788	$	39,874		$	41,107		$	(5,060	)	885		$	(44,041	)	$	233		$	33,901
Net income attributable to Merck & Co., Inc.	—	—		—			1,707			—			—		—			—			1,707
Other comprehensive loss, net of taxes	—	—		—			—			(62		)	—		—			—			(62		)
Cash dividends declared on common stock ($0.48 per share)	—	—		—			(1,291		)	—			—		—			—			(1,291		)
Treasury stock shares purchased	—	—		—			—			—			27		(1,596		)	—			(1,596		)
Share-based compensation plans and other	—	—		(133		)	—			—			(5	)	236			—			103
Net income attributable to noncontrolling interests	—	—		—			—			—			—		—			9			9
Distributions attributable to noncontrolling interests	—	—		—			—			—			—		—			(5		)	(5		)
Balance at June 30, 2018	3,577	$	1,788	$	39,741		$	41,523		$	(5,122	)	907		$	(45,401	)	$	237		$	32,766
Balance at April 1, 2019	3,577	$	1,788	$	38,768		$	44,065		$	(5,346	)	994		$	(51,736	)	$	131		$	27,670
Net income attributable to Merck & Co., Inc.	—	—		—			2,670			—			—		—			—			2,670
Other comprehensive loss, net of taxes	—	—		—			—			(16		)	—		—			—			(16		)
Cash dividends declared on common stock ($0.55 per share)	—	—		—			(1,440		)	—			—		—			—			(1,440		)
Treasury stock shares purchased	—	—		1,000			—			—			24		(2,235		)	—			(1,235		)
Share-based compensation plans and other	—	—		(284		)	—			—			(8	)	401			—			117
Net loss attributable to noncontrolling interests	—	—		—			—			—			—		—			(26		)	(26		)
Other changes in noncontrolling ownership interests	—	—		—			—			—			—		—			(3		)	(3		)
Balance at June 30, 2019	3,577	$	1,788	$	39,484		$	45,295		$	(5,362	)	1,010		$	(53,570	)	$	102		$	27,737

- 23 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

	Six Months Ended June 30,
	Common Stock			Other Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock					Non- Controlling Interests			Total
($ and shares in millions except per share amounts)	Shares	Par Value											Shares		Cost
Balance at January 1, 2018	3,577	$	1,788	$	39,902		$	41,350		$	(4,910	)	880		$	(43,794	)	$	233		$	34,569
Net income attributable to Merck & Co., Inc.	—	—		—			2,443			—			—		—			—			2,443
Adoption of new accounting standards	—	—		—			322			(274		)	—		—			—			48
Other comprehensive income, net of taxes	—	—		—			—			62			—		—			—			62
Cash dividends declared on common stock ($0.96 per share)	—	—		—			(2,592		)	—			—		—			—			(2,592		)
Treasury stock shares purchased	—	—		—			—			—			37		(2,162		)	—			(2,162		)
Share-based compensation plans and other	—	—		(161		)	—			—			(10	)	555			—			394
Net income attributable to noncontrolling interests	—	—		—			—			—			—		—			14			14
Distributions attributable to noncontrolling interests	—	—		—			—			—			—		—			(10		)	(10		)
Balance at June 30, 2018	3,577	$	1,788	$	39,741		$	41,523		$	(5,122	)	907		$	(45,401	)	$	237		$	32,766
Balance at January 1, 2019	3,577	$	1,788	$	38,808		$	42,579		$	(5,545	)	985		$	(50,929	)	$	181		$	26,882
Net income attributable to Merck & Co., Inc.	—	—		—			5,585			—			—		—			—			5,585
Other comprehensive income, net of taxes	—	—		—			—			183			—		—			—			183
Cash dividends declared on common stock ($1.10 per share)	—	—		—			(2,869		)	—			—		—			—			(2,869		)
Treasury stock shares purchased	—	—		1,000			—			—			38		(3,325		)	—			(2,325		)
Share-based compensation plans and other	—	—		(324		)	—			—			(13	)	684			—			360
Net loss attributable to noncontrolling interests	—	—		—			—			—			—		—			(79		)	(79		)
Balance at June 30, 2019	3,577	$	1,788	$	39,484		$	45,295		$	(5,362	)	1,010		$	(53,570	)	$	102		$	27,737

On October 25, 2018, the Company entered into accelerated share repurchase (ASR) agreements with two third-party financial institutions (Dealers). Under the ASR agreements, Merck agreed to purchase $5 billion of Merck’s common stock, in total, with an initial delivery of 56.7 million shares of Merck’s common stock, based on the then-current market price, made by the Dealers to Merck, and payments of $5 billion made by Merck to the Dealers on October 29, 2018, which were funded with existing cash and investments, as well as short-term borrowings. The payments to the Dealers were recorded as reductions to shareholders’ equity, consisting of a $4 billion increase in treasury stock, which reflected the value of the initial 56.7 million shares received on October 29, 2018, and a $1 billion decrease in other-paid-in capital, which reflected the value of the stock held back by the Dealers pending final settlement. Upon settlement of the ASR agreements in April 2019, Merck received an additional 7.7 million shares as determined by the average daily volume weighted-average price of Merck’s common stock during the term of the ASR program, less a negotiated discount, bringing the total shares received by Merck under this program to 64.4 million. The receipt of the additional shares was reflected as an increase to treasury stock and an increase to other-paid-in capital in the second quarter of 2019.

10. Share-Based Compensation Plans

The Company has share-based compensation plans under which the Company grants restricted stock units (RSUs) and performance share units (PSUs) to certain management level employees. In addition, employees and non-employee directors may be granted options to purchase shares of Company common stock at the fair market value at the time of grant.

The following table provides the amounts of share-based compensation cost recorded in the Condensed Consolidated Statement of Income:

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Pretax share-based compensation expense	$	111		$	90		$	204		$	170
Income tax benefit	(15		)	(13		)	(28		)	(28		)
Total share-based compensation expense, net of taxes	$	96		$	77		$	176		$	142

During the first six months of 2019, the Company granted 6 million RSUs with a weighted-average grant date fair value of $76.31 per RSU and during the first six months of 2018 granted 7 million RSUs with a weighted-average grant date fair value of $58.15 per RSU. During the first six months of 2019, the Company granted 609 thousand PSUs with a weighted-average

- 24 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

grant date fair value of $90.50 per PSU and during the first six months of 2018 granted 855 thousand PSUs with a weighted-average grant date fair value of $56.70 per PSU.

During the first six months of 2019, the Company granted 3 million stock options with a weighted-average exercise price of $80.00 per option and during the first six months of 2018 granted 3 million stock options with a weighted-average exercise price of $57.72 per option. The weighted-average fair value of options granted during the first six months of 2019 and 2018 was $10.63 and $8.19 per option, respectively, and was determined using the following assumptions:

	Six Months Ended   June 30,
	2019		2018
Expected dividend yield	3.2	%	3.4	%
Risk-free interest rate	2.4	%	2.8	%
Expected volatility	18.7	%	19.1	%
Expected life (years)	5.9		6.1

At June 30, 2019, there was $800 million of total pretax unrecognized compensation expense related to nonvested stock options, RSU and PSU awards which will be recognized over a weighted-average period of 2.2 years. For segment reporting, share-based compensation costs are unallocated expenses.

11. Pension and Other Postretirement Benefit Plans

The Company has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The net periodic benefit cost of such plans consisted of the following components: 

	Three Months Ended   June 30,												Six Months Ended   June 30,
	2019						2018						2019						2018
($ in millions)	U.S.			International			U.S.			International			U.S.			International			U.S.			International
Service cost	$	74		$	60		$	85		$	58		$	144		$	120		$	168		$	125
Interest cost	113			44			107			45			228			89			215			91
Expected return on plan assets	(205		)	(107		)	(211		)	(108		)	(411		)	(214		)	(425		)	(221		)
Amortization of unrecognized prior service credit	(12		)	(3		)	(13		)	(3		)	(25		)	(6		)	(25		)	(7		)
Net loss amortization	35			16			56			21			70			31			112			43
Termination benefits	3			1			7			—			5			1			17			—
Curtailments	—			—			5			(1		)	1			—			3			(1		)
Settlements	—			—			—			4			—			—			1			4
	$	8		$	11		$	36		$	16		$	12		$	21		$	66		$	34

The Company provides medical benefits, principally to its eligible U.S. retirees and similar benefits to their dependents, through its other postretirement benefit plans. The net credit of such plans consisted of the following components: 

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Service cost	$	12		$	14		$	24		$	28
Interest cost	18			18			35			35
Expected return on plan assets	(18		)	(21		)	(36		)	(41		)
Amortization of unrecognized prior service credit	(21		)	(21		)	(43		)	(42		)
Termination benefits	—			1			—			2
Curtailments	(1		)	(2		)	(1		)	(6		)
	$	(10	)	$	(11	)	$	(21	)	$	(24	)

In connection with restructuring actions (see Note 4), termination charges were recorded on pension and other postretirement benefit plans related to expanded eligibility for certain employees exiting Merck. Also, in connection with these restructuring actions, curtailments and settlements were recorded on pension and other postretirement benefit plans as reflected in the tables above.

- 25 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 12), with the exception of certain amounts for termination benefits, curtailments and settlements, which are recorded in Restructuring costs if the event giving rise to the termination benefits, curtailment or settlement is related to restructuring actions as noted above.

12. Other (Income) Expense, Net

Other (income) expense, net, consisted of: 

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Interest income	$	(75	)	$	(81	)	$	(164	)	$	(165	)
Interest expense	233			194			442			379
Exchange losses	27			71			128			77
Income from investments in equity securities, net (1)	(58		)	(153		)	(32		)	(178		)
Net periodic defined benefit plan (credit) cost other than service cost	(140		)	(130		)	(281		)	(265		)
Other, net	153			51			234			(188		)
	$	140		$	(48	)	$	327		$	(340	)

⁽¹⁾  Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investments funds.

The higher exchange losses in the first six months of 2019 reflect losses on forward exchange contracts related to the acquisition of Antelliq.

Other, net (as reflected in the table above) in the second quarter and first six months of 2019 includes $78 million and $162 million of goodwill impairment charges related to certain businesses in the Healthcare Services segment. Other, net in the first six months of 2018 includes a $115 million gain on the settlement of certain patent litigation.

Interest paid for the six months ended June 30, 2019 and 2018 was $356 million and $341 million, respectively.

13. Taxes on Income

The effective income tax rates of 18.9% and 17.8% for the second quarter of 2019 and 2018, respectively, and 13.0% and 28.4% for the first six months of 2019 and 2018, respectively, reflect the impacts of acquisition and divestiture-related costs and restructuring costs, partially offset by the beneficial impact of foreign earnings. In addition, the effective income tax rate for the first six months of 2019 reflects the favorable impact of a $360 million net tax benefit related to the settlement of certain federal income tax matters (discussed below). The effective income tax rate for the first six months of 2018 reflects the unfavorable impact of a $1.4 billion pretax charge recorded in connection with the formation of a collaboration with Eisai for which no tax benefit was recognized.

In the first quarter of 2019, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2012-2014 U.S. federal income tax returns. As a result, the Company was required to make a payment of $107 million. The Company’s reserves for unrecognized tax benefits for the years under examination exceeded the adjustments relating to this examination period and therefore the Company recorded a $360 million net tax benefit in the first six months of 2019. This net benefit reflects reductions in reserves for unrecognized tax benefits for tax positions relating to the years that were under examination, partially offset by additional reserves for tax positions not previously reserved for.

- 26 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

14. Earnings Per Share

The calculations of earnings per share are as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ and shares in millions except per share amounts)	2019		2018		2019		2018
Net income attributable to Merck & Co., Inc.	$	2,670	$	1,707	$	5,585	$	2,443
Average common shares outstanding	2,574		2,683		2,579		2,689
Common shares issuable (1)	14		13		17		13
Average common shares outstanding assuming dilution	2,588		2,696		2,596		2,702
Basic earnings per common share attributable to Merck & Co., Inc. common shareholders	$	1.04	$	0.64	$	2.17	$	0.91
Earnings per common share assuming dilution attributable to Merck & Co., Inc. common shareholders	$	1.03	$	0.63	$	2.15	$	0.90

⁽¹⁾  Issuable primarily under share-based compensation plans.

For the second quarter of 2019 and 2018, 3 million and 13 million, respectively, and for the first six months of 2019 and 2018, 4 million and 15 million, respectively, of common shares issuable under share-based compensation plans were excluded from the computation of earnings per common share assuming dilution because the effect would have been antidilutive.

15. Other Comprehensive Income (Loss)

Changes in AOCI by component are as follows:

	Three Months Ended June 30,
($ in millions)	Derivatives				Investments				Employee Benefit Plans				Cumulative Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance April 1, 2018, net of taxes	$	(201	)		$	(167	)		$	(3,095	)		$	(1,597	)	$	(5,060	)
Other comprehensive income (loss) before reclassification adjustments, pretax	265				(17		)		(1		)		(301		)	(54		)
Tax	(56		)		—				1				(60		)	(115		)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	209				(17		)		—				(361		)	(169		)
Reclassification adjustments, pretax	72			(1)	20			(2)	40			(3)	—			132
Tax	(15		)		—				(10		)		—			(25		)
Reclassification adjustments, net of taxes	57				20				30				—			107
Other comprehensive income (loss), net of taxes	266				3				30				(361		)	(62		)
Balance June 30, 2018, net of taxes	$	65			$	(164	)		$	(3,065	)		$	(1,958	)	$	(5,122	)
Balance April 1, 2019, net of taxes	$	118			$	4			$	(3,541	)		$	(1,927	)	$	(5,346	)
Other comprehensive income (loss) before reclassification adjustments, pretax	10				55				—				(25		)	40
Tax	(2		)		—				—				6			4
Other comprehensive income (loss) before reclassification adjustments, net of taxes	8				55				—				(19		)	44
Reclassification adjustments, pretax	(76		)	(1)	(11		)	(2)	14			(3)	—			(73		)
Tax	16				—				(3		)		—			13
Reclassification adjustments, net of taxes	(60		)		(11		)		11				—			(60		)
Other comprehensive income (loss), net of taxes	(52		)		44				11				(19		)	(16		)
Balance June 30, 2019, net of taxes	$	66			$	48			$	(3,530	)		$	(1,946	)	$	(5,362	)

- 27 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

	Six Months Ended June 30,
($ in millions)	Derivatives				Investments				Employee Benefit Plans				Cumulative Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance January 1, 2018, net of taxes	$	(108	)		$	(61	)		$	(2,787	)		$	(1,954	)	$	(4,910	)
Other comprehensive income (loss) before reclassification adjustments, pretax	84				(133		)		(2		)		18			(33		)
Tax	(18		)		1				4				(122		)	(135		)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	66				(132		)		2				(104		)	(168		)
Reclassification adjustments, pretax	164			(1)	36			(2)	81			(3)	—			281
Tax	(34		)		—				(17		)		—			(51		)
Reclassification adjustments, net of taxes	130				36				64				—			230
Other comprehensive income (loss), net of taxes	196				(96		)		66				(104		)	62
Adoption of ASU 2018-02	(23		)		1				(344		)		100			(266		)
Adoption of ASU 2016-01	—				(8		)		—				—			(8		)
Balance June 30, 2018, net of taxes	$	65			$	(164	)		$	(3,065	)		$	(1,958	)	$	(5,122	)
Balance January 1, 2019, net of taxes	$	166			$	(78	)		$	(3,556	)		$	(2,077	)	$	(5,545	)
Other comprehensive income (loss) before reclassification adjustments, pretax	(3		)		131				(1		)		131			258
Tax	1				—				6				—			7
Other comprehensive income (loss) before reclassification adjustments, net of taxes	(2		)		131				5				131			265
Reclassification adjustments, pretax	(124		)	(1)	(5		)	(2)	28			(3)	—			(101		)
Tax	26				—				(7		)		—			19
Reclassification adjustments, net of taxes	(98		)		(5		)		21				—			(82		)
Other comprehensive income (loss), net of taxes	(100		)		126				26				131			183
Balance June 30, 2019, net of taxes	$	66			$	48			$	(3,530	)		$	(1,946	)	$	(5,362	)

⁽¹⁾  Relates to foreign currency cash flow hedges that were reclassified from AOCI to Sales.

⁽²⁾  Represents net realized (gains) losses on the sales of available-for-sale debt securities that were reclassified from AOCI to Other (income) expense, net.

⁽³⁾  Includes net amortization of prior service cost and actuarial gains and losses included in net periodic benefit cost (see Note 11).

16. Segment Reporting

The Company’s operations are principally managed on a products basis and include four operating segments, which are the Pharmaceutical, Animal Health, Healthcare Services and Alliances segments. The Pharmaceutical and Animal Health segments are the only reportable segments.

The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. The Company sells these human health vaccines primarily to physicians, wholesalers, physician distributors and government entities. A large component of pediatric and adolescent vaccine sales are made to the U.S. Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the U.S. government. Additionally, the Company sells vaccines to the Federal government for placement into vaccine stockpiles. During 2019, as a result of changes to the Company’s internal reporting structure, certain costs that were previously included in the Pharmaceutical segment are now being included as part of non-segment expenses within Merck Research Laboratories. Prior period Pharmaceutical segment profits have been recast to reflect these changes on a comparable basis.

The Animal Health segment discovers, develops, manufactures and markets animal health products, including pharmaceutical and vaccine products, for the prevention, treatment and control of disease in all major livestock and companion animal species, which the Company sells to veterinarians, distributors and animal producers.

The Healthcare Services segment provides services and solutions that focus on engagement, health analytics and clinical services to improve the value of care delivered to patients.

The Alliances segment primarily includes activity from the Company’s relationship with AstraZeneca LP related to sales of Nexium and Prilosec, which concluded in 2018.

- 28 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Sales of the Company’s products were as follows:

	Three Months Ended June 30,															Six Months Ended June 30,
	2019							2018								2019							2018
($ in millions)	U.S.			Int’l		Total		U.S.			Int’l			Total		U.S.			Int’l		Total		U.S.			Int’l			Total
Pharmaceutical:
Oncology
Keytruda	$	1,498		$	1,136	$	2,634	$	959		$	707		$	1,667	$	2,782		$	2,121	$	4,903	$	1,797		$	1,333		$	3,131
Emend	67			54		121		89			59			148		130			107		237		168			105			273
Alliance revenue - Lynparza	66			45		111		31			13			44		116			74		190		55			22			76
Alliance revenue - Lenvima	54			43		97		19			16			35		104			67		171		19			16			35
Vaccines
Gardasil/Gardasil 9	456			430		886		302			306			608		818			906		1,724		682			586			1,269
ProQuad/M-M-R II/Varivax	500			174		675		356			70			426		843			328		1,171		668			150			818
RotaTeq	104			68		172		99			57			156		258			125		383		250			99			349
Pneumovax 23	123			47		170		122			71			193		248			107		355		234			137			372
Vaqta	38			20		58		42			23			65		67			39		105		60			42			101
Hospital Acute Care
Bridion	129			149		278		95			145			240		248			285		533		175			269			444
Noxafil	100			93		193		87			100			188		191			192		383		168			195			363
Cubicin	22			45		67		48			46			94		64			91		155		95			97			192
Invanz	18			60		78		87			63			149		31			118		150		177			123			300
Primaxin	—			70		71		—			68			68		1			129		130		5			135			140
Cancidas	3			64		67		4			83			87		4			125		129		7			171			178
Immunology
Simponi	—			214		214		—			233			233		—			422		422		—			464			464
Remicade	—			98		98		—			157			157		—			221		221		—			324			324
Neuroscience
Belsomra	21			55		76		29			42			71		45			98		143		52			73			125
Virology
Isentress/Isentress HD	94			153		247		132			174			305		202			300		502		260			326			586
Zepatier	39			68		108		(10		)	123			113		72			149		221		(10		)	253			243
Cardiovascular
Zetia	6			150		156		8			218			226		6			290		296		25			505			531
Vytorin	3			73		76		3			152			155		6			167		174		11			311			322
Atozet	—			92		92		—			101			101		—			186		186		—			174			174
Adempas	—			104		104		—			75			75		—			194		194		—			143			143
Diabetes
Januvia	471			437		908		503			446			949		855			877		1,732		968			862			1,829
Janumet	166			366		533		209			377			585		333			730		1,063		401			729			1,129
Women’s Health
NuvaRing	206			34		240		187			49			236		391			68		459		357			95			452
Implanon/Nexplanon	136			48		183		114			60			174		285			98		382		242			106			348
Diversified Brands
Singulair	8			153		160		5			180			185		13			338		352		11			350			360
Cozaar/Hyzaar	6			103		109		7			118			125		10			202		213		14			231			245
Nasonex	(1		)	73		72		—			81			81		(2		)	170		168		2			201			203
Arcoxia	—			75		75		—			84			84		—			149		149		—			166			166
Follistim AQ	24			39		63		27			43			70		53			67		121		56			81			138
Other pharmaceutical (1)	401			869		1,268		287			902			1,189		759			1,650		2,406		608			1,770			2,378
Total Pharmaceutical segment sales	4,758			5,702		10,460		3,841			5,442			9,282		8,933			11,190		20,123		7,557			10,644			18,201
Animal Health:
Livestock	145			526		671		107			526			633		261			1,021		1,282		231			1,055			1,286
Companion Animals	190			263		453		204			253			457		367			500		867		387			482			869
Total Animal Health segment sales	335			789		1,124		311			779			1,090		628			1,521		2,149		618			1,537			2,155
Other segment sales (2)	47			—		48		56			—			56		86			—		87		140			—			140
Total segment sales	5,140			6,491		11,632		4,208			6,221			10,428		9,647			12,711		22,359		8,315			12,181			20,496
Other (3)	4			125		128		54			(18		)	37		12			206		216		80			(74		)	6
	$	5,144		$	6,616	$	11,760	$	4,262		$	6,203		$	10,465	$	9,659		$	12,917	$	22,575	$	8,395		$	12,107		$	20,502

U.S. plus international may not equal total due to rounding.

⁽¹⁾  Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.

⁽²⁾  Represents the non-reportable segments of Healthcare Services and Alliances.

⁽³⁾  Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales.

- 29 -

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Product sales are recorded net of the provision for discounts, including chargebacks, which are customer discounts that occur when a contracted customer purchases through an intermediary wholesale purchaser, and rebates that are owed based upon definitive contractual agreements or legal requirements with private sector and public sector (Medicaid and Medicare Part D) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. These discounts, in the aggregate, reduced U.S. sales by $2.9 billion and $2.8 billion for the three months ended June 30, 2019 and 2018, respectively, and by $5.5 billion and $5.2 billion for the six months ended June 30, 2019 and 2018, respectively.

Consolidated sales by geographic area where derived are as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
United States	$	5,144	$	4,262	$	9,659	$	8,395
Europe, Middle East and Africa	3,163		3,144		6,265		6,334
Japan	921		855		1,720		1,592
China	763		559		1,509		1,045
Asia Pacific (other than Japan and China)	716		791		1,461		1,543
Latin America	658		594		1,219		1,126
Other	395		260		742		467
	$	11,760	$	10,465	$	22,575	$	20,502

A reconciliation of segment profits to Income before taxes is as follows:

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Segment profits:
Pharmaceutical segment	$	7,115		$	5,975		$	13,690		$	11,914
Animal Health segment	405			450			820			864
Other segments	(2		)	26			—			88
Total segment profits	7,518			6,451			14,510			12,866
Other profits (losses)	94			(2		)	124			(89		)
Unallocated:
Interest income	75			81			164			165
Interest expense	(233		)	(194		)	(442		)	(379		)
Depreciation and amortization	(427		)	(332		)	(786		)	(682		)
Research and development	(2,093		)	(2,190		)	(3,935		)	(5,307		)
Amortization of purchase accounting adjustments	(378		)	(732		)	(775		)	(1,464		)
Restructuring costs	(59		)	(228		)	(212		)	(323		)
Other unallocated, net	(1,238		)	(768		)	(2,322		)	(1,355		)
	$	3,259		$	2,086		$	6,326		$	3,432

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as selling, general and administrative expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, research and development expenses incurred in Merck Research Laboratories, the Company’s research and development division that focuses on human health-related activities, or general and administrative expenses, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. In addition, costs related to restructuring activities, as well as the amortization of purchase accounting adjustments are not allocated to segments.

Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits related to third-party manufacturing sales.

Other unallocated, net includes expenses from corporate and manufacturing cost centers, goodwill and other intangible asset impairment charges, gains or losses on sales of businesses, expense or income related to changes in the estimated fair value of liabilities for contingent consideration, and other miscellaneous income or expense items.

- 30 -

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Recent Developments

Business Developments

In April 2019, Merck acquired Antelliq Corporation (Antelliq), a leader in digital animal identification, traceability and monitoring solutions. These solutions help veterinarians, farmers and pet owners gather critical data to improve management, health and well-being of livestock and pets. Merck paid $2.3 billion to acquire all outstanding shares of Antelliq and spent $1.3 billion to repay Antelliq’s debt (see Note 2 to the condensed consolidated financial statements).

Also in April 2019, Merck acquired Immune Design, a late-stage immunotherapy company employing next-generation in vivo approaches to enable the body’s immune system to fight disease, for $301 million in cash (see Note 2 to the condensed consolidated financial statements).

In July 2019, Merck acquired Peloton Therapeutics, Inc. (Peloton), a clinical-stage biopharmaceutical company focused on the development of novel small molecule therapeutic candidates targeting hypoxia-inducible factor-2α (HIF-2α) for the treatment of patients with cancer and other non-oncology diseases. Peloton’s lead candidate, MK-6482 (formerly PT2977), is a novel oral HIF-2α inhibitor in late-stage development for renal cell carcinoma. Merck made an upfront payment of $1.05 billion in cash; additionally, former Peloton shareholders will be eligible to receive up to an additional $1.15 billion contingent upon successful achievement of future regulatory and sales-based milestones.

Restructuring Program

Merck recently approved a new global restructuring program (2019 Restructuring Program) as part of a worldwide initiative focused primarily on further optimizing the Company’s manufacturing and supply network, as well as reducing its global real estate footprint. This program is a continuation of the Company’s plant rationalization and builds on prior restructuring programs. The Company will continue to evaluate its global footprint and overall operating model, which could result in the identification of additional actions over time. The actions contemplated under the 2019 Restructuring Program are expected to be substantially completed by the end of 2023, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $800 million to $1.2 billion. The Company expects to record charges of approximately $500 million in 2019 related to the program. The Company anticipates the actions under the 2019 Restructuring Program to result in annual net cost savings of approximately $500 million by the end of 2023.

Pricing

Global efforts toward health care cost containment continue to exert pressure on product pricing and market access worldwide. In the United States, pricing pressure continues on many of the Company’s products. Changes to the U.S. health care system as part of health care reform, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, have contributed to pricing pressure. In several international markets, government-mandated pricing actions have reduced prices of generic and patented drugs. In addition, the Company’s revenue performance in the first six months of 2019 was negatively affected by other cost-reduction measures taken by governments and other third-parties to lower health care costs. The Company anticipates all of these actions will continue to negatively affect revenue performance for the remainder of 2019.

Operating Results

Sales

Worldwide sales were $11.8 billion for the second quarter of 2019, an increase of 12% compared with the second quarter of 2018 including a 3% unfavorable effect from foreign exchange. Global sales were $22.6 billion for the first six months of 2019, an increase of 10% compared with the same period of 2018 including a 3% unfavorable effect from foreign exchange. Sales growth in both periods was driven primarily by higher sales in the oncology franchise reflecting strong growth of Keytruda (pembrolizumab), as well as increased alliance revenue from Lynparza (olaparib) and Lenvima (lenvatinib). Higher sales of vaccines, including human papillomavirus (HPV) vaccine Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant)/Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant), and pediatric vaccines ProQuad (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), M‑M‑R II (Measles, Mumps and Rubella Virus Vaccine Live) and Varivax (Varicella Virus Vaccine Live) also drove sales growth in the second quarter and first six months of 2019.

Sales growth in both periods was partially offset by the ongoing effects of generic competition for cardiovascular products Zetia (ezetimibe) and Vytorin (ezetimibe and simvastatin), hospital acute care product Invanz (ertapenem sodium), and biosimilar competition for immunology product Remicade (infliximab). Lower sales of products within the diversified brands franchise, diabetes products Januvia (sitagliptin) and Janumet (sitagliptin/metformin HCl) and HIV products Isentress/Isentress HD (raltegravir) also partially offset revenue growth in the quarter and year-to-date period. The diversified brands franchise

- 31 -

includes certain products that are approaching the expiration of their marketing exclusivity or that are no longer protected by patents in developed markets.

International sales represented 56% and 57% of total sales in the second quarter and first six months of 2019, respectively. Performance in international markets was led by China, which had total sales of $763 million and $1.5 billion in the second quarter and first six months of 2019, respectively, representing growth rates of 37% and 44%, respectively, compared with the same prior year periods. Foreign exchange unfavorably affected sales performance in China by 9% and 10% in the second quarter and first six months of 2019, respectively.

Pharmaceutical Segment

Oncology

Keytruda is an anti-PD-1 therapy that has been approved for the treatment of multiple malignancies including non-small-cell lung cancer (NSCLC), melanoma, classical Hodgkin lymphoma (cHL), head and neck squamous cell carcinoma (HNSCC), urothelial carcinoma, cervical cancer, primary mediastinal large B-cell lymphoma (PMBCL), hepatocellular carcinoma, Merkel cell carcinoma, gastric or gastroesophageal junction adenocarcinoma and microsatellite instability-high (MSI-H) or mismatch repair deficient cancer. Keytruda was also recently approved in the United States for the treatment of certain patients with esophageal cancer, renal cell carcinoma and small-cell lung cancer (SCLC) (see below). The Keytruda clinical development program includes studies across a broad range of cancer types (see “Research and Development” below).

In July 2019, the U.S. Food and Drug Administration (FDA) approved Keytruda as monotherapy for the treatment of patients with recurrent locally advanced or metastatic squamous cell carcinoma of the esophagus whose tumors express PD-L1 (Combined Positive Score [CPS] ≥10) as determined by an FDA-approved test, with disease progression after one or more prior lines of systemic therapy.

In June 2019, the FDA approved Keytruda as monotherapy or in combination with chemotherapy for the first-line treatment of patients with metastatic or unresectable, recurrent HNSCC based on results from the pivotal Phase 3 KEYNOTE-048 trial. Keytruda was initially approved for the treatment of certain patients with recurrent or metastatic HNSCC under the FDA’s accelerated approval process based on data from the Phase 1b KEYNOTE-012 trial. In accordance with the accelerated approval process, continued approval was contingent upon verification and description of clinical benefit, which has now been demonstrated in KEYNOTE-048 and has resulted in the FDA converting the accelerated approval to a full (regular) approval.

Also in June 2019, the FDA approved Keytruda as monotherapy for the treatment of patients with metastatic SCLC with disease progression on or after platinum-based chemotherapy and at least one other prior line of therapy based on pooled data from the KEYNOTE-158 (cohort G) and KEYNOTE-028 (cohort C1) clinical trials.

In April 2019, the FDA approved Keytruda in combination with Inlyta (axitinib), a tyrosine kinase inhibitor, for the first-line treatment of patients with advanced renal cell carcinoma, the most common type of kidney cancer, based on findings from the pivotal Phase 3 KEYNOTE-426 trial.

Also in April 2019, the FDA approved an expanded label for Keytruda as monotherapy for the first-line treatment of patients with stage III NSCLC who are not candidates for surgical resection or definitive chemoradiation, or metastatic NSCLC, and whose tumors express PD-L1 (tumor proportion score [TPS] ≥1%) as determined by an FDA-approved test, with no EGFR or ALK genomic tumor aberrations. The approval is based on results from the Phase 3 KEYNOTE-042 trial.

Additionally, in April 2019, Merck announced that Keytruda was approved by China’s National Medical Products Administration in combination with pemetrexed and platinum chemotherapy for the first-line treatment of patients with metastatic nonsquamous NSCLC, with no EGFR or ALK genomic tumor aberrations, based on data from the pivotal Phase 3 KEYNOTE-189 trial.

In March 2019, the European Commission (EC) approved Keytruda in combination with carboplatin and either paclitaxel or nab-paclitaxel for the first-line treatment of adults with metastatic squamous NSCLC based on data from the Phase 3 KEYNOTE-407 trial. Keytruda was approved for this indication in the United States in October 2018.

In April 2019, the EC approved a new extended dosing schedule of 400 mg every six weeks (Q6W) delivered as an intravenous infusion over 30 minutes for all approved monotherapy indications in the European Union (EU). The Q6W dose is available in addition to the formerly approved dose of Keytruda 200 mg every three weeks (Q3W) infused over 30 minutes.

Global sales of Keytruda were $2.6 billion in the second quarter of 2019 and $4.9 billion in the first six months of 2019, representing growth of 58% and 57%, respectively, compared with the same periods of 2018. Foreign exchange unfavorably affected global sales performance by 5% in both the second quarter and first six months of 2019. Sales growth in both periods was driven by volume growth as the Company continues to launch Keytruda with multiple new indications globally. Sales in the United States continue to build across the multiple approved indications, in particular for the treatment of NSCLC both as monotherapy, and combination with chemotherapy for either nonsquamous or squamous NSCLC. Other indications contributing to U.S. sales growth include HNSCC, bladder cancer, melanoma, and MSI-H cancer, along with uptake in the recently launched

- 32 -

renal cell carcinoma and adjuvant melanoma indications. Keytruda sales growth in international markets was driven primarily by use in the treatment of NSCLC as monotherapy, as well as in combination with chemotherapy as that indication continues launching in multiple markets, including in Europe. The launch of multiple new indications in Japan and China also drove growth in the second quarter and first six months of 2019.

Global sales of Emend (aprepitant), for the prevention of chemotherapy-induced and post-operative nausea and vomiting, were $121 million in the second quarter of 2019 and $237 million for the first six months of 2019, declines of 18% and 13%, respectively, compared with the same periods of 2018. Foreign exchange unfavorably affected global sales performance by 3% in both the second quarter and first six months of 2019. The sales declines primarily reflect lower demand in the United States due to competition. The patent that provided U.S. market exclusivity for Emend expired in 2015 and the patent that provided market exclusivity in most major European markets expired in May 2019. The patent that provides U.S. market exclusivity for Emend for Injection expires in September 2019 and the patent that provides market exclusivity in major European markets expires in February 2020 (although six-month pediatric exclusivity may extend this date). The Company anticipates that sales of Emend in these markets will decline significantly after these patent expiries.

