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, 2022

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.)
126 East Lincoln Avenue
Rahway	New Jersey	07065
(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.)

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
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

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 ☒

The number of shares of common stock outstanding as of the close of business on July 31, 2022: 2,533,279,845

Table of Contents

		Page No.
PART I	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Condensed Consolidated Statement of Income	3
	Condensed Consolidated Statement of Comprehensive Income	3
	Condensed Consolidated Balance Sheet	4
	Condensed Consolidated Statement of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 4.	Controls and Procedures	49
	Cautionary Factors That May Affect Future Results	49
PART II	OTHER INFORMATION	49
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 6.	Exhibits	50
	Signatures	51

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,
	2022		2021		2022		2021
Sales	$	14,593	$	11,402	$	30,494	$	22,029
Costs, Expenses and Other
Cost of sales	4,216		3,104		9,596		6,303
Selling, general and administrative	2,512		2,281		4,834		4,468
Research and development	2,798		4,321		5,374		6,732
Restructuring costs	142		82		194		380
Other (income) expense, net	438		(103)		1,148		(558)
	10,106		9,685		21,146		17,325
Income from Continuing Operations Before Taxes	4,487		1,717		9,348		4,704
Taxes on Income from Continuing Operations	538		503		1,092		741
Net Income from Continuing Operations	3,949		1,214		8,256		3,963
Less: Net Income Attributable to Noncontrolling Interests	5		1		2		5
Net Income from Continuing Operations Attributable to Merck & Co., Inc.	3,944		1,213		8,254		3,958
Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests	—		332		—		766
Net Income Attributable to Merck & Co., Inc.	$	3,944	$	1,545	$	8,254	$	4,724
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations	$	1.56	$	0.48	$	3.26	$	1.56
Income from Discontinued Operations	—		0.13		—		0.30
Net Income	$	1.56	$	0.61	$	3.26	$	1.87
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations	$	1.55	$	0.48	$	3.25	$	1.56
Income from Discontinued Operations	—		0.13		—		0.30
Net Income	$	1.55	$	0.61	$	3.25	$	1.86

MERCK & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited, $ in millions)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net Income Attributable to Merck & Co., Inc.	$	3,944	$	1,545	$	8,254	$	4,724
Other Comprehensive Income Net of Taxes:
Net unrealized gain on derivatives, net of reclassifications	183		10		246		240
Benefit plan net gain and prior service credit, net of amortization	246		1,403		278		1,484
Cumulative translation adjustment	(387)		132		(422)		(167)
	42		1,545		102		1,557
Comprehensive Income Attributable to Merck & Co., Inc.	$	3,986	$	3,090	$	8,356	$	6,281

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

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MERCK & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited, $ in millions except per share amounts)

	June 30, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	9,675	$	8,096
Short-term investments	453		—
Accounts receivable (net of allowance for doubtful accounts of $82 in 2022  and $62 in 2021)	9,643		9,230
Inventories (excludes inventories of $2,764 in 2022 and $2,194 in 2021 classified in Other assets - see Note 7)	5,535		5,953
Other current assets	6,810		6,987
Total current assets	32,116		30,266
Investments	238		370
Property, Plant and Equipment, at cost, net of accumulated depreciation of $17,798 in 2022 and $18,192 in 2021	20,059		19,279
Goodwill	21,213		21,264
Other Intangibles, Net	22,497		22,933
Other Assets	10,972		11,582
	$	107,095	$	105,694
Liabilities and Equity
Current Liabilities
Loans payable and current portion of long-term debt	$	2,979	$	2,412
Trade accounts payable	3,482		4,609
Accrued and other current liabilities	13,501		13,859
Income taxes payable	1,438		1,224
Dividends payable	1,768		1,768
Total current liabilities	23,168		23,872
Long-Term Debt	28,684		30,690
Deferred Income Taxes	2,974		3,441
Other Noncurrent Liabilities	8,951		9,434
Merck & Co., Inc. Stockholders’ Equity
Common stock, $0.50 par value Authorized - 6,500,000,000 shares Issued - 3,577,103,522 shares in 2022 and 2021	1,788		1,788
Other paid-in capital	44,115		44,238
Retained earnings	58,437		53,696
Accumulated other comprehensive loss	(4,327)		(4,429)
	100,013		95,293
Less treasury stock, at cost: 1,043,894,068 shares in 2022 and 1,049,499,023 shares in 2021	56,770		57,109
Total Merck & Co., Inc. stockholders’ equity	43,243		38,184
Noncontrolling Interests	75		73
Total equity	43,318		38,257
	$	107,095	$	105,694

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

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MERCK & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited, $ in millions)

	Six Months Ended June 30,
	2022		2021
Cash Flows from Operating Activities of Continuing Operations
Net income from continuing operations	$	8,256	$	3,963
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities of continuing operations:
Amortization	1,163		871
Depreciation	895		749
Intangible asset impairment charges	23		—
Loss (income) from investments in equity securities, net	991		(854)
Charge for the acquisition of Pandion Therapeutics, Inc.	—		1,556
Deferred income taxes	(600)		29
Share-based compensation	257		243
Other	776		328
Net changes in assets and liabilities	(2,698)		(3,655)
Net Cash Provided by Operating Activities of Continuing Operations	9,063		3,230
Cash Flows from Investing Activities of Continuing Operations
Capital expenditures	(2,113)		(2,068)
Purchases of securities and other investments	(705)		(1)
Proceeds from sales of securities and other investments	374		386
Acquisition of Pandion Therapeutics, Inc., net of cash acquired	—		(1,554)
Other acquisitions, net of cash acquired	—		(90)
Other	194		16
Net Cash Used in Investing Activities of Continuing Operations	(2,250)		(3,311)
Cash Flows from Financing Activities of Continuing Operations
Net change in short-term borrowings	—		(3,983)
Payments on debt	(1,250)		(1,153)
Distribution from Organon & Co.	—		9,000
Purchases of treasury stock	—		(239)
Dividends paid to stockholders	(3,515)		(3,318)
Proceeds from exercise of stock options	109		51
Other	(207)		(194)
Net Cash (Used in) Provided by Financing Activities of Continuing Operations	(4,863)		164
Cash Flows from Discontinued Operations
Net cash provided by operating activities	—		1,051
Net cash used in investing activities	—		(134)
Net cash used in financing activities	—		(504)
Net Cash Flows Provided by Discontinued Operations	—		413
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	(364)		(19)
Net Increase in Cash, Cash Equivalents and Restricted Cash	1,586		477
Cash, Cash Equivalents and Restricted Cash at Beginning of Year (includes restricted cash of $71 and $103 at January 1, 2022 and 2021, respectively, included in Other current assets)	8,167		8,153
Cash, Cash Equivalents and Restricted Cash at End of Period (includes restricted cash of $78 and $55 at June 30, 2022 and 2021, respectively, included in Other current assets)	$	9,753	$	8,630

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

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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 (U.S.) (GAAP) 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 25, 2022.

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.

Reclassifications — Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

Spin-Off of Organon & Co.

On June 2, 2021, Merck completed the spin-off of products from its women’s health, biosimilars and established brands businesses into a new, independent, publicly traded company named Organon & Co. (Organon) through a distribution of Organon’s publicly traded stock to Company shareholders. The distribution is expected to qualify and has been treated as tax-free to the Company and its shareholders for U.S. federal income tax purposes. The established brands included in the transaction consisted of dermatology, non-opioid pain management, respiratory, select cardiovascular products, as well as the rest of Merck’s diversified brands franchise. Merck’s existing research pipeline programs continue to be owned and developed within Merck as planned. The historical results of the businesses that were contributed to Organon in the spin-off have been reflected as discontinued operations in the Company’s consolidated financial statements through the date of the spin-off (see Note 2).

Recently Adopted Accounting Standards

In August 2020, the Financial Accounting Standards Board (FASB) issued amended guidance on the accounting for convertible instruments and contracts in an entity’s own equity. The guidance removes the separation model for convertible debt instruments and preferred stock, amends requirements for conversion options to be classified in equity as well as amends diluted earnings per share (EPS) calculations for certain convertible debt instruments. The Company adopted the new guidance on January 1, 2022 using a modified retrospective approach. There was no impact to the Company’s consolidated financial statements upon adoption.

In November 2021, the FASB issued new guidance to increase the transparency of transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The guidance requires annual disclosures of such transactions to include the nature of the transactions and the significant terms and conditions, the accounting treatment and the impact to a company’s financial statements. The Company adopted the new guidance on January 1, 2022 on a prospective basis. There was no material impact to the Company’s consolidated financial statements upon adoption.

Recently Issued Accounting Standards Not Yet Adopted

In March 2020, the FASB issued optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for accounting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time between January 1, 2020 through December 31, 2022. The Company is currently evaluating the impact of adoption on its consolidated financial statements. The Company has evaluated all material contracts that may be affected by LIBOR cessation, including debt-related contracts, leases, business development and licensing arrangements, royalty and other agreements. The Company has amended certain agreements and continues to review any remaining agreements for potential impacts. With regard to debt-related exposures in particular, the Company’s four remaining interest rate swaps linked to LIBOR will mature in September 2022. The Company will transition its LIBOR-based debt to an alternative reference rate upon LIBOR discontinuance. Based on its evaluation thus far, the Company does not anticipate a material impact to its consolidated financial statements as a result of reference rate reform.

In October 2021, the FASB issued amended guidance that requires acquiring entities to recognize and measure contract assets and liabilities in a business combination in accordance with existing revenue recognition guidance. The amended guidance is effective for interim and annual periods in 2023 and is to be applied prospectively. Early adoption is permitted on a retrospective basis to the beginning of the fiscal year of adoption. The adoption of this guidance will not have an impact on the

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Notes to Condensed Consolidated Financial Statements (unaudited)

Company’s consolidated financial statements for prior acquisitions; however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations.

In June 2022, the FASB issued guidance related to the fair value measurement of an equity security subject to contractual restrictions that prohibit the sale of the equity security. The new guidance also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The amended guidance is effective for interim and annual periods in 2024 and is to be applied prospectively. Early adoption is permitted for both interim and annual periods. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

2. Spin-Off of Organon & Co.

On June 2, 2021, Merck completed the spin-off of Organon through a distribution of Organon’s publicly traded stock to Company shareholders. In connection with the spin-off, each Merck shareholder received one tenth of a share of Organon’s common stock for each share of Merck common stock held by such shareholder. The distribution is expected to qualify and has been treated as tax free to Merck and its shareholders for U.S. federal income tax purposes. Indebtedness of $9.5 billion principal amount, consisting of term loans and senior notes, was issued in 2021 in connection with the spin-off and assumed by Organon. Merck is no longer the obligor of any Organon debt or financing arrangements. Cash proceeds of $9.0 billion were distributed by Organon to Merck in connection with the spin-off.

Also in connection with the spin-off, Merck and Organon entered into a separation and distribution agreement and also entered into various other agreements to effect the spin-off and provide a framework for the relationship between Merck and Organon after the spin-off, including a transition services agreement (TSA), manufacturing and supply agreements (MSAs), trademark license agreements, intellectual property license agreements, an employee matters agreement, a tax matters agreement and certain other commercial agreements. Under the TSA, Merck is providing Organon various services and, similarly, Organon is providing Merck various services. The provision of services under the TSA generally will terminate within 25 months following the spin-off; however, the provision of certain services has been extended to 31 months. Merck and Organon also entered into a series of interim operating agreements pursuant to which in various jurisdictions where Merck held licenses, permits and other rights in connection with marketing, import and/or distribution of Organon products prior to the separation, Merck is continuing to market, import and distribute such products until such time as the relevant licenses and permits are transferred to Organon. Under such interim operating agreements and in accordance with the separation and distribution agreement, Merck is continuing operations in the affected markets on behalf of Organon, with Organon receiving all of the economic benefits and burdens of such activities. Additionally, Merck and Organon entered into a number of MSAs pursuant to which Merck is (a) manufacturing and supplying certain active pharmaceutical ingredients for Organon, (b) manufacturing and supplying certain formulated pharmaceutical products for Organon, and (c) packaging and labeling certain finished pharmaceutical products for Organon. Similarly, Organon and Merck entered into a number of MSAs pursuant to which Organon is (a) manufacturing and supplying certain formulated pharmaceutical products for Merck, and (b) packaging and labeling certain finished pharmaceutical products for Merck. The terms of the MSAs range in initial duration from four years to ten years.