Lynparza, an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see Note 3 to the condensed consolidated financial statements), is currently approved for certain types of ovarian and breast cancer. Merck recorded alliance revenue related to Lynparza of $111 million in the second quarter of 2019 compared with $44 million in the second quarter of 2018 and $190 million for the first six months of 2019 compared with $76 million for the first six months of 2018. The increase in alliance revenue reflects, in part, uptake in the treatment of ovarian cancer following U.S. approval in December 2018 based on the Phase 3 SOLO-1 trial. In April 2019, the EC approved Lynparza as a monotherapy for the treatment of certain adult patients with germline BRCA1/2-mutations, and who have human epidermal growth factor receptor 2 (HER2)-negative locally advanced or metastatic breast cancer, triggering a $30 million milestone payment from Merck to AstraZeneca. The approval was based on the results of the Phase 3 OlympiAD trial. In June 2019, the EC approved Lynparza as monotherapy for the maintenance treatment of certain adult patients with BRCA-mutated advanced ovarian, fallopian tube or primary peritoneal cancer based on data from the SOLO-1 trial, triggering a $30 million milestone payment from Merck to AstraZeneca.

Lenvima, an oral receptor tyrosine kinase inhibitor being developed as part of a collaboration with Eisai entered into in March 2018 (see Note 3 to the condensed consolidated financial statements), is approved for certain types of thyroid cancer, hepatocellular carcinoma, and in combination for certain patients with renal cell carcinoma. Merck recorded alliance revenue of $97 million and $35 million in the second quarter of 2019 and 2018, respectively, related to Lenvima. Alliance revenue for Lenvima was $171 million for the first six months of 2019. Lenvima sales in 2019 reflect strong performance in hepatocellular carcinoma following recent worldwide launches.

Vaccines

Worldwide sales of Gardasil/Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of HPV, were $886 million in the second quarter of 2019, an increase of 46% compared with the second quarter of 2018 including a 4% unfavorable effect from foreign exchange. Growth was driven primarily by public sector buying patterns, higher demand and pricing in the United States and the ongoing launch in China. Higher demand in Europe reflecting increased vaccination rates for both boys and girls also contributed to sales growth in the quarter. Global sales of Gardasil/Gardasil 9 were $1.7 billion for the first six months of 2019, an increase of 36% compared with the same period of 2018 including a 4% unfavorable effect from foreign exchange. Sales growth in the first six months of 2019 primarily reflects higher volumes in China, the United States and Europe.

Global sales of ProQuad, a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella, were $204 million in the second quarter of 2019, an increase of 40% compared with $146 million in the second quarter of 2018. Worldwide sales of ProQuad were $356 million in the first six months of 2019, an increase of 33% compared with $269 million in the first six months of 2018. Foreign exchange unfavorably affected global sales performance by 2% and 1% in the second quarter and first six months of 2019, respectively. Sales growth in both periods was driven primarily by higher volumes and pricing in the United States and volume growth in certain European markets.

Worldwide sales of M‑M‑R II, a vaccine to help protect against measles, mumps and rubella, were $199 million for the second quarter of 2019 compared with $95 million for the second quarter of 2018 and were $322 million in the first six months of 2019 compared with $188 million in the first six months of 2018. Growth in both periods was driven primarily by higher sales in the United Sates reflecting increased demand due to measles outbreaks, including private-sector buy-in, as well as higher pricing. Government tenders in Latin America also contributed to sales growth in the year-to-date period.

Global sales of Varivax, a vaccine to help prevent chickenpox (varicella), were $271 million for the second quarter of 2019, an increase of 46% compared with $186 million for the second quarter of 2018. Worldwide sales of Varivax were $492 million in the first six months of 2019, an increase of 36% compared with $361 million in the first six months of 2018. Foreign exchange unfavorably affected global sales performance by 4% and 5% in the second quarter and first six months of 2019,

- 33 -

respectively. Sales growth in both periods was driven primarily by government tenders in Brazil, as well as volume growth and pricing in the United States.

Worldwide sales of RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children, were $172 million in the second quarter of 2019 and were $383 million for the first six months of 2019, increases of 10% compared with the same periods of 2018. Foreign exchange unfavorably affected global sales performance by 3% and 2% in the second quarter and first six months of 2019, respectively. Sales growth in both periods was driven primarily by continued uptake from the launch in China.

Hospital Acute Care

Worldwide sales of Bridion (sugammadex) Injection, for the reversal of two types of neuromuscular blocking agents used during surgery, were $278 million in the second quarter of 2019 and $533 million for the first six months of 2019, increases of 16% and 20%, respectively, compared with the same periods of 2018. Foreign exchange unfavorably affected global sales performance by 4% and 5% in the second quarter and first six months of 2019, respectively. Sales growth in both periods was driven primarily by volume growth in the United States.

Worldwide sales of Noxafil (posaconazole), for the prevention of invasive fungal infections, were $193 million in the second quarter of 2019 and $383 million for the first six months of 2019, increases of 3% and 5%, respectively, compared with the same periods of 2018. Foreign exchange unfavorably affected global sales performance by 4% and 5% in the second quarter and first six months of 2019, respectively. The patent that provided U.S. market exclusivity for Noxafil expired in July 2019; accordingly, the Company anticipates declines in U.S. sales of Noxafil in future periods. Additionally, the patent for Noxafil will expire in a number of major European markets in December 2019. The Company anticipates sales of Noxafil in these markets will decline significantly thereafter.

Global sales of Invanz, for the treatment of certain infections, were $78 million in the second quarter of 2019 and $150 million for the first six months of 2019, declines of 48% and 50%, respectively, compared with the same periods of 2018. Foreign exchange unfavorably affected global sales performance by 4% in both the second quarter and first six months of 2019. The sales decline in both periods was driven by generic competition in the United States. The patent that provided U.S. market exclusivity for Invanz expired in November 2017. Accordingly, the Company is experiencing a significant decline in U.S. Invanz sales and expects the decline to continue.

In June 2019, the FDA approved a supplemental New Drug Application for the use of Zerbaxa (ceftolozane and tazobactam) for the treatment of patients 18 years and older with hospital-acquired bacterial pneumonia and ventilator-associated bacterial pneumonia (HABP/VABP) caused by certain susceptible Gram-negative microorganisms based on the results of the pivotal Phase 3 ASPECT-NP trial. In July 2019, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a positive opinion recommending Zerbaxa for the treatment of hospital-acquired pneumonia, including ventilator-associated pneumonia in adults based on the results of the ASPECT-NP trial. Zerbaxa was previously approved in the United States and EU for the treatment of certain adult patients with complicated urinary tract infections, including pyelonephritis, and complicated intra-abdominal infections.

In July 2019, the FDA approved Recarbrio (imipenem, cilastatin, and relebactam) for injection, a new combination antibacterial for the treatment of complicated urinary tract infections, including pyelonephritis, caused by certain Gram-negative microorganisms in patients 18 years of age and older who have limited or no alternative treatment options. Merck anticipates making Recarbrio available later in 2019.

Immunology

Sales of Simponi (golimumab), a once-monthly subcutaneous treatment for certain inflammatory diseases (marketed by the Company in Europe, Russia and Turkey), were $214 million in the second quarter of 2019 and $422 million for the first six months of 2019, declines of 8% and 9%, respectively, compared with the same periods of 2018. Foreign exchange unfavorably affected sales performance by 7% in both the second quarter and first six months of 2019. The Company anticipates sales of Simponi will be unfavorably affected in future periods by the recent launch of biosimilars for a competing product.

Sales of Remicade, a treatment for inflammatory diseases (marketed by the Company in Europe, Russia and Turkey), were $98 million in the second quarter of 2019 and $221 million for the first six months of 2019, declines of 37% and 32%, respectively, compared with the same periods of 2018. Foreign exchange unfavorably affected sales performance by 5% and 6% in the second quarter and first six months of 2019, respectively. The Company lost market exclusivity for Remicade in major European markets in 2015 and no longer has market exclusivity in any of its marketing territories. The Company is experiencing pricing and volume declines in these markets as a result of biosimilar competition and expects the declines to continue.

Virology

Global combined sales of Isentress/Isentress HD, an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, were $247 million in the second quarter of 2019 and $502 million for

- 34 -

the first six months of 2019, declines of 19% and 14%, respectively, compared with the same periods of 2018. Foreign exchange unfavorably affected global sales performance by 6% in both the second quarter and first six months of 2019. The sales declines were driven primarily by lower demand in the United States due to competitive pressure.

Cardiovascular

Combined global sales of Zetia (marketed in most countries outside the United States as Ezetrol), Vytorin (marketed outside the United States as Inegy), as well as Atozet (ezetimibe and atorvastatin) and Rosuzet (ezetimibe and rosuvastatin) (both marketed in certain countries outside of the United States), medicines for lowering LDL cholesterol, were $376 million in the second quarter of 2019 and $721 million for the first six months of 2019, declines of 25% and 32%, respectively, compared with the same periods of 2018. Foreign exchange unfavorably affected global sales performance by 4% in both the second quarter and first six months of 2019. The sales declines were driven primarily by lower sales in Europe. The EU patents for Ezetrol and Inegy expired in April 2018 and April 2019, respectively. Accordingly, the Company is experiencing sales declines in these markets as a result of generic competition and expects the declines to continue. Merck lost market exclusivity in the United States for Zetia in 2016 and Vytorin in 2017 and has lost nearly all U.S. sales of these products as a result of generic competition. The sales declines were also attributable to loss of exclusivity in Australia. These declines were partially offset by the launch of Rosuzet in Japan.

Adempas (riociguat), a cardiovascular drug for the treatment of pulmonary arterial hypertension, is part of a worldwide clinical development collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators including Adempas (see Note 3 to the condensed consolidated financial statements). Revenue from Adempas includes sales in Merck’s marketing territories, as well as Merck’s share of profits from the sale of Adempas in Bayer’s marketing territories. Merck recorded revenue related to Adempas of $104 million in the second quarter of 2019 and $194 million for the first six months of 2019, increases of 39% and 36%, respectively, compared with the same periods of 2018. Foreign exchange unfavorably affected global sales performance by 4% in both the second quarter and first six months of 2019. Sales growth in both periods was driven by higher profit sharing from Bayer.

Diabetes

Worldwide combined sales of Januvia and Janumet, medicines that help lower blood sugar levels in adults with type 2 diabetes, were $1.4 billion in the second quarter of 2019 and $2.8 billion for the first six months of 2019, declines of 6% compared with the same periods of 2018. Foreign exchange unfavorably affected global sales performance by 3% and 4% in the second quarter and first six months of 2019, respectively. The sales decline in both periods reflects continued pricing pressure in the United States, partially offset by higher demand globally. The Company expects U.S. pricing pressure to continue.

Women’s Health 

Worldwide sales of NuvaRing (etonogestrel/ethinyl estradiol vaginal ring), a vaginal contraceptive product, were $240 million in the second quarter of 2019 and $459 million for the first six months of 2019, increases of 2% compared with the same periods of 2018 including a 1% unfavorable effect from foreign exchange in both periods. The patent that provided U.S. market exclusivity for NuvaRing expired in April 2018 and the Company anticipates a significant decline in U.S. NuvaRing sales in future periods as a result of generic competition.

Animal Health Segment

Global sales of Animal Health products totaled $1.1 billion for the second quarter of 2019, growth of 3% compared with the second quarter of 2018 including a 6% unfavorable effect from foreign exchange. Growth in the second quarter was primarily driven by higher sales of livestock products, predominantly due to products obtained in the Antelliq acquisition. Companion animal sales performance in the second quarter reflects volume growth in vaccine and insulin products, partially offset by the timing of customer purchases in the prior year for the Bravecto (fluralaner) line of products for parasitic control. Worldwide sales of Animal Health products totaled $2.1 billion for the first six months of 2019, essentially flat compared with the first six months of 2018 including a 6% unfavorable effect from foreign exchange. Sales performance in the year-to-date period was driven by livestock products, due to the Antelliq acquisition and higher demand for poultry products, as well as higher demand for companion animal products, primarily the Bravecto line of products.

In April 2019, Merck acquired Antelliq, a leader in digital animal identification, traceability and monitoring solutions (see Note 2 to the condensed consolidated financial statements).

Costs, Expenses and Other

Cost of Sales

Cost of sales were $3.4 billion for the second quarter of 2019, essentially flat compared with the second quarter of 2018, and were $6.5 billion for the first six months of 2019, a decline of 2% compared with the same period of 2018. Costs in the second quarter of 2019 and 2018 include $371 million and $732 million, respectively, and for the first six months of 2019 and 2018 include $768 million and $1.5 billion, respectively, of expenses for the amortization of intangible assets recorded in connection

- 35 -

with business acquisitions. Cost of sales also include expenses for the amortization of amounts capitalized in connection with collaborations of $124 million and $157 million in the second quarter of 2019 and 2018, respectively, and $222 million and $195 million for the first six months of 2019 and 2018, respectively. These amounts include catch-up amortization from the accrual of sales-based milestones that were deemed by the Company to be probable in each period (see Note 3 to the condensed consolidated financial statements). In addition, cost of sales in the second quarter and first six months of 2019 include $69 million and $81 million, respectively, of intangible asset impairment charges related to marketed products and other intangibles recorded in connection with business acquisitions. The Company may recognize additional non-cash impairment charges in the future related to intangible assets that were measured at fair value and capitalized in connection with business acquisitions and such charges could be material. Also included in cost of sales are expenses associated with restructuring activities which amounted to $65 million and $3 million in the second quarter of 2019 and 2018, respectively, and $99 million and $9 million for the first six months of 2019 and 2018, respectively, including accelerated depreciation and asset write-offs related to the planned sale or closure of manufacturing facilities. Separation costs associated with manufacturing-related headcount reductions have been incurred and are reflected in Restructuring costs as discussed below.

Gross margin was 71.1% in the second quarter of 2019 compared with 67.3% in the second quarter of 2018 and was 71.4% in the first six months of 2019 compared with 67.8% for the first six months of 2018. The gross margin improvement in both periods largely reflects a lower aggregate impact from the amortization of intangible assets related to business acquisitions and restructuring costs as noted above, which unfavorably affected gross margin by 4.3 percentage points in the second quarter of 2019 compared with 7.1 percentage points in the second quarter of 2018 and by 4.3 percentage points in the first six months of 2019 compared with 7.2 percentage points in the first six months of 2018. The gross margin improvement in both periods also reflects the favorable effects of product mix and lower amortization of capitalized milestone payments related to collaborations as noted above.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses were $2.7 billion in the second quarter of 2019, an increase of 8% compared with the second quarter of 2018, reflecting higher administrative costs, acquisition and divestiture-related costs (primarily related to the acquisition of Antelliq), restructuring costs, and promotional costs, partially offset by the favorable effect of foreign exchange. SG&A expenses were $5.1 billion for the first six months of 2019, an increase of 2% compared with the same period of 2018, driven by higher administrative costs, restructuring costs, and acquisition and divestiture-related costs, partially offset by the favorable effect of foreign exchange and lower selling and promotional costs. SG&A expenses in the second quarter and first six months of 2019 include restructuring costs of $32 million related primarily to accelerated depreciation for facilities to be closed or divested.

Research and Development

Research and development (R&D) expenses declined 4% in the second quarter of 2019 to $2.2 billion driven primarily by lower expenses for business development transactions, reflecting a $344 million charge in the second quarter of 2018 related to the acquisition of Viralytics Limited (Viralytics). The decline was partially offset by higher expenses related to clinical development and increased investment in discovery research and early drug development. R&D expenses were $4.1 billion in the first six months of 2019, a decline of 25% compared with the same period of 2018. The decline was driven primarily by a $1.4 billion charge recorded in 2018 related to the formation of an oncology collaboration with Eisai (see Note 3 to the condensed consolidated financial statements) and lower expenses related to business development transactions. The year-to-date decline also reflects the favorable effect of foreign exchange and a reduction in expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration. Partially offsetting the decline were higher expenses related to clinical development and increased investment in discovery research and early drug development.

R&D expenses are comprised of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $1.5 billion and $1.4 billion in the second quarter of 2019 and 2018, respectively, and were $2.9 billion and $2.7 billion in the first six months of 2019 and 2018, respectively. Also included in R&D expenses are Animal Health research costs, licensing costs and costs incurred by other divisions in support of R&D activities, including depreciation, production and general and administrative, which in the aggregate were approximately $715 million and $525 million for the second quarter of 2019 and 2018, respectively, and were $1.3 billion and $1.0 billion in the first six months of 2019 and 2018, respectively. In addition, R&D expenses include expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration recorded in connection with business acquisitions. During the first six months of 2019, the Company recorded a net reduction in expenses of $38 million to decrease the estimated fair value of liabilities for contingent consideration related to the discontinuation or delay of certain programs.

Restructuring Costs

Merck recently approved a new global restructuring program (2019 Restructuring Program) as part of a worldwide initiative focused primarily on further optimizing the Company’s manufacturing and supply network, as well as reducing its global real estate footprint. This program is a continuation of the Company’s plant rationalization and builds on prior restructuring

- 36 -

programs. The Company will continue to evaluate its global footprint and overall operating model, which could result in the identification of additional actions over time. The actions contemplated under the 2019 Restructuring Program are expected to be substantially completed by the end of 2023, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $800 million to $1.2 billion. The Company expects to record charges of approximately $500 million in 2019 related to the program. The Company anticipates the actions under the 2019 Restructuring Program to result in annual net cost savings of approximately $500 million by the end of 2023. Actions under previous global restructuring programs have been substantially completed.

Restructuring costs, primarily representing separation and other related costs associated with these restructuring activities, were $59 million and $228 million for the second quarter of 2019 and 2018, respectively, and $212 million and $323 million for the first six months of 2019 and 2018, respectively. Separation costs incurred were associated with actual headcount reductions, as well as estimated expenses under existing severance programs for headcount reductions that were probable and could be reasonably estimated. Also included in restructuring costs are asset abandonment, shut-down and other related costs, as well as employee-related costs such as curtailment, settlement and termination charges associated with pension and other postretirement benefit plans and share-based compensation plan costs. For segment reporting, restructuring costs are unallocated expenses.

Additional costs associated with the Company’s restructuring activities are included in Cost of sales, Selling, general and administrative expenses and Research and development costs. The Company recorded aggregate pretax costs of $159 million and $235 million in the second quarter of 2019 and 2018, respectively, and $346 million and $339 million for the first six months of 2019 and 2018, respectively, related to restructuring program activities (see Note 4 to the condensed consolidated financial statements).

Other (Income) Expense, Net

Other (income) expense, net was $140 million of expense in the second quarter of 2019 compared with $48 million of income in the second quarter of 2018 and was $327 million of expense in the first six months of 2019 compared with $340 million of income for the first six months of 2018. For details on the components of Other (income) expense, net, see Note 12 to the condensed consolidated financial statements.

Segment Profits
	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Pharmaceutical segment profits	$	7,115		$	5,975		$	13,690		$	11,914
Animal Health segment profits	405			450			820			864
Other non-reportable segment profits	(2		)	26			—			88
Other	(4,259		)	(4,365		)	(8,184		)	(9,434		)
Income before taxes	$	3,259		$	2,086		$	6,326		$	3,432

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as selling, general and administrative expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, research and development expenses incurred in MRL, or general and administrative expenses, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. Also excluded from the determination of segment profits are acquisition and divestiture-related costs, including the amortization of purchase accounting adjustments, intangible asset impairment charges and changes in the estimated fair value measurement of liabilities for contingent consideration, and restructuring costs. Additionally, segment profits do not reflect other expenses from corporate and manufacturing cost centers and other miscellaneous income or expense. These unallocated items are reflected in “Other” in the above table. Also included in “Other” are miscellaneous corporate profits (losses), as well as operating profits (losses) related to third-party manufacturing sales.

Pharmaceutical segment profits grew 19% in the second quarter of 2019 and 15% in the first six months of 2019 compared with the same periods of 2018 driven primarily by higher sales and lower selling costs and, for the year-to-date period, also lower promotional costs. Animal Health segment profits declined 10% in the second quarter of 2019 compared with the second quarter of 2018 reflecting the unfavorable effect of foreign exchange and higher selling and administrative costs, partially offset by higher sales. Animal Health segment profits declined 5% in the first six months of 2019 compared with the corresponding period of 2018 largely reflecting the unfavorable effect of foreign exchange and higher selling costs.

- 37 -

Taxes on Income

The effective income tax rates of 18.9% and 17.8% for the second quarter of 2019 and 2018, respectively, and 13.0% and 28.4% for the first six months of 2019 and 2018, respectively, reflect the impacts of acquisition and divestiture-related costs and restructuring costs, partially offset by the beneficial impact of foreign earnings. In addition, the effective income tax rate for the first six months of 2019 reflects the favorable impact of a $360 million net tax benefit related to the settlement of certain federal income tax matters (discussed below). The effective income tax rate for the first six months of 2018 reflects the unfavorable impact of a $1.4 billion pretax charge recorded in connection with the formation of a collaboration with Eisai for which no tax benefit was recognized.

In the first quarter of 2019, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2012-2014 U.S. federal income tax returns. As a result, the Company was required to make a payment of $107 million. The Company’s reserves for unrecognized tax benefits for the years under examination exceeded the adjustments relating to this examination period and therefore the Company recorded a $360 million net tax benefit in the first six months of 2019. This net benefit reflects reductions in reserves for unrecognized tax benefits for tax positions relating to the years that were under examination, partially offset by additional reserves for tax positions not previously reserved for.

Net (Loss) Income Attributable to Noncontrolling Interests

Net (loss) income attributable to noncontrolling interests was $(26) million for the second quarter of 2019 compared with $9 million for the second quarter of 2018 and was $(79) million for the first six months of 2019 compared with $14 million for the first six months of 2018. The losses in 2019 primarily reflect the portion of goodwill impairment charges related to certain businesses in the Healthcare Services segment that are attributable to noncontrolling interests.

Net Income and Earnings per Common Share

Net income attributable to Merck & Co., Inc. was $2.7 billion for the second quarter of 2019 compared with $1.7 billion for the second quarter of 2018 and was $5.6 billion for the first six months of 2019 compared with $2.4 billion for the first six months of 2018. Earnings per common share assuming dilution attributable to Merck & Co., Inc. common shareholders (EPS) for the second quarter of 2019 were $1.03 compared with $0.63 in the second quarter of 2018 and were $2.15 for the first six months of 2019 compared with $0.90 for the first six months of 2018.

Non-GAAP Income and Non-GAAP EPS

Non-GAAP income and non-GAAP EPS are alternative views of the Company’s performance that Merck is providing because management believes this information enhances investors’ understanding of the Company’s results as it permits investors to understand how management assesses performance. Non-GAAP income and non-GAAP EPS exclude certain items because of the nature of these items and the impact that they have on the analysis of underlying business performance and trends. The excluded items (which should not be considered non-recurring) consist of acquisition and divestiture-related costs, restructuring costs and certain other items. These excluded items are significant components in understanding and assessing financial performance. Non-GAAP income and non-GAAP EPS are important internal measures for the Company. Senior management receives a monthly analysis of operating results that includes non-GAAP EPS. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the Company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. Since non-GAAP income and non-GAAP EPS are not measures determined in accordance with GAAP, they have no standardized meaning prescribed by GAAP and, therefore, may not be comparable to the calculation of similar measures of other companies. The information on non-GAAP income and non-GAAP EPS should be considered in addition to, but not as a substitute for or superior to, net income and EPS prepared in accordance with generally accepted accounting principles in the United States (GAAP).

- 38 -

A reconciliation between GAAP financial measures and non-GAAP financial measures is as follows:

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions except per share amounts)	2019			2018			2019			2018
Income before taxes as reported under GAAP	$	3,259		$	2,086		$	6,326		$	3,432
Increase (decrease) for excluded items:
Acquisition and divestiture-related costs	660			855			1,208			1,588
Restructuring costs	159			235			346			339
Other items:
Charge for the acquisition of Viralytics	—			344			—			344
Charge related to the formation of a collaboration with Eisai	—			—			—			1,400
Other	48			(32		)	48			(54		)
Non-GAAP income before taxes	4,126			3,488			7,928			7,049
Taxes on income as reported under GAAP	615			370			820			975
Estimated tax benefit on excluded items (1)	145			255			274			362
Net tax benefit from the settlement of certain federal income tax matters	—			—			360			—
Tax charge related to finalization of treasury regulations for the Tax Cuts and Job Act of 2017	—			—			(67		)	—
Non-GAAP taxes on income	760			625			1,387			1,337
Non-GAAP net income	3,366			2,863			6,541			5,712
Net (loss) income attributable to noncontrolling interests as reported under GAAP	(26		)	9			(79		)	14
Acquisition and divestiture-related costs attributable to noncontrolling interests	36			—			89			—
Non-GAAP net income attributable to noncontrolling interests	10			9			10			14
Non-GAAP net income attributable to Merck & Co., Inc.	$	3,356		$	2,854		$	6,531		$	5,698
EPS assuming dilution as reported under GAAP	$	1.03		$	0.63		$	2.15		$	0.90
EPS difference (2)	0.27			0.43			0.37			1.21
Non-GAAP EPS assuming dilution	$	1.30		$	1.06		$	2.52		$	2.11

⁽¹⁾  The estimated tax impact on the excluded items is determined by applying the statutory rate of the originating territory of the non-GAAP adjustments.

⁽²⁾  Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the applicable period.

Acquisition and Divestiture-Related Costs

Non-GAAP income and non-GAAP EPS exclude the impact of certain amounts recorded in connection with business acquisitions and divestitures. These amounts include the amortization of intangible assets and amortization of purchase accounting adjustments to inventories, as well as intangible asset impairment charges and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also excluded are integration, transaction, and certain other costs associated with business acquisitions and divestitures.

Restructuring Costs

Non-GAAP income and non-GAAP EPS exclude costs related to restructuring actions (see Note 4 to the condensed consolidated financial statements). These amounts include employee separation costs and accelerated depreciation associated with facilities to be closed or divested. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. Restructuring costs also include asset abandonment, shut-down and other related costs, as well as employee-related costs such as curtailment, settlement and termination charges associated with pension and other postretirement benefit plans and share-based compensation costs.

Certain Other Items

Non-GAAP income and non-GAAP EPS exclude certain other items. These items are adjusted for after evaluating them on an individual basis, considering their quantitative and qualitative aspects, and typically consist of items that are unusual in nature, significant to the results of a particular period or not indicative of future operating results. Excluded from non-GAAP income and non-GAAP EPS in 2019 is a net tax benefit related to the settlement of certain federal income tax matters (see Note 13 to the condensed consolidated financial statements) and a tax charge related to the finalization of U.S. treasury regulations related to the Tax Cuts and Jobs Act of 2017. Excluded from non-GAAP income and non-GAAP EPS in 2018 is a charge for the acquisition of Viralytics (see Note 2 to the condensed consolidated financial statements) and a charge related to the formation of a collaboration with Eisai (see Note 3 to the condensed consolidated financial statements).

- 39 -

Research and Development Update

Keytruda is an anti-PD-1 therapy approved for the treatment of many cancers. These approvals were the result of a broad clinical development program that currently consists of more than 1,000 clinical trials, including more than 600 trials that combine Keytruda with other cancer treatments. These studies encompass more than 30 cancer types including: bladder, cervical, colorectal, cutaneous squamous cell, gastric, HNSCC, hepatocellular, Hodgkin lymphoma, non-Hodgkin lymphoma, melanoma, mesothelioma, nasopharyngeal, NSCLC, ovarian, PMBCL, prostate, renal, small-cell lung and triple-negative breast, many of which are currently in Phase 3 clinical development. Further trials are being planned for other cancers.

In July 2019, the CHMP of the EMA adopted a positive opinion recommending approval of Keytruda, in combination with Inlyta (axitinib), a tyrosine kinase inhibitor, for the first-line treatment of patients with advanced renal cell carcinoma based on findings from the pivotal Phase 3 KEYNOTE-426 trial, which demonstrated significant improvements in overall survival (OS), progression-free survival (PFS) and objective response rate (ORR) for Keytruda in combination with axitinib compared to sunitinib. The CHMP’s recommendation will now be reviewed by the EC for marketing authorization in the EU, and a final decision is expected in the third quarter of 2019. Keytruda was approved for this indication by the FDA in April 2019.

Keytruda is also under review in the EU as monotherapy for the first-line treatment of patients with stage III NSCLC who are not candidates for surgical resection or definitive chemoradiation, or metastatic NSCLC, and whose tumors express PD-L1 (TPS ≥1%) with no EGFR or ALK genomic tumor aberrations. Keytruda was approved for this indication by the FDA in April 2019 based on results from the Phase 3 KEYNOTE-042 trial, in which Keytruda monotherapy demonstrated a statistically significant improvement in OS compared with chemotherapy alone in patients whose tumors expressed PD-L1 with a TPS ≥50%, with a TPS ≥20%, and then in the entire study population (TPS ≥1%).

In addition, Keytruda is under review in the EU as monotherapy or in combination with chemotherapy for the first-line treatment of patients with recurrent or metastatic HNSCC. This application is based in part on data from the pivotal Phase 3 KEYNOTE-048 trial where Keytruda demonstrated a significant improvement in OS compared with the standard of care, as monotherapy in patients whose tumors expressed PD-L1 with CPS≥20 and CPS≥1 and in combination with chemotherapy. Keytruda was approved for these indications by the FDA in June 2019.

Additionally, Keytruda is under review in the EU as monotherapy for the second-line treatment of advanced or metastatic esophageal or esophagogastric junction carcinoma, based on the results of the Phase 3 KEYNOTE-181 trial. In July 2019, the FDA approved Keytruda as monotherapy for the treatment of patients with recurrent locally advanced or metastatic squamous cell carcinoma of the esophagus with disease progression after one or more prior lines of systemic therapy and whose tumor express PD-L1 (CPS≥10).

In July 2019, the FDA accepted for review six supplemental Biologics License Applications (sBLAs) to update the dosing frequency for Keytruda to include an every-six-weeks (Q6W) dosing schedule option for certain monotherapy indications. Merck is seeking FDA approval of a 400 mg Q6W dose infused over 30 minutes for Keytruda monotherapy indications in melanoma, cHL, PMBCL, gastric cancer, hepatocellular carcinoma, and Merkel cell carcinoma. If approved by the FDA, the Q6W dose would be available for use in adults in addition to the currently approved dose of Keytruda 200 mg every three weeks (Q3W) infused over 30 minutes. The FDA set a PDUFA date of February 18, 2020. In the EU, 400 mg Q6W dosing for all approved Keytruda monotherapy indications was approved by the EC in March 2019.

In June 2019, Merck announced full results from the pivotal Phase 3 KEYNOTE-062 trial evaluating Keytruda as monotherapy and in combination with chemotherapy for the first-line treatment of advanced gastric or gastroesophageal junction adenocarcinoma. In the monotherapy arm of the study, Keytruda met a primary endpoint by demonstrating noninferiority to chemotherapy, the current standard of care, for OS in patients whose tumors expressed PD-L1 (CPS ≥1). In the combination arm of KEYNOTE-062, Keytruda plus chemotherapy was not found to be statistically superior for OS (CPS ≥1 or CPS ≥10) or PFS (CPS ≥1) compared with chemotherapy alone. Results were presented at the 2019 American Society of Clinical Oncology (ASCO) Annual Meeting and will be discussed with regulatory authorities. In September 2017, the FDA approved Keytruda as a third-line treatment for previously treated patients with recurrent locally advanced or metastatic gastric or gastroesophageal junction cancer whose tumors express PD-L1 (CPS ≥1) as determined by an FDA-approved test. KEYNOTE-062 was a potential confirmatory trial for this accelerated, third-line approval. In addition to KEYNOTE-062, additional first-line, Phase 3 studies in Merck’s gastric clinical program include KEYNOTE-811 and KEYNOTE-859, as well as KEYNOTE-585 in the neoadjuvant and adjuvant treatment setting.

In addition, Keytruda has received Breakthrough Therapy designation from the FDA for the treatment of high-risk, early-stage triple-negative breast cancer in combination with neoadjuvant chemotherapy. The FDA’s Breakthrough Therapy designation is intended to expedite the development and review of a candidate that is planned for use, alone or in combination, to treat a serious or life-threatening disease or condition when preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Additionally, the FDA recently granted Breakthrough Therapy designation for Keytruda in combination with Lenvima for the potential first-line treatment of

- 40 -

patients with advanced unresectable hepatocellular carcinoma not amenable to locoregional treatment. Lenvima is being developed as part of a collaboration with Eisai (see Note 3 to the condensed consolidated financial statements).

In July 2019, Merck announced that the Phase 3 KEYNOTE-522 trial investigating Keytruda in combination with chemotherapy met one of the dual-primary endpoints of pathologic complete response (pCR) following the neoadjuvant part of the neoadjuvant/adjuvant study regimen in patients with triple-negative breast cancer. Based on an interim analysis conducted by the independent Data Monitoring Committee (DMC), Keytruda, in combination with chemotherapy, demonstrated a statistically significant improvement in pCR rates compared with chemotherapy alone, regardless of PD-L1 status. A pCR is defined as a lack of cancer cells in tissue samples analyzed following completion of neoadjuvant therapy and definitive surgery. Based on the recommendation of the DMC, the trial will continue without changes to evaluate the other dual-primary endpoint of event-free survival, per the trial design.

In May 2019, Merck announced that the Phase 3 KEYNOTE-119 trial evaluating Keytruda as monotherapy for the second- or third-line treatment of patients with metastatic triple-negative breast cancer did not meet its pre-specified primary endpoint of superior OS compared to chemotherapy. Other endpoints were not formally tested per the study protocol because the primary endpoint of OS was not met. Results will be presented at an upcoming medical meeting. The Keytruda breast cancer clinical development program encompasses several internal and external collaborative studies, including three ongoing registration-enabling studies in triple-negative breast cancer: KEYNOTE-355, KEYNOTE-242, and KEYNOTE-522 (discussed above).

Lynparza is an oral PARP inhibitor currently approved for certain types of ovarian and breast cancer being co-developed for multiple cancer types as part of a collaboration with AstraZeneca (see Note 3 to the condensed consolidated financial statements).

In June 2019, Merck and AstraZeneca announced detailed results from the Phase 3 POLO trial evaluating Lynparza tablets as a first-line maintenance monotherapy for patients with germline BRCA-mutated metastatic pancreatic cancer whose disease had not progressed following platinum-based chemotherapy. Results from the trial showed a statistically-significant and clinically-meaningful improvement in PFS for Lynparza compared to placebo, reducing the risk of disease progression or death by 47%. The results of the trial were presented at the 2019 ASCO Annual Meeting and published online simultaneously in the New England Journal of Medicine.

Also in June 2019, Merck and AstraZeneca presented full results from the Phase 3 SOLO-3 trial which evaluated Lynparza, compared to chemotherapy, for the treatment of platinum-sensitive relapsed patients with germline BRCA1/2-mutated (gBRCAm) advanced ovarian cancer, who have received two or more prior lines of chemotherapy. The results from the trial showed a statistically-significant and clinically-meaningful improvement in ORR in the Lynparza arm compared to the chemotherapy arm. The key secondary endpoint of PFS was also significantly increased in the Lynparza arm compared to the chemotherapy arm. The results were presented at the 2019 ASCO Annual Meeting.

In July 2019, the CHMP of the EMA adopted a positive opinion recommending Zerbaxa for an additional indication for the treatment of hospital-acquired pneumonia (HAP), including ventilator-associated pneumonia (VAP), in adults based on results of the pivotal Phase 3 ASPECT-NP trial that evaluated the efficacy and safety of Zerbaxa for the treatment of adult patients with HAP, including VAP. The CHMP positive opinion will now be considered by the EC. Zerbaxa is currently approved in the EU for use as indicated in adult patients with complicated urinary tract infections, acute pyelonephritis, and complicated intra-abdominal infections.

The chart below reflects the Company’s research pipeline as of July 31, 2019. Candidates shown in Phase 3 include specific products and the date such candidate entered into Phase 3 development. Candidates shown in Phase 2 include the most advanced compound with a specific mechanism or, if listed compounds have the same mechanism, they are each currently intended for commercialization in a given therapeutic area. Small molecules and biologics are given MK-number designations and vaccine candidates are given V-number designations. Except as otherwise noted, candidates in Phase 1, additional indications in the same therapeutic area (other than with respect to cancer and certain other indications) and additional claims, line extensions or formulations for in-line products are not shown.

- 41 -

Phase 2	Phase 3 (Phase 3 entry date)	Under Review
Cancer MK-3475 Keytruda Advanced Solid Tumors MK-6482 Renal Cell MK-7123(1) Solid Tumors MK-7339 Lynparza(2) Advanced Solid Tumors MK-7690(1) Colorectal MK-7902 Lenvima(2) Biliary Tract V937 Cavatak Melanoma Cytomegalovirus V160 HIV-1 Infection MK-8591 (islatravir) Pediatric Neurofibromatosis Type 1 MK-5618 (selumetinib)(2)(3) Respiratory Syncytial Virus MK-1654 Schizophrenia MK-8189	Cancer MK-3475 Keytruda  Breast (October 2015) Cervical (October 2018) (EU) Colorectal (November 2015) Cutaneous Squamous Cell (April 2019) Gastric (May 2015) (EU) Hepatocellular (May 2016) (EU) Mesothelioma (May 2018) Nasopharyngeal (April 2016) Ovarian (December 2018) Prostate (May 2019) Small-Cell Lung (May 2017) (EU) MK-7339 Lynparza(2) Non-Small-Cell Lung (June 2019) Pancreatic (December 2014) Prostate (April 2017) MK-7902 Lenvima(1)(2) Bladder (May 2019) Endometrial (June 2018) Melanoma (March 2019) Non-Small-Cell Lung (March 2019) Cough MK-7264 (gefapixant) (March 2018) Heart Failure MK-1242 (vericiguat) (September 2016)(2) Pneumoconjugate Vaccine V114 (June 2018)	New Molecular Entities/Vaccines Bacterial Infection MK-7655A (relebactam+imipenem/cilastatin) (EU) Ebola Vaccine V920 (U.S.)(4)(EU) Certain Supplemental Filings Cancer MK-3475 Keytruda • First-Line Advanced Renal Cell Carcinoma (KEYNOTE-426) (EU) • First-Line Metastatic Non-Small-Cell Lung Cancer (KEYNOTE-042) (EU) • First-Line Head and Neck Cancer (KEYNOTE-048) (EU) • Recurrent Locally Advanced or Metastatic Esophageal Cancer (KEYNOTE-180/KEYNOTE-181) (EU) • Alternative Dosing Regimen (Q6W) (U.S.) HAP/VAP(5) MK-7625A Zerbaxa (EU)
		Footnotes: (1)  Being developed in combination with Keytruda. (2)  Being developed in a collaboration. (3)  This is a registrational study. (4)  Rolling submission. (5)  HAP - Hospital-Acquired Pneumonia / VAP - Ventilator-Associated Pneumonia

Liquidity and Capital Resources

($ in millions)	June 30, 2019			December 31, 2018
Cash and investments	$	10,884		$	15,097
Working capital	4,213			3,669
Total debt to total liabilities and equity	31.7		%	30.4		%

Cash provided by operating activities was $4.4 billion in the first six months of 2019 compared with $4.5 billion in the first six months of 2018. Cash provided by operating activities in the first six months of 2019 reflects the receipt of $424 million from AstraZeneca related to the conclusion of the Company’s relationship with AstraZeneca LP, as well as $1.4 billion of tax payments and a $325 million option payment to Eisai (see Note 3 to the condensed consolidated financial statements). Cash provided by operating activities in the first six months of 2018 reflects $750 million of upfront payments made by the Company related to the formation of a collaboration with Eisai (see Note 3 to the condensed consolidated financial statements). Cash provided by operating activities continues to be the Company’s primary source of funds to finance operating needs, capital expenditures, treasury stock purchases and dividends paid to shareholders.

Cash used in investing activities was $2.1 billion in the first six months of 2019 compared with cash provided by investing activities of $476 million in the first six months of 2018. The change was driven primarily by the acquisition of Antelliq, lower proceeds from the sales of securities and other investments and higher capital expenditures, partially offset by lower purchases of securities and other investments, as well as a $350 million milestone payment in 2018 related to a collaboration with Bayer (see Note 3 to the condensed consolidated financial statements).

Cash used in financing activities was $3.7 billion in the first six months of 2019 compared with $5.7 billion in the first six months of 2018. The lower use of cash in financing activities was driven primarily by proceeds from the issuance of debt (see below) and lower payments on debt, partially offset by the repayment of short-term borrowings, higher dividends paid to shareholders and higher purchases of treasury stock.

- 42 -

Capital expenditures totaled $1.4 billion and $1.0 billion for the first six months of 2019 and 2018, respectively.

Dividends paid to stockholders were $2.9 billion and $2.6 billion for the first six months of 2019 and 2018, respectively. In May 2019, the Board of Directors declared a quarterly dividend of $0.55 per share on the Company’s common stock for the third quarter that was paid in July 2019. In July 2019, the Board of Directors declared a quarterly dividend of $0.55 per share on the Company’s common stock for the fourth quarter that will be paid in October 2019.

In March 2019, the Company issued $5.0 billion principal amount of senior unsecured notes consisting of $750 million of 2.90% notes due 2024, $1.75 billion of 3.40% notes due 2029, $1.0 billion of 3.90% notes due 2039, and $1.5 billion of 4.00% notes due 2049. The Company used the net proceeds from the offering of $5.0 billion for general corporate purposes, including the repayment of outstanding commercial paper borrowings.

In October 2018, Merck’s Board of Directors authorized purchases of up to $10 billion of Merck’s common stock for its treasury. The treasury stock purchase authorization has no time limit and will be made over time in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions. During the first six months of 2019, the Company purchased $2.3 billion (30 million shares) for its treasury under this and a previously authorized share repurchase program. In addition, the Company received 7.7 million shares in settlement of accelerated share repurchase (ASR) agreements as discussed below. As of June 30, 2019, the Company’s remaining share repurchase authorization was $9.6 billion.

On October 25, 2018, the Company entered into ASR agreements with two third-party financial institutions (Dealers). Under the ASR agreements, Merck agreed to purchase $5 billion of Merck’s common stock, in total, with an initial delivery of 56.7 million shares of Merck’s common stock, based on the then-current market price, made by the Dealers to Merck, and payments of $5 billion made by Merck to the Dealers on October 29, 2018, which were funded with existing cash and investments, as well as short-term borrowings. Upon settlement of the ASR agreements in April 2019, Merck received an additional 7.7 million shares as determined by the average daily volume weighted-average price of Merck’s common stock during the term of the ASR program, less a negotiated discount, bringing the total shares received by Merck under this program to 64.4 million.

The Company has a $6.0 billion credit facility that matures in June 2024. The facility provides backup liquidity for the Company’s commercial paper borrowing facility and is to be used for general corporate purposes. The Company has not drawn funding from this facility.

Critical Accounting Policies

The Company’s significant accounting policies, which include management’s best estimates and judgments, are included in Note 2 to the consolidated financial statements for the year ended December 31, 2018 included in Merck’s Form 10‑K filed on February 27, 2019. Certain of these accounting policies are considered critical as disclosed in the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Merck’s Form 10-K because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates. There have been no significant changes in the Company’s critical accounting policies since December 31, 2018. See Note 1 to the condensed consolidated financial statements for information on the adoption of new accounting standards during 2019.

Recently Issued Accounting Standards

For a discussion of recently issued accounting standards, see Note 1 to the condensed consolidated financial statements.

Item 4. Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures over financial reporting. Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2019, the Company’s disclosure controls and procedures are effective. For the second quarter of 2019, there were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

This report and other written reports and oral statements made from time to time by the Company may contain so-called “forward-looking statements,” all of which are based on management’s current expectations and are subject to risks and uncertainties which may cause results to differ materially from those set forth in the statements. One can identify these forward-looking statements by their use of words such as “anticipates,” “expects,” “plans,” “will,” “estimates,” “forecasts,” “projects” and other words of similar meaning, or negative variations of any of the foregoing. One can also identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address the Company’s growth strategy, financial results, product development, product approvals, product potential and development programs. One must carefully consider any

- 43 -

such statement and should understand that many factors could cause actual results to differ materially from the Company’s forward-looking statements. These factors include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially.

The Company does not assume the obligation to update any forward-looking statement. One should carefully evaluate such statements in light of factors, including risk factors, described in the Company’s filings with the Securities and Exchange Commission, especially on Forms 10-K, 10-Q and 8-K. In Item 1A. “Risk Factors” of the Company’s Annual Report on Form 10‑K for the year ended December 31, 2018, as filed on February 27, 2019, the Company discusses in more detail various important risk factors that could cause actual results to differ from expected or historic results. The Company notes these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. One should understand that it is not possible to predict or identify all such factors. Consequently, the reader should not consider any such list to be a complete statement of all potential risks or uncertainties.

PART II - Other Information

Item 1. Legal Proceedings

The information called for by this Item is incorporated herein by reference to Note 8 included in Part I, Item 1, Financial Statements (unaudited) — Notes to Condensed Consolidated Financial Statements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer purchases of equity securities for the three months ended June 30, 2019 were as follows:

ISSUER PURCHASES OF EQUITY SECURITIES

				($ in millions)
Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
April 1 - April 30	9,300,182	(2)	$74.95	$10,741
May 1 - May 31	7,834,108		$78.88	$10,123
June 1 - June 30	6,025,248		82.74	$9,640
Total	23,159,538		$79.98	$9,640

⁽¹⁾  Shares purchased during the period were made as part of plans approved by the Board of Directors in November 2017 and October 2018 each to purchase up to $10 billion of Merck’s common stock for its treasury.

⁽²⁾ Includes 7.7 million shares received in April upon settlement of accelerated share repurchase agreements for which no cash was paid during the period.

Item 6. Exhibits

Number		Description
3.1	—	Restated Certificate of Incorporation of Merck & Co., Inc. (November 3, 2009) – Incorporated by reference to Current Report on Form 8-K filed on November 4, 2009 (No. 1-6571)
3.2	—	By-Laws of Merck & Co., Inc. (effective July 22, 2015) – Incorporated by reference to Current Report on Form 8-K filed on July 28, 2015 (No. 1-6571)
31.1	—	Rule 13a – 14(a)/15d – 14(a) Certification of Chief Executive Officer
31.2	—	Rule 13a – 14(a)/15d – 14(a) Certification of Chief Financial Officer
32.1	—	Section 1350 Certification of Chief Executive Officer
32.2	—	Section 1350 Certification of Chief Financial Officer
101	—	The following materials from Merck & Co., Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statement of Income, (ii) the Condensed Consolidated Statement of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheet, (iv) the Condensed Consolidated Statement of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements.

- 44 -

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 thereunto duly authorized.

	MERCK & CO., INC.
Date: August 6, 2019	/s/ Jennifer Zachary
	JENNIFER ZACHARY
	Executive Vice President and General Counsel
Date: August 6, 2019	/s/ Rita A. Karachun
	RITA A. KARACHUN
	Senior Vice President Finance - Global Controller

- 45 -

EXHIBIT INDEX

Number		Description
3.1	—	Restated Certificate of Incorporation of Merck & Co., Inc. (November 3, 2009) – Incorporated by reference to Current Report on Form 8-K filed on November 4, 2009 (No. 1-6571)
3.2	—	By-Laws of Merck & Co., Inc. (effective July 22, 2015) – Incorporated by reference to Current Report on Form 8-K filed on July 28, 2015 (No. 1-6571)
31.1	—	Rule 13a – 14(a)/15d – 14(a) Certification of Chief Executive Officer
31.2	—	Rule 13a – 14(a)/15d – 14(a) Certification of Chief Financial Officer
32.1	—	Section 1350 Certification of Chief Executive Officer
32.2	—	Section 1350 Certification of Chief Financial Officer
101	—	The following materials from Merck & Co., Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Statement of Income, (ii) the Condensed Consolidated Statement of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheet, (iv) the Condensed Consolidated Statement of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements.

- 46 -

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Kenneth C. Frazier, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Merck & Co., Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2019

By:	/s/ Kenneth C. Frazier
	KENNETH C. FRAZIER Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Robert M. Davis, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Merck & Co., Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   August 6, 2019

By:	/s/ Robert M. Davis
	ROBERT M. DAVIS Executive Vice President, Global Services and Chief Financial Officer

EX-32.1

Exhibit 32.1

Section 1350

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Merck & Co., Inc. (the “Company”), hereby certifies that the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 6, 2019	/s/ Kenneth C. Frazier
	Name: Title:	KENNETH C. FRAZIER Chairman, President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Section 1350

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350, the undersigned officer of Merck & Co., Inc. (the “Company”), hereby certifies that the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 6, 2019	/s/ Robert M. Davis
	Name: Title:	ROBERT M. DAVIS Executive Vice President, Global Services and Chief Financial Officer

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	1-6571
Entity Registrant Name	Merck & Co., Inc.
Entity Incorporation, State or Country Code	NJ
Entity Tax Identification Number	22-1918501
Entity Address, Address Line One	2000 Galloping Hill Road
Entity Address, City or Town	Kenilworth
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	07033
City Area Code	(908)
Local Phone Number	740-4000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		2,560,374,643
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000310158
Current Fiscal Year End Date	--12-31
Common Stock
Entity Information [Line Items]
Title of 12(b) Security	Common Stock ($0.50 par value)
Trading Symbol	MRK
Security Exchange Name	NYSE
1.125% Notes due 2021
Entity Information [Line Items]
Title of 12(b) Security	1.125% Notes due 2021
Trading Symbol	MRK/21
Security Exchange Name	NYSE
0.500% Notes due 2024
Entity Information [Line Items]
Title of 12(b) Security	0.500% Notes due 2024
Trading Symbol	MRK 24
Security Exchange Name	NYSE
1.875% Notes due 2026
Entity Information [Line Items]
Title of 12(b) Security	1.875% Notes due 2026
Trading Symbol	MRK/26
Security Exchange Name	NYSE
2.500% Notes due 2034
Entity Information [Line Items]
Title of 12(b) Security	2.500% Notes due 2034
Trading Symbol	MRK/34
Security Exchange Name	NYSE
1.375% Notes due 2036
Entity Information [Line Items]
Title of 12(b) Security	1.375% Notes due 2036
Trading Symbol	MRK 36A
Security Exchange Name	NYSE

XML

CONDENSED CONSOLIDATED STATEMENT OF INCOME - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Sales	$ 11,760	$ 10,465	$ 22,575	$ 20,502
Costs, Expenses and Other
Cost of sales	3,401	3,417	6,453	6,601
Selling, general and administrative	2,712	2,508	5,138	5,016
Research and development	2,189	2,274	4,119	5,470
Restructuring costs	59	228	212	323
Other (income) expense, net	140	(48)	327	(340)
Total Costs, Expenses and Other	8,501	8,379	16,249	17,070
Income Before Taxes	3,259	2,086	6,326	3,432
Taxes on Income	615	370	820	975
Net Income	2,644	1,716	5,506	2,457
Less: Net (Loss) Income Attributable to Noncontrolling Interests	(26)	9	(79)	14
Net Income Attributable to Merck & Co., Inc.	$ 2,670	$ 1,707	$ 5,585	$ 2,443
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders (in dollars per share)	$ 1.04	$ 0.64	$ 2.17	$ 0.91
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders (in dollars per share)	$ 1.03	$ 0.63	$ 2.15	$ 0.90

XML

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net Income Attributable to Merck & Co., Inc.	$ 2,670	$ 1,707	$ 5,585	$ 2,443
Other Comprehensive (Loss) Income Net of Taxes:
Net unrealized (loss) gain on derivatives, net of reclassifications	(52)	266	(100)	196
Net unrealized gain (loss) on investments, net of reclassifications	44	3	126	(96)
Benefit plan net gain and prior service credit, net of amortization	11	30	26	66
Cumulative translation adjustment	(19)	(361)	131	(104)
Other comprehensive income (loss), net of taxes	(16)	(62)	183	62
Comprehensive Income Attributable to Merck & Co., Inc.	$ 2,654	$ 1,645	$ 5,768	$ 2,505

XML

CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Current Assets
Cash and cash equivalents	$ 6,659	$ 7,965
Short-term investments	446	899
Accounts receivable (net of allowance for doubtful accounts of $122 in 2019 and $119 in 2018)	7,964	7,071
Inventories (excludes inventories of $1,464 in 2019 and $1,417 in 2018 classified in Other assets - see Note 6)	5,847	5,440
Other current assets	3,382	4,500
Total current assets	24,298	25,875
Investments	3,779	6,233
Property, Plant and Equipment, at cost, net of accumulated depreciation of $17,049 in 2019 and $16,324 in 2018	13,862	13,291
Goodwill	19,490	18,253
Other Intangibles, Net	13,381	11,431
Other Assets	9,155	7,554
Total Assets	83,965	82,637
Current Liabilities
Loans payable and current portion of long-term debt	3,816	5,308
Trade accounts payable	3,142	3,318
Accrued and other current liabilities	11,054	10,151
Income taxes payable	634	1,971
Dividends payable	1,439	1,458
Total current liabilities	20,085	22,206
Long-Term Debt	22,771	19,806
Deferred Income Taxes	2,089	1,702
Other Noncurrent Liabilities	11,283	12,041
Merck & Co., Inc. Stockholders’ Equity
Common stock, $0.50 par value Authorized - 6,500,000,000 shares Issued - 3,577,103,522 shares in 2019 and 2018	1,788	1,788
Other paid-in capital	39,484	38,808
Retained earnings	45,295	42,579
Accumulated other comprehensive loss	(5,362)	(5,545)
Stockholders' equity before deduction for treasury stock	81,205	77,630
Less treasury stock, at cost: 1,010,308,500 shares in 2019 and 984,543,979 shares in 2018	53,570	50,929
Total Merck & Co., Inc. stockholders’ equity	27,635	26,701
Noncontrolling Interests	102	181
Total equity	27,737	26,882
Liabilities and Equity	$ 83,965	$ 82,637

XML

CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 122	$ 119
Inventories classified in Other assets	1,464	1,417
Accumulated depreciation	$ 17,049	$ 16,324
Common stock, par value (in dollars per share)	$ 0.50	$ 0.50
Common stock, shares authorized (shares)	6,500,000,000	6,500,000,000
Common stock, shares issued (in shares)	3,577,103,522	3,577,103,522
Treasury stock, shares (shares)	1,010,308,500	984,543,979

XML

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash Flows from Operating Activities
Net income	$ 5,506	$ 2,457
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,871	2,427
Intangible asset impairment charges	252	0
Charge for future payments related to collaboration license options	0	650
Deferred income taxes	(149)	(258)
Share-based compensation	204	170
Other	114	365
Net changes in assets and liabilities	(3,378)	(1,274)
Net Cash Provided by Operating Activities	4,420	4,537
Cash Flows from Investing Activities
Capital expenditures	(1,377)	(1,033)
Purchases of securities and other investments	(1,810)	(5,248)
Proceeds from sales of securities and other investments	4,935	7,403
Acquisition of Antelliq Corporation, net of cash acquired	(3,620)	0
Other acquisitions, net of cash acquired	(270)	(372)
Other	85	(274)
Net Cash (Used in) Provided by Investing Activities	(2,057)	476
Cash Flows from Financing Activities
Net change in short-term borrowings	(3,532)	2,069
Payments on debt	0	(3,008)
Proceeds from issuance of debt	4,958	0
Purchases of treasury stock	(2,325)	(2,162)
Dividends paid to stockholders	(2,896)	(2,610)
Proceeds from exercise of stock options	304	299
Other	(207)	(277)
Net Cash Used in Financing Activities	(3,698)	(5,689)
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	28	(108)
Net Decrease in Cash, Cash Equivalents and Restricted Cash	(1,307)	(784)
Cash, Cash Equivalents and Restricted Cash at Beginning of Year (includes restricted cash of $2 million at January 1, 2019 included in Other Assets)	7,967	6,096
Cash, Cash Equivalents and Restricted Cash at End of Period (includes restricted cash of $1 million at June 30, 2019 included in Other Assets)	$ 6,660	$ 5,312

XML

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Statement of Cash Flows [Abstract]
Restricted cash	$ 1	$ 2

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Merck & Co., Inc. (Merck or the Company) have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements are not included herein. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in Merck’s Form 10-K filed on February 27, 2019.

The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. In the Company’s opinion, all adjustments necessary for a fair statement of these interim statements have been included and are of a normal and recurring nature. Certain reclassifications have been made to prior year amounts to conform to the current presentation.

Recently Adopted Accounting Standards

In February 2016, the FASB issued new accounting guidance for the accounting and reporting of leases (ASU 2016-02) and subsequently issued several updates to the new guidance (ASC 842 or new guidance). The new guidance requires that lessees recognize a right-of-use asset and a lease liability for each of its leases (other than leases that meet the definition of a short-term lease). Leases will be classified as either operating or finance. Operating leases will result in straight-line expense in the income statement (similar to previous operating leases), while finance leases will result in more expense being recognized in the earlier years of the lease term (similar to previous capital leases). The Company adopted the new standard on January 1, 2019 using a modified retrospective approach. Merck elected the transition method that allows for application of the standard at the adoption date rather than at the beginning of the earliest comparative period presented in the financial statements. The Company also elected available practical expedients. Upon adoption, the Company recognized $1.1 billion of additional assets and related liabilities on its consolidated balance sheet (see Note 7). The adoption of the new guidance did not impact the Company’s consolidated statements of income or cash flows.

Recently Issued Accounting Standards Not Yet Adopted

In June 2016, the FASB issued amended guidance on the accounting for credit losses on financial instruments. The guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance is effective for interim and annual periods beginning in 2020, with earlier application permitted in 2019, including adoption in any interim period. The new guidance is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings in the beginning of the period of adoption. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In April 2018, the FASB issued new guidance on the accounting for costs incurred to implement a cloud computing arrangement that is considered a service arrangement. The new guidance requires the capitalization of such costs, aligning it with the accounting for costs associated with developing or obtaining internal-use software. The new guidance is effective for interim and annual periods beginning in 2020. Early adoption is permitted, including adoption in any interim period. Prospective adoption for eligible costs incurred on or after the date of adoption or retrospective adoption is permitted. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In November 2018, the FASB issued new guidance for collaborative arrangements intended to reduce diversity in practice by clarifying whether certain transactions between collaborative arrangement participants should be accounted for under revenue recognition guidance (ASC 606). The new guidance is effective for interim and annual periods beginning in 2020. Early adoption is permitted, including adoption in any interim period. The new guidance is to be applied on a retrospective basis through a cumulative-effect adjustment directly to retained earnings. The Company does not anticipate the adoption of this standard will have a material effect on its consolidated financial statements.

XML

Acquisitions, Research Collaborations and License Agreements

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Acquisitions, Research Collaborations and License Agreements

Acquisitions, Research Collaborations and License Agreements

The Company continues to pursue acquisitions and the establishment of external alliances such as research collaborations and licensing agreements to complement its internal research capabilities. These arrangements often include upfront payments, as well as expense reimbursements or payments to the third party, and milestone, royalty or profit share arrangements, contingent upon the occurrence of certain future events linked to the success of the asset in development. The Company also reviews its marketed products and pipeline to examine candidates which may provide more value through out-licensing and, as part of its portfolio assessment process, may also divest certain assets. Pro forma financial information for acquired businesses is not presented if the historical financial results of the acquired entity are not significant when compared with the Company’s financial results.

In July 2019, Merck acquired Peloton Therapeutics, Inc. (Peloton), a clinical-stage biopharmaceutical company focused on the development of novel small molecule therapeutic candidates targeting hypoxia-inducible factor-2α (HIF-2α) for the treatment

of patients with cancer and other non-oncology diseases. Peloton’s lead candidate, MK-6482 (formerly PT2977), is a novel oral HIF-2α inhibitor in late-stage development for renal cell carcinoma. Merck made an upfront payment of $1.05 billion in cash; additionally, former Peloton shareholders will be eligible to receive up to an additional $1.15 billion contingent upon successful achievement of future regulatory and sales-based milestones. The acquisition will be accounted for as an acquisition of an asset.

On April 1, 2019, Merck acquired Antelliq Corporation (Antelliq), a leader in digital animal identification, traceability and monitoring solutions. These solutions help veterinarians, farmers and pet owners gather critical data to improve management, health and well-being of livestock and pets. Merck paid $2.3 billion to acquire all outstanding shares of Antelliq and spent $1.3 billion to repay Antelliq’s debt. The transaction was accounted for as an acquisition of a business.

The estimated fair value of assets acquired and liabilities assumed from Antelliq is as follows:

($ in millions)	April 1, 2019
Cash and cash equivalents	$	31
Accounts receivable	73
Inventories	97
Property, plant and equipment	62
Identifiable intangible assets (useful lives ranging from 18-24 years) (1)	2,689
Deferred income tax liabilities	(563		)
Other assets and liabilities, net	(81		)
Total identifiable net assets	2,308
Goodwill (2)	1,343
Consideration transferred	$	3,651

⁽¹⁾  The estimated fair values of identifiable intangible assets relate primarily to trade names and were determined using an income approach. The future net cash flows were discounted to present value utilizing a discount rate of 11.5%. Actual cash flows are likely to be different than those assumed.

⁽²⁾  The goodwill recognized is largely attributable to anticipated synergies expected to arise after the acquisition and was allocated to the Animal Health segment. The goodwill is not deductible for tax purposes.

The Company’s results for the second quarter of 2019 include two months of activity for Antelliq. The Company incurred $47 million of transaction costs directly related to the acquisition of Antelliq, consisting largely of advisory fees, which are reflected in Selling, general and administrative expenses in the second quarter of 2019.

Also in April 2019, Merck acquired Immune Design, a late-stage immunotherapy company employing next-generation in vivo approaches to enable the body’s immune system to fight disease, for $301 million in cash. The transaction was accounted for as an acquisition of a business. Merck recognized intangible assets for in-process research and development (IPR&D) of $156 million, cash of $83 million and other net assets of $31 million. The excess of the consideration transferred over the fair value of net assets acquired of $31 million was recorded as goodwill that was allocated to the Pharmaceutical segment and is not deductible for tax purposes. The fair values of the identifiable intangible assets related to IPR&D were determined using an income approach. Actual cash flows are likely to be different than those assumed.

In June 2018, Merck acquired Viralytics Limited (Viralytics), an Australian publicly traded company focused on oncolytic immunotherapy treatments for a range of cancers, for AUD 502 million ($378 million). The transaction provided Merck with full rights to Cavatak (V937, formerly CVA21), Viralytics’s investigational oncolytic immunotherapy. Cavatak is based on Viralytics’s proprietary formulation of an oncolytic virus (Coxsackievirus Type A21) that has been shown to preferentially infect and kill cancer cells. Cavatak is currently being evaluated in multiple Phase 1 and Phase 2 clinical trials, both as an intratumoral and intravenous agent, including in combination with Keytruda. Under a previous agreement between Merck and Viralytics, a study is investigating the use of the Keytruda and Cavatak combination in melanoma, prostate, lung and bladder cancers. The transaction was accounted for as an acquisition of an asset. Merck recorded net assets of $34 million (primarily cash) at the acquisition date and Research and development expenses of $344 million in the second quarter and first six months of 2018 related to the transaction. There are no future contingent payments associated with the acquisition.

In March 2018, Merck and Eisai Co., Ltd. (Eisai) entered into a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima, an orally available tyrosine kinase inhibitor discovered by Eisai (see Note 3).

XML

Collaborative Arrangements

6 Months Ended

Jun. 30, 2019

Collaborative Arrangements [Abstract]

Collaborative Arrangements

Collaborative Arrangements

Merck has entered into collaborative arrangements that provide the Company with varying rights to develop, produce and market products together with its collaborative partners. Both parties in these arrangements are active participants and exposed to significant risks and rewards dependent on the commercial success of the activities of the collaboration. Merck’s more significant collaborative arrangements are discussed below.

AstraZeneca

In July 2017, Merck and AstraZeneca PLC (AstraZeneca) entered into a global strategic oncology collaboration to co-develop and co-commercialize AstraZeneca’s Lynparza for multiple cancer types. Lynparza is an oral poly (ADP-ribose) polymerase (PARP) inhibitor currently approved for certain types of ovarian and breast cancer. The companies are jointly developing and commercializing Lynparza, both as monotherapy and in combination trials with other potential medicines. Independently, Merck and AstraZeneca will develop and commercialize Lynparza in combinations with their respective PD-1 and PD-L1 medicines, Keytruda and Imfinzi. The companies will also jointly develop and commercialize AstraZeneca’s selumetinib, an oral, potent, selective inhibitor of MEK, part of the mitogen-activated protein kinase (MAPK) pathway, currently being developed for multiple indications. Under the terms of the agreement, AstraZeneca and Merck will share the development and commercialization costs for Lynparza and selumetinib monotherapy and non-PD-L1/PD-1 combination therapy opportunities.

Gross profits from Lynparza and selumetinib product sales generated through monotherapies or combination therapies are shared equally. Merck will fund all development and commercialization costs of Keytruda in combination with Lynparza or selumetinib. AstraZeneca will fund all development and commercialization costs of Imfinzi in combination with Lynparza or selumetinib. AstraZeneca is the principal on Lynparza sales transactions. Merck records its share of Lynparza product sales, net of cost of sales and commercialization costs, as alliance revenue within the Pharmaceutical segment and its share of development costs associated with the collaboration as part of Research and development costs. Reimbursements received from AstraZeneca for research and development expenses are recognized as reductions to Research and development costs.

As part of the agreement, Merck made an upfront payment to AstraZeneca of $1.6 billion in 2017 and will make payments of up to $750 million over a multi-year period for certain license options (of which $250 million was paid in December 2017, $400 million was paid in December 2018 and $100 million is expected to be paid in December 2019). The Company recorded an aggregate charge of $2.35 billion in Research and development expenses in 2017 related to the upfront payment and future license option payments. In addition, the agreement provides for additional contingent payments from Merck to AstraZeneca related to the successful achievement of sales-based and regulatory milestones.

In the second quarter of 2019, Merck determined it was probable that annual sales of Lynparza in the future would trigger a $300 million sales-based milestone payment from Merck to AstraZeneca. Accordingly, in the second quarter of 2019, Merck recorded a $300 million liability and a corresponding increase to the intangible asset related to Lynparza and also recognized $52 million of cumulative amortization expense within Cost of sales. Prior to 2019, Merck accrued sales-based milestone payments aggregating $700 million related to Lynparza. Of these amounts, $250 million has been paid to AstraZeneca. Potential future sales-based milestone payments of $3.1 billion have not yet been accrued as they are not deemed by the Company to be probable at this time.

In April 2019, Lynparza received regulatory approval in the European Union (EU) as a monotherapy for the treatment of certain adult patients with advanced breast cancer, triggering a $30 million capitalized milestone payment from Merck to AstraZeneca. In June 2019, Lynparza received regulatory approval in the EU as a monotherapy for the maintenance treatment of certain adult patients with BRCA-mutated advanced ovarian cancer, triggering a $30 million capitalized milestone payment from Merck to AstraZeneca. In 2018, Lynparza received regulatory approvals triggering capitalized milestone payments of $140 million in the aggregate from Merck to AstraZeneca. Potential future regulatory milestone payments of $1.7 billion remain under the agreement.

The asset balance related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) was $1.0 billion at June 30, 2019 and is included in Other Assets on the Consolidated Balance Sheet. The amount is being amortized over its estimated useful life through 2028 as supported by projected future cash flows, subject to impairment testing.

Summarized financial information related to this collaboration is as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
Alliance revenue	$	111	$	44	$	190	$	76
Cost of sales (1)	73		24		92		36
Selling, general and administrative	33		9		59		16
Research and development	33		42		78		71
($ in millions)					June 30, 2019		December 31, 2018
Receivables from AstraZeneca included in Other current assets					$	105	$	52
Payables to AstraZeneca included in Accrued and other current liabilities (2)					605		405
Payables to AstraZeneca included in Other Noncurrent Liabilities (3)					300		250

⁽¹⁾ Represents amortization of capitalized milestone payments.

⁽²⁾ Includes accrued milestone and license option payments.

⁽³⁾ Includes accrued milestone payments.

Eisai

In March 2018, Merck and Eisai announced a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima, an orally available tyrosine kinase inhibitor discovered by Eisai. Under the agreement, Merck and Eisai will develop and commercialize Lenvima jointly, both as monotherapy and in combination with Merck’s anti-PD-1 therapy, Keytruda. Eisai records Lenvima product sales globally (Eisai is the principal on Lenvima sales transactions), and Merck and Eisai share gross profits equally. Merck records its share of Lenvima product sales, net of cost of sales and commercialization costs, as alliance revenue. Expenses incurred during co-development, including for studies evaluating Lenvima as monotherapy, are shared equally by the two companies and reflected in Research and development costs.