Amounts included in the condensed consolidated statement of income for the above MSAs include sales of $95 million and $194 million and related cost of sales of $103 million and $208 million for the three and six months ended June 30, 2022, respectively. Amounts included in the condensed consolidated statement of income for the TSAs were immaterial for the three and six months ended June 30, 2022. The amounts included in the condensed consolidated statement of income for the MSAs and TSAs in the three and six months ended June 30, 2021 were immaterial.

The amounts due from Organon under all of the above agreements were $649 million and $964 million at June 30, 2022 and December 31, 2021, respectively, and are reflected in Other current assets. The amounts due to Organon under these agreements were $357 million and $400 million at June 30, 2022 and December 31, 2021, respectively, and are included in Accrued and other current liabilities.

The results of the women’s health, biosimilars and established brands businesses (previously included in the Pharmaceutical segment) that were contributed to Organon in the spin-off, as well as interest expense related to the debt issuance in 2021, have been reflected as discontinued operations in the Company’s condensed consolidated statement of income as Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests for periods prior to the spin-off on June 2, 2021. Merck incurred separation costs of $307 million and $556 million for the three and six months ended June 30, 2021, respectively, related to the spin-off of Organon, which are also included in Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests. These costs primarily relate to professional fees for separation activities within finance, tax, legal and information technology functions, as well as investment banking fees.

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Notes to Condensed Consolidated Financial Statements (unaudited)

Details of Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests are as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
($ in millions)	2021 (1)
Sales	$	1,059	$	2,512
Costs, Expenses and Other
Cost of sales	318		789
Selling, general and administrative	431		877
Research and development	50		103
Restructuring costs	—		1
Other (income) expense, net	(23)		(15)
	776		1,755
Income from discontinued operations before taxes	283		757
Income tax benefit	(49)		(12)
Income from discontinued operations, net of taxes	332		769
Less: Income of discontinued operations attributable to noncontrolling interests	—		3
	$	332	$	766

(1)    Reflects amounts through the June 2, 2021 spin-off date.

3.    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 2022, Merck and Orion Corporation (Orion) announced a global co-development and co-commercialization agreement for Orion’s investigational candidate ODM-208 (MK-5684) and other drugs targeting cytochrome P450 11A1 (CYP11A1), an enzyme important in steroid production. ODM-208 is an oral, non-steroidal inhibitor of CYP11A1 currently being evaluated in a Phase 2 clinical trial for the treatment of patients with metastatic castration-resistant prostate cancer. Merck made an upfront payment to Orion of $290 million, which will be recorded in Research and development expenses in the third quarter of 2022. Orion will be responsible for the manufacture of clinical and commercial supply of ODM-208. In addition, the contract provides both parties with an option to convert the initial co-development and co-commercialization agreement into a global exclusive license to Merck. If the option is exercised, Merck would assume full responsibility for all past development and commercialization expenses associated with the program since inception of the agreement, as well as all future development and commercialization expenses. In addition, Orion would be eligible to receive milestone payments associated with progress in the development and commercialization of ODM-208 as well as tiered double-digit royalties on sales if the product is approved.

Also in July 2022, Merck and Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. (Kelun-Biotech) closed a license and collaboration agreement in which Merck gained exclusive worldwide rights for the development, manufacture and commercialization of an investigational antibody drug conjugate (ADC) (MK-1200) for the treatment of solid tumors. Under the terms of the agreement, Merck and Kelun-Biotech will collaborate on the early clinical development of the investigational ADC. Merck will make an upfront payment of $35 million, which will be recorded in Research and development expenses in the third quarter of 2022. Kelun-Biotech is also eligible to receive future contingent milestone payments aggregating up to $82 million in developmental milestones, $334 million in regulatory milestones, and $485 million in sales-based milestones. The agreement also provides for Merck to pay tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on future net sales.

In May 2022, in connection with an existing arrangement, Merck exercised its option to obtain an exclusive license outside of China for the development, manufacture and commercialization of Kelun-Biotech’s trophoblast antigen 2 (TROP2)-targeting ADC programs, including its lead compound, SKB-264 (MK-2870). SKB-264 is currently being evaluated in Phase 2 trials for non-small-cell lung cancer and advanced solid tumors. Under the terms of the agreement, Merck and Kelun-Biotech

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

will collaborate on certain early clinical development plans, including evaluating the potential of SKB-264 as a monotherapy and in combination with Keytruda (pembrolizumab) for advanced solid tumors. Upon option exercise, Merck made a payment of $30 million, which was recorded in Research and development expenses in the second quarter of 2022, and agreed to make additional payments of $30 million upon completion of specified project activities and $25 million upon technology transfer. Merck also agreed to make quarterly payments in 2022 and 2023 aggregating $101 million to fund Kelun-Biotech’s ongoing research and development activities. In addition, Kelun-Biotech is eligible to receive future contingent milestone payments (which includes all program compounds) aggregating up to $90 million in developmental milestones, $290 million in first commercial sale milestones, and $780 million in sales-based milestones. The agreement also provides for Merck to pay tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on future net sales.

In April 2021, Merck acquired Pandion Therapeutics, Inc. (Pandion), a clinical-stage biotechnology company developing novel therapeutics designed to address the unmet needs of patients living with autoimmune diseases. Pandion is advancing a pipeline of precision immune modulators targeting critical immune control nodes. Total consideration paid of $1.9 billion included $147 million of transaction costs primarily comprised of share-based compensation payments to settle equity awards. The transaction was accounted for as an acquisition of an asset. Merck recorded net assets of $156 million (primarily cash) and Research and development expenses of $1.7 billion in the second quarter and first six months of 2021 related to the transaction. There are no future contingent payments associated with the acquisition.

In January 2021, Merck entered into an exclusive license and research collaboration agreement with Artiva Biotherapeutics, Inc. (Artiva) to discover, develop and manufacture CAR-NK cells that target certain solid tumors using Artiva’s proprietary platform. Merck and Artiva agreed to engage in up to three different research programs, each covering a collaboration target. Merck has sole responsibility for all development and commercialization activities (including regulatory filing and approval). Under the terms of the agreement, Merck made an upfront payment of $30 million, which was included in Research and development expenses in the first six months of 2021, for license and other rights for the first two collaboration targets and agreed to make another upfront payment of $15 million for license and other rights for the third collaboration target when it is selected by Merck and accepted by Artiva. In addition, Artiva is eligible to receive future contingent milestone payments (which span all three collaboration targets), aggregating up to: $217.5 million in developmental milestones, $570 million in regulatory milestones, and $1.05 billion in sales-based milestones. The agreement also provides for Merck to pay tiered royalties ranging from 7% to 14% on future sales.

As part of Merck’s 2020 acquisition of OncoImmune, Merck obtained MK-7110, a therapeutic candidate that was being evaluated for the treatment of patients hospitalized with COVID-19. In 2021, Merck received feedback from the U.S. Food and Drug Administration (FDA) that additional data would be needed to support a potential Emergency Use Authorization application and therefore the Company did not expect MK-7110 would become available until the first half of 2022. Given this timeline and the technical, clinical and regulatory uncertainties, the availability of a number of medicines for patients hospitalized with COVID-19, and the need to concentrate Merck’s resources on accelerating the development and manufacture of the most viable therapeutics and vaccines, Merck decided to discontinue development of MK-7110 for the treatment of COVID-19. Due to the discontinuation, the Company recorded charges of $37 million and $207 million in the second quarter and first six months of 2021, respectively, which are reflected in Cost of sales and relate to fixed assets and materials written off, as well as the recognition of liabilities for purchase commitments.

4.    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 2017, Merck and AstraZeneca PLC (AstraZeneca) entered into a global strategic oncology collaboration to co-develop and co-commercialize AstraZeneca’s Lynparza (olaparib) for multiple cancer types. 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 are also jointly developing and commercializing AstraZeneca’s Koselugo (selumetinib) for multiple indications. Under the terms of the agreement, AstraZeneca and Merck will share the development and commercialization costs for Lynparza and Koselugo monotherapy and non-PD-L1/PD-1 combination therapy opportunities.

Profits from Lynparza and Koselugo product sales generated through monotherapies or combination therapies are shared equally. AstraZeneca is the principal on Lynparza and Koselugo sales transactions. Merck records its share of Lynparza and Koselugo product sales, net of cost of sales and commercialization costs, as alliance revenue and its share of development costs associated with the collaboration as part of Research and development expenses. Reimbursements received from AstraZeneca for research and development expenses are recognized as reductions to Research and development costs.

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

As part of the agreement, Merck made an upfront payment to AstraZeneca and also made payments over a multi-year period for certain license options. In addition, the agreement provides for contingent payments from Merck to AstraZeneca related to the successful achievement of sales-based and regulatory milestones.

In the first quarter of 2022, Merck determined it was probable that sales of Lynparza in the future would trigger a $600 million sales-based milestone payment from Merck to AstraZeneca. Accordingly, Merck recorded a $600 million liability and a corresponding increase to the intangible asset related to Lynparza. Merck also recognized $250 million of cumulative amortization catch-up expense related to the recognition of this milestone in the first quarter of 2022. In the first six months of 2022, Merck made a sales-based milestone payment to AstraZeneca (which had been previously accrued for) of $400 million. As of June 30, 2022, sales-based milestone payments accrued but not yet paid totaled $600 million. Potential future sales-based milestone payments of $2.1 billion have not yet been accrued as they are not deemed by the Company to be probable at this time. In the first six months of 2022, Lynparza received a regulatory approval triggering a capitalized milestone payment of $175 million from Merck to AstraZeneca. Potential future regulatory milestone payments of $1.3 billion remain under the agreement.

The intangible asset balance related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) was $1.5 billion at June 30, 2022 and is included in Other Intangibles, Net. 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)	2022		2021		2022		2021
Alliance revenue - Lynparza	$	275	$	248	$	541	$	475
Alliance revenue - Koselugo	24		8		33		14
Total alliance revenue	$	299	$	256	$	574	$	489
Cost of sales (1)	62		42		361		84
Selling, general and administrative	46		43		90		83
Research and development	25		31		51		60
($ in millions)					June 30, 2022		December 31, 2021
Receivables from AstraZeneca included in Other current assets					$	300	$	271
Payables to AstraZeneca included in Trade accounts payable and Accrued and other current liabilities (2)					12		415
Payables to AstraZeneca included in Other Noncurrent Liabilities (2)					600		—

(1) Represents amortization of capitalized milestone payments. Amount in the first six months of 2022 includes $250 million of cumulative amortization catch-up expense as noted above.

(2) Includes accrued milestone payments.

Eisai

In 2018, Merck and Eisai Co., Ltd. (Eisai) announced a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima (lenvatinib), 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 Keytruda. Eisai records Lenvima product sales globally (Eisai is the principal on Lenvima sales transactions) and Merck and Eisai share applicable 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 are shared by the two companies in accordance with the collaboration agreement and reflected in Research and development expenses. Certain expenses incurred solely by Merck or Eisai are not shareable under the collaboration agreement, including costs incurred in excess of agreed upon caps and costs related to certain combination studies of Keytruda and Lenvima.

Under the agreement, Merck made an upfront payment to Eisai and also made payments over a multi-year period for certain option rights (of which the final $125 million option payment was made in March 2021). In addition, the agreement provides for contingent payments from Merck to Eisai related to the successful achievement of sales-based and regulatory milestones. In the first six months of 2022, Merck made sales-based milestone payments to Eisai (which had been previously accrued for) aggregating $600 million. Potential future sales-based milestone payments of $2.6 billion have not yet been accrued as they are not deemed by the Company to be probable at this time. In the first six months of 2022, Lenvima received a regulatory approval triggering a capitalized milestone payment of $25 million from Merck to Eisai. In July 2022, Merck made

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

an additional $25 million capitalized regulatory approval milestone payment, which was accrued for as of June 30, 2022. There are no regulatory milestone payments remaining under the agreement.

The intangible asset balance related to Lenvima (which includes capitalized sales-based and regulatory milestone payments) was $920 million at June 30, 2022 and is included in Other Intangibles, Net. 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)	2022		2021		2022		2021
Alliance revenue - Lenvima	$	231	$	181	$	459	$	310
Cost of sales (1)	53		47		106		94
Selling, general and administrative	42		31		73		54
Research and development	47		57		104		121
($ in millions)					June 30, 2022		December 31, 2021
Receivables from Eisai included in Other current assets					$	247	$	200
Payables to Eisai included in Accrued and other current liabilities (2)					25		625

(1) Represents amortization of capitalized milestone payments.