Under the agreement, Merck made an upfront payment to Eisai of $750 million and will make payments of up to $650 million for certain option rights through 2021 (of which $325 million was paid in March 2019, $200 million is expected to be paid in March 2020 and $125 million is expected to be paid in March 2021). The Company recorded an aggregate charge of $1.4 billion in Research and development expenses in the first quarter of 2018 related to the upfront payment and future option payments. In addition, the agreement provides for Eisai to receive up to $385 million associated with the achievement of certain clinical and regulatory milestones and up to $3.97 billion for the achievement of milestones associated with sales of Lenvima.

In the first quarter of 2019, Merck determined it was probable that annual sales of Lenvima in the future would trigger $282 million of sales-based milestone payments from Merck to Eisai. Accordingly, in the first quarter of 2019, Merck recorded $282 million of liabilities and corresponding increases to the intangible asset related to Lenvima and also recognized $35 million of cumulative amortization expense within Cost of sales. Merck previously accrued sales-based milestone payments aggregating $268 million related to Lenvima in 2018. Of these amounts, $50 million has been paid to Eisai. Potential future sales-based milestone payments of $3.42 billion have not yet been accrued as they are not deemed by the Company to be probable at this time.

In 2018, Lenvima received regulatory approvals triggering capitalized milestone payments of $250 million in the aggregate from Merck to Eisai. Potential future regulatory milestone payments of $135 million remain under the agreement.

The asset balance related to Lenvima (which includes capitalized sales-based and regulatory milestone payments) was $687 million at June 30, 2019 and is included in Other Assets on the Consolidated Balance Sheet. The amount is being amortized over its estimated useful life through 2026 as supported by projected future cash flows, subject to impairment testing.

Summarized financial information related to this collaboration is as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
Alliance revenue	$	97	$	35	$	171	$	35
Cost of sales (1)	23		1		74		1
Selling, general and administrative	19		2		38		2
Research and development (2)	62		36		109		1,436
($ in millions)					June 30, 2019		December 31, 2018
Receivables from Eisai included in Other current assets					$	98	$	71
Payables to Eisai included in Accrued and other current liabilities (3)					709		375
Payables to Eisai included in Other Noncurrent Liabilities (3)					125		543

⁽¹⁾ Represents amortization of capitalized milestone payments.

⁽²⁾ Amount for the first six months of 2018 includes the upfront payment and future option payments.

⁽³⁾ Includes accrued milestone and option payments.

Bayer AG

In 2014, the Company entered into a worldwide clinical development collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators including Bayer’s Adempas, which is approved to treat pulmonary arterial hypertension and chronic thromboembolic pulmonary hypertension. The two companies have implemented a joint development and commercialization strategy. The collaboration also includes clinical development of Bayer’s vericiguat, which is in Phase 3 trials for worsening heart failure, as well as opt-in rights for other early-stage sGC compounds in development by Bayer. Merck in turn made available its early-stage sGC compounds under similar terms. Under the agreement, Bayer leads commercialization of Adempas in the Americas, while Merck leads commercialization in the rest of the world. For vericiguat and other potential opt-in products, Bayer will lead commercialization in the rest of world and Merck will lead in the Americas. For all products and candidates included in the agreement, both companies will share in development costs and profits on sales and will have the right to co-promote in territories where they are not the lead. Revenue from Adempas includes sales in Merck’s marketing territories, as well as Merck’s share of profits from the sale of Adempas in Bayer’s marketing territories.

In the first quarter of 2018, Merck made a $350 million sales-based milestone payment to Bayer, which was accrued for in 2016 when Merck deemed the payment to be probable. In the second quarter of 2018, Merck determined it was probable that annual worldwide sales of Adempas in the future would trigger a $375 million sales-based milestone payment from Merck to Bayer; accordingly, Merck recorded a $375 million liability and a corresponding increase to the intangible asset related to Adempas and also recognized $106 million of cumulative amortization expense within Cost of sales. There is an additional $400 million potential future sales-based milestone payment that has not yet been accrued as it is not deemed by the Company to be probable at this time.

The intangible asset balance related to Adempas (which includes the acquired intangible asset balance, as well as capitalized sales-based milestone payments) was $956 million at June 30, 2019 and is included in Other Intangibles, Net on the Consolidated Balance Sheet. The amount is being amortized over its estimated useful life through 2027 as supported by projected future cash flows, subject to impairment testing.

Summarized financial information related to this collaboration is as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
Net product sales recorded by Merck	$	53	$	47	$	100	$	90
Merck’s profit share from sales in Bayer’s marketing territories	51		28		94		53
Total sales	104		75		194		143
Cost of sales (1)	29		132		58		159
Selling, general and administrative	11		10		20		17
Research and development	32		28		62		56
($ in millions)					June 30, 2019		December 31, 2018
Receivables from Bayer included in Other current assets					$	41	$	32
Payables to Bayer included in Other Noncurrent Liabilities (2)					375		375

⁽¹⁾ Includes amortization of intangible assets.

⁽²⁾ Represents accrued milestone payment.

XML

Restructuring

6 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Restructuring

Restructuring

Merck recently approved a new global restructuring program (2019 Restructuring Program) as part of a worldwide initiative focused primarily on further optimizing the Company’s manufacturing and supply network, as well as reducing its global real estate footprint. This program is a continuation of the Company’s plant rationalization and builds on prior restructuring programs. The Company will continue to evaluate its global footprint and overall operating model, which could result in the identification of additional actions over time. The actions contemplated under the 2019 Restructuring Program are expected to be substantially completed by the end of 2023, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $800 million to $1.2 billion. The Company estimates that approximately 55% of the cumulative pretax costs will result in cash outlays, primarily related to employee separation expense and facility shut-down costs. Approximately 45% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. The Company expects to record charges of approximately $500 million in 2019 related to the program. Actions under previous global restructuring programs have been substantially completed.

The Company recorded total pretax costs of $159 million and $235 million in the second quarter of 2019 and 2018, respectively, and $346 million and $339 million for the first six months of 2019 and 2018, respectively, related to restructuring program activities. For segment reporting, restructuring charges are unallocated expenses.

The following tables summarize the charges related to restructuring program activities by type of cost:

	Three Months Ended June 30, 2019								Six Months Ended June 30, 2019
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation		Other		Total
Cost of sales	$	—	$	64	$	1	$	65	$	—	$	98	$	1	$	99
Selling, general and administrative	—		32		—		32		—		32		—		32
Research and development	—		2		1		3		—		2		1		3
Restructuring costs	25		—		34		59		153		—		59		212
	$	25	$	98	$	36	$	159	$	153	$	132	$	61	$	346

	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation			Other		Total
Cost of sales	$	—	$	—	$	3	$	3	$	—	$	—		$	9	$	9
Selling, general and administrative	—		—		1		1		—		1			1		2
Research and development	—		—		3		3		—		(3		)	8		5
Restructuring costs	200		—		28		228		255		—			68		323
	$	200	$	—	$	35	$	235	$	255	$	(2	)	$	86	$	339

Separation costs are associated with actual headcount reductions, as well as those headcount reductions which were probable and could be reasonably estimated.

Accelerated depreciation costs primarily relate to manufacturing, research and administrative facilities and equipment to be sold or closed as part of the programs. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. All the sites have and will continue to operate up through the respective closure dates and, since future undiscounted cash flows are sufficient to recover the respective book values, Merck is recording accelerated depreciation over the revised useful life of the site assets. Anticipated site closure dates, particularly related to manufacturing locations, have been and may continue to be adjusted to reflect changes resulting from regulatory or other factors.

Other activity in 2019 and 2018 includes asset abandonment, shut-down and other related costs, as well as pretax gains and losses resulting from sales of facilities and related assets. Additionally, other activity includes certain employee-related costs associated with pension and other postretirement benefit plans (see Note 11) and share-based compensation.

The following table summarizes the charges and spending relating to restructuring program activities for the six months ended June 30, 2019:

($ in millions)	Separation Costs			Accelerated Depreciation			Other			Total
Restructuring reserves January 1, 2019	$	443		$	—		$	91		$	534
Expense	153			132			61			346
(Payments) receipts, net	(126		)	—			(77		)	(203		)
Non-cash activity	—			(132		)	(2		)	(134		)
Restructuring reserves June 30, 2019 (1)	$	470		$	—		$	73		$	543

⁽¹⁾ 

The remaining cash outlays are expected to be substantially completed by the end of 2023.

XML

Financial Instruments

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

Financial Instruments

Derivative Instruments and Hedging Activities

The Company manages the impact of foreign exchange rate movements and interest rate movements on its earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments.

A significant portion of the Company’s revenues and earnings in foreign affiliates is exposed to changes in foreign exchange rates. The objectives and accounting related to the Company’s foreign currency risk management program, as well as its interest rate risk management activities are discussed below.

Foreign Currency Risk Management

The Company has established revenue hedging, balance sheet risk management and net investment hedging programs to protect against volatility of future foreign currency cash flows and changes in fair value caused by volatility in foreign exchange rates.

The objective of the revenue hedging program is to reduce the variability caused by changes in foreign exchange rates that would affect the U.S. dollar value of future cash flows derived from foreign currency denominated sales, primarily the euro and Japanese yen. To achieve this objective, the Company will hedge a portion of its forecasted foreign currency denominated third-party and intercompany distributor entity sales (forecasted sales) that are expected to occur over its planning cycle, typically no more than two years into the future. The Company will layer in hedges over time, increasing the portion of forecasted sales hedged as it gets closer to the expected date of the forecasted sales. The portion of forecasted sales hedged is based on assessments of cost-benefit profiles that consider natural offsetting exposures, revenue and exchange rate volatilities and correlations, and the cost of hedging instruments. The Company manages its anticipated transaction exposure principally with purchased local currency put options, forward contracts and purchased collar options.

The fair values of these derivative contracts are recorded as either assets (gain positions) or liabilities (loss positions) in the Condensed Consolidated Balance Sheet. Changes in the fair value of derivative contracts are recorded each period in either current earnings or Other comprehensive income (OCI), depending on whether the derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. For derivatives that are designated as cash flow hedges, the unrealized gains or losses on these contracts is recorded in Accumulated other comprehensive income (AOCI) and reclassified into Sales when the hedged anticipated revenue is recognized. For those derivatives which are not designated as cash flow hedges, but serve as economic hedges of forecasted sales, unrealized gains or losses are recorded in Sales each period. The cash flows from both designated and non-designated contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows. The Company does not enter into derivatives for trading or speculative purposes.

The Company manages operating activities and net asset positions at each local subsidiary in order to mitigate the effects of exchange on monetary assets and liabilities. The Company also uses a balance sheet risk management program to mitigate the exposure of net monetary assets that are denominated in a currency other than a subsidiary’s functional currency from the effects of volatility in foreign exchange. In these instances, Merck principally utilizes forward exchange contracts to offset the effects of exchange on exposures denominated in developed country currencies, primarily the euro and Japanese yen. For exposures in developing country currencies, the Company will enter into forward contracts to partially offset the effects of exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the exchange rate and the cost of the hedging instrument. The cash flows from these contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows.

Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Other (income) expense, net. The forward contracts are not designated as hedges and are marked to market through Other (income) expense, net. Accordingly, fair value changes in the forward contracts help mitigate the changes in the value of the remeasured assets and liabilities attributable to changes in foreign currency exchange rates, except to the extent of the spot-forward differences. These differences are not significant due to the short-term nature of the contracts, which typically have average maturities at inception of less than one year.

The Company also uses forward exchange contracts to hedge its net investment in foreign operations against movements in exchange rates. The forward contracts are designated as hedges of the net investment in a foreign operation. The Company hedges a portion of the net investment in certain of its foreign operations. The unrealized gains or losses on these contracts are recorded in foreign currency translation adjustment within OCI and remain in AOCI until either the sale or complete or substantially complete liquidation of the subsidiary. The Company excludes certain portions of the change in fair value of its derivative instruments from the assessment of hedge effectiveness (excluded component). Changes in fair value of the excluded components are recognized in OCI. The Company recognizes in earnings the initial value of the excluded component on a straight-line basis over the life of the derivative instrument, rather than using the mark-to-market approach. The cash flows from these contracts are reported as investing activities in the Condensed Consolidated Statement of Cash Flows.

Foreign exchange risk is also managed through the use of foreign currency debt. The Company’s senior unsecured euro-denominated notes have been designated as, and are effective as, economic hedges of the net investment in a foreign operation. Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the euro-denominated debt instruments are included in foreign currency translation adjustment within OCI.

The effects of the Company’s net investment hedges on OCI and the Consolidated Statement of Income are shown below:

	Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1)											Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing
	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2019		2018			2019			2018			2019			2018			2019			2018
Net Investment Hedging Relationships
Foreign exchange contracts	$	17	$	(12	)	$	7		$	(14	)	$	(8	)	$	(3	)	$	(15	)	$	(3	)
Euro-denominated notes	28		(271		)	(2		)	(92		)	—			—			—			—

⁽¹⁾ No amounts were reclassified from AOCI into income related to the sale of a subsidiary.

Interest Rate Risk Management

The Company may use interest rate swap contracts on certain investing and borrowing transactions to manage its net exposure to interest rate changes and to reduce its overall cost of borrowing. The Company does not use leveraged swaps and, in general, does not leverage any of its investment activities that would put principal capital at risk.

At June 30, 2019, the Company was a party to 19 pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of fixed-rate notes in which the notional amounts match the amount of the hedged fixed-rate notes as detailed in the table below.

	June 30, 2019
($ in millions)	Par Value of Debt	Number of Interest Rate Swaps Held	Total Swap Notional Amount
1.85% notes due 2020	1,250	5	1,250
3.875% notes due 2021	1,150	5	1,150
2.40% notes due 2022	1,000	4	1,000
2.35% notes due 2022	1,250	5	1,250

The interest rate swap contracts are designated hedges of the fair value changes in the notes attributable to changes in the benchmark London Interbank Offered Rate (LIBOR) swap rate. The fair value changes in the notes attributable to changes in the LIBOR swap rate are recorded in interest expense along with the offsetting fair value changes in the swap contracts. The cash flows from these contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows.

The table below presents the location of amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:

	Carrying Amount of Hedged Liabilities				Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount
($ in millions)	June 30, 2019		December 31, 2018		June 30, 2019			December 31, 2018
Balance Sheet Line Item in which Hedged Item is Included
Loans payable and current portion of long-term debt	$	1,244	$	—	$	(6	)	$	—
Long-Term Debt	3,406		4,560		11			(82		)

Presented in the table below is the fair value of derivatives on a gross basis segregated between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:

		June 30, 2019						December 31, 2018
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
($ in millions)	Balance Sheet Caption	Asset		Liability				Asset		Liability
Derivatives Designated as Hedging Instruments
Interest rate swap contracts	Other Assets	$	14	$	—	$	2,150	$	—	$	—	$	—
Interest rate swap contracts	Accrued and other current liabilities	—		6		1,250		—		—		—
Interest rate swap contracts	Other Noncurrent Liabilities	—		2		1,250		—		81		4,650
Foreign exchange contracts	Other current assets	168		—		6,389		263		—		6,222
Foreign exchange contracts	Other Assets	49		—		2,790		75		—		2,655
Foreign exchange contracts	Accrued and other current liabilities	—		13		1,252		—		7		774
Foreign exchange contracts	Other Noncurrent Liabilities	—		—		—		—		1		89
		$	231	$	21	$	15,081	$	338	$	89	$	14,390
Derivatives Not Designated as Hedging Instruments
Foreign exchange contracts	Other current assets	$	70	$	—	$	6,665	$	116	$	—	$	5,430
Foreign exchange contracts	Accrued and other current liabilities	—		63		4,982		—		71		9,922
		$	70	$	63	$	11,647	$	116	$	71	$	15,352
		$	301	$	84	$	26,728	$	454	$	160	$	29,742

As noted above, the Company records its derivatives on a gross basis in the Condensed Consolidated Balance Sheet. The Company has master netting agreements with several of its financial institution counterparties (see Concentrations of Credit Risk below). The following table provides information on the Company’s derivative positions subject to these master netting arrangements as if they were presented on a net basis, allowing for the right of offset by counterparty and cash collateral exchanged per the master agreements and related credit support annexes:

	June 30, 2019						December 31, 2018
($ in millions)	Asset			Liability			Asset			Liability
Gross amounts recognized in the consolidated balance sheet	$	301		$	84		$	454		$	160
Gross amounts subject to offset in master netting arrangements not offset in the consolidated balance sheet	(69		)	(69		)	(121		)	(121		)
Cash collateral received	(32		)	—			(107		)	—
Net amounts	$	200		$	15		$	226		$	39

The table below provides information regarding the location and amount of pretax (gains) losses of derivatives designated in fair value or cash flow hedging relationships:

	Sales					Other (income) expense, net (1)					Other comprehensive income (loss)						Sales				Other (income) expense, net (1)						Other comprehensive income (loss)
	Three Months Ended June 30,					Three Months Ended June 30,					Three Months Ended June 30,						Six Months Ended June 30,				Six Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2019		2018			2019			2018		2019			2018			2019	2018			2019			2018			2019			2018
Financial Statement Line Items in which Effects of Fair Value or Cash Flow Hedges are Recorded	$	11,760	$	10,465		$	140		(48	)	$	(16	)	$	(62	)	22,575	$	20,502		$	327		$	(340	)	$	183		$	62
(Gain) loss on fair value hedging relationships
Interest rate swap contracts
Hedged items	—		—			55			(15	)	—			—			—	—			88			(77		)	—			—
Derivatives designated as hedging instruments	—		—			(45		)	22		—			—			—	—			(68		)	84			—			—
Impact of cash flow hedging relationships
Foreign exchange contracts
Amount of income (loss) recognized in OCI on derivatives	—		—			—			—		10			264			—	—			—			—			(2		)	84
Increase (decrease) in Sales as a result of AOCI reclassifications	75		(73		)	—			—		(75		)	73			119	(166		)	—			—			(119		)	166
Interest rate contracts
Amount of gain recognized in Other (income) expense, net on derivatives	—		—			(1		)	(1	)	—			—			—	—			(2		)	(2		)	—			—
Amount of loss recognized in OCI on derivatives	—		—			—			—		(1		)	(1		)	—	—			—			—			(5		)	(2		)

⁽¹⁾ Interest expense is a component of Other (income) expense, net.

The table below provides information regarding the income statement effects of derivatives not designated as hedging instruments:

		Amount of Derivative Pretax (Gain) Loss Recognized in Income
		Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	Income Statement Caption	2019			2018			2019		2018
Derivatives Not Designated as Hedging Instruments
Foreign exchange contracts (1)	Other (income) expense, net	$	2		$	(195	)	$	120	$	(167	)
Foreign exchange contracts (2)	Sales	(6		)	(14		)	4		(5		)

⁽¹⁾ These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates.

⁽²⁾ These derivative contracts serve as economic hedges of forecasted transactions.

At June 30, 2019, the Company estimates $76 million of pretax net unrealized gains on derivatives maturing within the next 12 months that hedge foreign currency denominated sales over that same period will be reclassified from AOCI to Sales. The amount ultimately reclassified to Sales may differ as foreign exchange rates change. Realized gains and losses are ultimately determined by actual exchange rates at maturity.

Investments in Debt and Equity Securities

Information on investments in debt and equity securities is as follows:

	June 30, 2019									December 31, 2018
	Amortized Cost		Gross Unrealized					Fair Value		Amortized Cost		Gross Unrealized					Fair Value
($ in millions)			Gains		Losses							Gains		Losses
Corporate notes and bonds	$	2,666	$	36	$	(2	)	$	2,700	$	4,985	$	3	$	(68	)	$	4,920
Asset-backed securities	789		4		(1		)	792		1,285		1		(11		)	1,275
U.S. government and agency securities	575		10		—			585		895		2		(5		)	892
Foreign government bonds	41		—		—			41		167		—		(1		)	166
Mortgage-backed securities	5		—		—			5		8		—		—			8
Total debt securities	$	4,076	$	50	$	(3	)	$	4,123	$	7,340	$	6	$	(85	)	$	7,261
Publicly traded equity securities (1)								756									456
Total debt and publicly traded equity securities								$	4,879								$	7,717

⁽¹⁾ Unrealized net (losses) gains recognized in Other (income) expense, net on equity securities still held at June 30, 2019 were $(39) million and $7 million, for the second quarter of 2019 and 2018, respectively, and were $75 million and $50 million for the first six months of 2019 and 2018, respectively.

At June 30, 2019, the Company also had $465 million of equity investments without readily determinable fair values included in Other Assets. During the first six months of 2019, the Company recognized unrealized gains of $4 million on certain of these equity investments recorded in Other (income) expense, net based on favorable observable price changes from transactions involving similar investments of the same investee. In addition, during the first six months of 2019, the Company recognized unrealized losses of $10 million in Other (income) expense, net related to certain of these investments based on unfavorable observable price changes. Since January 1, 2018, cumulative unrealized gains and cumulative unrealized losses based on observable prices changes for investments in equity investments without readily determinable fair values were $172 million and $21 million, respectively.

Available-for-sale debt securities included in Short-term investments totaled $398 million at June 30, 2019. Of the remaining debt securities, $3.4 billion mature within five years. At June 30, 2019 and December 31, 2018, there were no debt securities pledged as collateral.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company uses a fair value hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value with Level 1 having the highest priority and Level 3 having the lowest: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities, Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities, Level 3 - Unobservable inputs that are supported by little or no market activity. Level 3 assets or liabilities are those whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques with significant unobservable inputs, as well as assets or liabilities for which the determination of fair value requires significant judgment or estimation. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements Using								Fair Value Measurements Using
	Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
($ in millions)	June 30, 2019								December 31, 2018
Assets
Investments
Corporate notes and bonds	$	—	$	2,660	$	—	$	2,660	$	—	$	4,835	$	—	$	4,835
Asset-backed securities (1)	—		788		—		788		—		1,253		—		1,253
U.S. government and agency securities	—		508		—		508		—		731		—		731
Foreign government bonds	—		41		—		41		—		166		—		166
Publicly traded equity securities	228		—		—		228		147		—		—		147
	228		3,997		—		4,225		147		6,985		—		7,132
Other assets (2)
U.S. government and agency securities	58		19		—		77		55		106		—		161
Corporate notes and bonds	—		40		—		40		—		85		—		85
Mortgage-backed securities	—		5		—		5		—		8		—		8
Asset-backed securities (1)	—		4		—		4		—		22		—		22
Publicly traded equity securities	528		—		—		528		309		—		—		309
	586		68		—		654		364		221		—		585
Derivative assets (3)
Purchased currency options	—		158		—		158		—		213		—		213
Forward exchange contracts	—		129		—		129		—		241		—		241
Interest rate swaps	—		14		—		14		—		—		—		—
	—		301		—		301		—		454		—		454
Total assets	$	814	$	4,366	$	—	$	5,180	$	511	$	7,660	$	—	$	8,171
Liabilities
Other liabilities
Contingent consideration	$	—	$	—	$	753	$	753	$	—	$	—	$	788	$	788
Derivative liabilities (3)
Forward exchange contracts	—		73		—		73		—		74		—		74
Interest rate swaps	—		8		—		8		—		81		—		81
Written currency options	—		3		—		3		—		5		—		5
	—		84		—		84		—		160		—		160
Total liabilities	$	—	$	84	$	753	$	837	$	—	$	160	$	788	$	948

⁽¹⁾  Primarily all of the asset-backed securities are highly-rated (Standard & Poor’s rating of AAA and Moody’s Investors Service rating of Aaa), secured primarily by auto loan, credit card and student loan receivables, with weighted-average lives of primarily 5 years or less.

⁽²⁾  Investments included in other assets are restricted as to use, primarily for the payment of benefits under employee benefit plans.

⁽³⁾  The fair value determination of derivatives includes the impact of the credit risk of counterparties to the derivatives and the Company’s own credit risk, the effects of which were not significant.

There were no transfers between Level 1 and Level 2 during the first six months of 2019. As of June 30, 2019, Cash and cash equivalents of $6.7 billion included $5.9 billion of cash equivalents (which would be considered Level 2 in the fair value hierarchy).

Contingent Consideration

Summarized information about the changes in liabilities for contingent consideration is as follows:

	Six Months Ended June 30,
($ in millions)	2019			2018
Fair value January 1	$	788		$	935
Changes in estimated fair value (1)	50			122
Additions	—			8
Payments	(85		)	(235		)
Fair value June 30 (2)	$	753		$	830

⁽¹⁾ Recorded in Cost of sales, Research and development expenses, and Other (income) expense, net. Includes cumulative translation adjustments.

⁽²⁾ Balance at June 30, 2019 includes $114 million recorded as a current liability for amounts expected to be paid within the next 12 months.

The payments of contingent consideration in both periods include payments related to liabilities recorded in connection with the 2016 termination of the Sanofi-Pasteur MSD joint venture. The payments of contingent consideration in the first six months of 2018 also include $175 million related to the achievement of a clinical development milestone for MK-7264 (gefapixant), a program obtained in connection with the acquisition of Afferent Pharmaceuticals.

Other Fair Value Measurements

Some of the Company’s financial instruments, such as cash and cash equivalents, receivables and payables, are reflected in the balance sheet at carrying value, which approximates fair value due to their short-term nature.

The estimated fair value of loans payable and long-term debt (including current portion) at June 30, 2019, was $28.6 billion compared with a carrying value of $26.6 billion and at December 31, 2018, was $25.6 billion compared with a carrying value of $25.1 billion. Fair value was estimated using recent observable market prices and would be considered Level 2 in the fair value hierarchy.

Concentrations of Credit Risk

On an ongoing basis, the Company monitors concentrations of credit risk associated with corporate and government issuers of securities and financial institutions with which it conducts business. Credit exposure limits are established to limit a concentration with any single issuer or institution. Cash and investments are placed in instruments that meet high credit quality standards as specified in the Company’s investment policy guidelines.

The majority of the Company’s accounts receivable arise from product sales in the United States and Europe and are primarily due from drug wholesalers and retailers, hospitals, government agencies, managed health care providers and pharmacy benefit managers. The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in their credit profile. The Company also continues to monitor global economic conditions, including the volatility associated with international sovereign economies, and associated impacts on the financial markets and its business. The Company does not expect to have write-offs or adjustments to accounts receivable which would have a material adverse effect on its financial position, liquidity or results of operations.

Derivative financial instruments are executed under International Swaps and Derivatives Association master agreements. The master agreements with several of the Company’s financial institution counterparties also include credit support annexes. These annexes contain provisions that require collateral to be exchanged depending on the value of the derivative assets and liabilities, the Company’s credit rating, and the credit rating of the counterparty. Cash received by the Company from various counterparties was $32 million and $107 million at June 30, 2019 and December 31, 2018, respectively. The obligation to return such collateral is recorded in Accrued and other current liabilities. No cash collateral was advanced by the Company to counterparties as of June 30, 2019 or December 31, 2018.

XML

Inventories

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consisted of:

($ in millions)	June 30, 2019			December 31, 2018
Finished goods	$	1,750		$	1,658
Raw materials and work in process	5,388			5,004
Supplies	202			194
Total (approximates current cost)	7,340			6,856
(Decrease) increase to LIFO costs	(29		)	1
	$	7,311		$	6,857
Recognized as:
Inventories	$	5,847		$	5,440
Other assets	1,464			1,417

Amounts recognized as Other assets are comprised almost entirely of raw materials and work in process inventories. At June 30, 2019 and December 31, 2018, these amounts included $1.3 billion and $1.4 billion, respectively, of inventories not expected to be sold within one year. In addition, these amounts included $118 million and $7 million at June 30, 2019 and December 31, 2018, respectively, of inventories produced in preparation for product launches.

XML

Loans Payable, Long-Term Debt and Leases

6 Months Ended

Jun. 30, 2019

Loans Payable, Long-Term Debt and Leases [Abstract]

Loans Payable, Long-Term Debt and Leases

Loans Payable, Long-Term Debt and Leases

Long-Term Debt

In March 2019, the Company issued $5.0 billion principal amount of senior unsecured notes consisting of $750 million of 2.90% notes due 2024, $1.75 billion of 3.40% notes due 2029, $1.0 billion of 3.90% notes due 2039, and $1.5 billion of 4.00% notes due 2049. The Company used the net proceeds from the offering of $5.0 billion for general corporate purposes, including the repayment of outstanding commercial paper borrowings.

Leases

As discussed in Note 1, on January 1, 2019, Merck adopted new guidance for the accounting and reporting of leases. The Company has operating leases primarily for manufacturing facilities, research and development facilities, corporate offices, employee housing, vehicles and certain equipment. As permitted under the transition guidance in ASC 842, the Company elected a package of practical expedients which, among other provisions, allowed the Company to carry forward historical lease classifications. The Company determines if an arrangement is a lease at inception. When evaluating contracts for embedded leases, the Company exercises judgment to determine if there is an explicit or implicit identified asset in the contract and if Merck controls the use of that asset. Embedded leases, primarily associated with contract manufacturing organizations, are immaterial.

Under ASC 842 transition guidance, Merck elected the hindsight practical expedient to determine the lease term for existing leases, which permits companies to consider available information prior to the effective date of the new guidance as to the actual or likely exercise of options to extend or terminate the lease. The lease term includes options to extend or terminate the lease when it is reasonably certain that Merck will exercise that option. Real estate leases for facilities have an average remaining lease term of eight years, which include options to extend the leases for up to four years where applicable. Vehicle leases are generally in effect for four years. The Company has made an accounting policy election not to record short-term leases (leases with an initial term of 12 months or less) on the balance sheet; however, Merck currently has no short-term leases.

Lease expense for operating lease payments is recognized on a straight-line basis over the term of the lease. Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term. Since most of the Company’s leases do not have a readily determinable implicit discount rate, the Company uses its incremental borrowing rate to calculate the present value of lease payments. As a practical expedient, the Company has made an accounting policy election not to separate lease components (e.g. payments for rent, real estate taxes and insurance costs) from non-lease components (e.g. common-area maintenance costs) in the event that the agreement contains both. Merck includes both the lease and non-lease components for purposes of calculating the right-of-use asset and related lease liability (if the non-lease components are fixed). For vehicle leases and employee housing, the Company applies a portfolio approach to effectively account for the operating lease assets and liabilities.

Certain of the Company’s lease agreements contain variable lease payments that are adjusted periodically for inflation or for actual operating expense true-ups compared with estimated amounts; however, these amounts are immaterial. Sublease income and activity related to sale and leaseback transactions are immaterial. Merck’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating lease cost was $82 million and $165 million for the second quarter and first six months of 2019, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $65 million and $138 million for the second quarter and first six months of 2019, respectively.

Supplemental balance sheet information related to operating leases is as follows:

($ in millions)	June 30, 2019
Assets
Other Assets (1)	$	1,063
Liabilities
Accrued and other current liabilities	$	241
Other Noncurrent Liabilities	752
	$	993
Weighted-average remaining lease term (years)	7.5
Weighted-average discount rate	3.4		%

⁽¹⁾ Includes prepaid leases that have no related lease liability.

Maturities of operating leases liabilities are as follows:

($ in millions)	June 30, 2019
2019 (excluding the six months ended June 30, 2019)	$	138
2020	232
2021	172
2022	146
2023	98
Thereafter	339
Total lease payments	1,125
Less: imputed interest	(132		)
	$	993

As of June 30, 2019, the Company had entered into additional real estate operating leases that had not yet commenced. The obligations associated with these leases totaled $127 million, of which $72 million related to a lease that commenced in July 2019 and has a lease term of 10 years.

As of December 31, 2018, prior to the adoption of ASC 842, the minimum aggregate rental commitments under noncancellable leases were as follows: 2019, $188 million; 2020, $198 million; 2021, $150 million; 2022, $134 million; 2023, $84 million and thereafter, $243 million.

XML

Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Contingencies

Contingencies

The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters. In the opinion of the Company, it is unlikely that the resolution of these matters will be material to the Company’s financial position, results of operations or cash flows.

Given the nature of the litigation discussed below and the complexities involved in these matters, the Company is unable to reasonably estimate a possible loss or range of possible loss for such matters until the Company knows, among other factors, (i) what claims, if any, will survive dispositive motion practice, (ii) the extent of the claims, including the size of any potential class, particularly when damages are not specified or are indeterminate, (iii) how the discovery process will affect the litigation, (iv) the settlement posture of the other parties to the litigation and (v) any other factors that may have a material effect on the litigation.

The Company records accruals for contingencies when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. For product liability claims, a portion of the overall accrual is actuarially determined and considers such factors as past experience, number of claims reported and estimates of claims incurred but not yet reported. Individually significant contingent

losses are accrued when probable and reasonably estimable. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.

The Company’s decision to obtain insurance coverage is dependent on market conditions, including cost and availability, existing at the time such decisions are made. The Company has evaluated its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, has no insurance for most product liabilities effective August 1, 2004.

Product Liability Litigation

Fosamax

As previously disclosed, Merck is a defendant in product liability lawsuits in the United States involving Fosamax (Fosamax Litigation). As of June 30, 2019, approximately 3,900 cases have been filed and either are pending or conditionally dismissed (as noted below) against Merck in either federal or state court. Plaintiffs in the vast majority of these cases generally allege that they sustained femur fractures and/or other bone injuries (Femur Fractures) in association with the use of Fosamax.

In March 2011, Merck submitted a Motion to Transfer to the Judicial Panel on Multidistrict Litigation (JPML) seeking to have all federal cases alleging Femur Fractures consolidated into one multidistrict litigation for coordinated pre-trial proceedings. All federal cases involving allegations of Femur Fracture have been or will be transferred to a multidistrict litigation in the District of New Jersey (Femur Fracture MDL). In the only bellwether case tried to date in the Femur Fracture MDL, Glynn v. Merck, the jury returned a verdict in Merck’s favor. In addition, in June 2013, the Femur Fracture MDL court granted Merck’s motion for judgment as a matter of law in the Glynn case and held that the plaintiff’s failure to warn claim was preempted by federal law.

In August 2013, the Femur Fracture MDL court entered an order requiring plaintiffs in the Femur Fracture MDL to show cause why those cases asserting claims for a femur fracture injury that took place prior to September 14, 2010, should not be dismissed based on the court’s preemption decision in the Glynn case. Pursuant to the show cause order, in March 2014, the Femur Fracture MDL court dismissed with prejudice approximately 650 cases on preemption grounds. Plaintiffs in approximately 515 of those cases appealed that decision to the U.S. Court of Appeals for the Third Circuit (Third Circuit). In March 2017, the Third Circuit issued a decision reversing the Femur Fracture MDL court’s preemption ruling and remanding the appealed cases back to the Femur Fracture MDL court. Merck filed a petition for a writ of certiorari to the U.S. Supreme Court in August 2017 seeking review of the Third Circuit’s decision. In December 2017, the Supreme Court invited the Solicitor General to file a brief in the case expressing the views of the United States, and in May 2018, the Solicitor General submitted a brief stating that the Third Circuit’s decision was wrongly decided and recommended that the Supreme Court grant Merck’s cert petition. The Supreme Court granted Merck’s petition in June 2018, and an oral argument before the Supreme Court was held on January 7, 2019. On May 20, 2019, the Supreme Court issued its opinion and decided that the Third Circuit had incorrectly concluded that the issue of preemption should be resolved by a jury, and accordingly vacated the judgment of the Third Circuit and remanded the proceedings back to the Third Circuit to address the issue in a manner consistent with the Supreme Court’s opinion. The Third Circuit has requested, by August 6, 2019, ten page letters from each side addressing two specific issues central to the appeal.

Accordingly, as of June 30, 2019, 11 cases were actively pending in the Femur Fracture MDL, and approximately 1,060 cases have either been dismissed without prejudice or administratively closed pending final resolution by the Supreme Court of the appeal of the Femur Fracture MDL court’s preemption order.

As of June 30, 2019, approximately 2,555 cases alleging Femur Fractures have been filed in New Jersey state court and are pending before Judge James Hyland in Middlesex County. The parties selected an initial group of cases to be reviewed through fact discovery. Merck has continued to select additional cases to be reviewed through fact discovery from 2016 to the present.

As of June 30, 2019, approximately 275 cases alleging Femur Fractures have been filed and are pending in California state court. All of the Femur Fracture cases filed in California state court have been coordinated before a single judge in Orange County, California.

Additionally, there are four Femur Fracture cases pending in other state courts.

Discovery is presently stayed in the Femur Fracture MDL and in the state court cases in California. Merck intends to defend against these lawsuits.

Januvia/Janumet

As previously disclosed, Merck is a defendant in product liability lawsuits in the United States involving Januvia and/or Janumet. As of June 30, 2019, Merck is aware of approximately 1,350 product users alleging that Januvia and/or Janumet caused the development of pancreatic cancer and other injuries.

Most claims have been filed in multidistrict litigation before the U.S. District Court for the Southern District of California (MDL). Outside of the MDL, the majority of claims have been filed in coordinated proceedings before the Superior Court of California, County of Los Angeles (California State Court).

In November 2015, the MDL and California State Court-in separate opinions-granted summary judgment to defendants on grounds of federal preemption.

Plaintiffs appealed in both forums. In November 2017, the U.S. Court of Appeals for the Ninth Circuit vacated the judgment and remanded for further discovery, which is ongoing. In November 2018, the California state appellate court reversed and remanded on similar grounds. In March 2019, the parties in the MDL and the California coordinated proceeding agreed to coordinate and adopt a schedule for completing discovery on general causation and preemption issues and for renewing summary judgment and Daubert motions. Under the stipulated case management schedule, the filing deadline for Daubert and summary judgment motions will take place in May 2020.

As of June 30, 2019, seven product users have claims pending against Merck in state courts other than California, including Illinois. In June 2017, the Illinois trial court denied Merck’s motion for summary judgment based on federal preemption. Merck appealed, and the Illinois appellate court affirmed in December 2018. Merck filed a petition for leave to appeal to the Illinois Supreme Court in February 2019. In April 2019, the Illinois Supreme Court stayed consideration of the pending petition to appeal until the United States Supreme Court issued its opinion in Merck Sharp & Dohme Corp. v. Albrecht, No. 17-290. Merck filed the opinion in Albrecht with the Illinois Supreme Court in June 2019. The petition for leave to appeal remains pending.

In addition to the claims noted above, the Company has agreed to toll the statute of limitations for approximately 50 additional claims. The Company intends to continue defending against these lawsuits.

Governmental Proceedings

In the fall of 2018, the Company received a records subpoena from the U.S. Attorney’s Office for the District of Vermont (VT USAO) pursuant to Section 248 of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) relating to an investigation of potential health care offenses. The subpoena sought information relating to any actual or potential business relationship or arrangement Merck has had with Practice Fusion, Inc. (PFI), a cloud-based, electronic health records (EHR) company that was acquired by Allscripts in January 2018. The Company cooperated with the government and responded to that subpoena. Subsequently, on May 21, 2019, Merck received a second records subpoena from the VT USAO that broadened the government’s information request by seeking information relating to Merck’s relationship with any EHR company. Shortly thereafter, the VT USAO served a Civil Investigation Demand (CID) upon Merck similarly seeking information on the Company’s relationships with EHR vendors. The CID explains that the government is conducting a False Claims Act investigation concerning whether Merck and/or PFI submitted claims to federal healthcare programs that violate the Federal Anti-Kickback Statute. Merck is cooperating with the government’s investigation.

On April 15, 2019, Merck received a set of investigative interrogatories from the California Attorney General’s Office pursuant to its investigation of conduct and agreements that allegedly affected or delayed competition to Lantus in the insulin market. The interrogatories seek information concerning Merck’s development of an insulin glargine product, and its subsequent termination, as well as Merck’s patent litigation against Sanofi S.A. concerning Lantus and the resolution of that litigation. Merck is cooperating with the California Attorney General’s investigation.

As previously disclosed, the Company’s subsidiaries in China have, in the past, received and may continue to receive inquiries regarding their operations from various Chinese governmental agencies. Some of these inquiries may be related to matters involving other multinational pharmaceutical companies, as well as Chinese entities doing business with such companies. The Company’s policy is to cooperate with these authorities and to provide responses as appropriate.

As previously disclosed, from time to time, the Company receives inquiries and is the subject of preliminary investigation activities from competition and other governmental authorities in markets outside the United States. These authorities may include regulators, administrative authorities, and law enforcement and other similar officials, and these preliminary investigation activities may include site visits, formal or informal requests or demands for documents or materials, inquiries or interviews and similar matters. Certain of these preliminary inquiries or activities may lead to the commencement of formal proceedings. Should those proceedings be determined adversely to the Company, monetary fines and/or remedial undertakings may be required.

Commercial and Other Litigation

Zetia Antitrust Litigation

As previously disclosed, Merck, MSD, Schering Corporation and MSP Singapore Company LLC (collectively, the Merck Defendants) are defendants in putative class action and opt-out lawsuits filed in 2018 on behalf of direct and indirect purchasers of Zetia alleging violations of federal and state antitrust laws, as well as other state statutory and common law causes of action. The cases have been consolidated for pretrial purposes in a federal multidistrict litigation before Judge Rebecca Beach Smith in the Eastern District of Virginia. In December 2018, the court denied the Merck Defendants’ motions to dismiss or stay the direct purchaser putative class actions pending bilateral arbitration. On February 6, 2019, the magistrate judge issued a report and recommendation recommending that the district judge grant in part and deny in part defendants’ motions to dismiss on non-arbitration issues. On February 20, 2019, defendants and retailer opt-out plaintiffs filed objections to the report and recommendation. The parties await a decision from the district judge. Trial is currently scheduled to begin on September 30, 2020.

Merck KGaA Litigation

As previously disclosed, in January 2016, to protect its long-established brand rights in the United States, the Company filed a lawsuit against Merck KGaA, Darmstadt, Germany (KGaA), historically operating as the EMD Group in the United States, alleging it improperly uses the name “Merck” in the United States. KGaA has filed suit against the Company in France, the UK, Germany, Switzerland, Mexico, India, Australia, Singapore, Hong Kong, and China alleging, among other things, unfair competition, trademark infringement and/or corporate name infringement. In the UK, Australia, Singapore, Hong Kong, and India, KGaA also alleges breach of the parties’ coexistence agreement. The litigation is ongoing in the United States with no trial date set, and also ongoing in numerous jurisdictions outside of the United States; the Company is defending those suits in each jurisdiction.

Patent Litigation

From time to time, generic manufacturers of pharmaceutical products file abbreviated New Drug Applications (NDAs) with the U.S. Food and Drug Administration (FDA) seeking to market generic forms of the Company’s products prior to the expiration of relevant patents owned by the Company. To protect its patent rights, the Company may file patent infringement lawsuits against such generic companies. Similar lawsuits defending the Company’s patent rights may exist in other countries. The Company intends to vigorously defend its patents, which it believes are valid, against infringement by companies attempting to market products prior to the expiration of such patents. As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products and, with respect to products acquired through acquisitions, potentially significant intangible asset impairment charges.

Inegy — The patents protecting Inegy in Europe expired; supplemental protection certificates (SPCs) in many European countries expired in April 2019. The Company filed actions for patent infringement seeking damages against those companies that launched generic products before April 2019.

Januvia, Janumet, Janumet XR — In February 2019, Par Pharmaceutical, Inc. (Par Pharmaceutical) filed suit against the Company in the U.S. District Court for the District of New Jersey, seeking a declaratory judgment of invalidity of a patent owned by the Company covering certain salt and polymorphic forms of sitagliptin that expires in 2026. In response, the Company filed a patent infringement lawsuit in the U.S. District Court for the District of Delaware against Par Pharmaceutical and additional companies that also indicated an intent to market generic versions of Januvia, Janumet, and Janumet XR following expiration of key patent protection in 2022, but prior to the expiration of the later-granted patent owned by the Company covering certain salt and polymorphic forms of sitagliptin that expires in 2026, and a later granted patent owned by the Company covering the Janumet formulation which expires in 2028. Par Pharmaceutical dismissed its case in the U.S. District Court for the District of New Jersey against the Company and will litigate the action in the U.S. District Court for the District of Delaware. The Company filed a patent infringement lawsuit against Mylan Pharmaceuticals Inc. and Mylan Inc. (Mylan) in the Northern District of West Virginia. The Company has a pending, unopposed motion before the Judicial Panel of Multidistrict Litigation to transfer the Company’s lawsuit against Mylan to the U.S. District Court for the District of Delaware for coordinated and consolidated pretrial proceedings with the other cases pending in that district. The U.S. District Court for the District of Delaware has scheduled the lawsuits for a single 3-day trial on invalidity issues beginning October 4, 2021. The Court will schedule separate 1-day trials on infringement issues if necessary.

Other Litigation

There are various other pending legal proceedings involving the Company, principally product liability and intellectual property lawsuits. While it is not feasible to predict the outcome of such proceedings, in the opinion of the Company, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to the Company’s financial position, results of operations or cash flows either individually or in the aggregate.

Legal Defense Reserves

Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the significant factors considered in the review of these legal defense reserves are as follows: the actual costs incurred by the Company; the development of the Company’s legal defense strategy and structure in light of the scope of its litigation; the number of cases being brought against the Company; the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated litigation. The amount of legal defense reserves as of June 30, 2019 and December 31, 2018 of approximately $260 million and $245 million, respectively, represents the Company’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation; however, events such as additional trials and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by the Company. The Company will continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if, based upon the factors set forth, it believes it would be appropriate to do so.

XML

Equity

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Equity

Equity

	Three Months Ended June 30,
	Common Stock			Other Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock					Non- Controlling Interests			Total
($ and shares in millions except per share amounts)	Shares	Par Value											Shares		Cost
Balance at April 1, 2018	3,577	$	1,788	$	39,874		$	41,107		$	(5,060	)	885		$	(44,041	)	$	233		$	33,901
Net income attributable to Merck & Co., Inc.	—	—		—			1,707			—			—		—			—			1,707
Other comprehensive loss, net of taxes	—	—		—			—			(62		)	—		—			—			(62		)
Cash dividends declared on common stock ($0.48 per share)	—	—		—			(1,291		)	—			—		—			—			(1,291		)
Treasury stock shares purchased	—	—		—			—			—			27		(1,596		)	—			(1,596		)
Share-based compensation plans and other	—	—		(133		)	—			—			(5	)	236			—			103
Net income attributable to noncontrolling interests	—	—		—			—			—			—		—			9			9
Distributions attributable to noncontrolling interests	—	—		—			—			—			—		—			(5		)	(5		)
Balance at June 30, 2018	3,577	$	1,788	$	39,741		$	41,523		$	(5,122	)	907		$	(45,401	)	$	237		$	32,766
Balance at April 1, 2019	3,577	$	1,788	$	38,768		$	44,065		$	(5,346	)	994		$	(51,736	)	$	131		$	27,670
Net income attributable to Merck & Co., Inc.	—	—		—			2,670			—			—		—			—			2,670
Other comprehensive loss, net of taxes	—	—		—			—			(16		)	—		—			—			(16		)
Cash dividends declared on common stock ($0.55 per share)	—	—		—			(1,440		)	—			—		—			—			(1,440		)
Treasury stock shares purchased	—	—		1,000			—			—			24		(2,235		)	—			(1,235		)
Share-based compensation plans and other	—	—		(284		)	—			—			(8	)	401			—			117
Net loss attributable to noncontrolling interests	—	—		—			—			—			—		—			(26		)	(26		)
Other changes in noncontrolling ownership interests	—	—		—			—			—			—		—			(3		)	(3		)
Balance at June 30, 2019	3,577	$	1,788	$	39,484		$	45,295		$	(5,362	)	1,010		$	(53,570	)	$	102		$	27,737

	Six Months Ended June 30,
	Common Stock			Other Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock					Non- Controlling Interests			Total
($ and shares in millions except per share amounts)	Shares	Par Value											Shares		Cost
Balance at January 1, 2018	3,577	$	1,788	$	39,902		$	41,350		$	(4,910	)	880		$	(43,794	)	$	233		$	34,569
Net income attributable to Merck & Co., Inc.	—	—		—			2,443			—			—		—			—			2,443
Adoption of new accounting standards	—	—		—			322			(274		)	—		—			—			48
Other comprehensive income, net of taxes	—	—		—			—			62			—		—			—			62
Cash dividends declared on common stock ($0.96 per share)	—	—		—			(2,592		)	—			—		—			—			(2,592		)
Treasury stock shares purchased	—	—		—			—			—			37		(2,162		)	—			(2,162		)
Share-based compensation plans and other	—	—		(161		)	—			—			(10	)	555			—			394
Net income attributable to noncontrolling interests	—	—		—			—			—			—		—			14			14
Distributions attributable to noncontrolling interests	—	—		—			—			—			—		—			(10		)	(10		)
Balance at June 30, 2018	3,577	$	1,788	$	39,741		$	41,523		$	(5,122	)	907		$	(45,401	)	$	237		$	32,766
Balance at January 1, 2019	3,577	$	1,788	$	38,808		$	42,579		$	(5,545	)	985		$	(50,929	)	$	181		$	26,882
Net income attributable to Merck & Co., Inc.	—	—		—			5,585			—			—		—			—			5,585
Other comprehensive income, net of taxes	—	—		—			—			183			—		—			—			183
Cash dividends declared on common stock ($1.10 per share)	—	—		—			(2,869		)	—			—		—			—			(2,869		)
Treasury stock shares purchased	—	—		1,000			—			—			38		(3,325		)	—			(2,325		)
Share-based compensation plans and other	—	—		(324		)	—			—			(13	)	684			—			360
Net loss attributable to noncontrolling interests	—	—		—			—			—			—		—			(79		)	(79		)
Balance at June 30, 2019	3,577	$	1,788	$	39,484		$	45,295		$	(5,362	)	1,010		$	(53,570	)	$	102		$	27,737

On October 25, 2018, the Company entered into accelerated share repurchase (ASR) agreements with two third-party financial institutions (Dealers). Under the ASR agreements, Merck agreed to purchase $5 billion of Merck’s common stock, in total, with an initial delivery of 56.7 million shares of Merck’s common stock, based on the then-current market price, made by the Dealers to Merck, and payments of $5 billion made by Merck to the Dealers on October 29, 2018, which were funded with existing cash and investments, as well as short-term borrowings. The payments to the Dealers were recorded as reductions to shareholders’ equity, consisting of a $4 billion increase in treasury stock, which reflected the value of the initial 56.7 million shares received on October 29, 2018, and a $1 billion decrease in other-paid-in capital, which reflected the value of the stock held back by the Dealers pending final settlement. Upon settlement of the ASR agreements in April 2019, Merck received an additional 7.7 million shares as determined by the average daily volume weighted-average price of Merck’s common stock during the term of the ASR program, less a negotiated discount, bringing the total shares received by Merck under this program to 64.4 million. The receipt of the additional shares was reflected as an increase to treasury stock and an increase to other-paid-in capital in the second quarter of 2019.

XML

Share-Based Compensation Plans

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Share-Based Compensation Plans

Share-Based Compensation Plans

The Company has share-based compensation plans under which the Company grants restricted stock units (RSUs) and performance share units (PSUs) to certain management level employees. In addition, employees and non-employee directors may be granted options to purchase shares of Company common stock at the fair market value at the time of grant.

The following table provides the amounts of share-based compensation cost recorded in the Condensed Consolidated Statement of Income:

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Pretax share-based compensation expense	$	111		$	90		$	204		$	170
Income tax benefit	(15		)	(13		)	(28		)	(28		)
Total share-based compensation expense, net of taxes	$	96		$	77		$	176		$	142

During the first six months of 2019, the Company granted 6 million RSUs with a weighted-average grant date fair value of $76.31 per RSU and during the first six months of 2018 granted 7 million RSUs with a weighted-average grant date fair value of $58.15 per RSU. During the first six months of 2019, the Company granted 609 thousand PSUs with a weighted-average

grant date fair value of $90.50 per PSU and during the first six months of 2018 granted 855 thousand PSUs with a weighted-average grant date fair value of $56.70 per PSU.

During the first six months of 2019, the Company granted 3 million stock options with a weighted-average exercise price of $80.00 per option and during the first six months of 2018 granted 3 million stock options with a weighted-average exercise price of $57.72 per option. The weighted-average fair value of options granted during the first six months of 2019 and 2018 was $10.63 and $8.19 per option, respectively, and was determined using the following assumptions:

	Six Months Ended   June 30,
	2019		2018
Expected dividend yield	3.2	%	3.4	%
Risk-free interest rate	2.4	%	2.8	%
Expected volatility	18.7	%	19.1	%
Expected life (years)	5.9		6.1

At June 30, 2019, there was $800 million of total pretax unrecognized compensation expense related to nonvested stock options, RSU and PSU awards which will be recognized over a weighted-average period of 2.2 years. For segment reporting, share-based compensation costs are unallocated expenses.

XML

Pension and Other Postretirement Benefit Plans

6 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefit Plans

Pension and Other Postretirement Benefit Plans

The Company has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The net periodic benefit cost of such plans consisted of the following components: 

	Three Months Ended   June 30,												Six Months Ended   June 30,
	2019						2018						2019						2018
($ in millions)	U.S.			International			U.S.			International			U.S.			International			U.S.			International
Service cost	$	74		$	60		$	85		$	58		$	144		$	120		$	168		$	125
Interest cost	113			44			107			45			228			89			215			91
Expected return on plan assets	(205		)	(107		)	(211		)	(108		)	(411		)	(214		)	(425		)	(221		)
Amortization of unrecognized prior service credit	(12		)	(3		)	(13		)	(3		)	(25		)	(6		)	(25		)	(7		)
Net loss amortization	35			16			56			21			70			31			112			43
Termination benefits	3			1			7			—			5			1			17			—
Curtailments	—			—			5			(1		)	1			—			3			(1		)
Settlements	—			—			—			4			—			—			1			4
	$	8		$	11		$	36		$	16		$	12		$	21		$	66		$	34

The Company provides medical benefits, principally to its eligible U.S. retirees and similar benefits to their dependents, through its other postretirement benefit plans. The net credit of such plans consisted of the following components: 

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Service cost	$	12		$	14		$	24		$	28
Interest cost	18			18			35			35
Expected return on plan assets	(18		)	(21		)	(36		)	(41		)
Amortization of unrecognized prior service credit	(21		)	(21		)	(43		)	(42		)
Termination benefits	—			1			—			2
Curtailments	(1		)	(2		)	(1		)	(6		)
	$	(10	)	$	(11	)	$	(21	)	$	(24	)

In connection with restructuring actions (see Note 4), termination charges were recorded on pension and other postretirement benefit plans related to expanded eligibility for certain employees exiting Merck. Also, in connection with these restructuring actions, curtailments and settlements were recorded on pension and other postretirement benefit plans as reflected in the tables above.

The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 12), with the exception of certain amounts for termination benefits, curtailments and settlements, which are recorded in Restructuring costs if the event giving rise to the termination benefits, curtailment or settlement is related to restructuring actions as noted above.

XML

Other (Income) Expense, Net

6 Months Ended

Jun. 30, 2019

Other Income and Expenses [Abstract]

Other (Income) Expense, Net

Other (Income) Expense, Net

Other (income) expense, net, consisted of: 

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Interest income	$	(75	)	$	(81	)	$	(164	)	$	(165	)
Interest expense	233			194			442			379
Exchange losses	27			71			128			77
Income from investments in equity securities, net (1)	(58		)	(153		)	(32		)	(178		)
Net periodic defined benefit plan (credit) cost other than service cost	(140		)	(130		)	(281		)	(265		)
Other, net	153			51			234			(188		)
	$	140		$	(48	)	$	327		$	(340	)

⁽¹⁾  Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investments funds.

The higher exchange losses in the first six months of 2019 reflect losses on forward exchange contracts related to the acquisition of Antelliq.

Other, net (as reflected in the table above) in the second quarter and first six months of 2019 includes $78 million and $162 million of goodwill impairment charges related to certain businesses in the Healthcare Services segment. Other, net in the first six months of 2018 includes a $115 million gain on the settlement of certain patent litigation.

Interest paid for the six months ended June 30, 2019 and 2018 was $356 million and $341 million, respectively.

XML

Taxes on Income

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Taxes on Income

Taxes on Income

The effective income tax rates of 18.9% and 17.8% for the second quarter of 2019 and 2018, respectively, and 13.0% and 28.4% for the first six months of 2019 and 2018, respectively, reflect the impacts of acquisition and divestiture-related costs and restructuring costs, partially offset by the beneficial impact of foreign earnings. In addition, the effective income tax rate for the first six months of 2019 reflects the favorable impact of a $360 million net tax benefit related to the settlement of certain federal income tax matters (discussed below). The effective income tax rate for the first six months of 2018 reflects the unfavorable impact of a $1.4 billion pretax charge recorded in connection with the formation of a collaboration with Eisai for which no tax benefit was recognized.

In the first quarter of 2019, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2012-2014 U.S. federal income tax returns. As a result, the Company was required to make a payment of $107 million. The Company’s reserves for unrecognized tax benefits for the years under examination exceeded the adjustments relating to this examination period and therefore the Company recorded a $360 million net tax benefit in the first six months of 2019. This net benefit reflects reductions in reserves for unrecognized tax benefits for tax positions relating to the years that were under examination, partially offset by additional reserves for tax positions not previously reserved for.

XML

Earnings Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The calculations of earnings per share are as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ and shares in millions except per share amounts)	2019		2018		2019		2018
Net income attributable to Merck & Co., Inc.	$	2,670	$	1,707	$	5,585	$	2,443
Average common shares outstanding	2,574		2,683		2,579		2,689
Common shares issuable (1)	14		13		17		13
Average common shares outstanding assuming dilution	2,588		2,696		2,596		2,702
Basic earnings per common share attributable to Merck & Co., Inc. common shareholders	$	1.04	$	0.64	$	2.17	$	0.91
Earnings per common share assuming dilution attributable to Merck & Co., Inc. common shareholders	$	1.03	$	0.63	$	2.15	$	0.90

⁽¹⁾  Issuable primarily under share-based compensation plans.

For the second quarter of 2019 and 2018, 3 million and 13 million, respectively, and for the first six months of 2019 and 2018, 4 million and 15 million, respectively, of common shares issuable under share-based compensation plans were excluded from the computation of earnings per common share assuming dilution because the effect would have been antidilutive.

XML

Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

Changes in AOCI by component are as follows:

	Three Months Ended June 30,
($ in millions)	Derivatives				Investments				Employee Benefit Plans				Cumulative Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance April 1, 2018, net of taxes	$	(201	)		$	(167	)		$	(3,095	)		$	(1,597	)	$	(5,060	)
Other comprehensive income (loss) before reclassification adjustments, pretax	265				(17		)		(1		)		(301		)	(54		)
Tax	(56		)		—				1				(60		)	(115		)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	209				(17		)		—				(361		)	(169		)
Reclassification adjustments, pretax	72			(1)	20			(2)	40			(3)	—			132
Tax	(15		)		—				(10		)		—			(25		)
Reclassification adjustments, net of taxes	57				20				30				—			107
Other comprehensive income (loss), net of taxes	266				3				30				(361		)	(62		)
Balance June 30, 2018, net of taxes	$	65			$	(164	)		$	(3,065	)		$	(1,958	)	$	(5,122	)
Balance April 1, 2019, net of taxes	$	118			$	4			$	(3,541	)		$	(1,927	)	$	(5,346	)
Other comprehensive income (loss) before reclassification adjustments, pretax	10				55				—				(25		)	40
Tax	(2		)		—				—				6			4
Other comprehensive income (loss) before reclassification adjustments, net of taxes	8				55				—				(19		)	44
Reclassification adjustments, pretax	(76		)	(1)	(11		)	(2)	14			(3)	—			(73		)
Tax	16				—				(3		)		—			13
Reclassification adjustments, net of taxes	(60		)		(11		)		11				—			(60		)
Other comprehensive income (loss), net of taxes	(52		)		44				11				(19		)	(16		)
Balance June 30, 2019, net of taxes	$	66			$	48			$	(3,530	)		$	(1,946	)	$	(5,362	)

	Six Months Ended June 30,
($ in millions)	Derivatives				Investments				Employee Benefit Plans				Cumulative Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance January 1, 2018, net of taxes	$	(108	)		$	(61	)		$	(2,787	)		$	(1,954	)	$	(4,910	)
Other comprehensive income (loss) before reclassification adjustments, pretax	84				(133		)		(2		)		18			(33		)
Tax	(18		)		1				4				(122		)	(135		)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	66				(132		)		2				(104		)	(168		)
Reclassification adjustments, pretax	164			(1)	36			(2)	81			(3)	—			281
Tax	(34		)		—				(17		)		—			(51		)
Reclassification adjustments, net of taxes	130				36				64				—			230
Other comprehensive income (loss), net of taxes	196				(96		)		66				(104		)	62
Adoption of ASU 2018-02	(23		)		1				(344		)		100			(266		)
Adoption of ASU 2016-01	—				(8		)		—				—			(8		)
Balance June 30, 2018, net of taxes	$	65			$	(164	)		$	(3,065	)		$	(1,958	)	$	(5,122	)
Balance January 1, 2019, net of taxes	$	166			$	(78	)		$	(3,556	)		$	(2,077	)	$	(5,545	)
Other comprehensive income (loss) before reclassification adjustments, pretax	(3		)		131				(1		)		131			258
Tax	1				—				6				—			7
Other comprehensive income (loss) before reclassification adjustments, net of taxes	(2		)		131				5				131			265
Reclassification adjustments, pretax	(124		)	(1)	(5		)	(2)	28			(3)	—			(101		)
Tax	26				—				(7		)		—			19
Reclassification adjustments, net of taxes	(98		)		(5		)		21				—			(82		)
Other comprehensive income (loss), net of taxes	(100		)		126				26				131			183
Balance June 30, 2019, net of taxes	$	66			$	48			$	(3,530	)		$	(1,946	)	$	(5,362	)

⁽¹⁾  Relates to foreign currency cash flow hedges that were reclassified from AOCI to Sales.

⁽²⁾  Represents net realized (gains) losses on the sales of available-for-sale debt securities that were reclassified from AOCI to Other (income) expense, net.

⁽³⁾ 

Includes net amortization of prior service cost and actuarial gains and losses included in net periodic benefit cost (see Note 11).

XML

Segment Reporting

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company’s operations are principally managed on a products basis and include four operating segments, which are the Pharmaceutical, Animal Health, Healthcare Services and Alliances segments. The Pharmaceutical and Animal Health segments are the only reportable segments.

The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. The Company sells these human health vaccines primarily to physicians, wholesalers, physician distributors and government entities. A large component of pediatric and adolescent vaccine sales are made to the U.S. Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the U.S. government. Additionally, the Company sells vaccines to the Federal government for placement into vaccine stockpiles. During 2019, as a result of changes to the Company’s internal reporting structure, certain costs that were previously included in the Pharmaceutical segment are now being included as part of non-segment expenses within Merck Research Laboratories. Prior period Pharmaceutical segment profits have been recast to reflect these changes on a comparable basis.

The Animal Health segment discovers, develops, manufactures and markets animal health products, including pharmaceutical and vaccine products, for the prevention, treatment and control of disease in all major livestock and companion animal species, which the Company sells to veterinarians, distributors and animal producers.

The Healthcare Services segment provides services and solutions that focus on engagement, health analytics and clinical services to improve the value of care delivered to patients.

The Alliances segment primarily includes activity from the Company’s relationship with AstraZeneca LP related to sales of Nexium and Prilosec, which concluded in 2018.

Sales of the Company’s products were as follows:

	Three Months Ended June 30,															Six Months Ended June 30,
	2019							2018								2019							2018
($ in millions)	U.S.			Int’l		Total		U.S.			Int’l			Total		U.S.			Int’l		Total		U.S.			Int’l			Total
Pharmaceutical:
Oncology
Keytruda	$	1,498		$	1,136	$	2,634	$	959		$	707		$	1,667	$	2,782		$	2,121	$	4,903	$	1,797		$	1,333		$	3,131
Emend	67			54		121		89			59			148		130			107		237		168			105			273
Alliance revenue - Lynparza	66			45		111		31			13			44		116			74		190		55			22			76
Alliance revenue - Lenvima	54			43		97		19			16			35		104			67		171		19			16			35
Vaccines
Gardasil/Gardasil 9	456			430		886		302			306			608		818			906		1,724		682			586			1,269
ProQuad/M-M-R II/Varivax	500			174		675		356			70			426		843			328		1,171		668			150			818
RotaTeq	104			68		172		99			57			156		258			125		383		250			99			349
Pneumovax 23	123			47		170		122			71			193		248			107		355		234			137			372
Vaqta	38			20		58		42			23			65		67			39		105		60			42			101
Hospital Acute Care
Bridion	129			149		278		95			145			240		248			285		533		175			269			444
Noxafil	100			93		193		87			100			188		191			192		383		168			195			363
Cubicin	22			45		67		48			46			94		64			91		155		95			97			192
Invanz	18			60		78		87			63			149		31			118		150		177			123			300
Primaxin	—			70		71		—			68			68		1			129		130		5			135			140
Cancidas	3			64		67		4			83			87		4			125		129		7			171			178
Immunology
Simponi	—			214		214		—			233			233		—			422		422		—			464			464
Remicade	—			98		98		—			157			157		—			221		221		—			324			324
Neuroscience
Belsomra	21			55		76		29			42			71		45			98		143		52			73			125
Virology
Isentress/Isentress HD	94			153		247		132			174			305		202			300		502		260			326			586
Zepatier	39			68		108		(10		)	123			113		72			149		221		(10		)	253			243
Cardiovascular
Zetia	6			150		156		8			218			226		6			290		296		25			505			531
Vytorin	3			73		76		3			152			155		6			167		174		11			311			322
Atozet	—			92		92		—			101			101		—			186		186		—			174			174
Adempas	—			104		104		—			75			75		—			194		194		—			143			143
Diabetes
Januvia	471			437		908		503			446			949		855			877		1,732		968			862			1,829
Janumet	166			366		533		209			377			585		333			730		1,063		401			729			1,129
Women’s Health
NuvaRing	206			34		240		187			49			236		391			68		459		357			95			452
Implanon/Nexplanon	136			48		183		114			60			174		285			98		382		242			106			348
Diversified Brands
Singulair	8			153		160		5			180			185		13			338		352		11			350			360
Cozaar/Hyzaar	6			103		109		7			118			125		10			202		213		14			231			245
Nasonex	(1		)	73		72		—			81			81		(2		)	170		168		2			201			203
Arcoxia	—			75		75		—			84			84		—			149		149		—			166			166
Follistim AQ	24			39		63		27			43			70		53			67		121		56			81			138
Other pharmaceutical (1)	401			869		1,268		287			902			1,189		759			1,650		2,406		608			1,770			2,378
Total Pharmaceutical segment sales	4,758			5,702		10,460		3,841			5,442			9,282		8,933			11,190		20,123		7,557			10,644			18,201
Animal Health:
Livestock	145			526		671		107			526			633		261			1,021		1,282		231			1,055			1,286
Companion Animals	190			263		453		204			253			457		367			500		867		387			482			869
Total Animal Health segment sales	335			789		1,124		311			779			1,090		628			1,521		2,149		618			1,537			2,155
Other segment sales (2)	47			—		48		56			—			56		86			—		87		140			—			140
Total segment sales	5,140			6,491		11,632		4,208			6,221			10,428		9,647			12,711		22,359		8,315			12,181			20,496
Other (3)	4			125		128		54			(18		)	37		12			206		216		80			(74		)	6
	$	5,144		$	6,616	$	11,760	$	4,262		$	6,203		$	10,465	$	9,659		$	12,917	$	22,575	$	8,395		$	12,107		$	20,502

U.S. plus international may not equal total due to rounding.

⁽¹⁾  Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.

⁽²⁾  Represents the non-reportable segments of Healthcare Services and Alliances.

⁽³⁾  Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales.

Product sales are recorded net of the provision for discounts, including chargebacks, which are customer discounts that occur when a contracted customer purchases through an intermediary wholesale purchaser, and rebates that are owed based upon definitive contractual agreements or legal requirements with private sector and public sector (Medicaid and Medicare Part D) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. These discounts, in the aggregate, reduced U.S. sales by $2.9 billion and $2.8 billion for the three months ended June 30, 2019 and 2018, respectively, and by $5.5 billion and $5.2 billion for the six months ended June 30, 2019 and 2018, respectively.