(2) Includes accrued milestone 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 (riociguat). The two companies have implemented a joint development and commercialization strategy. The collaboration also includes development of Bayer’s Verquvo (vericiguat), which was approved in the U.S. in January 2021, in Japan in June 2021 and in the EU in July 2021. Under the agreement, Bayer commercializes Adempas in the Americas, while Merck commercializes in the rest of the world. For Verquvo, Merck commercializes in the U.S. and Bayer commercializes in the rest of the world. Both companies share in development costs and profits on sales. Merck records sales of Adempas and Verquvo in its marketing territories, as well as alliance revenue. Alliance revenue represents Merck’s share of profits from sales of Adempas and Verquvo in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs. Cost of sales includes Bayer’s share of profits from sales in Merck’s marketing territories.

In addition, the agreement provided for contingent payments from Merck to Bayer related to the successful achievement of sales-based milestones. In January 2022, Merck made the final $400 million sales-based milestone payment under this collaboration to Bayer.

The intangible asset balances related to Adempas (which includes the acquired intangible asset balance, as well as capitalized sales-based milestone payments attributed to Adempas) and Verquvo (which reflects the portion of the final sales-based milestone payment that was attributed to Verquvo) were $691 million and $60 million, respectively, at June 30, 2022 and are included in Other Intangibles, Net. The assets are being amortized over their estimated useful lives (through 2027 for Adempas and through 2031 for Verquvo) as supported by projected future cash flows, subject to impairment testing.

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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)	2022		2021		2022		2021
Alliance revenue - Adempas/Verquvo	$	98	$	74	$	170	$	149
Net sales of Adempas recorded by Merck	63		74		124		129
Net sales of Verquvo recorded by Merck	6		1		9		1
Total sales	$	167	$	149	$	303	$	279
Cost of sales (1)	54		67		103		275
Selling, general and administrative	42		34		65		51
Research and development	17		13		34		20
($ in millions)					June 30, 2022		December 31, 2021
Receivables from Bayer included in Other current assets					$	144	$	114
Payables to Bayer included in Accrued and other current liabilities (2)					74		472

(1) Includes amortization of intangible assets. Amount in the first six months of 2021 includes $153 million of cumulative amortization catch-up expense. In addition, cost of sales includes Bayer’s share of profits from sales in Merck’s marketing territories.

(2) Amount as of December 31, 2021 includes accrued milestone payment.

Ridgeback Biotherapeutics LP

In 2020, Merck and Ridgeback Biotherapeutics LP (Ridgeback), a closely held biotechnology company, entered into a collaboration agreement to develop Lagevrio (molnupiravir), an orally available antiviral candidate in clinical development for the treatment of patients with COVID-19. Merck gained exclusive worldwide rights to develop and commercialize Lagevrio and related molecules.

Under the terms of the agreement, Ridgeback received an upfront payment and is eligible to receive future contingent payments dependent upon the achievement of certain developmental and regulatory approval milestones. The agreement also provides for Merck to reimburse Ridgeback for a portion of certain third-party contingent milestone payments and royalties on net sales, which is part of the profit share calculation. Merck is the principal on sales transactions, recognizing sales and related costs, with profit sharing amounts recorded within Cost of sales. Profits from the collaboration are split equally between the partners. Reimbursements from Ridgeback for its share of research and development costs (deducted from Ridgeback’s share of profits) are reflected as decreases to Research and development expenses.

Lagevrio has received multiple authorizations or approvals worldwide and Merck has entered into advance purchase and supply agreements for Lagevrio in nearly 40 markets. As of June 30, 2022, the Company has 1.1 million remaining courses to be supplied under these agreements.

Summarized financial information related to this collaboration is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
Lagevrio sales	$	1,177	$	—	$	4,424	$	—
Cost of sales (1)	622		6		2,338		52
Selling, general and administrative	30		4		65		7
Research and development	15		68		21		110
($ in millions)					June 30, 2022		December 31, 2021
Payables to Ridgeback included in Accrued and other current liabilities (2)					$	683	$	283

(1) Includes royalty expense and amortization of capitalized milestone payments.

(2) Includes accrued royalty and milestone payments.

Bristol Myers Squibb

Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein obtained as part of Merck’s November 2021 acquisition of Acceleron Pharma Inc. that is being developed and commercialized through a global collaboration with Bristol Myers Squibb (BMS). Reblozyl is approved in the U.S., Europe, Canada and Australia for the treatment of anemia in certain rare blood disorders and is also being evaluated for additional indications for hematology therapies. BMS is the principal on sales transactions for Reblozyl; however, Merck co-promotes Reblozyl (and will co-promote

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

all future products approved under this collaboration) in North America, which is reimbursed by BMS. Merck receives a 20% sales royalty from BMS which could increase to a maximum of 24% based on sales levels. This royalty will be reduced by 50% upon the earlier of patent expiry or generic entry on an indication-by-indication basis in each market. Additionally, Merck is eligible to receive future contingent sales-based milestone payments of up to $80 million. Merck recorded alliance revenue of $33 million (consisting of royalties) within Sales in the second quarter of 2022 related to this collaboration. Merck recorded alliance revenue of $86 million in the first six months of 2022, which includes royalties of $66 million, as well as the receipt of a regulatory approval milestone payment of $20 million.

5.    Restructuring

In 2019, Merck approved a global restructuring program (Restructuring Program) as part of a worldwide initiative focused 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 actions currently contemplated under the 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 $3.5 billion. The Company estimates that approximately 70% of the cumulative pretax costs will result in cash outlays, primarily related to employee separation expense and facility shut-down costs. Approximately 30% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested.

The Company recorded total pretax costs of $258 million and $128 million in the second quarter of 2022 and 2021, respectively, and $384 million and $462 million for the first six months of 2022 and 2021, respectively, related to restructuring program activities. Since inception of the Restructuring Program through June 30, 2022, Merck has recorded total pretax accumulated costs of approximately $3.0 billion. For the full year of 2022, the Company expects to record charges of approximately $550 million related to the Restructuring Program. 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, 2022								Six Months Ended June 30, 2022
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation		Other		Total
Cost of sales	$	—	$	17	$	50	$	67	$	—	$	35	$	78	$	113
Selling, general and administrative	—		8		19		27		—		12		36		48
Research and development	—		22		—		22		—		29		—		29
Restructuring costs	106		—		36		142		132		—		62		194
	$	106	$	47	$	105	$	258	$	132	$	76	$	176	$	384

	Three Months Ended June 30, 2021								Six Months Ended June 30, 2021
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation		Other		Total
Cost of sales	$	—	$	11	$	27	$	38	$	—	$	21	$	44	$	65
Selling, general and administrative	—		2		—		2		—		4		—		4
Research and development	—		6		—		6		—		13		—		13
Restructuring costs	64		—		18		82		293		—		87		380
	$	64	$	19	$	45	$	128	$	293	$	38	$	131	$	462

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 program. 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 2022 and 2021 includes asset abandonment, facility shut-down and other related costs, as well as pretax gains and losses resulting from the sales of facilities and related assets. Additionally, other activity includes certain employee-related costs associated with pension and other postretirement benefit plans (see Note 10) and share-based compensation.

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

The following table summarizes the charges and spending relating to restructuring program activities for the six months ended June 30, 2022:

($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total
Restructuring reserves January 1, 2022	$	596	$	—	$	41	$	637
Expense	132		76		176		384
(Payments) receipts, net	(167)		—		(280)		(447)
Non-cash activity	—		(76)		90		14
Restructuring reserves June 30, 2022 (1)	$	561	$	—	$	27	$	588

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

6.    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 of 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 changes 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, Japanese yen and Chinese renminbi. 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 are recorded in Accumulated Other Comprehensive Loss (AOCL) 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, Japanese yen, British pound, Canadian dollar and Swiss franc. For exposures in developing country currencies, including the Chinese renminbi, the Company will enter into forward contracts to 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

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

(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 a portion of 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 unrealized gains or losses on these contracts are recorded in foreign currency translation adjustment within OCI and remain in AOCL 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 components). Changes in fair value of the excluded components are recognized in OCI. The Company recognizes in earnings the initial value of the excluded components 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)	2022		2021		2022		2021		2022		2021		2022		2021
Net Investment Hedging Relationships
Foreign exchange contracts	$	(31)	$	(3)	$	(46)	$	(28)	$	(1)	$	(4)	$	(2)	$	(8)
Euro-denominated notes	(128)		45		(181)		(122)		—		—		—		—

(1) No amounts were reclassified from AOCL 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.

In February 2022, five interest rate swaps with a total notional amount of $1.25 billion matured. These swaps effectively converted the Company’s $1.25 billion, 2.35% fixed-rate notes due 2022 to variable rate debt. At June 30, 2022, the Company was a party to four 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, 2022
($ in millions)	Par Value of Debt		Number of Interest Rate Swaps Held	Total Swap Notional Amount
2.40% notes due 2022	$	1,000	4	$	1,000

The interest rate swap contracts are designated hedges of the fair value changes in the notes attributable to changes in the benchmark 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. See Note 1 for a discussion of the pending discontinuation of LIBOR as part of reference rate reform. The cash flows from these contracts are reported as operating activities in the Condensed Consolidated Statement of Cash Flows.

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

The table below presents the location of amounts recorded on the Condensed 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, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Balance Sheet Line Item in which Hedged Item is Included
Loans payable and current portion of long-term debt	$	999	$	2,263	$	(1)	$	13

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, 2022						December 31, 2021
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
($ in millions)		Asset		Liability				Asset		Liability
Derivatives Designated as Hedging Instruments	Balance Sheet Caption
Interest rate swap contracts	Other current assets	$	1	$	—	$	1,000	$	14	$	—	$	2,250
Foreign exchange contracts	Other current assets	467		—		6,751		271		—		6,778
Foreign exchange contracts	Other Assets	57		—		1,334		43		—		1,551
Foreign exchange contracts	Accrued and other current liabilities	—		2		510		—		24		1,623
Foreign exchange contracts	Other Noncurrent Liabilities	—		1		126		—		1		43
		$	525	$	3	$	9,721	$	328	$	25	$	12,245
Derivatives Not Designated as Hedging Instruments	Balance Sheet Caption
Foreign exchange contracts	Other current assets	$	407	$	—	$	10,931	$	221	$	—	$	10,073
Foreign exchange contracts	Accrued and other current liabilities	—		131		7,074		—		96		10,640
		$	407	$	131	$	18,005	$	221	$	96	$	20,713
		$	932	$	134	$	27,726	$	549	$	121	$	32,958

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, 2022				December 31, 2021
($ in millions)	Asset		Liability		Asset		Liability
Gross amounts recognized in the condensed consolidated balance sheet	$	932	$	134	$	549	$	121
Gross amounts subject to offset in master netting arrangements not offset in the condensed consolidated balance sheet	(123)		(123)		(110)		(110)
Cash collateral received	(527)		—		(164)		—
Net amounts	$	282	$	11	$	275	$	11

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

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

	Three Months Ended June 30,												Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021		2022		2021		2022		2021		2022		2021		2022		2021
Financial Statement Line Items in which Effects of Fair Value or Cash Flow Hedges are Recorded	Sales				Other (income) expense, net (1)				Other comprehensive income (loss)				Sales				Other (income) expense, net (1)				Other comprehensive income (loss)
	$	14,593	$	11,402	$	438	$	(103)	$	42	$	1,545	$	30,494	$	22,029	$	1,148	$	(558)	$	102	$	1,557
(Gain) loss on fair value hedging relationships
Interest rate swap contracts
Hedged items	—		—		(4)		(9)		—		—		—		—		(14)		(19)		—		—
Derivatives designated as hedging instruments	—		—		1		(1)		—		—		—		—		4		—		—		—
Impact of cash flow hedging relationships
Foreign exchange contracts
Amount of gain (loss) recognized in OCI on derivatives	—		—		—		—		403		(58)		—		—		—		—		551		121
Increase (decrease) in Sales as a result of AOCL reclassifications	172		(71)		—		—		(172)		71		239		(183)		—		—		(239)		183
Interest rate contracts
Amount of gain recognized in Other (income) expense, net on derivatives	—		—		—		—		—		—		—		—		(1)		(1)		—		—
Amount of loss recognized in OCI on derivatives	—		—		—		—		—		—		—		—		—		—		(1)		(1)

(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)		2022		2021		2022		2021
Derivatives Not Designated as Hedging Instruments	Income Statement Caption
Foreign exchange contracts (1)	Other (income) expense, net	$	(64)	$	167	$	(36)	$	217
Foreign exchange contracts (2)	Sales	(36)		14		(38)		10

(1) These derivative contracts primarily mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates. Amounts in 2021 include a loss on forward exchange contracts entered into in conjunction with the spin-off of Organon.