Consolidated sales by geographic area where derived are as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
United States	$	5,144	$	4,262	$	9,659	$	8,395
Europe, Middle East and Africa	3,163		3,144		6,265		6,334
Japan	921		855		1,720		1,592
China	763		559		1,509		1,045
Asia Pacific (other than Japan and China)	716		791		1,461		1,543
Latin America	658		594		1,219		1,126
Other	395		260		742		467
	$	11,760	$	10,465	$	22,575	$	20,502

A reconciliation of segment profits to Income before taxes is as follows:

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Segment profits:
Pharmaceutical segment	$	7,115		$	5,975		$	13,690		$	11,914
Animal Health segment	405			450			820			864
Other segments	(2		)	26			—			88
Total segment profits	7,518			6,451			14,510			12,866
Other profits (losses)	94			(2		)	124			(89		)
Unallocated:
Interest income	75			81			164			165
Interest expense	(233		)	(194		)	(442		)	(379		)
Depreciation and amortization	(427		)	(332		)	(786		)	(682		)
Research and development	(2,093		)	(2,190		)	(3,935		)	(5,307		)
Amortization of purchase accounting adjustments	(378		)	(732		)	(775		)	(1,464		)
Restructuring costs	(59		)	(228		)	(212		)	(323		)
Other unallocated, net	(1,238		)	(768		)	(2,322		)	(1,355		)
	$	3,259		$	2,086		$	6,326		$	3,432

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as selling, general and administrative expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, research and development expenses incurred in Merck Research Laboratories, the Company’s research and development division that focuses on human health-related activities, or general and administrative expenses, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. In addition, costs related to restructuring activities, as well as the amortization of purchase accounting adjustments are not allocated to segments.

Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits related to third-party manufacturing sales.

Other unallocated, net includes expenses from corporate and manufacturing cost centers, goodwill and other intangible asset impairment charges, gains or losses on sales of businesses, expense or income related to changes in the estimated fair value of liabilities for contingent consideration, and other miscellaneous income or expense items.

XML

Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Merck & Co., Inc. (Merck or the Company) have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements are not included herein. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in Merck’s Form 10-K filed on February 27, 2019.

The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. In the Company’s opinion, all adjustments necessary for a fair statement of these interim statements have been included and are of a normal and recurring nature. Certain reclassifications have been made to prior year amounts to conform to the current presentation.

Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

In February 2016, the FASB issued new accounting guidance for the accounting and reporting of leases (ASU 2016-02) and subsequently issued several updates to the new guidance (ASC 842 or new guidance). The new guidance requires that lessees recognize a right-of-use asset and a lease liability for each of its leases (other than leases that meet the definition of a short-term lease). Leases will be classified as either operating or finance. Operating leases will result in straight-line expense in the income statement (similar to previous operating leases), while finance leases will result in more expense being recognized in the earlier years of the lease term (similar to previous capital leases). The Company adopted the new standard on January 1, 2019 using a modified retrospective approach. Merck elected the transition method that allows for application of the standard at the adoption date rather than at the beginning of the earliest comparative period presented in the financial statements. The Company also elected available practical expedients. Upon adoption, the Company recognized $1.1 billion of additional assets and related liabilities on its consolidated balance sheet (see Note 7). The adoption of the new guidance did not impact the Company’s consolidated statements of income or cash flows.

Recently Issued Accounting Standards Not Yet Adopted

In June 2016, the FASB issued amended guidance on the accounting for credit losses on financial instruments. The guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The new guidance is effective for interim and annual periods beginning in 2020, with earlier application permitted in 2019, including adoption in any interim period. The new guidance is to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings in the beginning of the period of adoption. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In April 2018, the FASB issued new guidance on the accounting for costs incurred to implement a cloud computing arrangement that is considered a service arrangement. The new guidance requires the capitalization of such costs, aligning it with the accounting for costs associated with developing or obtaining internal-use software. The new guidance is effective for interim and annual periods beginning in 2020. Early adoption is permitted, including adoption in any interim period. Prospective adoption for eligible costs incurred on or after the date of adoption or retrospective adoption is permitted. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

In November 2018, the FASB issued new guidance for collaborative arrangements intended to reduce diversity in practice by clarifying whether certain transactions between collaborative arrangement participants should be accounted for under revenue recognition guidance (ASC 606). The new guidance is effective for interim and annual periods beginning in 2020. Early adoption is permitted, including adoption in any interim period. The new guidance is to be applied on a retrospective basis through a cumulative-effect adjustment directly to retained earnings. The Company does not anticipate the adoption of this standard will have a material effect on its consolidated financial statements.

Legal Defense Costs

Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.

XML

Acquisitions, Research Collaborations and License Agreements (Tables)

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Fair Value of Assets Acquired and Liabilities Assumed

The estimated fair value of assets acquired and liabilities assumed from Antelliq is as follows:

($ in millions)	April 1, 2019
Cash and cash equivalents	$	31
Accounts receivable	73
Inventories	97
Property, plant and equipment	62
Identifiable intangible assets (useful lives ranging from 18-24 years) (1)	2,689
Deferred income tax liabilities	(563		)
Other assets and liabilities, net	(81		)
Total identifiable net assets	2,308
Goodwill (2)	1,343
Consideration transferred	$	3,651

⁽¹⁾  The estimated fair values of identifiable intangible assets relate primarily to trade names and were determined using an income approach. The future net cash flows were discounted to present value utilizing a discount rate of 11.5%. Actual cash flows are likely to be different than those assumed.

⁽²⁾  The goodwill recognized is largely attributable to anticipated synergies expected to arise after the acquisition and was allocated to the Animal Health segment. The goodwill is not deductible for tax purposes.

XML

Collaborative Arrangements (Tables)

6 Months Ended

Jun. 30, 2019

Collaborative Arrangements [Abstract]

Collaboration Arrangements

Summarized financial information related to this collaboration is as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
Alliance revenue	$	97	$	35	$	171	$	35
Cost of sales (1)	23		1		74		1
Selling, general and administrative	19		2		38		2
Research and development (2)	62		36		109		1,436
($ in millions)					June 30, 2019		December 31, 2018
Receivables from Eisai included in Other current assets					$	98	$	71
Payables to Eisai included in Accrued and other current liabilities (3)					709		375
Payables to Eisai included in Other Noncurrent Liabilities (3)					125		543

⁽¹⁾ Represents amortization of capitalized milestone payments.

⁽²⁾ Amount for the first six months of 2018 includes the upfront payment and future option payments.

⁽³⁾ Includes accrued milestone and option payments.

Summarized financial information related to this collaboration is as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
Alliance revenue	$	111	$	44	$	190	$	76
Cost of sales (1)	73		24		92		36
Selling, general and administrative	33		9		59		16
Research and development	33		42		78		71
($ in millions)					June 30, 2019		December 31, 2018
Receivables from AstraZeneca included in Other current assets					$	105	$	52
Payables to AstraZeneca included in Accrued and other current liabilities (2)					605		405
Payables to AstraZeneca included in Other Noncurrent Liabilities (3)					300		250

⁽¹⁾ Represents amortization of capitalized milestone payments.

⁽²⁾ Includes accrued milestone and license option payments.

Summarized financial information related to this collaboration is as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
Net product sales recorded by Merck	$	53	$	47	$	100	$	90
Merck’s profit share from sales in Bayer’s marketing territories	51		28		94		53
Total sales	104		75		194		143
Cost of sales (1)	29		132		58		159
Selling, general and administrative	11		10		20		17
Research and development	32		28		62		56
($ in millions)					June 30, 2019		December 31, 2018
Receivables from Bayer included in Other current assets					$	41	$	32
Payables to Bayer included in Other Noncurrent Liabilities (2)					375		375

⁽¹⁾ Includes amortization of intangible assets.

⁽²⁾ Represents accrued milestone payment.

XML

Restructuring (Tables)

6 Months Ended

Jun. 30, 2019

Restructuring and Related Activities [Abstract]

Charges Related to Restructuring Program Activities by Type of Cost

The following tables summarize the charges related to restructuring program activities by type of cost:

	Three Months Ended June 30, 2019								Six Months Ended June 30, 2019
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation		Other		Total
Cost of sales	$	—	$	64	$	1	$	65	$	—	$	98	$	1	$	99
Selling, general and administrative	—		32		—		32		—		32		—		32
Research and development	—		2		1		3		—		2		1		3
Restructuring costs	25		—		34		59		153		—		59		212
	$	25	$	98	$	36	$	159	$	153	$	132	$	61	$	346

	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation			Other		Total
Cost of sales	$	—	$	—	$	3	$	3	$	—	$	—		$	9	$	9
Selling, general and administrative	—		—		1		1		—		1			1		2
Research and development	—		—		3		3		—		(3		)	8		5
Restructuring costs	200		—		28		228		255		—			68		323
	$	200	$	—	$	35	$	235	$	255	$	(2	)	$	86	$	339

Charges and Spending Relating to Restructuring Activities by Program

The following table summarizes the charges and spending relating to restructuring program activities for the six months ended June 30, 2019:

($ in millions)	Separation Costs			Accelerated Depreciation			Other			Total
Restructuring reserves January 1, 2019	$	443		$	—		$	91		$	534
Expense	153			132			61			346
(Payments) receipts, net	(126		)	—			(77		)	(203		)
Non-cash activity	—			(132		)	(2		)	(134		)
Restructuring reserves June 30, 2019 (1)	$	470		$	—		$	73		$	543

⁽¹⁾ 

The remaining cash outlays are expected to be substantially completed by the end of 2023.

XML

Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Effect of Net Investment Hedges on OCI and the Consolidated Statement of Income

The effects of the Company’s net investment hedges on OCI and the Consolidated Statement of Income are shown below:

	Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1)											Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing
	Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2019		2018			2019			2018			2019			2018			2019			2018
Net Investment Hedging Relationships
Foreign exchange contracts	$	17	$	(12	)	$	7		$	(14	)	$	(8	)	$	(3	)	$	(15	)	$	(3	)
Euro-denominated notes	28		(271		)	(2		)	(92		)	—			—			—			—

⁽¹⁾ No amounts were reclassified from AOCI into income related to the sale of a subsidiary.

Summary of Interest Rate Swaps Held

At June 30, 2019, the Company was a party to 19 pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of fixed-rate notes in which the notional amounts match the amount of the hedged fixed-rate notes as detailed in the table below.

	June 30, 2019
($ in millions)	Par Value of Debt	Number of Interest Rate Swaps Held	Total Swap Notional Amount
1.85% notes due 2020	1,250	5	1,250
3.875% notes due 2021	1,150	5	1,150
2.40% notes due 2022	1,000	4	1,000
2.35% notes due 2022	1,250	5	1,250

Amounts Recorded on Balance Sheet Related to Fair Value Hedges

The table below presents the location of amounts recorded on the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges:

	Carrying Amount of Hedged Liabilities				Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount
($ in millions)	June 30, 2019		December 31, 2018		June 30, 2019			December 31, 2018
Balance Sheet Line Item in which Hedged Item is Included
Loans payable and current portion of long-term debt	$	1,244	$	—	$	(6	)	$	—
Long-Term Debt	3,406		4,560		11			(82		)

Fair Value of Derivatives on a Gross Basis Segregated between those Derivatives that are Designated as Hedging Instruments and those that are Not Designated as Hedging Instruments

Presented in the table below is the fair value of derivatives on a gross basis segregated between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:

		June 30, 2019						December 31, 2018
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
($ in millions)	Balance Sheet Caption	Asset		Liability				Asset		Liability
Derivatives Designated as Hedging Instruments
Interest rate swap contracts	Other Assets	$	14	$	—	$	2,150	$	—	$	—	$	—
Interest rate swap contracts	Accrued and other current liabilities	—		6		1,250		—		—		—
Interest rate swap contracts	Other Noncurrent Liabilities	—		2		1,250		—		81		4,650
Foreign exchange contracts	Other current assets	168		—		6,389		263		—		6,222
Foreign exchange contracts	Other Assets	49		—		2,790		75		—		2,655
Foreign exchange contracts	Accrued and other current liabilities	—		13		1,252		—		7		774
Foreign exchange contracts	Other Noncurrent Liabilities	—		—		—		—		1		89
		$	231	$	21	$	15,081	$	338	$	89	$	14,390
Derivatives Not Designated as Hedging Instruments
Foreign exchange contracts	Other current assets	$	70	$	—	$	6,665	$	116	$	—	$	5,430
Foreign exchange contracts	Accrued and other current liabilities	—		63		4,982		—		71		9,922
		$	70	$	63	$	11,647	$	116	$	71	$	15,352
		$	301	$	84	$	26,728	$	454	$	160	$	29,742

Information on Derivative Positions Subject to Master Netting Arrangements as if they were Presented on a Net Basis

The following table provides information on the Company’s derivative positions subject to these master netting arrangements as if they were presented on a net basis, allowing for the right of offset by counterparty and cash collateral exchanged per the master agreements and related credit support annexes:

	June 30, 2019						December 31, 2018
($ in millions)	Asset			Liability			Asset			Liability
Gross amounts recognized in the consolidated balance sheet	$	301		$	84		$	454		$	160
Gross amounts subject to offset in master netting arrangements not offset in the consolidated balance sheet	(69		)	(69		)	(121		)	(121		)
Cash collateral received	(32		)	—			(107		)	—
Net amounts	$	200		$	15		$	226		$	39

Location and Amount of Pretax (Gains) Losses of Derivatives

The table below provides information regarding the location and amount of pretax (gains) losses of derivatives designated in fair value or cash flow hedging relationships:

	Sales					Other (income) expense, net (1)					Other comprehensive income (loss)						Sales				Other (income) expense, net (1)						Other comprehensive income (loss)
	Three Months Ended June 30,					Three Months Ended June 30,					Three Months Ended June 30,						Six Months Ended June 30,				Six Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2019		2018			2019			2018		2019			2018			2019	2018			2019			2018			2019			2018
Financial Statement Line Items in which Effects of Fair Value or Cash Flow Hedges are Recorded	$	11,760	$	10,465		$	140		(48	)	$	(16	)	$	(62	)	22,575	$	20,502		$	327		$	(340	)	$	183		$	62
(Gain) loss on fair value hedging relationships
Interest rate swap contracts
Hedged items	—		—			55			(15	)	—			—			—	—			88			(77		)	—			—
Derivatives designated as hedging instruments	—		—			(45		)	22		—			—			—	—			(68		)	84			—			—
Impact of cash flow hedging relationships
Foreign exchange contracts
Amount of income (loss) recognized in OCI on derivatives	—		—			—			—		10			264			—	—			—			—			(2		)	84
Increase (decrease) in Sales as a result of AOCI reclassifications	75		(73		)	—			—		(75		)	73			119	(166		)	—			—			(119		)	166
Interest rate contracts
Amount of gain recognized in Other (income) expense, net on derivatives	—		—			(1		)	(1	)	—			—			—	—			(2		)	(2		)	—			—
Amount of loss recognized in OCI on derivatives	—		—			—			—		(1		)	(1		)	—	—			—			—			(5		)	(2		)

⁽¹⁾ Interest expense is a component of Other (income) expense, net.

Income Statement Effects of Derivatives Not Designated as Hedging Instruments

The table below provides information regarding the income statement effects of derivatives not designated as hedging instruments:

		Amount of Derivative Pretax (Gain) Loss Recognized in Income
		Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	Income Statement Caption	2019			2018			2019		2018
Derivatives Not Designated as Hedging Instruments
Foreign exchange contracts (1)	Other (income) expense, net	$	2		$	(195	)	$	120	$	(167	)
Foreign exchange contracts (2)	Sales	(6		)	(14		)	4		(5		)

⁽¹⁾ These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates.

⁽²⁾ These derivative contracts serve as economic hedges of forecasted transactions.

Information on Investments in Debt and Equity Securities

Information on investments in debt and equity securities is as follows:

	June 30, 2019									December 31, 2018
	Amortized Cost		Gross Unrealized					Fair Value		Amortized Cost		Gross Unrealized					Fair Value
($ in millions)			Gains		Losses							Gains		Losses
Corporate notes and bonds	$	2,666	$	36	$	(2	)	$	2,700	$	4,985	$	3	$	(68	)	$	4,920
Asset-backed securities	789		4		(1		)	792		1,285		1		(11		)	1,275
U.S. government and agency securities	575		10		—			585		895		2		(5		)	892
Foreign government bonds	41		—		—			41		167		—		(1		)	166
Mortgage-backed securities	5		—		—			5		8		—		—			8
Total debt securities	$	4,076	$	50	$	(3	)	$	4,123	$	7,340	$	6	$	(85	)	$	7,261
Publicly traded equity securities (1)								756									456
Total debt and publicly traded equity securities								$	4,879								$	7,717

⁽¹⁾ Unrealized net (losses) gains recognized in Other (income) expense, net on equity securities still held at June 30, 2019 were $(39) million and $7 million, for the second quarter of 2019 and 2018, respectively, and were $75 million and $50 million for the first six months of 2019 and 2018, respectively.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements Using								Fair Value Measurements Using
	Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
($ in millions)	June 30, 2019								December 31, 2018
Assets
Investments
Corporate notes and bonds	$	—	$	2,660	$	—	$	2,660	$	—	$	4,835	$	—	$	4,835
Asset-backed securities (1)	—		788		—		788		—		1,253		—		1,253
U.S. government and agency securities	—		508		—		508		—		731		—		731
Foreign government bonds	—		41		—		41		—		166		—		166
Publicly traded equity securities	228		—		—		228		147		—		—		147
	228		3,997		—		4,225		147		6,985		—		7,132
Other assets (2)
U.S. government and agency securities	58		19		—		77		55		106		—		161
Corporate notes and bonds	—		40		—		40		—		85		—		85
Mortgage-backed securities	—		5		—		5		—		8		—		8
Asset-backed securities (1)	—		4		—		4		—		22		—		22
Publicly traded equity securities	528		—		—		528		309		—		—		309
	586		68		—		654		364		221		—		585
Derivative assets (3)
Purchased currency options	—		158		—		158		—		213		—		213
Forward exchange contracts	—		129		—		129		—		241		—		241
Interest rate swaps	—		14		—		14		—		—		—		—
	—		301		—		301		—		454		—		454
Total assets	$	814	$	4,366	$	—	$	5,180	$	511	$	7,660	$	—	$	8,171
Liabilities
Other liabilities
Contingent consideration	$	—	$	—	$	753	$	753	$	—	$	—	$	788	$	788
Derivative liabilities (3)
Forward exchange contracts	—		73		—		73		—		74		—		74
Interest rate swaps	—		8		—		8		—		81		—		81
Written currency options	—		3		—		3		—		5		—		5
	—		84		—		84		—		160		—		160
Total liabilities	$	—	$	84	$	753	$	837	$	—	$	160	$	788	$	948

⁽¹⁾  Primarily all of the asset-backed securities are highly-rated (Standard & Poor’s rating of AAA and Moody’s Investors Service rating of Aaa), secured primarily by auto loan, credit card and student loan receivables, with weighted-average lives of primarily 5 years or less.

⁽²⁾  Investments included in other assets are restricted as to use, primarily for the payment of benefits under employee benefit plans.

⁽³⁾ 

The fair value determination of derivatives includes the impact of the credit risk of counterparties to the derivatives and the Company’s own credit risk, the effects of which were not significant.

Information About the Changes in Liabilities for Contingent Consideration

Summarized information about the changes in liabilities for contingent consideration is as follows:

	Six Months Ended June 30,
($ in millions)	2019			2018
Fair value January 1	$	788		$	935
Changes in estimated fair value (1)	50			122
Additions	—			8
Payments	(85		)	(235		)
Fair value June 30 (2)	$	753		$	830

⁽¹⁾ Recorded in Cost of sales, Research and development expenses, and Other (income) expense, net. Includes cumulative translation adjustments.

⁽²⁾ Balance at June 30, 2019 includes $114 million recorded as a current liability for amounts expected to be paid within the next 12 months.

XML

Inventories (Tables)

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Schedule of Inventories

Inventories consisted of:

($ in millions)	June 30, 2019			December 31, 2018
Finished goods	$	1,750		$	1,658
Raw materials and work in process	5,388			5,004
Supplies	202			194
Total (approximates current cost)	7,340			6,856
(Decrease) increase to LIFO costs	(29		)	1
	$	7,311		$	6,857
Recognized as:
Inventories	$	5,847		$	5,440
Other assets	1,464			1,417

XML

Loans Payable, Long-Term Debt and Leases Loans Payable, Long-Term Debt and Leases (Tables)

6 Months Ended

Jun. 30, 2019

Loans Payable, Long-Term Debt and Leases [Abstract]

Supplemental Balance Sheet Information

Supplemental balance sheet information related to operating leases is as follows:

($ in millions)	June 30, 2019
Assets
Other Assets (1)	$	1,063
Liabilities
Accrued and other current liabilities	$	241
Other Noncurrent Liabilities	752
	$	993
Weighted-average remaining lease term (years)	7.5
Weighted-average discount rate	3.4		%

⁽¹⁾ Includes prepaid leases that have no related lease liability.

Schedule of Maturities of Operating Lease Liabilities

Maturities of operating leases liabilities are as follows:

($ in millions)	June 30, 2019
2019 (excluding the six months ended June 30, 2019)	$	138
2020	232
2021	172
2022	146
2023	98
Thereafter	339
Total lease payments	1,125
Less: imputed interest	(132		)
	$	993

XML

Equity (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Equity

	Three Months Ended June 30,
	Common Stock			Other Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock					Non- Controlling Interests			Total
($ and shares in millions except per share amounts)	Shares	Par Value											Shares		Cost
Balance at April 1, 2018	3,577	$	1,788	$	39,874		$	41,107		$	(5,060	)	885		$	(44,041	)	$	233		$	33,901
Net income attributable to Merck & Co., Inc.	—	—		—			1,707			—			—		—			—			1,707
Other comprehensive loss, net of taxes	—	—		—			—			(62		)	—		—			—			(62		)
Cash dividends declared on common stock ($0.48 per share)	—	—		—			(1,291		)	—			—		—			—			(1,291		)
Treasury stock shares purchased	—	—		—			—			—			27		(1,596		)	—			(1,596		)
Share-based compensation plans and other	—	—		(133		)	—			—			(5	)	236			—			103
Net income attributable to noncontrolling interests	—	—		—			—			—			—		—			9			9
Distributions attributable to noncontrolling interests	—	—		—			—			—			—		—			(5		)	(5		)
Balance at June 30, 2018	3,577	$	1,788	$	39,741		$	41,523		$	(5,122	)	907		$	(45,401	)	$	237		$	32,766
Balance at April 1, 2019	3,577	$	1,788	$	38,768		$	44,065		$	(5,346	)	994		$	(51,736	)	$	131		$	27,670
Net income attributable to Merck & Co., Inc.	—	—		—			2,670			—			—		—			—			2,670
Other comprehensive loss, net of taxes	—	—		—			—			(16		)	—		—			—			(16		)
Cash dividends declared on common stock ($0.55 per share)	—	—		—			(1,440		)	—			—		—			—			(1,440		)
Treasury stock shares purchased	—	—		1,000			—			—			24		(2,235		)	—			(1,235		)
Share-based compensation plans and other	—	—		(284		)	—			—			(8	)	401			—			117
Net loss attributable to noncontrolling interests	—	—		—			—			—			—		—			(26		)	(26		)
Other changes in noncontrolling ownership interests	—	—		—			—			—			—		—			(3		)	(3		)
Balance at June 30, 2019	3,577	$	1,788	$	39,484		$	45,295		$	(5,362	)	1,010		$	(53,570	)	$	102		$	27,737

	Six Months Ended June 30,
	Common Stock			Other Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock					Non- Controlling Interests			Total
($ and shares in millions except per share amounts)	Shares	Par Value											Shares		Cost
Balance at January 1, 2018	3,577	$	1,788	$	39,902		$	41,350		$	(4,910	)	880		$	(43,794	)	$	233		$	34,569
Net income attributable to Merck & Co., Inc.	—	—		—			2,443			—			—		—			—			2,443
Adoption of new accounting standards	—	—		—			322			(274		)	—		—			—			48
Other comprehensive income, net of taxes	—	—		—			—			62			—		—			—			62
Cash dividends declared on common stock ($0.96 per share)	—	—		—			(2,592		)	—			—		—			—			(2,592		)
Treasury stock shares purchased	—	—		—			—			—			37		(2,162		)	—			(2,162		)
Share-based compensation plans and other	—	—		(161		)	—			—			(10	)	555			—			394
Net income attributable to noncontrolling interests	—	—		—			—			—			—		—			14			14
Distributions attributable to noncontrolling interests	—	—		—			—			—			—		—			(10		)	(10		)
Balance at June 30, 2018	3,577	$	1,788	$	39,741		$	41,523		$	(5,122	)	907		$	(45,401	)	$	237		$	32,766
Balance at January 1, 2019	3,577	$	1,788	$	38,808		$	42,579		$	(5,545	)	985		$	(50,929	)	$	181		$	26,882
Net income attributable to Merck & Co., Inc.	—	—		—			5,585			—			—		—			—			5,585
Other comprehensive income, net of taxes	—	—		—			—			183			—		—			—			183
Cash dividends declared on common stock ($1.10 per share)	—	—		—			(2,869		)	—			—		—			—			(2,869		)
Treasury stock shares purchased	—	—		1,000			—			—			38		(3,325		)	—			(2,325		)
Share-based compensation plans and other	—	—		(324		)	—			—			(13	)	684			—			360
Net loss attributable to noncontrolling interests	—	—		—			—			—			—		—			(79		)	(79		)
Balance at June 30, 2019	3,577	$	1,788	$	39,484		$	45,295		$	(5,362	)	1,010		$	(53,570	)	$	102		$	27,737

XML

Share-Based Compensation Plans (Tables)

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Amounts of Share-Based Compensation Cost Recorded in Consolidated Statement of Income

The following table provides the amounts of share-based compensation cost recorded in the Condensed Consolidated Statement of Income:

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Pretax share-based compensation expense	$	111		$	90		$	204		$	170
Income tax benefit	(15		)	(13		)	(28		)	(28		)
Total share-based compensation expense, net of taxes	$	96		$	77		$	176		$	142

Assumptions Used to Determine Weighted-Average Fair Value of Options Granted

The weighted-average fair value of options granted during the first six months of 2019 and 2018 was $10.63 and $8.19 per option, respectively, and was determined using the following assumptions:

	Six Months Ended   June 30,
	2019		2018
Expected dividend yield	3.2	%	3.4	%
Risk-free interest rate	2.4	%	2.8	%
Expected volatility	18.7	%	19.1	%
Expected life (years)	5.9		6.1

XML

Pension and Other Postretirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2019

Pension Plans

Defined Benefit Plan Disclosure [Line Items]

Components of net cost of defined benefit plans

The Company has defined benefit pension plans covering eligible employees in the United States and in certain of its international subsidiaries. The net periodic benefit cost of such plans consisted of the following components: 

	Three Months Ended   June 30,												Six Months Ended   June 30,
	2019						2018						2019						2018
($ in millions)	U.S.			International			U.S.			International			U.S.			International			U.S.			International
Service cost	$	74		$	60		$	85		$	58		$	144		$	120		$	168		$	125
Interest cost	113			44			107			45			228			89			215			91
Expected return on plan assets	(205		)	(107		)	(211		)	(108		)	(411		)	(214		)	(425		)	(221		)
Amortization of unrecognized prior service credit	(12		)	(3		)	(13		)	(3		)	(25		)	(6		)	(25		)	(7		)
Net loss amortization	35			16			56			21			70			31			112			43
Termination benefits	3			1			7			—			5			1			17			—
Curtailments	—			—			5			(1		)	1			—			3			(1		)
Settlements	—			—			—			4			—			—			1			4
	$	8		$	11		$	36		$	16		$	12		$	21		$	66		$	34

Other Postretirement Benefit Plans

Defined Benefit Plan Disclosure [Line Items]

Components of net cost of defined benefit plans

The Company provides medical benefits, principally to its eligible U.S. retirees and similar benefits to their dependents, through its other postretirement benefit plans. The net credit of such plans consisted of the following components: 

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Service cost	$	12		$	14		$	24		$	28
Interest cost	18			18			35			35
Expected return on plan assets	(18		)	(21		)	(36		)	(41		)
Amortization of unrecognized prior service credit	(21		)	(21		)	(43		)	(42		)
Termination benefits	—			1			—			2
Curtailments	(1		)	(2		)	(1		)	(6		)
	$	(10	)	$	(11	)	$	(21	)	$	(24	)

XML

Other (Income) Expense, Net (Tables)

6 Months Ended

Jun. 30, 2019

Other Income and Expenses [Abstract]

Other (Income) Expense, Net

Other (income) expense, net, consisted of: 

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Interest income	$	(75	)	$	(81	)	$	(164	)	$	(165	)
Interest expense	233			194			442			379
Exchange losses	27			71			128			77
Income from investments in equity securities, net (1)	(58		)	(153		)	(32		)	(178		)
Net periodic defined benefit plan (credit) cost other than service cost	(140		)	(130		)	(281		)	(265		)
Other, net	153			51			234			(188		)
	$	140		$	(48	)	$	327		$	(340	)

⁽¹⁾ 

Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investments funds.

XML

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Calculations of Earnings Per Share

The calculations of earnings per share are as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ and shares in millions except per share amounts)	2019		2018		2019		2018
Net income attributable to Merck & Co., Inc.	$	2,670	$	1,707	$	5,585	$	2,443
Average common shares outstanding	2,574		2,683		2,579		2,689
Common shares issuable (1)	14		13		17		13
Average common shares outstanding assuming dilution	2,588		2,696		2,596		2,702
Basic earnings per common share attributable to Merck & Co., Inc. common shareholders	$	1.04	$	0.64	$	2.17	$	0.91
Earnings per common share assuming dilution attributable to Merck & Co., Inc. common shareholders	$	1.03	$	0.63	$	2.15	$	0.90

⁽¹⁾ 

Issuable primarily under share-based compensation plans.

XML

Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Changes in AOCI by Component

Changes in AOCI by component are as follows:

	Three Months Ended June 30,
($ in millions)	Derivatives				Investments				Employee Benefit Plans				Cumulative Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance April 1, 2018, net of taxes	$	(201	)		$	(167	)		$	(3,095	)		$	(1,597	)	$	(5,060	)
Other comprehensive income (loss) before reclassification adjustments, pretax	265				(17		)		(1		)		(301		)	(54		)
Tax	(56		)		—				1				(60		)	(115		)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	209				(17		)		—				(361		)	(169		)
Reclassification adjustments, pretax	72			(1)	20			(2)	40			(3)	—			132
Tax	(15		)		—				(10		)		—			(25		)
Reclassification adjustments, net of taxes	57				20				30				—			107
Other comprehensive income (loss), net of taxes	266				3				30				(361		)	(62		)
Balance June 30, 2018, net of taxes	$	65			$	(164	)		$	(3,065	)		$	(1,958	)	$	(5,122	)
Balance April 1, 2019, net of taxes	$	118			$	4			$	(3,541	)		$	(1,927	)	$	(5,346	)
Other comprehensive income (loss) before reclassification adjustments, pretax	10				55				—				(25		)	40
Tax	(2		)		—				—				6			4
Other comprehensive income (loss) before reclassification adjustments, net of taxes	8				55				—				(19		)	44
Reclassification adjustments, pretax	(76		)	(1)	(11		)	(2)	14			(3)	—			(73		)
Tax	16				—				(3		)		—			13
Reclassification adjustments, net of taxes	(60		)		(11		)		11				—			(60		)
Other comprehensive income (loss), net of taxes	(52		)		44				11				(19		)	(16		)
Balance June 30, 2019, net of taxes	$	66			$	48			$	(3,530	)		$	(1,946	)	$	(5,362	)

	Six Months Ended June 30,
($ in millions)	Derivatives				Investments				Employee Benefit Plans				Cumulative Translation Adjustment			Accumulated Other Comprehensive Income (Loss)
Balance January 1, 2018, net of taxes	$	(108	)		$	(61	)		$	(2,787	)		$	(1,954	)	$	(4,910	)
Other comprehensive income (loss) before reclassification adjustments, pretax	84				(133		)		(2		)		18			(33		)
Tax	(18		)		1				4				(122		)	(135		)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	66				(132		)		2				(104		)	(168		)
Reclassification adjustments, pretax	164			(1)	36			(2)	81			(3)	—			281
Tax	(34		)		—				(17		)		—			(51		)
Reclassification adjustments, net of taxes	130				36				64				—			230
Other comprehensive income (loss), net of taxes	196				(96		)		66				(104		)	62
Adoption of ASU 2018-02	(23		)		1				(344		)		100			(266		)
Adoption of ASU 2016-01	—				(8		)		—				—			(8		)
Balance June 30, 2018, net of taxes	$	65			$	(164	)		$	(3,065	)		$	(1,958	)	$	(5,122	)
Balance January 1, 2019, net of taxes	$	166			$	(78	)		$	(3,556	)		$	(2,077	)	$	(5,545	)
Other comprehensive income (loss) before reclassification adjustments, pretax	(3		)		131				(1		)		131			258
Tax	1				—				6				—			7
Other comprehensive income (loss) before reclassification adjustments, net of taxes	(2		)		131				5				131			265
Reclassification adjustments, pretax	(124		)	(1)	(5		)	(2)	28			(3)	—			(101		)
Tax	26				—				(7		)		—			19
Reclassification adjustments, net of taxes	(98		)		(5		)		21				—			(82		)
Other comprehensive income (loss), net of taxes	(100		)		126				26				131			183
Balance June 30, 2019, net of taxes	$	66			$	48			$	(3,530	)		$	(1,946	)	$	(5,362	)

⁽¹⁾  Relates to foreign currency cash flow hedges that were reclassified from AOCI to Sales.

⁽²⁾  Represents net realized (gains) losses on the sales of available-for-sale debt securities that were reclassified from AOCI to Other (income) expense, net.

⁽³⁾ 

Includes net amortization of prior service cost and actuarial gains and losses included in net periodic benefit cost (see Note 11).