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

At June 30, 2022, the Company estimates $463 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 AOCL 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.

- 17 -

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, 2022								December 31, 2021
	Amortized Cost		Gross Unrealized				Fair Value		Amortized Cost		Gross Unrealized				Fair Value
($ in millions)			Gains		Losses						Gains		Losses
Commercial paper	$	334	$	—	$	—	$	334	$	—	$	—	$	—	$	—
U.S. government and agency securities	72		—		—		72		80		—		—		80
Corporate notes and bonds	4		—		—		4		4		—		—		4
Foreign government bonds	2		—		—		2		2		—		—		2
Total debt securities	$	412	$	—	$	—	$	412	$	86	$	—	$	—	$	86
Publicly traded equity securities (1)							1,530								1,647
Total debt and publicly traded equity securities							$	1,942							$	1,733

(1) Unrealized net (gains) losses of $(25) million and $194 million were recorded in Other (income) expense, net in the second quarter and first six months of 2022, respectively, on equity securities still held at June 30, 2022. Unrealized net losses of $18 million and $199 million were recorded in Other (income) expense, net in the second quarter and first six months of 2021, respectively, on equity securities still held at June 30, 2021.

At June 30, 2022 and June 30, 2021, the Company also had $671 million and $694 million, respectively, of equity investments without readily determinable fair values included in Other Assets. The Company records unrealized gains on these equity investments based on favorable observable price changes from transactions involving similar investments of the same investee and records unrealized losses based on unfavorable observable price changes, which are included in Other (income) expense, net. During the first six months of 2022, the Company recorded unrealized gains of $20 million and unrealized net losses of $1 million related to certain of these equity investments still held at June 30, 2022. During the first six months of 2021, the Company recorded unrealized gains of $75 million and unrealized losses of $1 million related to certain of these investments still held at June 30, 2021. Cumulative unrealized gains and cumulative unrealized losses based on observable price changes for investments in equity investments without readily determinable fair values still held at June 30, 2022 were $254 million and $8 million, respectively.

At June 30, 2022 and June 30, 2021, the Company also had $805 million and $1.0 billion, respectively, recorded in Other Assets for equity securities held through ownership interests in investment funds. Losses (gains) recorded in Other (income) expense, net relating to these investment funds were $302 million and $(238) million for the second quarter of 2022 and 2021, respectively, and were $811 million and $(502) million for the first six months of 2022 and 2021, respectively.

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.

- 18 -

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
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
($ in millions)	June 30, 2022								December 31, 2021
Assets
Investments
Commercial paper	$	—	$	334	$	—	$	334	$	—	$	—	$	—	$	—
Foreign government bonds	—		2		—		2		—		2		—		2
Publicly traded equity securities	355		—		—		355		368		—		—		368
	355		336		—		691		368		2		—		370
Other assets (1)
U.S. government and agency securities	72		—		—		72		80		—		—		80
Corporate notes and bonds	4		—		—		4		4		—		—		4
Publicly traded equity securities	1,175		—		—		1,175		1,279		—		—		1,279
	1,251		—		—		1,251		1,363		—		—		1,363
Derivative assets (2)
Forward exchange contracts	—		576		—		576		—		351		—		351
Purchased currency options	—		355		—		355		—		184		—		184
Interest rate swaps	—		1		—		1		—		14		—		14
	—		932		—		932		—		549		—		549
Total assets	$	1,606	$	1,268	$	—	$	2,874	$	1,731	$	551	$	—	$	2,282
Liabilities
Other liabilities
Contingent consideration	$	—	$	—	$	542	$	542	$	—	$	—	$	777	$	777
Derivative liabilities (2)
Forward exchange contracts	—		133		—		133		—		120		—		120
Written currency options	—		1		—		1		—		1		—		1
	—		134		—		134		—		121		—		121
Total liabilities	$	—	$	134	$	542	$	676	$	—	$	121	$	777	$	898

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

(2)    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.

As of June 30, 2022 and December 31, 2021, Cash and cash equivalents included $8.6 billion and $6.8 billion of cash equivalents, respectively (which would be considered Level 2 in the fair value hierarchy).

Contingent Consideration

Summarized information about the changes in the fair value of liabilities for contingent consideration associated with business combinations is as follows:

($ in millions)	2022		2021
Fair value January 1	$	777	$	841
Changes in estimated fair value (1)	(114)		50
Payments	(119)		—
Other	(2)		(12)
Fair value June 30 (2)	$	542	$	879

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

(2) At June 30, 2022, $402 million of the liabilities relate to the 2016 termination of the Sanofi Pasteur MSD joint venture. As part of the termination, Merck recorded a liability for contingent future royalty payments of 11.5% on net sales of all Merck products that were previously sold by the joint venture through December 31, 2024. The fair value of this liability is determined utilizing the estimated amount and timing of projected cash flows using a risk-adjusted discount rate to present value the cash flows. As part of the Company’s routine assessment, the discount rate was reduced from 8% to 6% during the second quarter of 2022, which resulted in an immaterial increase to the liability. Balance at June 30, 2022 includes $131 million recorded as a current liability for amounts expected to be paid within the next 12 months.

The payments of contingent consideration in 2022 relate to the Sanofi Pasteur MSD liabilities described above.

- 19 -

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

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, 2022, was $29.0 billion compared with a carrying value of $31.7 billion and at December 31, 2021, was $35.7 billion compared with a carrying value of $33.1 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 U.S., Europe and China 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 has accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. The Company factored $1.9 billion and $2.8 billion of accounts receivable as of June 30, 2022 and December 31, 2021, respectively, under these factoring arrangements, which reduced outstanding accounts receivable. The cash received from the financial institutions is reported within operating activities in the Condensed Consolidated Statement of Cash Flows. In certain of these factoring arrangements, for ease of administration, the Company will collect customer payments related to the factored receivables, which it then remits to the financial institutions. As of June 30, 2022 and December 31, 2021, the Company had collected $28 million and $62 million, respectively, on behalf of the financial institutions, which is reflected as restricted cash in Other current assets and the related obligation to remit the cash within Accrued and other current liabilities. The Company remitted the cash to the financial institutions in July 2022 and January 2022, respectively. The net cash flows relating to these collections are reported as financing activities in the Condensed Consolidated Statement of Cash Flows. The cost of factoring such accounts receivable was de minimis.

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 collateral received by the Company from various counterparties was $527 million and $164 million at June 30, 2022 and December 31, 2021, respectively. The obligation to return such collateral is recorded in Accrued and other current liabilities.

7.    Inventories

Inventories consisted of:

($ in millions)	June 30, 2022		December 31, 2021
Finished goods	$	1,680	$	1,747
Raw materials and work in process	6,542		6,220
Supplies	217		196
Total (approximates current cost)	8,439		8,163
Decrease to LIFO cost	(140)		(16)
	$	8,299	$	8,147
Recognized as:
Inventories	$	5,535	$	5,953
Other assets	2,764		2,194

Amounts recognized as Other Assets are comprised almost entirely of raw materials and work in process inventories. At June 30, 2022 and December 31, 2021, these amounts included $2.4 billion and $1.9 billion, respectively, of inventories not

- 20 -

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

expected to be sold within one year. In addition, these amounts included $366 million and $256 million at June 30, 2022 and December 31, 2021, respectively, of inventories produced in preparation for product launches.

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 condition, 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.

Product Liability Litigation

Fosamax

As previously disclosed, Merck is a defendant in product liability lawsuits in the U.S. involving Fosamax (alendronate sodium) (Fosamax Litigation). As of June 30, 2022, approximately 3,450 cases are pending against Merck in either a federal multidistrict litigation (Femur Fracture MDL) 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 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. In May 2019, the U.S. Supreme Court 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. In November 2019, the Third Circuit remanded the cases back to the District Court in order to allow that court to determine in the first instance whether the plaintiffs’ state law claims are preempted by federal law under the standards described by the Supreme Court in its opinion. On March 23, 2022, the District Court granted Merck’s motion and ruled that plaintiffs’ failure to warn claims are preempted as a matter of law to the extent they assert that Merck should have added a warning or precaution regarding atypical femur fractures prior to September 2010. Plaintiffs have indicated that they do not intend to move forward with any other claims at this point and intend to appeal the District Court’s preemption ruling to the Third Circuit.

Discovery is presently stayed in the Femur Fracture MDL. As part of the spin-off of Organon, Organon is required to indemnify Merck for all liabilities relating to, arising from, or resulting from the Fosamax Litigation.

Januvia/Janumet

As previously disclosed, Merck is a defendant in product liability lawsuits in the U.S. involving Januvia (sitagliptin) and/or Janumet (sitagliptin and metformin HCl).

Most claims were filed in multidistrict litigation before the U.S. District Court for the Southern District of California (MDL). On March 9, 2021, the MDL Court issued an omnibus order granting defendants’ summary judgment motions based on preemption and failure to establish general causation, as well as granting defendants’ motions to exclude plaintiffs’ expert

- 21 -

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

witnesses. The plaintiffs appealed that order. Since that time, more than half of these claims have been dismissed with prejudice as to Merck, and on October 5, 2021, the U.S. Court of Appeals for the Ninth Circuit dismissed the appeal as to Merck and two of its codefendants. The MDL Court’s judgment is now final and no longer appealable with respect to remaining claims.

Outside of the MDL, the majority of claims were filed in coordinated proceedings before the Superior Court of California, County of Los Angeles (California State Court). On April 6, 2021, the court in California issued an omnibus order granting defendants’ summary judgment motions and also granting defendants’ motions to exclude plaintiffs’ expert witnesses. On May 31, 2022, the court entered judgment in favor of Merck as to all of the claims pending against Merck in that jurisdiction.

As of June 30, 2022, six 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 U.S. Supreme Court issued its opinion in Merck Sharp & Dohme Corp. v. Albrecht (relating to the Fosamax matter discussed above). Merck filed the opinion in Albrecht with the Illinois Supreme Court in June 2019. The petition for leave to appeal was decided in September 2019, in which the Illinois Supreme Court directed the intermediate appellate court to reconsider its earlier ruling. The Illinois Appellate Court issued a favorable decision concluding, consistent with Albrecht, that preemption presents a legal question to be resolved by the court. In May 2020, the Illinois Appellate Court issued a mandate to the state trial court, which, as of June 30, 2022, had not scheduled a case management conference or otherwise taken action.

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 any remaining lawsuits.

Governmental Proceedings

As previously disclosed, from time to time, the Company’s subsidiaries in China 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 U.S. 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, Schering-Plough 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 (ezetimibe) 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 (MDL) before Judge Rebecca Beach Smith in the Eastern District of Virginia.

In November 2019, the direct purchaser plaintiffs and the indirect purchaser plaintiffs filed motions for class certification. In August 2020, the district court granted in part the direct purchasers’ motion for class certification and certified a class of 35 direct purchasers. In August 2021, the Fourth Circuit vacated the district court’s class certification order and remanded for further proceedings consistent with the court’s ruling. In September 2021, the direct purchaser plaintiffs filed a renewed motion for class certification. On January 25, 2022, the magistrate judge recommended that the district court deny the motion for class certification. On February 8, 2022, the direct purchaser plaintiffs filed objections to the recommendation. On April 13, 2022, the district court denied the direct purchaser plaintiffs’ renewed motion for class certification. In August 2021, the district court granted certification of a class of indirect purchasers.

In 2020 and 2021, United Healthcare Services, Inc., Humana Inc., Centene Corporation and others, and Kaiser Foundation Health Plan, Inc. (collectively, the insurer plaintiffs), each filed a lawsuit in a jurisdiction outside of the Eastern District of Virginia against the Merck Defendants and others, making similar allegations as those made in the Zetia MDL, as well as additional allegations about Vytorin. These cases have been transferred to the Eastern District of Virginia to proceed with the Zetia MDL.

- 22 -

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

On February 9, 2022, the insurer plaintiffs filed amended complaints. On March 2, 2022, the Merck Defendants, jointly with other defendants, moved to dismiss certain aspects of the insurer plaintiffs’ complaints, including any claims for Vytorin damages.

In April 2022, the direct purchaser plaintiffs moved for an order setting a deadline for direct purchasers of Zetia not currently parties to the case to file cases against defendants in order for those cases to be coordinated for trial with the existing direct purchaser plaintiffs and other MDL plaintiff groups. The court granted that motion, setting a deadline of June 30, 2022 for unnamed direct purchasers to file claims. On June 30, 2022, 23 new entities, many related, brought new complaints against defendants or otherwise sought to intervene. Defendants’ summary judgment motions, filed in August 2020, are still pending. The court has scheduled trial for all plaintiffs other than the insurer plaintiffs for April 2023.

Rotavirus Vaccines Antitrust Litigation

As previously disclosed, MSD is a defendant in putative class action lawsuits filed in 2018 on behalf of direct purchasers of RotaTeq (Rotavirus Vaccine, Live, Oral, Pentavalent), alleging violations of federal antitrust laws. The cases were consolidated in the Eastern District of Pennsylvania. In January 2019, the court denied MSD’s motions to compel arbitration and to dismiss the consolidated complaint. In February 2019, MSD appealed the court’s order on arbitration to the Third Circuit. In October 2019, the Third Circuit vacated the district court’s order and remanded for limited discovery on the issue of arbitrability. On July 6, 2020, MSD filed a renewed motion to compel arbitration, and plaintiffs filed a cross motion for summary judgment as to arbitrability. On November 20, 2020, the district court denied MSD’s motion and granted plaintiffs’ motion. On December 4, 2020, MSD filed a notice of appeal to the Third Circuit. On March 21, 2022, the Third Circuit reversed the order of the district court and remanded with the instruction that the court grant MSD’s motion to compel arbitration. On April 4, 2022, plaintiffs filed a petition for panel rehearing or rehearing en banc, and on May 25, 2022, the Third Circuit denied the petition. On July 1, 2022, the district court stayed the case in favor of arbitration of plaintiffs’ claims.

Bravecto Litigation

As previously disclosed, in January 2020, the Company was served with a complaint in the U.S. District Court for the District of New Jersey. Following motion practice, the plaintiffs filed a second amended complaint on July 1, 2021, seeking to certify a nationwide class action of purchasers or users of Bravecto (fluralaner) products in the U.S. or its territories between May 1, 2014 and July 1, 2021. Plaintiffs contend Bravecto causes neurological events in dogs and cats and alleges violations of the New Jersey Consumer Fraud Act, breach of warranty, product liability, and related theories. The Company moved to dismiss or, alternatively, to strike the class allegations from the second amended complaint, and that motion is pending. A similar case was filed in Quebec, Canada in May 2019. The Superior Court certified a class of dog owners in Quebec who gave Bravecto Chew to their dogs between February 16, 2017 and November 2, 2018 whose dogs experienced one of the conditions in the post-marketing adverse reactions section of the labeling approved on November 2, 2018. The Company and plaintiffs each appealed the class certification decision. The Court of Appeal of Quebec heard the appeal on February 7, 2022 and issued a decision on April 25, 2022 allowing both parties’ appeals in part. The Company sought leave to appeal to the Supreme Court of Canada.

340B Program Litigation

Merck has filed a complaint in the U.S. District Court for the District of Columbia to challenge the letter Merck received from the Health Resources and Services Administration (HRSA) in May 2022 regarding Merck’s 340B Program integrity initiative. HRSA’s letter to Merck asserts that Merck is in violation of the 340B statute. HRSA further claims that continued failure to provide the 340B price to covered entities using contract pharmacies may result in civil monetary penalties for each instance of alleged overcharging, in addition to repayment for any instance of overcharging. The letter is very similar to letters HRSA has sent to other manufacturers, which letters have been held to be unlawful by multiple federal courts. Merck disagrees with HRSA’s assertion. Merck remains committed to the 340B Program and to providing 340B discounts to eligible covered entities. Merck’s 340B Program integrity initiative is consistent with the requirements of the 340B statute and is intended to ensure the integrity and sustainability of the 340B statute by reducing prohibited duplicate discounts and diversion and putting patients back at the center of the program. Merck continues to offer all of the Company’s covered outpatient drugs to all 340B covered entities for purchase at or below the 340B ceiling price.

Patent Litigation

From time to time, generic manufacturers of pharmaceutical products file abbreviated New Drug Applications (NDAs) with the 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,

- 23 -

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

could result in significantly shortened periods of exclusivity for these products and, with respect to products acquired through acquisitions accounted for as business combinations, potentially significant intangible asset impairment charges.

Bridion — As previously disclosed, between January and November 2020, the Company received multiple Paragraph IV Certification Letters under the Hatch-Waxman Act notifying the Company that generic drug companies have filed applications to the FDA seeking pre-patent expiry approval to sell generic versions of Bridion (sugammadex) Injection. In March, April and December 2020, the Company filed patent infringement lawsuits in the U.S. District Courts for the District of New Jersey and the Northern District of West Virginia against those generic companies. All actions in the District of New Jersey have been consolidated. These lawsuits, which assert one or more patents covering sugammadex and methods of using sugammadex, automatically stay FDA approval of the generic applications until June 2023 or until adverse court decisions, if any, whichever may occur earlier. The West Virginia action remains stayed. The U.S. District Court for the District of New Jersey has set a bench trial in this matter beginning on October 12, 2022.

The Company has settled with four generic companies providing that these generic companies can bring their generic versions of Bridion to the market in January 2026 (which may be delayed by any applicable pediatric exclusivity) or earlier under certain circumstances. The Company has agreed to stay the lawsuit filed against two generic companies, which in exchange agreed to be bound by a judgment on the merits of the consolidated action in the District of New Jersey. One of the generic companies in the consolidated action requested dismissal of the action against it and the Company did not oppose this request, which was subsequently granted by the court. The Company does not expect this company to bring its generic version of Bridion to the market before January 2026 or later, depending on any applicable pediatric exclusivity, unless the Company receives an adverse court decision.

Januvia, Janumet, Janumet XR — As previously disclosed, the FDA has granted pediatric exclusivity with respect to Januvia, Janumet, and Janumet XR (sitagliptin and metformin HCl extended-release), which provides a further six months of exclusivity in the U.S. beyond the expiration of all patents listed in the FDA’s Orange Book. Adding this exclusivity to the term of the key patent protection extends exclusivity on these products to January 2023. The Company currently anticipates that sales of Januvia and Janumet in the U.S. will decline significantly after this date. However, Januvia, Janumet, and Janumet XR contain sitagliptin phosphate monohydrate and the Company has another patent covering certain phosphate salt and polymorphic forms of sitagliptin (2027 salt/polymorph patent), which, if determined to be valid, would preclude generic manufacturers from making sitagliptin phosphate salt and polymorphic forms until 2027 with the expiration of that patent, plus pediatric exclusivity. In 2019, 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 the 2027 salt/polymorph patent. 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, but prior to the expiration of the 2027 salt/polymorph patent, and a later granted patent owned by the Company covering the Janumet formulation where its term plus the pediatric exclusivity ends in 2029. The Company also filed a patent infringement lawsuit against Mylan in the Northern District of West Virginia. The Judicial Panel on Multidistrict Litigation entered an order transferring 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.

Prior to the beginning of the scheduled October 2021 trial in the U.S. District Court for the District of Delaware on invalidity issues, the Company settled with all defendants scheduled to participate in that trial. In the Company’s case against Mylan, a bench trial was held in December 2021 in the U.S. District Court for the Northern District of West Virginia, and the closing arguments were held on April 13, 2022.

In total, the Company has settled with 22 generic companies providing that these generic companies can bring their generic versions of Januvia and Janumet to the market in May 2026 or earlier under certain circumstances, and their generic versions of Janumet XR to the market in July 2026 or earlier under certain circumstances.

Additionally, in 2019, Mylan filed a petition for Inter Partes Review (IPR) at the U.S. Patent and Trademark Office (USPTO) seeking invalidity of some, but not all, of the claims of the 2027 salt/polymorph patent. The USPTO instituted IPR proceedings in May 2020, finding a reasonable likelihood that the challenged claims are not valid. A trial was held in February 2021 and a final decision was rendered in May 2021, holding that all of the challenged claims were not invalid. Mylan has appealed the USPTO’s decision to the U.S. Court of Appeals for the Federal Circuit, and a hearing was held on August 2, 2022.

In March 2021, the Company filed a patent infringement lawsuit in the U.S. District Court for the District of Delaware against Zydus Worldwide DMCC, Zydus Pharmaceuticals (USA) Inc., and Cadila Healthcare Ltd. (collectively, Zydus). In that lawsuit, the Company alleged infringement of the 2027 salt/polymorph patent based on the filing of Zydus’s application seeking approval of its sitagliptin tablets. The U.S. District Court for the District of Delaware has set a three-day bench trial in this matter beginning on October 31, 2022.

- 24 -

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

Generic companies have sought revocation of the Supplementary Protection Certificate (SPC) for Janumet in the following European countries: Austria, Bulgaria, Czech Republic, Estonia, Finland, France, Hungary, Italy, Portugal, Romania, Slovakia, Slovenia, and Sweden. If the generic companies are successful, Janumet could lose market exclusivity in these countries at the same time as the expiry of Januvia pediatric market exclusivity in September 2022. In February 2022, a Finnish court referred certain questions to the European Court of Justice that could determine the validity of the Janumet SPCs in Europe. In June 2021, a German court decided that the SPC for Janumet is invalid, which decision the Company has appealed. The validity of the Janumet SPC was upheld in the Czech Republic in March 2022 in a first instance decision, which has been appealed. In June 2022, a Romanian court decided that the SPC for Janumet was invalid in a first instance decision.

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 condition, 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, 2022 and December 31, 2021 of approximately $235 million and $230 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.

- 25 -

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

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, 2021	3,577	$	1,788	$	39,613	$	48,888	$	(6,622)	1,046	$	(56,722)	$	94	$	27,039
Net income attributable to Merck & Co., Inc.	—	—		—		1,545		—		—	—		—		1,545
Other comprehensive income, net of taxes	—	—		—		—		1,545		—	—		—		1,545
Cash dividends declared on common stock ($0.65 per share)	—	—		—		(1,656)		—		—	—		—		(1,656)
Treasury stock shares purchased	—	—		—		—		—		3	(239)		—		(239)
Spin-off of Organon & Co.	—	—		4,643		—		449		—	—		(1)		5,091
Share-based compensation plans and other	—	—		(217)		—		—		(5)	279		—		62
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		1		1
Balance at June 30, 2021	3,577	$	1,788	$	44,039	$	48,777	$	(4,628)	1,044	$	(56,682)	$	94	$	33,388
Balance at April 1, 2022	3,577	$	1,788	$	44,275	$	56,252	$	(4,369)	1,049	$	(57,063)	$	70	$	40,953
Net income attributable to Merck & Co., Inc.	—	—		—		3,944		—		—	—		—		3,944
Other comprehensive income, net of taxes	—	—		—		—		42		—	—		—		42
Cash dividends declared on common stock ($0.69 per share)	—	—		—		(1,759)		—		—	—		—		(1,759)
Share-based compensation plans and other	—	—		(160)		—		—		(5)	293		—		133
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		5		5
Balance at June 30, 2022	3,577	$	1,788	$	44,115	$	58,437	$	(4,327)	1,044	$	(56,770)	$	75	$	43,318

	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, 2021	3,577	$	1,788	$	39,588	$	47,362	$	(6,634)	1,047	$	(56,787)	$	87	$	25,404
Net income attributable to Merck & Co., Inc.	—	—		—		4,724		—		—	—		—		4,724
Other comprehensive income, net of taxes	—	—		—		—		1,557		—	—		—		1,557
Cash dividends declared on common stock ($1.30 per share)	—	—		—		(3,309)		—		—	—		—		(3,309)
Treasury stock shares purchased	—	—		—		—		—		3	(239)		—		(239)
Spin-off of Organon & Co.	—	—		4,643		—		449		—	—		(1)		5,091
Share-based compensation plans and other	—	—		(192)		—		—		(6)	344		—		152
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		8		8
Balance at June 30, 2021	3,577	$	1,788	$	44,039	$	48,777	$	(4,628)	1,044	$	(56,682)	$	94	$	33,388
Balance at January 1, 2022	3,577	$	1,788	$	44,238	$	53,696	$	(4,429)	1,049	$	(57,109)	$	73	$	38,257
Net income attributable to Merck & Co., Inc.	—	—		—		8,254		—		—	—		—		8,254
Other comprehensive income, net of taxes	—	—		—		—		102		—	—		—		102
Cash dividends declared on common stock ($1.38 per share)	—	—		—		(3,513)		—		—	—		—		(3,513)
Share-based compensation plans and other	—	—		(123)		—		—		(5)	339		—		216
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		2		2
Balance at June 30, 2022	3,577	$	1,788	$	44,115	$	58,437	$	(4,327)	1,044	$	(56,770)	$	75	$	43,318