XML

Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Sales of Company's products

Sales of the Company’s products were as follows:

	Three Months Ended June 30,															Six Months Ended June 30,
	2019							2018								2019							2018
($ in millions)	U.S.			Int’l		Total		U.S.			Int’l			Total		U.S.			Int’l		Total		U.S.			Int’l			Total
Pharmaceutical:
Oncology
Keytruda	$	1,498		$	1,136	$	2,634	$	959		$	707		$	1,667	$	2,782		$	2,121	$	4,903	$	1,797		$	1,333		$	3,131
Emend	67			54		121		89			59			148		130			107		237		168			105			273
Alliance revenue - Lynparza	66			45		111		31			13			44		116			74		190		55			22			76
Alliance revenue - Lenvima	54			43		97		19			16			35		104			67		171		19			16			35
Vaccines
Gardasil/Gardasil 9	456			430		886		302			306			608		818			906		1,724		682			586			1,269
ProQuad/M-M-R II/Varivax	500			174		675		356			70			426		843			328		1,171		668			150			818
RotaTeq	104			68		172		99			57			156		258			125		383		250			99			349
Pneumovax 23	123			47		170		122			71			193		248			107		355		234			137			372
Vaqta	38			20		58		42			23			65		67			39		105		60			42			101
Hospital Acute Care
Bridion	129			149		278		95			145			240		248			285		533		175			269			444
Noxafil	100			93		193		87			100			188		191			192		383		168			195			363
Cubicin	22			45		67		48			46			94		64			91		155		95			97			192
Invanz	18			60		78		87			63			149		31			118		150		177			123			300
Primaxin	—			70		71		—			68			68		1			129		130		5			135			140
Cancidas	3			64		67		4			83			87		4			125		129		7			171			178
Immunology
Simponi	—			214		214		—			233			233		—			422		422		—			464			464
Remicade	—			98		98		—			157			157		—			221		221		—			324			324
Neuroscience
Belsomra	21			55		76		29			42			71		45			98		143		52			73			125
Virology
Isentress/Isentress HD	94			153		247		132			174			305		202			300		502		260			326			586
Zepatier	39			68		108		(10		)	123			113		72			149		221		(10		)	253			243
Cardiovascular
Zetia	6			150		156		8			218			226		6			290		296		25			505			531
Vytorin	3			73		76		3			152			155		6			167		174		11			311			322
Atozet	—			92		92		—			101			101		—			186		186		—			174			174
Adempas	—			104		104		—			75			75		—			194		194		—			143			143
Diabetes
Januvia	471			437		908		503			446			949		855			877		1,732		968			862			1,829
Janumet	166			366		533		209			377			585		333			730		1,063		401			729			1,129
Women’s Health
NuvaRing	206			34		240		187			49			236		391			68		459		357			95			452
Implanon/Nexplanon	136			48		183		114			60			174		285			98		382		242			106			348
Diversified Brands
Singulair	8			153		160		5			180			185		13			338		352		11			350			360
Cozaar/Hyzaar	6			103		109		7			118			125		10			202		213		14			231			245
Nasonex	(1		)	73		72		—			81			81		(2		)	170		168		2			201			203
Arcoxia	—			75		75		—			84			84		—			149		149		—			166			166
Follistim AQ	24			39		63		27			43			70		53			67		121		56			81			138
Other pharmaceutical (1)	401			869		1,268		287			902			1,189		759			1,650		2,406		608			1,770			2,378
Total Pharmaceutical segment sales	4,758			5,702		10,460		3,841			5,442			9,282		8,933			11,190		20,123		7,557			10,644			18,201
Animal Health:
Livestock	145			526		671		107			526			633		261			1,021		1,282		231			1,055			1,286
Companion Animals	190			263		453		204			253			457		367			500		867		387			482			869
Total Animal Health segment sales	335			789		1,124		311			779			1,090		628			1,521		2,149		618			1,537			2,155
Other segment sales (2)	47			—		48		56			—			56		86			—		87		140			—			140
Total segment sales	5,140			6,491		11,632		4,208			6,221			10,428		9,647			12,711		22,359		8,315			12,181			20,496
Other (3)	4			125		128		54			(18		)	37		12			206		216		80			(74		)	6
	$	5,144		$	6,616	$	11,760	$	4,262		$	6,203		$	10,465	$	9,659		$	12,917	$	22,575	$	8,395		$	12,107		$	20,502

U.S. plus international may not equal total due to rounding.

⁽¹⁾  Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.

⁽²⁾  Represents the non-reportable segments of Healthcare Services and Alliances.

⁽³⁾ 

Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales.

Consolidated revenues by geographic area

Consolidated sales by geographic area where derived are as follows:

	Three Months Ended   June 30,				Six Months Ended   June 30,
($ in millions)	2019		2018		2019		2018
United States	$	5,144	$	4,262	$	9,659	$	8,395
Europe, Middle East and Africa	3,163		3,144		6,265		6,334
Japan	921		855		1,720		1,592
China	763		559		1,509		1,045
Asia Pacific (other than Japan and China)	716		791		1,461		1,543
Latin America	658		594		1,219		1,126
Other	395		260		742		467
	$	11,760	$	10,465	$	22,575	$	20,502

Reconciliation of segment profits to income before taxes

A reconciliation of segment profits to Income before taxes is as follows:

	Three Months Ended   June 30,						Six Months Ended   June 30,
($ in millions)	2019			2018			2019			2018
Segment profits:
Pharmaceutical segment	$	7,115		$	5,975		$	13,690		$	11,914
Animal Health segment	405			450			820			864
Other segments	(2		)	26			—			88
Total segment profits	7,518			6,451			14,510			12,866
Other profits (losses)	94			(2		)	124			(89		)
Unallocated:
Interest income	75			81			164			165
Interest expense	(233		)	(194		)	(442		)	(379		)
Depreciation and amortization	(427		)	(332		)	(786		)	(682		)
Research and development	(2,093		)	(2,190		)	(3,935		)	(5,307		)
Amortization of purchase accounting adjustments	(378		)	(732		)	(775		)	(1,464		)
Restructuring costs	(59		)	(228		)	(212		)	(323		)
Other unallocated, net	(1,238		)	(768		)	(2,322		)	(1,355		)
	$	3,259		$	2,086		$	6,326		$	3,432

XML

Basis of Presentation - Adoption of New Accounting Standards - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2019	Jan. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Additional Assets	$ 1,063
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Additional Assets		$ 1,100

XML

Acquisitions, Research Collaborations and License Agreements - Acquisitions (Details) $ in Millions, $ in Millions		1 Months Ended				3 Months Ended		6 Months Ended
	Apr. 01, 2019 USD ($)	Jul. 31, 2019 USD ($)	Apr. 30, 2019 USD ($)	Jun. 30, 2018 AUD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Acquisitions Research Collaborations And License Agreements Transactions [Line Items]
Goodwill						$ 19,490		$ 19,490		$ 18,253
Research and development						$ 2,189	$ 2,274	$ 4,119	$ 5,470
Antelliq
Acquisitions Research Collaborations And License Agreements Transactions [Line Items]
Payment to acquire business	$ 2,300
Payment of debt	1,300
Transaction costs	47
Cash and cash equivalents	31
Goodwill	$ 1,343
Immune Design
Acquisitions Research Collaborations And License Agreements Transactions [Line Items]
Payment to acquire business			$ 301
Intangible assets recognized			156
Cash and cash equivalents			83
Other assets recognized			31
Goodwill			$ 31
Viralytics
Acquisitions Research Collaborations And License Agreements Transactions [Line Items]
Payment to acquire business				$ 502	$ 378
Other assets recognized					$ 34		34		34
Research and development							$ 344		$ 344
Subsequent Event | Peloton
Acquisitions Research Collaborations And License Agreements Transactions [Line Items]
Payment to acquire business		$ 1,050
Potential future milestone payments, maximum		$ 1,150

XML

Acquisitions, Research Collaborations and License Agreements - Fair Value of Assets Acquired and Liabilities Assumed (Details) $ in Millions	Apr. 01, 2019 USD ($)	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)
Acquisitions Research Collaborations And License Agreements Transactions [Line Items]
Goodwill		$ 19,490	$ 18,253
Minimum
Acquisitions Research Collaborations And License Agreements Transactions [Line Items]
Useful lives of identifiable intangible assets	18 years
Maximum
Acquisitions Research Collaborations And License Agreements Transactions [Line Items]
Useful lives of identifiable intangible assets	24 years
Antelliq
Acquisitions Research Collaborations And License Agreements Transactions [Line Items]
Cash and cash equivalents	$ 31
Accounts receivable	73
Inventories	97
Property, plant and equipment	62
Identifiable intangible assets (useful lives ranging from 18-24 years) (1)	2,689
Deferred income tax liabilities	(563)
Other assets and liabilities, net	(81)
Total identifiable net assets	2,308
Goodwill	1,343
Consideration transferred	$ 3,651
Measurement Input, Discount Rate | Antelliq
Acquisitions Research Collaborations And License Agreements Transactions [Line Items]
Present value discount rate	0.115

XML

Collaborative Arrangements - Narrative (Details) - USD ($) $ in Millions	1 Months Ended										3 Months Ended				6 Months Ended		12 Months Ended		18 Months Ended	37 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2019	Jun. 30, 2019	Apr. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017	Jul. 31, 2017	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Mar. 31, 2021
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research and development											$ 2,189		$ 2,274		$ 4,119	$ 5,470
Other liabilities, noncurrent				$ 11,283			$ 12,041				11,283				11,283		$ 12,041		$ 12,041
Lynparza | Other Assets
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Finite-lived intangible assets				1,000							1,000				1,000
Lenvima | Other Assets
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Finite-lived intangible assets				687							687				687
Adempas | Other intangible assets
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Finite-lived intangible assets				956							956				956
AstraZeneca
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Upfront and milestone payments																		$ 1,600
License option payment related to collaborative arrangement							$ 400		$ 250	$ 750
Research and development																		$ 2,350
AstraZeneca | Forecast
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
License option payment related to collaborative arrangement			$ 100
AstraZeneca | Lynparza
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cumulative amortization expense											52
AstraZeneca | Sales-Based Milestones
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Probable contingent payments collaborative arrangement																			$ 700
Contingent milestone payments collaborative arrangement															3,100
AstraZeneca | Sales-Based Milestones | Lynparza
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Probable contingent payments collaborative arrangement											300
Liabilities				300							$ 300				300
Milestone payments made to collaborative partner																	250
AstraZeneca | Regulatory Milestones | Lynparza
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payments made to collaborative partner				$ 30	$ 30												140
Contingent milestone payments collaborative arrangement															1,700
Eisai
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Upfront and milestone payments								$ 750
License option payment related to collaborative arrangement						$ 325
Research and development														$ 1,400		1,400
Eisai | Forecast
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
License option payment related to collaborative arrangement	$ 125	$ 200																		$ 650
Eisai | Lenvima
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cumulative amortization expense												$ 35
Eisai | Sales-Based Milestones
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Contingent milestone payments collaborative arrangement								3,970							3,420
Eisai | Sales-Based Milestones | Lenvima
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Probable contingent payments collaborative arrangement												282					268
Liabilities						$ 282						$ 282
Milestone payments made to collaborative partner															50
Eisai | Regulatory Milestones
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Contingent milestone payments collaborative arrangement								$ 385							135
Eisai | Regulatory Milestones | Lenvima
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Milestone payments made to collaborative partner																	$ 250
Bayer AG | Adempas
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cumulative amortization expense													106
Bayer AG | Sales-Based Milestones
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Probable contingent payments collaborative arrangement													375
Milestone payments made to collaborative partner														$ 350
Contingent milestone payments collaborative arrangement															$ 400
Other liabilities, noncurrent													$ 375			$ 375

XML

Collaborative Arrangements - Schedule of Collaborative Arrangement Transactions (Details) - Collaborative Arrangement - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Other current assets | AstraZeneca
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Receivables from counterparty	$ 105		$ 105		$ 52
Other current assets | Eisai
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Receivables from counterparty	98		98		71
Other current assets | Bayer AG
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Receivables from counterparty	41		41		32
Accounts payable and accrued liabilities | AstraZeneca
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payables to counterparty	605		605		405
Accounts payable and accrued liabilities | Eisai
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payables to counterparty	709		709		375
Other Noncurrent Liabilities | AstraZeneca
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payables to counterparty	300		300		250
Other Noncurrent Liabilities | Eisai
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payables to counterparty	125		125		543
Other Noncurrent Liabilities | Bayer AG
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payables to counterparty	375		375		$ 375
Revenue | AstraZeneca
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Total sales	111	$ 44	190	$ 76
Revenue | Eisai
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Total sales	97	35	171	35
Revenue | Bayer AG
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Net product sales recorded by Merck	53	47	100	90
Merck’s profit share from sales in Bayer’s marketing territories	51	28	94	53
Total sales	104	75	194	143
Cost of sales | AstraZeneca
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Expenses	73	24	92	36
Cost of sales | Eisai
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Expenses	23	1	74	1
Cost of sales | Bayer AG
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Expenses	29	132	58	159
Selling, general and administrative | AstraZeneca
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Expenses	33	9	59	16
Selling, general and administrative | Eisai
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Expenses	19	2	38	2
Selling, general and administrative | Bayer AG
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Expenses	11	10	20	17
Research and development | AstraZeneca
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Expenses	33	42	78	71
Research and development | Eisai
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Expenses	62	36	109	1,436
Research and development | Bayer AG
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Expenses	$ 32	$ 28	$ 62	$ 56

XML

Restructuring - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2019
Restructuring Cost and Reserve [Line Items]
Estimate of cumulative pre tax costs that will result in cash outlays			55.00%
Estimate of cumulative pre tax costs that will be noncash			45.00%
Total pretax restructuring costs	$ 159	$ 235	$ 346	$ 339
Minimum
Restructuring Cost and Reserve [Line Items]
Expected restructuring and related cost	800		800
Maximum
Restructuring Cost and Reserve [Line Items]
Expected restructuring and related cost	$ 1,200		$ 1,200
Forecast
Restructuring Cost and Reserve [Line Items]
Expected restructuring and related cost					$ 500

XML

Restructuring - Charges Related to Restructuring Program Activities by Type of Cost (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	$ 159	$ 235	$ 346	$ 339
Separation Costs
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	25	200	153	255
Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	98	0	132	(2)
Other
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	36	35	61	86
Cost of sales
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	65	3	99	9
Cost of sales | Separation Costs
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	0	0	0	0
Cost of sales | Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	64	0	98	0
Cost of sales | Other
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	1	3	1	9
Selling, general and administrative
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	32	1	32	2
Selling, general and administrative | Separation Costs
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	0	0	0	0
Selling, general and administrative | Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	32	0	32	1
Selling, general and administrative | Other
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	0	1	0	1
Research and development
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	3	3	3	5
Research and development | Separation Costs
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	0	0	0	0
Research and development | Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	2	0	2	(3)
Research and development | Other
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	1	3	1	8
Restructuring costs
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	59	228	212	323
Restructuring costs | Separation Costs
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	25	200	153	255
Restructuring costs | Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	0	0	0	0
Restructuring costs | Other
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	$ 34	$ 28	$ 59	$ 68

XML

Restructuring - Charges and Spending Relating to Restructuring Activities by Program (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Restructuring Reserve [Roll Forward]
Restructuring reserve, beginning balance			$ 534
Expense	$ 159	$ 235	346	$ 339
(Payments) receipts, net			(203)
Non-cash activity			(134)
Restructuring reserve, ending balance	543		543
Separation Costs
Restructuring Reserve [Roll Forward]
Restructuring reserve, beginning balance			443
Expense	25	200	153	255
(Payments) receipts, net			(126)
Non-cash activity			0
Restructuring reserve, ending balance	470		470
Accelerated Depreciation
Restructuring Reserve [Roll Forward]
Restructuring reserve, beginning balance			0
Expense	98	0	132	(2)
(Payments) receipts, net			0
Non-cash activity			(132)
Restructuring reserve, ending balance	0		0
Other
Restructuring Reserve [Roll Forward]
Restructuring reserve, beginning balance			91
Expense	36	$ 35	61	$ 86
(Payments) receipts, net			(77)
Non-cash activity			(2)
Restructuring reserve, ending balance	$ 73		$ 73

XML

Financial Instruments - Narrative (Details)	6 Months Ended
	Jun. 30, 2019 USD ($) interest_rate_swap	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Derivative [Line Items]
Number of interest rate swaps held (in interest rate swaps) | interest_rate_swap	19
Pretax net unrealized gain on derivatives maturing within next 12 months estimated to be reclassified from AOCI to sales	$ 76,000,000
Equity investments without readily determinable fair values	465,000,000
Unrealized gains recognized on investments in equity securities without readily determinable fair values	4,000,000
Unrealized losses recognized on investments in equity securities without readily determinable fair values	10,000,000
Cumulative unrealized gains on investments	172,000,000
Cumulative unrealized losses on investments	21,000,000
Available-for-sale debt securities included in Short-term investments	398,000,000
Available-for-sale debt securities maturing after one year through five years	3,400,000,000
Cash and cash equivalents	6,659,000,000		$ 7,965,000,000
Payments of contingent consideration	85,000,000	$ 235,000,000
Fair value of loans payable and long-term debt, including current portion	28,600,000,000		25,600,000,000
Debt, Long-term and Short-term, Combined Amount	26,600,000,000		25,100,000,000
Cash collateral received from counterparties	32,000,000		107,000,000
Cash collateral advanced to counterparties	0		$ 0
Significant Other Observable Inputs (Level 2)
Derivative [Line Items]
Cash and cash equivalents	6,700,000,000
Cash equivalents	$ 5,900,000,000
Derivatives Designated as Hedging Instruments | Maximum
Derivative [Line Items]
Maximum average period of maturities of contracts in years (less than)	2 years
Derivatives Not Designated as Hedging Instruments | Maximum
Derivative [Line Items]
Maximum average period of maturities of contracts in years (less than)	1 year
gefapixant
Derivative [Line Items]
Payments of contingent consideration		$ 175,000,000

XML

Financial Instruments - Effect of Net Investment Hedges (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Foreign exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1)	$ 17	$ (12)	$ 7	$ (14)
Foreign exchange contracts | Other (income) expense, net
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing	(8)	(3)	(15)	(3)
Euro-denominated notes
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1)	28	(271)	(2)	(92)
Euro-denominated notes | Other (income) expense, net
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing	$ 0	$ 0	$ 0	$ 0

XML

Financial Instruments - Summary of Interest Rate Swaps Held (Details)	Jun. 30, 2019 USD ($) interest_rate_swap	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Derivative [Line Items]
Par Value of Debt		$ 5,000,000,000.0
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap	19
Total Swap Notional Amount	$ 26,728,000,000		$ 29,742,000,000
1.85% notes due 2020 | Interest rate swap contracts
Derivative [Line Items]
Stated interest rate (as percent)	1.85%
Par Value of Debt	$ 1,250,000,000
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap	5
Total Swap Notional Amount	$ 1,250,000,000
3.875% notes due 2021 | Interest rate swap contracts
Derivative [Line Items]
Stated interest rate (as percent)	3.875%
Par Value of Debt	$ 1,150,000,000
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap	5
Total Swap Notional Amount	$ 1,150,000,000
2.40% notes due 2022 | Interest rate swap contracts
Derivative [Line Items]
Stated interest rate (as percent)	2.40%
Par Value of Debt	$ 1,000,000,000
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap	4
Total Swap Notional Amount	$ 1,000,000,000
2.35% notes due 2022 | Interest rate swap contracts
Derivative [Line Items]
Stated interest rate (as percent)	2.35%
Par Value of Debt	$ 1,250,000,000
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap	5
Total Swap Notional Amount	$ 1,250,000,000

XML

Financial Instruments - Fair Value Hedges (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Loans payable and current portion of long-term debt
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Carrying Amount of Hedged Liabilities	$ 1,244	$ 0
Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount	(6)	0
Long-Term Debt
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Carrying Amount of Hedged Liabilities	3,406	4,560
Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount	$ 11	$ (82)

XML

Financial Instruments - Fair Value of Derivatives Segregated between those Derivatives that are Designated as Hedging Instruments and those that are Not Designated as Hedging Instruments (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	$ 301	$ 454
Fair Value of Derivative, Liability	84	160
U.S. Dollar Notional	26,728	29,742
Derivatives Designated as Hedging Instruments
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	231	338
Fair Value of Derivative, Liability	21	89
U.S. Dollar Notional	15,081	14,390
Derivatives Not Designated as Hedging Instruments
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	70	116
Fair Value of Derivative, Liability	63	71
U.S. Dollar Notional	11,647	15,352
Interest rate swap contracts | Derivatives Designated as Hedging Instruments | Other Assets
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	14	0
U.S. Dollar Notional	2,150	0
Interest rate swap contracts | Derivatives Designated as Hedging Instruments | Accrued and other current liabilities
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Liability	6	0
U.S. Dollar Notional	1,250	0
Interest rate swap contracts | Derivatives Designated as Hedging Instruments | Other Noncurrent Liabilities
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Liability	2	81
U.S. Dollar Notional	1,250	4,650
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Other Assets
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	49	75
U.S. Dollar Notional	2,790	2,655
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Accrued and other current liabilities
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Liability	13	7
U.S. Dollar Notional	1,252	774
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Other Noncurrent Liabilities
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Liability	0	1
U.S. Dollar Notional	0	89
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Other current assets
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	168	263
U.S. Dollar Notional	6,389	6,222
Foreign exchange contracts | Derivatives Not Designated as Hedging Instruments | Accrued and other current liabilities
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Liability	63	71
U.S. Dollar Notional	4,982	9,922
Foreign exchange contracts | Derivatives Not Designated as Hedging Instruments | Other current assets
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	70	116
U.S. Dollar Notional	$ 6,665	$ 5,430

XML

Financial Instruments - Information on Derivative Positions Subject to Master Netting Arrangements as if they were Presented on a Net Basis (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Gross amounts recognized in the consolidated balance sheet, asset	$ 301,000,000	$ 454,000,000
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet, asset	(69,000,000)	(121,000,000)
Cash collateral received, asset	(32,000,000)	(107,000,000)
Net amounts, asset	200,000,000	226,000,000
Gross amounts recognized in the consolidated balance sheet, liability	84,000,000	160,000,000
Gross amount subject to offset in master netting arrangements not offset in the consolidated balance sheet, liability	(69,000,000)	(121,000,000)
Cash collateral received, liability	0	0
Net amounts, liability	$ 15,000,000	$ 39,000,000

XML

Financial Instruments - Location and Amount of Pretax (Gains) Losses of Derivatives (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments, Gain (Loss) [Line Items]
Sales	$ 11,760	$ 10,465	$ 22,575	$ 20,502
Other (income) expense, net	140	(48)	327	(340)
Other comprehensive income (loss)	(16)	(62)	183	62
Interest rate swap contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of income (loss) recognized in OCI on derivatives	(1)	(1)	(5)	(2)
Interest rate swap contracts | Other (income) expense, net
Derivative Instruments, Gain (Loss) [Line Items]
Hedged items	55	(15)	88	(77)
Derivatives designated as hedging instruments	(45)	22	(68)	84
Amount of gain recognized in Other (income) expense, net on derivatives	(1)	(1)	(2)	(2)
Foreign exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of income (loss) recognized in OCI on derivatives	10	264	(2)	84
Increase (decrease) in Sales as a result of AOCI reclassifications	(75)	73	(119)	166
Foreign exchange contracts | Reclassification out of Accumulated Other Comprehensive Income | Accumulated Gain (Loss), Cash Flow Hedge, Including Noncontrolling Interest
Derivative Instruments, Gain (Loss) [Line Items]
Sales	$ 75	$ (73)	$ 119	$ (166)

XML

Financial Instruments - Income Statement Effects on Derivatives Not Designated as Hedging Instruments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Foreign currency | Other (income) expense, net
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Derivative Pretax (Gain) Loss Recognized in Income	$ 2	$ (195)	$ 120	$ (167)
Forecasted transactions | Sales
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Derivative Pretax (Gain) Loss Recognized in Income	$ (6)	$ (14)	$ 4	$ (5)

XML

Financial Instruments - Information on Available-for-sale Investments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	$ 4,076		$ 4,076		$ 7,340
Debt securities, unrealized gains	50		50		6
Debt securities, unrealized losses	(3)		(3)		(85)
Debt securities, fair value	4,123		4,123		7,261
Publicly traded equity securities, fair value	756		756		456
Total debt and publicly traded equity securities, fair value	4,879		4,879		7,717
Unrealized net gain	(39)	$ 7	75	$ 50
Corporate notes and bonds
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	2,666		2,666		4,985
Debt securities, unrealized gains	36		36		3
Debt securities, unrealized losses	(2)		(2)		(68)
Debt securities, fair value	2,700		2,700		4,920
Asset-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	789		789		1,285
Debt securities, unrealized gains	4		4		1
Debt securities, unrealized losses	(1)		(1)		(11)
Debt securities, fair value	792		792		1,275
U.S. government and agency securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	575		575		895
Debt securities, unrealized gains	10		10		2
Debt securities, unrealized losses	0		0		(5)
Debt securities, fair value	585		585		892
Foreign government bonds
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	41		41		167
Debt securities, unrealized gains	0		0		0
Debt securities, unrealized losses	0		0		(1)
Debt securities, fair value	41		41		166
Mortgage-backed securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	5		5		8
Debt securities, unrealized gains	0		0		0
Debt securities, unrealized losses	0		0		0
Debt securities, fair value	$ 5		$ 5		$ 8

XML

Financial Instruments - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Assets
Investments	$ 4,123	$ 7,261
Publicly traded equity securities	756	456
Derivative assets	301	454
Liabilities
Contingent consideration	753	788	$ 830	$ 935
Derivative liabilities	84	160
Corporate notes and bonds
Assets
Investments	2,700	4,920
Asset-backed securities
Assets
Investments	$ 792	1,275
Liabilities
Primary weighted average life of collateral	5 years
U.S. government and agency securities
Assets
Investments	$ 585	892
Foreign government bonds
Assets
Investments	41	166
Mortgage-backed securities
Assets
Investments	5	8
Fair Value, Measurements, Recurring
Assets
Investments	4,225	7,132
Other assets	654	585
Derivative assets	301	454
Total assets	5,180	8,171
Liabilities
Contingent consideration	753	788
Derivative liabilities	84	160
Total liabilities	837	948
Fair Value, Measurements, Recurring | Foreign exchange contracts
Assets
Derivative assets	129	241
Liabilities
Derivative liabilities	73	74
Fair Value, Measurements, Recurring | Interest rate swap contracts
Assets
Derivative assets	14	0
Fair Value, Measurements, Recurring | Currency options
Assets
Derivative assets	158	213
Liabilities
Derivative liabilities	3	5
Fair Value, Measurements, Recurring | Interest rate swap contracts
Liabilities
Derivative liabilities	8	81
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1)
Assets
Investments	228	147
Other assets	586	364
Derivative assets	0	0
Total assets	814	511
Liabilities
Contingent consideration	0	0
Derivative liabilities	0	0
Total liabilities	0	0
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1) | Foreign exchange contracts
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1) | Interest rate swap contracts
Assets
Derivative assets	0	0
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1) | Currency options
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Fair Value, Measurements, Recurring | Quoted Prices In Active Markets for Identical Assets (Level 1) | Interest rate swap contracts
Liabilities
Derivative liabilities	0	0
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2)
Assets
Investments	3,997	6,985
Other assets	68	221
Derivative assets	301	454
Total assets	4,366	7,660
Liabilities
Contingent consideration	0	0
Derivative liabilities	84	160
Total liabilities	84	160
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Foreign exchange contracts
Assets
Derivative assets	129	241
Liabilities
Derivative liabilities	73	74
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Interest rate swap contracts
Assets
Derivative assets	14	0
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Currency options
Assets
Derivative assets	158	213
Liabilities
Derivative liabilities	3	5
Fair Value, Measurements, Recurring | Significant Other Observable Inputs (Level 2) | Interest rate swap contracts
Liabilities
Derivative liabilities	8	81
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3)
Assets
Investments	0	0
Other assets	0	0
Derivative assets	0	0
Total assets	0	0
Liabilities
Contingent consideration	753	788
Derivative liabilities	0	0
Total liabilities	753	788
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Foreign exchange contracts
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Interest rate swap contracts
Assets
Derivative assets	0	0
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Currency options
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Fair Value, Measurements, Recurring | Significant Unobservable Inputs (Level 3) | Interest rate swap contracts
Liabilities
Derivative liabilities	0	0
Fair Value, Measurements, Recurring | Corporate notes and bonds
Assets
Investments	2,660	4,835
Other assets	40	85
Fair Value, Measurements, Recurring | Corporate notes and bonds | Quoted Prices In Active Markets for Identical Assets (Level 1)
Assets
Investments	0	0
Other assets	0	0
Fair Value, Measurements, Recurring | Corporate notes and bonds | Significant Other Observable Inputs (Level 2)
Assets
Investments	2,660	4,835
Other assets	40	85
Fair Value, Measurements, Recurring | Corporate notes and bonds | Significant Unobservable Inputs (Level 3)
Assets
Investments	0	0
Other assets	0	0
Fair Value, Measurements, Recurring | Asset-backed securities
Assets
Investments	788	1,253
Other assets	4	22
Fair Value, Measurements, Recurring | Asset-backed securities | Quoted Prices In Active Markets for Identical Assets (Level 1)
Assets
Investments	0	0
Other assets	0	0
Fair Value, Measurements, Recurring | Asset-backed securities | Significant Other Observable Inputs (Level 2)
Assets
Investments	788	1,253
Other assets	4	22
Fair Value, Measurements, Recurring | Asset-backed securities | Significant Unobservable Inputs (Level 3)
Assets
Investments	0	0
Other assets	0	0
Fair Value, Measurements, Recurring | U.S. government and agency securities
Assets
Investments	508	731
Other assets	77	161
Fair Value, Measurements, Recurring | U.S. government and agency securities | Quoted Prices In Active Markets for Identical Assets (Level 1)
Assets
Investments	0	0
Other assets	58	55
Fair Value, Measurements, Recurring | U.S. government and agency securities | Significant Other Observable Inputs (Level 2)
Assets
Investments	508	731
Other assets	19	106
Fair Value, Measurements, Recurring | U.S. government and agency securities | Significant Unobservable Inputs (Level 3)
Assets
Investments	0	0
Other assets	0	0
Fair Value, Measurements, Recurring | Foreign government bonds
Assets
Investments	41	166
Fair Value, Measurements, Recurring | Foreign government bonds | Quoted Prices In Active Markets for Identical Assets (Level 1)
Assets
Investments	0	0
Fair Value, Measurements, Recurring | Foreign government bonds | Significant Other Observable Inputs (Level 2)
Assets
Investments	41	166
Fair Value, Measurements, Recurring | Foreign government bonds | Significant Unobservable Inputs (Level 3)
Assets
Investments	0	0
Fair Value, Measurements, Recurring | Mortgage-backed securities
Assets
Other assets	5	8
Fair Value, Measurements, Recurring | Mortgage-backed securities | Quoted Prices In Active Markets for Identical Assets (Level 1)
Assets
Other assets	0	0
Fair Value, Measurements, Recurring | Mortgage-backed securities | Significant Other Observable Inputs (Level 2)
Assets
Other assets	5	8
Fair Value, Measurements, Recurring | Mortgage-backed securities | Significant Unobservable Inputs (Level 3)
Assets
Other assets	0	0
Fair Value, Measurements, Recurring | Publicly traded equity securities
Assets
Publicly traded equity securities	228	147
Other assets	528	309
Fair Value, Measurements, Recurring | Publicly traded equity securities | Quoted Prices In Active Markets for Identical Assets (Level 1)
Assets
Publicly traded equity securities	228	147
Other assets	528	309
Fair Value, Measurements, Recurring | Publicly traded equity securities | Significant Other Observable Inputs (Level 2)
Assets
Publicly traded equity securities	0	0
Other assets	0	0
Fair Value, Measurements, Recurring | Publicly traded equity securities | Significant Unobservable Inputs (Level 3)
Assets
Publicly traded equity securities	0	0
Other assets	$ 0	$ 0

XML

Financial Instruments - Information About Changes in Liabilities for Contingent Consideration (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair value, beginning balance	$ 788	$ 935
Changes in estimated fair value	50	122
Business Combination, Consideration Transferred, Liabilities Incurred	0	8
Payments	(85)	(235)
Fair value, ending balance	753	$ 830
Current liability	$ 114

XML

Inventories - Inventories (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Finished goods	$ 1,750	$ 1,658
Raw materials and work in process	5,388	5,004
Supplies	202	194
Total (approximates current cost)	7,340	6,856
(Decrease) increase to LIFO costs	(29)	1
Total current and noncurrent inventories	7,311	6,857
Recognized as:
Inventories	5,847	5,440
Other assets	$ 1,464	$ 1,417

XML

Inventories - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Inventory [Line Items]
Inventories classified in Other assets	$ 1,464	$ 1,417
Inventories Not Expected to be Sold Within One Year
Inventory [Line Items]
Inventories classified in Other assets	1,300	1,400
Inventories Produced in Preparation for Product Launches
Inventory [Line Items]
Inventories classified in Other assets	$ 118	$ 7

XML

Loans Payable, Long-Term Debt and Leases - Debt Narrative (Details)	1 Months Ended
	Mar. 31, 2019 USD ($)
Debt Instrument [Line Items]
Face amount of debt	$ 5,000,000,000.0
Net proceeds from offering	5,000,000,000.0
2.90% Notes Due 2024
Debt Instrument [Line Items]
Face amount of debt	$ 750,000,000
Stated interest rate (as percent)	2.90%
3.40% Notes Due 2029
Debt Instrument [Line Items]
Face amount of debt	$ 1,750,000,000
Stated interest rate (as percent)	3.40%
3.90% Notes Due 2039
Debt Instrument [Line Items]
Face amount of debt	$ 1,000,000,000.0
Stated interest rate (as percent)	3.90%
4.00% Notes Due 2049
Debt Instrument [Line Items]
Face amount of debt	$ 1,500,000,000
Stated interest rate (as percent)	4.00%

XML

Loans Payable, Long-Term Debt and Leases Loans Payable, Long-Term Debt and Leases - Operating Leases (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jul. 31, 2019	Dec. 31, 2018
Lessee, Lease, Description [Line Items]
Weighted-average remaining lease term (in years)	7 years 6 months	7 years 6 months
Operating lease cost	$ 82	$ 165
Cash payments included in the measurement of operating lease liabilities	65	138
Obligations associated with operating leases not yet commenced	$ 127	$ 127
2019				$ 188
2020				198
2021				150
2022				134
2023				84
Thereafter				$ 243
Facilities
Lessee, Lease, Description [Line Items]
Weighted-average remaining lease term (in years)	8 years	8 years
Renewal term (in years)	4 years	4 years
Vehicle
Lessee, Lease, Description [Line Items]
Weighted-average remaining lease term (in years)	4 years	4 years
Subsequent Event
Lessee, Lease, Description [Line Items]
Obligations associated with operating leases not yet commenced			$ 72
Term for operating lease not yet commenced (in years)			10 years

XML

Loans Payable, Long-Term Debt and Leases - Balance Sheet Information (Details) $ in Millions	Jun. 30, 2019 USD ($)
Loans Payable, Long-Term Debt and Leases [Abstract]
Other Assets	$ 1,063
Accrued and other current liabilities	241
Other Noncurrent Liabilities	752
Operating lease liability	$ 993
Weighted-average remaining lease term (in years)	7 years 6 months
Weighted-average discount rate (as percent)	3.40%