- 26 -

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

10.    Pension and Other Postretirement Benefit Plans

The Company has defined benefit pension plans covering eligible employees in the U.S. and in certain of its international subsidiaries. The net periodic benefit cost of such plans (including certain costs reported as part of discontinued operations in the first six months of 2021) consisted of the following components: 

	Three Months Ended June 30,								Six Months Ended June 30,
	2022				2021				2022				2021
($ in millions)	U.S.		International		U.S.		International		U.S.		International		U.S.		International
Service cost	$	99	$	72	$	98	$	87	$	198	$	147	$	198	$	179
Interest cost	103		37		106		30		206		75		202		59
Expected return on plan assets	(197)		(98)		(191)		(104)		(393)		(199)		(379)		(209)
Amortization of unrecognized prior service credit	(8)		(3)		(11)		(4)		(16)		(7)		(20)		(9)
Net loss amortization	56		25		58		38		112		50		142		78
Termination benefits	1		—		52		2		1		—		53		3
Curtailments	4		—		9		(27)		8		—		16		(27)
Settlements	101		—		—		2		101		—		—		2
	$	159	$	33	$	121	$	24	$	217	$	66	$	212	$	76

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)	2022		2021		2022		2021
Service cost	$	12	$	13	$	25	$	26
Interest cost	11		11		23		22
Expected return on plan assets	(21)		(20)		(43)		(39)
Amortization of unrecognized prior service credit	(25)		(25)		(50)		(50)
Termination benefits	—		37		—		37
Curtailments	—		(27)		—		(28)
	$	(23)	$	(11)	$	(45)	$	(32)

Net periodic benefit cost (credit) for pension and other postretirement benefit plans in the second quarter and first six months of 2021 includes expenses for curtailments, settlements and termination benefits provided to certain employees in connection with the spin-off of Organon.

In connection with restructuring actions (see Note 5), termination charges were recorded on pension plans related to expanded eligibility for certain employees exiting Merck. Also, in connection with these restructuring activities, curtailments and settlements were recorded on certain pension plans. In addition, lump sum payments to U.S. pension plan participants triggered a partial settlement resulting in a charge of $101 million in the second quarter and first six months of 2022. This partial settlement triggered a remeasurement of some of the Company’s U.S. pension plans. This remeasurement, which was calculated using discount rates and asset values as of June 30, 2022, resulted in a net decrease of $165 million to net pension liabilities and also resulted in a related adjustment to AOCL.

The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 11), 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 or in Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests if related to the spin-off of Organon (each as noted above).

- 27 -

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

11.    Other (Income) Expense, Net

Other (income) expense, net, consisted of: 

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
Interest income	$	(15)	$	(9)	$	(22)	$	(20)
Interest expense	240		202		483		401
Exchange losses	86		114		124		155
Loss (income) from investments in equity securities, net (1)	284		(280)		991		(854)
Net periodic defined benefit plan (credit) cost other than service cost	(27)		(110)		(148)		(199)
Other, net	(130)		(20)		(280)		(41)
	$	438	$	(103)	$	1,148	$	(558)

(1)    Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds. Unrealized gains and losses from investments that are directly owned are determined at the end of the reporting period, while gains and losses from ownership interests in investment funds are accounted for on a one quarter lag. The Company estimates that losses of approximately $135 million will be recorded in the third quarter of 2022 from ownership interests in investment funds.

Interest paid for the six months ended June 30, 2022 and 2021 was $449 million and $363 million, respectively.

12.    Taxes on Income

The effective income tax rates from continuing operations were 12.0% and 29.3% for the second quarter of 2022 and 2021, respectively, and 11.7% and 15.8% for the first six months of 2022 and 2021, respectively. The effective income tax rates from continuing operations reflect the beneficial impact of foreign earnings. Additionally, the effective income tax rates from continuing operations in the second quarter and first six months of 2021 reflect the unfavorable effect of a charge for the acquisition of Pandion for which no tax benefit was recognized. The effective income tax rate from continuing operations for the first six months of 2021 also reflects a net tax benefit of $207 million related to the settlement of certain federal income tax matters as discussed below.

In the first quarter of 2021, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2015-2016 U.S. federal income tax returns. As a result, the Company was required to make a payment of $190 million (of which $172 million related to continuing operations and $18 million related to discontinued operations). 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 $236 million net tax benefit in the first six months of 2021 (of which $207 million related to continuing operations and $29 million related to discontinued operations). This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination.

- 28 -

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

13.    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)	2022		2021		2022		2021
Net Income from Continuing Operations Attributable to Merck & Co., Inc.	$	3,944	$	1,213	$	8,254	$	3,958
Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests	—		332		—		766
Net Income Attributable to Merck & Co., Inc.	$	3,944	$	1,545	$	8,254	$	4,724
Average common shares outstanding	2,531		2,533		2,529		2,532
Common shares issuable (1)	9		7		9		8
Average common shares outstanding assuming dilution	2,540		2,540		2,538		2,540
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations	$	1.56	$	0.48	$	3.26	$	1.56
Income from Discontinued Operations	—		0.13		—		0.30
Net Income	$	1.56	$	0.61	$	3.26	$	1.87
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations	$	1.55	$	0.48	$	3.25	$	1.56
Income from Discontinued Operations	—		0.13		—		0.30
Net Income	$	1.55	$	0.61	$	3.25	$	1.86

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

For the second quarter of 2022 and 2021, 2 million and 12 million, respectively, and for the first six months of 2022 and 2021, 6 million and 11 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.

- 29 -

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

14.    Other Comprehensive Income (Loss)

Changes in each component of other comprehensive income (loss) are as follows:

	Three Months Ended June 30,
($ in millions)	Derivatives			Employee Benefit Plans			Foreign Currency Translation Adjustment		Accumulated Other Comprehensive Loss
Balance April 1, 2021, net of taxes	$	(36)		$	(4,459)		$	(2,127)	$	(6,622)
Other comprehensive income (loss) before reclassification adjustments, pretax	(59)			1,767			140		1,848
Tax	13			(400)			(8)		(395)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	(46)			1,367			132		1,453
Reclassification adjustments, pretax	71		(1)	55		(2)	—		126
Tax	(15)			(19)			—		(34)
Reclassification adjustments, net of taxes	56			36			—		92
Other comprehensive income (loss), net of taxes	10			1,403			132		1,545
Spin-off of Organon (see Note 2)	—			28			421		449
Balance June 30, 2021, net of taxes	$	(26)		$	(3,028)		$	(1,574)	$	(4,628)
Balance April 1, 2022, net of taxes	$	207		$	(2,711)		$	(1,865)	$	(4,369)
Other comprehensive income (loss) before reclassification adjustments, pretax	403			168			(365)		206
Tax	(85)			(35)			(22)		(142)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	318			133			(387)		64
Reclassification adjustments, pretax	(171)		(1)	144		(2)	—		(27)
Tax	36			(31)			—		5
Reclassification adjustments, net of taxes	(135)			113			—		(22)
Other comprehensive income (loss), net of taxes	183			246			(387)		42
Balance June 30, 2022, net of taxes	$	390		$	(2,465)		$	(2,252)	$	(4,327)

	Six Months Ended June 30,
($ in millions)	Derivatives			Employee Benefit Plans			Foreign Currency Translation Adjustment		Accumulated Other Comprehensive Loss
Balance January 1, 2021, net of taxes	$	(266)		$	(4,540)		$	(1,828)	$	(6,634)
Other comprehensive income (loss) before reclassification adjustments, pretax	121			1,763			(71)		1,813
Tax	(25)			(401)			(96)		(522)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	96			1,362			(167)		1,291
Reclassification adjustments, pretax	182		(1)	142		(3)	—		324
Tax	(38)			(20)			—		(58)
Reclassification adjustments, net of taxes	144			122			—		266
Other comprehensive income (loss), net of taxes	240			1,484			(167)		1,557
Spin-off of Organon (see Note 2)	—			28			421		449
Balance June 30, 2021, net of taxes	$	(26)		$	(3,028)		$	(1,574)	$	(4,628)
Balance January 1, 2022, net of taxes	$	144		$	(2,743)		$	(1,830)	$	(4,429)
Other comprehensive income (loss) before reclassification adjustments, pretax	551			169			(383)		337
Tax	(116)			(37)			(39)		(192)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	435			132			(422)		145
Reclassification adjustments, pretax	(239)		(1)	189		(3)	—		(50)
Tax	50			(43)			—		7
Reclassification adjustments, net of taxes	(189)			146			—		(43)
Other comprehensive income (loss), net of taxes	246			278			(422)		102
Balance June 30, 2022, net of taxes	$	390		$	(2,465)		$	(2,252)	$	(4,327)

(1) Primarily relates to foreign currency cash flow hedges that were reclassified from AOCL to Sales.

(2) Includes net amortization of prior service cost and actuarial gains and losses included in net periodic benefit cost (see Note 10).

- 30 -

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

15.    Segment Reporting

The Company’s operations are principally managed on a product basis and include two operating segments, which are the Pharmaceutical and Animal Health segments, both of which are 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. 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.

The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceutical and vaccine products, as well as health management solutions and services, for the prevention, treatment and control of disease in all major livestock and companion animal species. The Company also offers an extensive suite of digitally connected identification, traceability and monitoring products. The Company sells its products to veterinarians, distributors and animal producers.

- 31 -

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,
	2022						2021						2022						2021
($ 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	$	3,197	$	2,055	$	5,252	$	2,347	$	1,829	$	4,176	$	5,976	$	4,085	$	10,061	$	4,528	$	3,548	$	8,076
Alliance revenue-Lynparza (1)	143		132		275		124		124		248		283		257		541		242		233		475
Alliance revenue-Lenvima (1)	128		103		231		88		93		181		284		175		459		173		137		310
Alliance revenue-Reblozyl (2)	28		5		33		—		—		—		55		30		86		—		—		—
Vaccines
Gardasil/Gardasil 9	428		1,245		1,674		454		781		1,234		846		2,287		3,133		766		1,385		2,151
ProQuad/M-M-R II/Varivax	434		143		578		386		130		516		805		243		1,047		718		246		965
RotaTeq	98		75		173		111		97		208		273		116		389		229		137		366
Pneumovax 23	94		59		153		100		52		152		212		114		325		173		150		323
Vaqta	16		19		35		22		34		56		45		25		71		47		43		90
Hospital Acute Care
Bridion	237		190		426		197		190		387		432		389		821		364		363		727
Prevymis	47		56		103		37		56		93		87		110		197		72		103		174
Primaxin	—		64		64		—		60		60		1		122		122		—		125		125
Dificid	63		3		66		32		2		34		113		6		119		56		4		61
Noxafil	16		45		60		14		52		66		25		92		118		29		104		133
Invanz	2		45		46		(4)		52		48		2		96		99		—		104		104
Cancidas	2		39		42		1		53		54		4		91		95		3		108		111
Zerbaxa	22		24		46		(2)		1		(1)		40		36		76		(4)		(5)		(9)
Cardiovascular
Alliance revenue-Adempas/Verquvo (3)	88		10		98		81		(7)		74		159		11		170		149		—		149
Adempas	—		63		63		—		74		74		—		124		124		—		129		129
Virology
Lagevrio	—		1,177		1,177		—		—		—		1,523		2,901		4,424		—		—		—
Isentress/Isentress HD	67		80		147		74		118		192		128		177		305		145		256		401
Neuroscience
Belsomra	19		50		69		14		63		78		39		98		137		32		125		157
Immunology
Simponi	—		181		181		—		202		202		—		366		366		—		416		416
Remicade	—		53		53		—		75		75		—		114		114		—		160		160
Diabetes
Januvia	301		455		756		284		500		784		626		909		1,535		632		961		1,593
Janumet	105		371		476		74		403		477		168		762		931		158		805		962
Other pharmaceutical (4)	191		288		479		213		299		512		372		628		998		429		640		1,069
Total Pharmaceutical segment sales	5,726		7,030		12,756		4,647		5,333		9,980		12,498		14,364		26,863		8,941		10,277		19,218
Animal Health:
Livestock	164		662		826		161		659		821		335		1,322		1,658		318		1,322		1,640
Companion Animals	313		328		641		298		353		651		616		676		1,291		578		672		1,250
Total Animal Health segment sales	477		990		1,467		459		1,012		1,472		951		1,998		2,949		896		1,994		2,890
Total segment sales	6,203		8,020		14,223		5,106		6,345		11,452		13,449		16,362		29,812		9,837		12,271		22,108
Other (5)	35		335		370		(6)		(44)		(50)		128		555		682		53		(132)		(79)
	$	6,238	$	8,355	$	14,593	$	5,100	$	6,301	$	11,402	$	13,577	$	16,917	$	30,494	$	9,890	$	12,139	$	22,029

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

(1)    Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 4).