XML

Loans Payable, Long-Term Debt and Leases Loans Payable, Long-Term Debt and Leases - Maturity Schedule (Details) $ in Millions	Jun. 30, 2019 USD ($)
Loans Payable, Long-Term Debt and Leases [Abstract]
2019 (excluding the six months ended June 30, 2019)	$ 138
2020	232
2021	172
2022	146
2023	98
Thereafter	339
Total lease payments	1,125
Less: imputed interest	(132)
Operating lease liability	$ 993

XML

Contingencies - Narrative (Details) $ in Millions	1 Months Ended	6 Months Ended
	Mar. 31, 2014 Case	Jun. 30, 2019 USD ($) Claim Case	Dec. 31, 2018 USD ($)
Legal Defense Costs
Loss Contingencies [Line Items]
Legal defense costs reserve | $		$ 260	$ 245
Fosamax
Loss Contingencies [Line Items]
Loss contingency, pending claims, number (in legal matters)		3,900
Fosamax | Femur Fracture Litigation | Federal
Loss Contingencies [Line Items]
Loss contingency, pending claims, number (in legal matters)		11
Loss contingency, claims dismissed, number (in legal matters)	650	1,060
Loss contingency, claims on appeal, number (in legal matters)	515
Fosamax | Femur Fracture Litigation | New Jersey state court
Loss Contingencies [Line Items]
Loss contingency, pending claims, number (in legal matters)		2,555
Fosamax | Femur Fracture Litigation | California state court
Loss Contingencies [Line Items]
Loss contingency, pending claims, number (in legal matters)		275
Fosamax | Femur Fracture Litigation | Other state courts
Loss Contingencies [Line Items]
Loss contingency, pending claims, number (in legal matters)		4
Januvia
Loss Contingencies [Line Items]
Loss contingency, pending claims, number (in legal matters) | Claim		1,350
Januvia | Other state courts
Loss Contingencies [Line Items]
Loss contingency, pending claims, number (in legal matters) | Claim		7
Januvia | Cases Company Agreed To Toll Statute Of Limitations
Loss Contingencies [Line Items]
Loss contingency, pending claims, number (in legal matters) | Claim		50

XML

Equity (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jan. 01, 2018
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares, beginning balance (in shares)			3,577,103,522
Equity, beginning balance	$ 27,670	$ 33,901	$ 26,882	$ 34,569
Net income attributable to Merck & Co., Inc.	2,670	1,707	5,585	2,443
Adoption of new accounting standards					$ 48
Other comprehensive income (loss), net of taxes	(16)	(62)	183	62
Cash dividends declared on common stock	(1,440)	(1,291)	(2,869)	(2,592)
Treasury stock shares purchased	(1,235)	(1,596)	(2,325)	(2,162)
Share-based compensation plans and other	117	103	360	394
Net income (loss) attributable to noncontrolling interests	(26)	9	$ (79)	14
Distributions attributable to noncontrolling interests		(5)		(10)
Other changes in noncontrolling ownership interests	$ (3)
Shares, ending balance (in shares)	3,577,103,522		3,577,103,522
Equity, ending balance	$ 27,737	$ 32,766	$ 27,737	$ 32,766
Cash dividends declared on common stock (in dollars per share)	$ 0.55	$ 0.48	$ 1.10	$ 0.96
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares, beginning balance (in shares)	3,577,000,000	3,577,000,000	3,577,000,000	3,577,000,000
Equity, beginning balance	$ 1,788	$ 1,788	$ 1,788	$ 1,788
Shares, ending balance (in shares)	3,577,000,000	3,577,000,000	3,577,000,000	3,577,000,000
Equity, ending balance	$ 1,788	$ 1,788	$ 1,788	$ 1,788
Other Paid-In Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity, beginning balance	38,768	39,874	38,808	39,902
Treasury stock shares purchased	1,000		1,000
Share-based compensation plans and other	(284)	(133)	(324)	(161)
Equity, ending balance	39,484	39,741	39,484	39,741
Retained Earnings
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity, beginning balance	44,065	41,107	42,579	41,350
Net income attributable to Merck & Co., Inc.	2,670	1,707	5,585	2,443
Adoption of new accounting standards					322
Cash dividends declared on common stock	(1,440)	(1,291)	(2,869)	(2,592)
Equity, ending balance	45,295	41,523	45,295	41,523
Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity, beginning balance	(5,346)	(5,060)	(5,545)	(4,910)
Adoption of new accounting standards					$ (274)
Other comprehensive income (loss), net of taxes	(16)	(62)	183	62
Equity, ending balance	$ (5,362)	$ (5,122)	$ (5,362)	$ (5,122)
Treasury Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares, beginning balance (in shares)	994,000,000	885,000,000	985,000,000	880,000,000
Equity, beginning balance	$ (51,736)	$ (44,041)	$ (50,929)	$ (43,794)
Treasury stock shares purchased (in shares)	24,000,000	27,000,000	38,000,000	37,000,000
Treasury stock shares purchased	$ (2,235)	$ (1,596)	$ (3,325)	$ (2,162)
Share-based compensation plans and other (in shares)	(8,000,000)	(5,000,000)	(13,000,000)	(10,000,000)
Share-based compensation plans and other	$ 401	$ 236	$ 684	$ 555
Shares, ending balance (in shares)	1,010,000,000	907,000,000	1,010,000,000	907,000,000
Equity, ending balance	$ (53,570)	$ (45,401)	$ (53,570)	$ (45,401)
Non- Controlling Interests
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity, beginning balance	131	233	181	233
Net income (loss) attributable to noncontrolling interests	(26)	9	(79)	14
Distributions attributable to noncontrolling interests		(5)		(10)
Other changes in noncontrolling ownership interests	(3)
Equity, ending balance	$ 102	$ 237	$ 102	$ 237

XML

Equity - Narrative (Details) - USD ($) shares in Millions, $ in Millions		1 Months Ended	3 Months Ended		6 Months Ended		9 Months Ended
	Oct. 29, 2018	Apr. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Oct. 25, 2018
Accelerated Share Repurchases [Line Items]
Treasury stock shares acquired			$ 1,235	$ 1,596	$ 2,325	$ 2,162
Accelerated Share Repurchase Agreement
Accelerated Share Repurchases [Line Items]
Share repurchase program authorized amount								$ 5,000
Treasury stock shares purchased (in shares)	56.7	7.7					64.4
Payment under ASR agreement	$ 5,000
Treasury stock shares acquired	4,000
Decrease in other-paid-in capital	$ 1,000

XML

Share-Based Compensation Plans - Amounts of Share-Based Compensation Cost Recorded in Consolidated Statement of Income (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-based Payment Arrangement [Abstract]
Pretax share-based compensation expense	$ 111	$ 90	$ 204	$ 170
Income tax benefit	(15)	(13)	(28)	(28)
Total share-based compensation expense, net of taxes	$ 96	$ 77	$ 176	$ 142

XML

Share-Based Compensation Plans - Narrative (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted (in shares)	3,000	3,000
Weighted- average exercise price of options granted in period (in dollars per share)	$ 80.00	$ 57.72
Weighted- average fair value per option granted (in dollars per share)	$ 10.63	$ 8.19
Total pretax unrecognized compensation expense related to nonvested stock options, RSU and PSU awards	$ 800
Weighted average period in years of recognition for nonvested stock options, RSU and PSU awards	2 years 2 months 12 days
Restricted Stock Units (RSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted (in shares)	6,000	7,000
Weighted-average fair value per share granted (in dollars per share)	$ 76.31	$ 58.15
Performance Share Units (PSUs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares granted (in shares)	609	855
Weighted-average fair value per share granted (in dollars per share)	$ 90.50	$ 56.70

XML

Share-Based Compensation Plans - Assumptions Used to Determine Weighted-Average Fair Value of Options Granted (Details)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Share-based Payment Arrangement [Abstract]
Expected dividend yield	3.20%	3.40%
Risk-free interest rate	2.40%	2.80%
Expected volatility	18.70%	19.10%
Expected life (years)	5 years 10 months 24 days	6 years 1 month 6 days

XML

Pension and Other Postretirement Benefit Plans - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Other Postretirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 12	$ 14	$ 24	$ 28
Interest cost	18	18	35	35
Expected return on plan assets	(18)	(21)	(36)	(41)
Amortization of unrecognized prior service credit	(21)	(21)	(43)	(42)
Termination benefits	0	1	0	2
Curtailments	(1)	(2)	(1)	(6)
Net periodic benefit cost	(10)	(11)	(21)	(24)
U.S. | Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	74	85	144	168
Interest cost	113	107	228	215
Expected return on plan assets	(205)	(211)	(411)	(425)
Amortization of unrecognized prior service credit	(12)	(13)	(25)	(25)
Net loss amortization	35	56	70	112
Termination benefits	3	7	5	17
Curtailments	0	5	1	3
Settlements	0	0	0	1
Net periodic benefit cost	8	36	12	66
International | Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	60	58	120	125
Interest cost	44	45	89	91
Expected return on plan assets	(107)	(108)	(214)	(221)
Amortization of unrecognized prior service credit	(3)	(3)	(6)	(7)
Net loss amortization	16	21	31	43
Termination benefits	1	0	1	0
Curtailments	0	(1)	0	(1)
Settlements	0	4	0	4
Net periodic benefit cost	$ 11	$ 16	$ 21	$ 34

XML

Other (Income) Expense, Net (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Other Income and Expenses [Abstract]
Interest income	$ (75)	$ (81)	$ (164)	$ (165)
Interest expense	233	194	442	379
Exchange losses	27	71	128	77
Loss (income) from investments in equity securities	(58)	(153)	(32)	(178)
Net periodic defined benefit plan (credit) cost other than service cost	(140)	(130)	(281)	(265)
Other, net	153	51	234	(188)
Other (income) expense, net	$ 140	$ (48)	$ 327	$ (340)

XML

Other (Income) Expense, Net - Narrative (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018
Other Income and Expenses [Abstract]
Goodwill impairment charges	$ 78	$ 162
Gain on settlement			$ 115
Interest paid		$ 356	$ 341

XML

Taxes on Income - Narrative (Details) - USD ($) $ in Millions	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Examination [Line Items]
Effective income tax rate (as percent)	18.90%		17.80%		13.00%	28.40%
Research and development	$ 2,189		$ 2,274		$ 4,119	$ 5,470
Eisai
Income Tax Examination [Line Items]
Research and development				$ 1,400		$ 1,400
Internal Revenue Service (IRS) | Domestic Tax Authority
Income Tax Examination [Line Items]
Tax benefit recognized related to settlement					$ 360
Income taxes paid		$ 107

XML

Earnings Per Share - Calculations of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Net income attributable to Merck & Co., Inc.	$ 2,670	$ 1,707	$ 5,585	$ 2,443
Average common shares outstanding (in shares)	2,574	2,683	2,579	2,689
Common shares issuable (in shares)	14	13	17	13
Average common shares outstanding assuming dilution (in shares)	2,588	2,696	2,596	2,702
Basic earnings per common share attributable to Merck & Co., Inc. common shareholders (in dollars per share)	$ 1.04	$ 0.64	$ 2.17	$ 0.91
Earnings per common share assuming dilution attributable to Merck & Co., Inc. common shareholders (in dollars per share)	$ 1.03	$ 0.63	$ 2.15	$ 0.90

XML

Earnings Per Share - Narrative (Details) - shares shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share [Abstract]
Common shares issuable under share-based compensation plans excluded from diluted earnings per common share because the effect would have been antidilutive (in shares)	3	13	4	15

XML

Other Comprehensive Income (Loss) - Changes in AOCI by Component (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jan. 01, 2018
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	$ 27,670	$ 33,901	$ 26,882	$ 34,569
Other comprehensive income (loss) before reclassification adjustments, pretax	40	(54)	258	(33)
Tax	4	(115)	7	(135)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	44	(169)	265	(168)
Reclassification adjustments, pretax	(73)	132	(101)	281
Tax	13	(25)	19	(51)
Reclassification adjustments, net of taxes	(60)	107	(82)	230
Other comprehensive income (loss), net of taxes	(16)	(62)	183	62
Adoption of ASU 2018-02				(266)
Adoption of ASU 2016-01					$ (8)
Equity, ending balance	27,737	32,766	27,737	32,766
Derivatives
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	118	(201)	166	(108)
Other comprehensive income (loss) before reclassification adjustments, pretax	10	265	(3)	84
Tax	(2)	(56)	1	(18)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	8	209	(2)	66
Reclassification adjustments, pretax	(76)	72	(124)	164
Tax	16	(15)	26	(34)
Reclassification adjustments, net of taxes	(60)	57	(98)	130
Other comprehensive income (loss), net of taxes	(52)	266	(100)	196
Adoption of ASU 2018-02				(23)
Adoption of ASU 2016-01					0
Equity, ending balance	66	65	66	65
Investments
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	4	(167)	(78)	(61)
Other comprehensive income (loss) before reclassification adjustments, pretax	55	(17)	131	(133)
Tax	0	0	0	1
Other comprehensive income (loss) before reclassification adjustments, net of taxes	55	(17)	131	(132)
Reclassification adjustments, pretax	(11)	20	(5)	36
Tax	0	0	0	0
Reclassification adjustments, net of taxes	(11)	20	(5)	36
Other comprehensive income (loss), net of taxes	44	3	126	(96)
Adoption of ASU 2018-02				1
Adoption of ASU 2016-01					(8)
Equity, ending balance	48	(164)	48	(164)
Employee Benefit Plans
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	(3,541)	(3,095)	(3,556)	(2,787)
Other comprehensive income (loss) before reclassification adjustments, pretax	0	(1)	(1)	(2)
Tax	0	1	6	4
Other comprehensive income (loss) before reclassification adjustments, net of taxes	0	0	5	2
Reclassification adjustments, pretax	14	40	28	81
Tax	(3)	(10)	(7)	(17)
Reclassification adjustments, net of taxes	11	30	21	64
Other comprehensive income (loss), net of taxes	11	30	26	66
Adoption of ASU 2018-02				(344)
Adoption of ASU 2016-01					0
Equity, ending balance	(3,530)	(3,065)	(3,530)	(3,065)
Cumulative Translation Adjustment
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	(1,927)	(1,597)	(2,077)	(1,954)
Other comprehensive income (loss) before reclassification adjustments, pretax	(25)	(301)	131	18
Tax	6	(60)	0	(122)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	(19)	(361)	131	(104)
Reclassification adjustments, pretax	0	0	0	0
Tax	0	0	0	0
Reclassification adjustments, net of taxes	0	0	0	0
Other comprehensive income (loss), net of taxes	(19)	(361)	131	(104)
Adoption of ASU 2018-02				100
Adoption of ASU 2016-01					$ 0
Equity, ending balance	(1,946)	(1,958)	(1,946)	(1,958)
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	(5,346)	(5,060)	(5,545)	(4,910)
Equity, ending balance	$ (5,362)	$ (5,122)	$ (5,362)	$ (5,122)

XML

Segment Reporting - Narrative (Details) $ in Billions	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) segment	Jun. 30, 2018 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment			4
Sales discounts | $	$ 2.9	$ 2.8	$ 5.5	$ 5.2

XML

Segment Reporting - Sales of Company's Products (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Sales	$ 11,760	$ 10,465	$ 22,575	$ 20,502
Operating Segments
Segment Reporting Information [Line Items]
Sales	11,632	10,428	22,359	20,496
Other
Segment Reporting Information [Line Items]
Sales	128	37	216	6
United States
Segment Reporting Information [Line Items]
Sales	5,144	4,262	9,659	8,395
United States | Operating Segments
Segment Reporting Information [Line Items]
Sales	5,140	4,208	9,647	8,315
United States | Other
Segment Reporting Information [Line Items]
Sales	4	54	12	80
International
Segment Reporting Information [Line Items]
Sales	6,616	6,203	12,917	12,107
International | Operating Segments
Segment Reporting Information [Line Items]
Sales	6,491	6,221	12,711	12,181
International | Other
Segment Reporting Information [Line Items]
Sales	125	(18)	206	(74)
Total Pharmaceutical segment sales | Operating Segments
Segment Reporting Information [Line Items]
Sales	10,460	9,282	20,123	18,201
Total Pharmaceutical segment sales | Operating Segments | Keytruda
Segment Reporting Information [Line Items]
Sales	2,634	1,667	4,903	3,131
Total Pharmaceutical segment sales | Operating Segments | Emend
Segment Reporting Information [Line Items]
Sales	121	148	237	273
Total Pharmaceutical segment sales | Operating Segments | Alliance revenue - Lynparza
Segment Reporting Information [Line Items]
Sales	111	44	190	76
Total Pharmaceutical segment sales | Operating Segments | Alliance revenue - Lenvima
Segment Reporting Information [Line Items]
Sales	97	35	171	35
Total Pharmaceutical segment sales | Operating Segments | Gardasil/Gardasil 9
Segment Reporting Information [Line Items]
Sales	886	608	1,724	1,269
Total Pharmaceutical segment sales | Operating Segments | ProQuad/M-M-R II/Varivax
Segment Reporting Information [Line Items]
Sales	675	426	1,171	818
Total Pharmaceutical segment sales | Operating Segments | RotaTeq
Segment Reporting Information [Line Items]
Sales	172	156	383	349
Total Pharmaceutical segment sales | Operating Segments | Pneumovax 23
Segment Reporting Information [Line Items]
Sales	170	193	355	372
Total Pharmaceutical segment sales | Operating Segments | Vaqta
Segment Reporting Information [Line Items]
Sales	58	65	105	101
Total Pharmaceutical segment sales | Operating Segments | Bridion
Segment Reporting Information [Line Items]
Sales	278	240	533	444
Total Pharmaceutical segment sales | Operating Segments | Noxafil
Segment Reporting Information [Line Items]
Sales	193	188	383	363
Total Pharmaceutical segment sales | Operating Segments | Cubicin
Segment Reporting Information [Line Items]
Sales	67	94	155	192
Total Pharmaceutical segment sales | Operating Segments | Invanz
Segment Reporting Information [Line Items]
Sales	78	149	150	300
Total Pharmaceutical segment sales | Operating Segments | Primaxin
Segment Reporting Information [Line Items]
Sales	71	68	130	140
Total Pharmaceutical segment sales | Operating Segments | Cancidas
Segment Reporting Information [Line Items]
Sales	67	87	129	178
Total Pharmaceutical segment sales | Operating Segments | Simponi
Segment Reporting Information [Line Items]
Sales	214	233	422	464
Total Pharmaceutical segment sales | Operating Segments | Remicade
Segment Reporting Information [Line Items]
Sales	98	157	221	324
Total Pharmaceutical segment sales | Operating Segments | Belsomra
Segment Reporting Information [Line Items]
Sales	76	71	143	125
Total Pharmaceutical segment sales | Operating Segments | Isentress/Isentress HD
Segment Reporting Information [Line Items]
Sales	247	305	502	586
Total Pharmaceutical segment sales | Operating Segments | Zepatier
Segment Reporting Information [Line Items]
Sales	108	113	221	243
Total Pharmaceutical segment sales | Operating Segments | Zetia
Segment Reporting Information [Line Items]
Sales	156	226	296	531
Total Pharmaceutical segment sales | Operating Segments | Vytorin
Segment Reporting Information [Line Items]
Sales	76	155	174	322
Total Pharmaceutical segment sales | Operating Segments | Atozet
Segment Reporting Information [Line Items]
Sales	92	101	186	174
Total Pharmaceutical segment sales | Operating Segments | Adempas
Segment Reporting Information [Line Items]
Sales	104	75	194	143
Total Pharmaceutical segment sales | Operating Segments | Januvia
Segment Reporting Information [Line Items]
Sales	908	949	1,732	1,829
Total Pharmaceutical segment sales | Operating Segments | Janumet
Segment Reporting Information [Line Items]
Sales	533	585	1,063	1,129
Total Pharmaceutical segment sales | Operating Segments | NuvaRing
Segment Reporting Information [Line Items]
Sales	240	236	459	452
Total Pharmaceutical segment sales | Operating Segments | Implanon/Nexplanon
Segment Reporting Information [Line Items]
Sales	183	174	382	348
Total Pharmaceutical segment sales | Operating Segments | Singulair
Segment Reporting Information [Line Items]
Sales	160	185	352	360
Total Pharmaceutical segment sales | Operating Segments | Cozaar/Hyzaar
Segment Reporting Information [Line Items]
Sales	109	125	213	245
Total Pharmaceutical segment sales | Operating Segments | Nasonex
Segment Reporting Information [Line Items]
Sales	72	81	168	203
Total Pharmaceutical segment sales | Operating Segments | Arcoxia
Segment Reporting Information [Line Items]
Sales	75	84	149	166
Total Pharmaceutical segment sales | Operating Segments | Follistim AQ
Segment Reporting Information [Line Items]
Sales	63	70	121	138
Total Pharmaceutical segment sales | Operating Segments | Other Pharmaceutical
Segment Reporting Information [Line Items]
Sales	1,268	1,189	2,406	2,378
Total Pharmaceutical segment sales | United States | Operating Segments
Segment Reporting Information [Line Items]
Sales	4,758	3,841	8,933	7,557
Total Pharmaceutical segment sales | United States | Operating Segments | Keytruda
Segment Reporting Information [Line Items]
Sales	1,498	959	2,782	1,797
Total Pharmaceutical segment sales | United States | Operating Segments | Emend
Segment Reporting Information [Line Items]
Sales	67	89	130	168
Total Pharmaceutical segment sales | United States | Operating Segments | Alliance revenue - Lynparza
Segment Reporting Information [Line Items]
Sales	66	31	116	55
Total Pharmaceutical segment sales | United States | Operating Segments | Alliance revenue - Lenvima
Segment Reporting Information [Line Items]
Sales	54	19	104	19
Total Pharmaceutical segment sales | United States | Operating Segments | Gardasil/Gardasil 9
Segment Reporting Information [Line Items]
Sales	456	302	818	682
Total Pharmaceutical segment sales | United States | Operating Segments | ProQuad/M-M-R II/Varivax
Segment Reporting Information [Line Items]
Sales	500	356	843	668
Total Pharmaceutical segment sales | United States | Operating Segments | RotaTeq
Segment Reporting Information [Line Items]
Sales	104	99	258	250
Total Pharmaceutical segment sales | United States | Operating Segments | Pneumovax 23
Segment Reporting Information [Line Items]
Sales	123	122	248	234
Total Pharmaceutical segment sales | United States | Operating Segments | Vaqta
Segment Reporting Information [Line Items]
Sales	38	42	67	60
Total Pharmaceutical segment sales | United States | Operating Segments | Bridion
Segment Reporting Information [Line Items]
Sales	129	95	248	175
Total Pharmaceutical segment sales | United States | Operating Segments | Noxafil
Segment Reporting Information [Line Items]
Sales	100	87	191	168
Total Pharmaceutical segment sales | United States | Operating Segments | Cubicin
Segment Reporting Information [Line Items]
Sales	22	48	64	95
Total Pharmaceutical segment sales | United States | Operating Segments | Invanz
Segment Reporting Information [Line Items]
Sales	18	87	31	177
Total Pharmaceutical segment sales | United States | Operating Segments | Primaxin
Segment Reporting Information [Line Items]
Sales	0	0	1	5
Total Pharmaceutical segment sales | United States | Operating Segments | Cancidas
Segment Reporting Information [Line Items]
Sales	3	4	4	7
Total Pharmaceutical segment sales | United States | Operating Segments | Simponi
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Total Pharmaceutical segment sales | United States | Operating Segments | Remicade
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Total Pharmaceutical segment sales | United States | Operating Segments | Belsomra
Segment Reporting Information [Line Items]
Sales	21	29	45	52
Total Pharmaceutical segment sales | United States | Operating Segments | Isentress/Isentress HD
Segment Reporting Information [Line Items]
Sales	94	132	202	260
Total Pharmaceutical segment sales | United States | Operating Segments | Zepatier
Segment Reporting Information [Line Items]
Sales	39	(10)	72	(10)
Total Pharmaceutical segment sales | United States | Operating Segments | Zetia
Segment Reporting Information [Line Items]
Sales	6	8	6	25
Total Pharmaceutical segment sales | United States | Operating Segments | Vytorin
Segment Reporting Information [Line Items]
Sales	3	3	6	11
Total Pharmaceutical segment sales | United States | Operating Segments | Atozet
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Total Pharmaceutical segment sales | United States | Operating Segments | Adempas
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Total Pharmaceutical segment sales | United States | Operating Segments | Januvia
Segment Reporting Information [Line Items]
Sales	471	503	855	968
Total Pharmaceutical segment sales | United States | Operating Segments | Janumet
Segment Reporting Information [Line Items]
Sales	166	209	333	401
Total Pharmaceutical segment sales | United States | Operating Segments | NuvaRing
Segment Reporting Information [Line Items]
Sales	206	187	391	357
Total Pharmaceutical segment sales | United States | Operating Segments | Implanon/Nexplanon
Segment Reporting Information [Line Items]
Sales	136	114	285	242
Total Pharmaceutical segment sales | United States | Operating Segments | Singulair
Segment Reporting Information [Line Items]
Sales	8	5	13	11
Total Pharmaceutical segment sales | United States | Operating Segments | Cozaar/Hyzaar
Segment Reporting Information [Line Items]
Sales	6	7	10	14
Total Pharmaceutical segment sales | United States | Operating Segments | Nasonex
Segment Reporting Information [Line Items]
Sales	(1)	0	(2)	2
Total Pharmaceutical segment sales | United States | Operating Segments | Arcoxia
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Total Pharmaceutical segment sales | United States | Operating Segments | Follistim AQ
Segment Reporting Information [Line Items]
Sales	24	27	53	56
Total Pharmaceutical segment sales | United States | Operating Segments | Other Pharmaceutical
Segment Reporting Information [Line Items]
Sales	401	287	759	608
Total Pharmaceutical segment sales | International | Operating Segments
Segment Reporting Information [Line Items]
Sales	5,702	5,442	11,190	10,644
Total Pharmaceutical segment sales | International | Operating Segments | Keytruda
Segment Reporting Information [Line Items]
Sales	1,136	707	2,121	1,333
Total Pharmaceutical segment sales | International | Operating Segments | Emend
Segment Reporting Information [Line Items]
Sales	54	59	107	105
Total Pharmaceutical segment sales | International | Operating Segments | Alliance revenue - Lynparza
Segment Reporting Information [Line Items]
Sales	45	13	74	22
Total Pharmaceutical segment sales | International | Operating Segments | Alliance revenue - Lenvima
Segment Reporting Information [Line Items]
Sales	43	16	67	16
Total Pharmaceutical segment sales | International | Operating Segments | Gardasil/Gardasil 9
Segment Reporting Information [Line Items]
Sales	430	306	906	586
Total Pharmaceutical segment sales | International | Operating Segments | ProQuad/M-M-R II/Varivax
Segment Reporting Information [Line Items]
Sales	174	70	328	150
Total Pharmaceutical segment sales | International | Operating Segments | RotaTeq
Segment Reporting Information [Line Items]
Sales	68	57	125	99
Total Pharmaceutical segment sales | International | Operating Segments | Pneumovax 23
Segment Reporting Information [Line Items]
Sales	47	71	107	137
Total Pharmaceutical segment sales | International | Operating Segments | Vaqta
Segment Reporting Information [Line Items]
Sales	20	23	39	42
Total Pharmaceutical segment sales | International | Operating Segments | Bridion
Segment Reporting Information [Line Items]
Sales	149	145	285	269
Total Pharmaceutical segment sales | International | Operating Segments | Noxafil
Segment Reporting Information [Line Items]
Sales	93	100	192	195
Total Pharmaceutical segment sales | International | Operating Segments | Cubicin
Segment Reporting Information [Line Items]
Sales	45	46	91	97
Total Pharmaceutical segment sales | International | Operating Segments | Invanz
Segment Reporting Information [Line Items]
Sales	60	63	118	123
Total Pharmaceutical segment sales | International | Operating Segments | Primaxin
Segment Reporting Information [Line Items]
Sales	70	68	129	135
Total Pharmaceutical segment sales | International | Operating Segments | Cancidas
Segment Reporting Information [Line Items]
Sales	64	83	125	171
Total Pharmaceutical segment sales | International | Operating Segments | Simponi
Segment Reporting Information [Line Items]
Sales	214	233	422	464
Total Pharmaceutical segment sales | International | Operating Segments | Remicade
Segment Reporting Information [Line Items]
Sales	98	157	221	324
Total Pharmaceutical segment sales | International | Operating Segments | Belsomra
Segment Reporting Information [Line Items]
Sales	55	42	98	73
Total Pharmaceutical segment sales | International | Operating Segments | Isentress/Isentress HD
Segment Reporting Information [Line Items]
Sales	153	174	300	326
Total Pharmaceutical segment sales | International | Operating Segments | Zepatier
Segment Reporting Information [Line Items]
Sales	68	123	149	253
Total Pharmaceutical segment sales | International | Operating Segments | Zetia
Segment Reporting Information [Line Items]
Sales	150	218	290	505
Total Pharmaceutical segment sales | International | Operating Segments | Vytorin
Segment Reporting Information [Line Items]
Sales	73	152	167	311
Total Pharmaceutical segment sales | International | Operating Segments | Atozet
Segment Reporting Information [Line Items]
Sales	92	101	186	174
Total Pharmaceutical segment sales | International | Operating Segments | Adempas
Segment Reporting Information [Line Items]
Sales	104	75	194	143
Total Pharmaceutical segment sales | International | Operating Segments | Januvia
Segment Reporting Information [Line Items]
Sales	437	446	877	862
Total Pharmaceutical segment sales | International | Operating Segments | Janumet
Segment Reporting Information [Line Items]
Sales	366	377	730	729
Total Pharmaceutical segment sales | International | Operating Segments | NuvaRing
Segment Reporting Information [Line Items]
Sales	34	49	68	95
Total Pharmaceutical segment sales | International | Operating Segments | Implanon/Nexplanon
Segment Reporting Information [Line Items]
Sales	48	60	98	106
Total Pharmaceutical segment sales | International | Operating Segments | Singulair
Segment Reporting Information [Line Items]
Sales	153	180	338	350
Total Pharmaceutical segment sales | International | Operating Segments | Cozaar/Hyzaar
Segment Reporting Information [Line Items]
Sales	103	118	202	231
Total Pharmaceutical segment sales | International | Operating Segments | Nasonex
Segment Reporting Information [Line Items]
Sales	73	81	170	201
Total Pharmaceutical segment sales | International | Operating Segments | Arcoxia
Segment Reporting Information [Line Items]
Sales	75	84	149	166
Total Pharmaceutical segment sales | International | Operating Segments | Follistim AQ
Segment Reporting Information [Line Items]
Sales	39	43	67	81
Total Pharmaceutical segment sales | International | Operating Segments | Other Pharmaceutical
Segment Reporting Information [Line Items]
Sales	869	902	1,650	1,770
Total Animal Health segment sales | Operating Segments
Segment Reporting Information [Line Items]
Sales	1,124	1,090	2,149	2,155
Total Animal Health segment sales | Operating Segments | Livestock
Segment Reporting Information [Line Items]
Sales	671	633	1,282	1,286
Total Animal Health segment sales | Operating Segments | Companion Animals
Segment Reporting Information [Line Items]
Sales	453	457	867	869
Total Animal Health segment sales | United States | Operating Segments
Segment Reporting Information [Line Items]
Sales	335	311	628	618
Total Animal Health segment sales | United States | Operating Segments | Livestock
Segment Reporting Information [Line Items]
Sales	145	107	261	231
Total Animal Health segment sales | United States | Operating Segments | Companion Animals
Segment Reporting Information [Line Items]
Sales	190	204	367	387
Total Animal Health segment sales | International | Operating Segments
Segment Reporting Information [Line Items]
Sales	789	779	1,521	1,537
Total Animal Health segment sales | International | Operating Segments | Livestock
Segment Reporting Information [Line Items]
Sales	526	526	1,021	1,055
Total Animal Health segment sales | International | Operating Segments | Companion Animals
Segment Reporting Information [Line Items]
Sales	263	253	500	482
Other segment sales | Operating Segments
Segment Reporting Information [Line Items]
Sales	48	56	87	140
Other segment sales | United States | Operating Segments
Segment Reporting Information [Line Items]
Sales	47	56	86	140
Other segment sales | International | Operating Segments
Segment Reporting Information [Line Items]
Sales	$ 0	$ 0	$ 0	$ 0

XML

Segment Reporting - Consolidated Revenues by Geographic Area (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue from External Customer [Line Items]
Sales	$ 11,760	$ 10,465	$ 22,575	$ 20,502
United States
Revenue from External Customer [Line Items]
Sales	5,144	4,262	9,659	8,395
Europe, Middle East and Africa
Revenue from External Customer [Line Items]
Sales	3,163	3,144	6,265	6,334
Japan
Revenue from External Customer [Line Items]
Sales	921	855	1,720	1,592
China
Revenue from External Customer [Line Items]
Sales	763	559	1,509	1,045
Asia Pacific (other than Japan and China)
Revenue from External Customer [Line Items]
Sales	716	791	1,461	1,543
Latin America
Revenue from External Customer [Line Items]
Sales	658	594	1,219	1,126
Other
Revenue from External Customer [Line Items]
Sales	$ 395	$ 260	$ 742	$ 467

XML

Segment Reporting - Reconciliation of Segment Profits to Income Before Taxes (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Profits	$ 3,259	$ 2,086	$ 6,326	$ 3,432
Interest income	75	81	164	165
Interest expense	(233)	(194)	(442)	(379)
Depreciation and amortization			(1,871)	(2,427)
Research and development	(2,189)	(2,274)	(4,119)	(5,470)
Restructuring costs	(59)	(228)	(212)	(323)
Total segment profits
Segment Reporting Information [Line Items]
Profits	7,518	6,451	14,510	12,866
Total segment profits | Pharmaceutical segment
Segment Reporting Information [Line Items]
Profits	7,115	5,975	13,690	11,914
Total segment profits | Animal Health segment
Segment Reporting Information [Line Items]
Profits	405	450	820	864
Total segment profits | Other segments
Segment Reporting Information [Line Items]
Profits	(2)	26	0	88
Other profits (losses)
Segment Reporting Information [Line Items]
Profits	94	(2)	124	(89)
Unallocated
Segment Reporting Information [Line Items]
Interest income	75	81	164	165
Interest expense	(233)	(194)	(442)	(379)
Depreciation and amortization	(427)	(332)	(786)	(682)
Research and development	(2,093)	(2,190)	(3,935)	(5,307)
Amortization of purchase accounting adjustments	(378)	(732)	(775)	(1,464)
Restructuring costs	(59)	(228)	(212)	(323)
Other unallocated, net	$ (1,238)	$ (768)	$ (2,322)	$ (1,355)