(2)    Alliance revenue for Reblozyl represents royalties and, for the year-to-date period, a payment received related to the achievement of a regulatory milestone (see Note 4).

(3)    Alliance revenue for Adempas/Verquvo represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 4).

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

(5)    Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales (including sales to Organon). Other for the six months ended June 30, 2022 and 2021 also includes $146 million and $56 million, respectively, related to upfront and contingent milestone payments received by Merck for out-licensing arrangements.

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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 $3.0 billion and $3.1 billion for the three months ended June 30, 2022 and 2021, respectively, and $5.9 billion and $6.0 billion for the six months ended June 30, 2022 and 2021, respectively.

Consolidated sales by geographic area where derived are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
United States	$	6,238	$	5,100	$	13,577	$	9,890
Europe, Middle East and Africa	3,582		3,333		7,942		6,569
China	1,372		975		2,515		1,697
Japan	1,114		661		2,103		1,291
Asia Pacific (other than China and Japan)	1,008		594		1,938		1,168
Latin America	642		532		1,249		1,032
Other	637		207		1,170		382
	$	14,593	$	11,402	$	30,494	$	22,029

A reconciliation of segment profits to Income from Continuing Operations Before Taxes is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
Segment profits:
Pharmaceutical segment	$	9,173	$	7,257	$	18,673	$	13,845
Animal Health segment	571		552		1,156		1,124
Total segment profits	9,744		7,809		19,829		14,969
Other profits	260		(79)		454		(113)
Unallocated:
Interest income	15		9		22		20
Interest expense	(240)		(202)		(483)		(401)
Amortization	(463)		(357)		(1,163)		(871)
Depreciation	(431)		(332)		(809)		(673)
Research and development	(2,652)		(4,175)		(5,097)		(6,480)
Restructuring costs	(142)		(82)		(194)		(380)
Other unallocated, net	(1,604)		(874)		(3,211)		(1,367)
	$	4,487	$	1,717	$	9,348	$	4,704

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 intangible assets and 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 measurement of liabilities for contingent consideration, and other miscellaneous income or expense items.

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

Business Developments

Below is a summary of significant business development activity thus far in 2022. See Note 3 to the condensed consolidated financial statements for additional information.

In July 2022, Merck and Orion Corporation (Orion) announced a global co-development and co-commercialization agreement for Orion’s investigational candidate ODM-208 (MK-5684) and other drugs targeting cytochrome P450 11A1 (CYP11A1), an enzyme important in steroid production. ODM-208 is an oral, non-steroidal inhibitor of CYP11A1 currently being evaluated in a Phase 2 clinical trial for the treatment of patients with metastatic castration-resistant prostate cancer. Merck made an upfront payment to Orion of $290 million, which will be recorded in Research and development expenses in the third quarter of 2022.

Also in July 2022, Merck and Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. (Kelun-Biotech) closed a license and collaboration agreement in which Merck gained exclusive worldwide rights for the development, manufacture and commercialization of an investigational antibody drug conjugate (ADC) (MK-1200) for the treatment of solid tumors. Under the terms of the agreement, Merck and Kelun-Biotech will collaborate on the early clinical development of the investigational ADC. Merck will make an upfront payment of $35 million, which will be recorded in Research and development expenses in the third quarter of 2022. Kelun-Biotech is also eligible to receive future contingent milestone payments and tiered royalties on future net sales.

In May 2022, in connection with an existing arrangement, Merck exercised its option to obtain an exclusive license outside of China for the development, manufacture and commercialization of Kelun-Biotech’s trophoblast antigen 2 (TROP2)-targeting ADC programs, including its lead compound, SKB-264 (MK-2870). SKB-264 is currently being evaluated in Phase 2 trials for non-small-cell lung cancer (NSCLC) and advanced solid tumors. Under the terms of the agreement, Merck and Kelun-Biotech will collaborate on certain early clinical development plans, including evaluating the potential of SKB-264 as a monotherapy and in combination with Keytruda (pembrolizumab) for advanced solid tumors. Upon option exercise, Merck made a payment of $30 million, which was recorded in Research and development expenses in the second quarter of 2022, and agreed to make additional payments upon completion of specified project activities, technology transfer, as well as payments to fund Kelun-Biotech’s ongoing research and development activities. In addition, Kelun-Biotech is eligible to receive future contingent milestone payments and royalties on future net sales.

Spin-Off of Organon & Co.

On June 2, 2021, Merck completed the spin-off of products from its women’s health, biosimilars and established brands businesses into a new, independent, publicly traded company named Organon & Co. (Organon) through a distribution of Organon’s publicly traded stock to Company shareholders. The distribution is expected to qualify and has been treated as tax-free to the Company and its shareholders for U.S. federal income tax purposes. The established brands included in the transaction consisted of dermatology, non-opioid pain management, respiratory, select cardiovascular products, as well as the rest of Merck’s diversified brands franchise. Merck’s existing research pipeline programs continue to be owned and developed within Merck as planned. The historical results of the businesses that were contributed to Organon in the spin-off have been reflected as discontinued operations in the Company’s consolidated financial statements through the date of the spin-off (see Note 2 to the condensed consolidated financial statements).

Other Developments

War in Ukraine

In February 2022, Russia invaded Ukraine. The Company’s primary concerns are the safety and well-being of its employees and ensuring patients and customers have continued access to medicines and vaccines needed for patient and public health. The Company is working cross-functionally across the globe to monitor and mitigate interruptions to business continuity resulting from the war, including its impact on Merck’s supply chain, operations and clinical trials. For humanitarian reasons, the Company is continuing to supply essential medicines and vaccines in Russia while working to maintain compliance with evolving international sanctions. Merck plans to donate profits resulting from its operations in Russia to humanitarian causes. The Company does not have research or manufacturing facilities in Russia, currently does not plan to make further investments in Russia, and has suspended screening and enrollment in ongoing clinical trials as well as planning for new studies in Russia, although the Company continues to treat patients already enrolled in existing clinical trials and collect data from these studies. The Company is also using its resources to help alleviate the humanitarian crisis in Ukraine, including through donations of funds and products. The financial impacts of the war were immaterial to the Company’s consolidated financial statements for the second quarter and first six months of 2022. Combined sales to Russia and Ukraine were approximately 1% of total Merck consolidated sales for the full year of 2021.

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The combination of Russia’s invasion of Ukraine, as well as the resultant economic sanctions imposed by the U.S., the European Union (EU) and other governments are having pervasive effects in markets worldwide. The Company is unable to determine at this time the future impacts of this conflict either directly or indirectly on the Company’s business.

COVID-19

Although COVID-19-related disruptions had some negative effects on sales for the second quarter and first six months of 2022, Merck continues to believe that global health systems and patients have largely adapted to the impacts of the COVID-19 pandemic. Merck’s sales of Lagevrio (molnupiravir), an investigational oral antiviral COVID-19 medicine, were $1.2 billion and $4.4 billion in the second quarter and first six months of 2022, respectively. In the second quarter and first six months of 2021, COVID-19-related disruptions resulted in an estimated negative impact to Pharmaceutical segment sales of approximately $400 million and $1.0 billion, respectively, because a substantial portion of Merck’s Pharmaceutical segment revenue is comprised of physician-administered products, which were unfavorably affected by social distancing measures and fewer well visits.

In April 2021, Merck announced it was discontinuing the development of MK-7110 for the treatment of hospitalized patients with COVID-19, which was obtained as part of Merck’s acquisition of OncoImmune (see Note 3 to the condensed consolidated financial statements). This decision resulted in charges of $37 million and $207 million to Cost of sales in the second quarter and first six months of 2021, respectively.

In March 2021, Merck announced it had entered into multiple agreements to support efforts to expand manufacturing capacity and supply of SARS-CoV-2/COVID-19 medicines and vaccines. The Biomedical Advanced Research and Development Authority (BARDA), a division of the Office of the Assistant Secretary for Preparedness and Response within the U.S. Department of Health and Human Services, provided Merck with $102 million of funding in the first quarter of 2022 to adapt and make available a number of existing manufacturing facilities for the production of SARS-CoV-2/COVID-19 vaccines and medicines. The funding is being recognized as a reduction to Cost of sales over the production period, offsetting the depreciation expense related to the amounts that were capitalized in connection with the modification of the manufacturing facilities. In May 2022, Johnson & Johnson terminated a previously executed agreement with Merck supporting the manufacturing and supply of Johnson & Johnson’s SARS-CoV-2/COVID-19 vaccine. Merck continues to use one of its facilities in the U.S. to produce drug substance for Johnson & Johnson’s vaccine under a separate agreement.

Pricing

Global efforts toward health care cost containment continue to exert pressure on product pricing and market access worldwide. Changes to the U.S. health care system enacted in prior years 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 sales performance in the first six months of 2022 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs. In the U.S., the Biden Administration and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs. The Company anticipates all of these actions and additional actions in the future will continue to negatively affect sales performance.

Supply Chain

As a result of global macroeconomic conditions, the Company is experiencing some disruption and volatility in its global supply chain network, and the Company may in the future experience disruptions in availability and delays in shipments of raw materials and packaging, as well as related cost inflation.

Operating Results

Sales

	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2022		2021		% Change				2022		2021		% Change
United States	$	6,238	$	5,100	22	%	22	%	$	13,577	$	9,890	37	%	37	%
International	8,355		6,301		33	%	38	%	16,917		12,139		39	%	45	%
Total	$	14,593	$	11,402	28	%	31	%	$	30,494	$	22,029	38	%	41	%

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

Worldwide sales grew 28% to $14.6 billion in the second quarter of 2022 and rose 38% to $30.5 billion in the first six months of 2022. Revenue performance in both periods was attributable in part to higher sales in the virology franchise driven by Lagevrio (molnupiravir) sales of $1.2 billion and $4.4 billion in the second quarter and first six months of 2022,

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respectively. Also contributing to revenue growth in both periods were higher sales in the oncology franchise largely driven by strong growth of Keytruda (pembrolizumab) and increased alliance revenue from Lenvima (lenvatinib) and Lynparza (olaparib), as well as higher sales in the vaccines franchise, primarily attributable to growth of Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant) and Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant). Higher sales of hospital acute care products, including Bridion (sugammadex) Injection, and higher third-party manufacturing sales also drove revenue growth in the second quarter and first six months of 2022. Revenue growth in the year-to-date period also reflects higher sales of Animal Health products. As discussed above, COVID-19-related disruptions had some negative effects on sales in the second quarter and first six months of 2022, but to a lesser extent than in the same periods of 2021 which benefited year-over-year sales growth.

Revenue growth in the second quarter and first six months of 2022 was partially offset by lower sales of virology products Isentress/Isentress HD (raltegravir) and lower combined sales of diabetes products Januvia (sitagliptin) and Janumet (sitagliptin and metformin HCl).

See Note 15 to the condensed consolidated financial statements for details on sales of the Company’s products. A discussion of performance for select products in the franchises follows.

Pharmaceutical Segment

Oncology

	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2022		2021		% Change				2022		2021		% Change
Keytruda	$	5,252	$	4,176	26	%	30	%	$	10,061	$	8,076	25	%	29	%
Alliance Revenue - Lynparza (1)	275		248		11	%	17	%	541		475		14	%	18	%
Alliance Revenue - Lenvima (1)	231		181		28	%	33	%	459		310		48	%	51	%

(1) Alliance revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 4 to the condensed consolidated financial statements).

Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved as monotherapy for the treatment of certain patients with cervical cancer, classical Hodgkin lymphoma, cutaneous squamous cell carcinoma, endometrial carcinoma, esophageal or gastroesophageal junction (GEJ) carcinoma, head and neck squamous cell carcinoma (HNSCC), hepatocellular carcinoma (HCC), NSCLC, melanoma, Merkel cell carcinoma, microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) cancer (solid tumors) including MSI-H/dMMR colorectal cancer, primary mediastinal large B-cell lymphoma, tumor mutational burden-high (TMB-H) cancer (solid tumors), and urothelial carcinoma including non-muscle invasive bladder cancer. Additionally, Keytruda is approved as monotherapy for the adjuvant treatment of certain patients with renal cell carcinoma (RCC) or stage IIB, IIC or III melanoma. Keytruda is also approved for certain patients with high-risk early-stage TNBC in combination with chemotherapy as neoadjuvant treatment, and then continued as a single agent as adjuvant treatment after surgery. In addition, Keytruda is approved for the treatment of certain patients in combination with chemotherapy for metastatic squamous and nonsquamous NSCLC, in combination with chemotherapy, with or without bevacizumab for cervical cancer, in combination with chemotherapy for esophageal cancer, in combination with trastuzumab, fluoropyrimidine- and platinum-containing chemotherapy for human epidermal growth factor 2 (HER-2)-positive gastric or GEJ adenocarcinoma, in combination with chemotherapy for HNSCC, in combination with chemotherapy for TNBC, in combination with axitinib for advanced RCC, and in combination with Lenvima for both endometrial carcinoma and RCC. The Keytruda clinical development program includes studies across a broad range of cancer types. See “Research and Development Update” below.

Global sales of Keytruda grew 26% and 25% in the second quarter and first six months of 2022, respectively. Sales growth was primarily driven by higher demand as the Company continues to launch Keytruda with multiple new indications globally. Sales in the U.S. continue to build across the multiple approved metastatic indications, in particular for the treatment of certain types of RCC, HNSCC, and MSI-H cancers. Keytruda sales growth in the U.S. also benefited from increased uptake across recent earlier-stage launches including certain types of neoadjuvant/adjuvant TNBC, as well as certain types of RCC and melanoma. Keytruda sales growth in international markets reflects continued uptake predominately for the NSCLC, HNSCC and RCC indications, particularly in Europe.

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Keytruda received the following regulatory approvals thus far in 2022.

Date	Approval
January 2022	European Commission (EC) approval as monotherapy for the adjuvant treatment of adults with RCC at increased risk of recurrence following nephrectomy, or following nephrectomy and resection of metastatic lesions based on the KEYNOTE-564 trial.
February 2022	Japan Ministry of Health, Labour and Welfare approval of the combination of Keytruda plus Lenvima for radically unresectable or metastatic RCC based on the CLEAR (Study 307)/KEYNOTE-581 trial.
February 2022	Japan Pharmaceuticals and Medical Devices Agency approval for the treatment of adult patients with advanced or recurrent TMB-H solid tumors that have progressed after chemotherapy (limited to use when difficult to treat with standard of care) based on the KEYNOTE-158 trial.
March 2022	U.S. Food and Drug Administration (FDA) approval as a single agent for the treatment of patients with advanced endometrial carcinoma that is MSI-H or dMMR who have disease progression following prior systemic therapy in any setting and are not candidates for curative surgery or radiation based on the KEYNOTE-158 trial (Cohorts D & K).
April 2022	EC approval in combination with chemotherapy, with or without bevacizumab, for the treatment of persistent, recurrent or metastatic cervical cancer in certain adults whose tumors express PD-L1 based on the KEYNOTE-826 trial.
April 2022	EC approval as monotherapy for the treatment of certain adult patients with unresectable or metastatic MSI-H/dMMR colorectal, gastric, small intestine or biliary cancer, as well as advanced or recurrent MSI-H/dMMR endometrial cancer based on data from the KEYNOTE-164 and KEYNOTE-158 trials.
May 2022	EC approval in combination with chemotherapy as neoadjuvant treatment, and then continued as monotherapy as adjuvant treatment after surgery for adults with locally advanced or early-stage TNBC at high risk of recurrence based on the KEYNOTE-522 trial.
June 2022	EC approval as monotherapy for the adjuvant treatment of adults and adolescents aged 12 years and older with stage IIB or IIC melanoma and who have undergone complete resection based on the KEYNOTE-716 trial. Additionally, EC approval expanding the indications in advanced (unresectable or metastatic) melanoma and stage III melanoma with lymph node involvement (as adjuvant treatment following complete resection) to include adolescent patients aged 12 years and older.

Lynparza is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see Note 4 to the condensed consolidated financial statements). Lynparza is approved for the treatment of certain types of advanced ovarian, breast, pancreatic and prostate cancers. Alliance revenue related to Lynparza increased 11% and 14% in the second quarter and first six months of 2022, respectively, largely driven by higher demand globally across the multiple approved indications, particularly in the U.S. largely attributable to uptake in the earlier-stage breast cancer indication following recent approval by the FDA. In March 2022, Lynparza was approved by the FDA for the adjuvant treatment of adult patients with deleterious or suspected deleterious germline BRCA-mutated (gBRCAm), HER2-negative high-risk early breast cancer who have been treated with neoadjuvant or adjuvant chemotherapy based on the OlympiA trial. In August 2022, the EC approved Lynparza as monotherapy or in combination with endocrine therapy for the adjuvant treatment of adult patients with gBRCAm who have HER2-negative high-risk early breast cancer previously treated with neoadjuvant or adjuvant chemotherapy based on the OlympiA trial.

Lenvima is an oral receptor tyrosine kinase inhibitor being developed as part of a collaboration with Eisai Co., Ltd. (Eisai) (see Note 4 to the condensed consolidated financial statements). Lenvima is approved for the treatment of certain types of thyroid cancer, RCC, HCC, in combination with everolimus for certain patients with RCC, and in combination with Keytruda for both endometrial carcinoma and RCC. Alliance revenue related to Lenvima grew 28% and 48% in the second quarter and first six months of 2022, respectively, reflecting uptake in the advanced RCC and advanced endometrial cancer indications, particularly in the U.S.

Vaccines

	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2022		2021		% Change				2022		2021		% Change
Gardasil/Gardasil 9	$	1,674	$	1,234	36	%	40	%	$	3,133	$	2,151	46	%	48	%
ProQuad	214		189		13	%	15	%	376		354		6	%	8	%
M-M-R II	103		87		17	%	19	%	206		167		23	%	25	%
Varivax	261		240		9	%	10	%	465		444		5	%	6	%
RotaTeq	173		208		(17)	%	(14)	%	389		366		6	%	8	%
Pneumovax 23	153		152		1	%	4	%	325		323		1	%	3	%

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Combined worldwide sales of Gardasil and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of human papillomavirus (HPV), grew 36% and 46% in the second quarter and first six months of 2022, respectively, driven primarily by strong demand outside of the U.S., particularly in China, which also benefited from increased supply. Combined sales of Gardasil and Gardasil 9 in the U.S. declined in the second quarter of 2022 and increased for the first six months of 2022 due to public sector buying patterns.

Global sales of ProQuad (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella, increased 13% and 6% in the second quarter and first six months of 2022, respectively, largely due to higher pricing and demand in the U.S.

Worldwide sales of M‑M‑R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella, grew 17% and 23% in the second quarter and first six months of 2022, respectively, primarily due to higher demand and pricing in the U.S., as well as higher demand in Latin America.

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), grew 9% and 5% in the second quarter and first six months of 2022, respectively, primarily attributable to higher pricing and demand in the U.S.

Global sales of RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children, declined 17% in the second quarter of 2022 primarily due to lower demand in China and public sector buying patterns in the U.S. Global sales of RotaTeq grew 6% in the first six months of 2022 due to public sector buying patterns in the U.S., partially offset by lower demand in China.

Worldwide sales of Pneumovax 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, grew 1% in the first six months of 2022 primarily reflecting higher demand in the U.S. and Latin America that was largely offset by lower demand in Europe.

In June 2022, the FDA approved an expanded indication for Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine) to include use in infants and children. Vaxneuvance is now indicated for the prevention of invasive disease caused by Streptococcus pneumoniae serotypes 1, 3, 4, 5, 6A, 6B, 7F, 9V, 14, 18C, 19A, 19F, 22F, 23F and 33F in individuals 6 weeks of age and older. The FDA’s approval was based on data from seven randomized, double-blind clinical studies assessing safety, tolerability and immunogenicity of Vaxneuvance in infants and children. Vaxneuvance was previously approved by the FDA in 2021 for use in adults 18 years of age and older. Also in June 2022, the U.S. Centers for Disease Control and Prevention’s (CDC’s) Advisory Committee on Immunization Practices (ACIP) unanimously voted to include Vaxneuvance as a recommended option for vaccination in infants and children, including routine use in children under 2 years of age. This provisional recommendation will be reviewed by the director of the CDC and the Department of Health and Human Services, and final recommendations will become official when published in the CDC’s Morbidity and Mortality Weekly Report (MMWR). The ACIP also unanimously voted to include Vaxneuvance in the Vaccines for Children program.

Hospital Acute Care

	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2022		2021		% Change				2022		2021		% Change
Bridion	$	426	$	387	10	%	15	%	$	821	$	727	13	%	17	%
Zerbaxa	46		(1)		*		*		76		(9)		*		*

*Calculation not meaningful.

Worldwide sales of Bridion, for the reversal of two types of neuromuscular blocking agents used during surgery, grew 10% and 13% in the second quarter and first six months of 2022, respectively, due to higher demand globally, particularly in the U.S. and Europe, largely attributable to Bridion’s growing share among neuromuscular blockade reversal agents and an increase in surgical procedures.

In December 2020, the Company temporarily suspended sales of Zerbaxa (ceftolozane and tazobactam), a combination antibacterial and beta-lactamase inhibitor for the treatment of certain bacterial infections, and subsequently issued a product recall, following the identification of product sterility issues. A phased resupply for Zerbaxa was initiated in the fourth quarter of 2021 and is being expanded to additional markets during 2022.

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Cardiovascular

	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2022		2021		% Change				2022		2021		% Change
Alliance Revenue - Adempas/Verquvo (1)	$	98	$	74	33	%	33	%	$	170	$	149	14	%	15	%
Adempas	63		74		(14)	%	(5)	%	124		129		(4)	%	6	%

(1) Alliance revenue represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 4 to the condensed consolidated financial statements).

Adempas (riociguat) and Verquvo (vericiguat) are part of a worldwide collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators (see Note 4 to the condensed consolidated financial statements). Adempas is approved for the treatment of certain types of pulmonary arterial hypertension. Verquvo was approved in the U.S. in January 2021 to reduce the risk of cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous diuretics in adults with symptomatic chronic heart failure and reduced ejection fraction. Verquvo was also approved in Japan in June 2021 and in the EU in July 2021. Alliance revenue from the collaboration grew 33% and 14% in the second quarter and first six months of 2022, respectively. Revenue also includes sales of Adempas and Verquvo in Merck’s marketing territories.

Virology

	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2022		2021		% Change				2022		2021		% Change
Lagevrio	$	1,177	$	—	—		—		$	4,424	$	—	—		—
Isentress/Isentress HD	147		192		(24)	%	(19)	%	305		401		(24)	%	(20)	%

Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback (see Note 4 to the condensed consolidated financial statements). Lagevrio has received multiple authorizations or approvals worldwide. Sales of Lagevrio were $1.2 billion in the second quarter of 2022 primarily consisting of sales in Japan and the United Kingdom (UK). Merck’s initial supply commitment of Lagevrio to the U.S. was fulfilled in the first quarter of 2022; therefore, there were no sales of Lagevrio in the U.S. in the second quarter of 2022. Sales of Lagevrio were $4.4 billion in the first six months of 2022 primarily consisting of sales in the U.S., the UK, Japan and Australia. Merck has entered into advance purchase and supply agreements for Lagevrio in nearly 40 markets. The Company expects full-year 2022 Lagevrio sales to be between $5.0 billion to $5.5 billion.

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, declined 24% in both the second quarter and first six months of 2022 due to lower global demand, reflecting in part competitive pressure in Europe and the U.S. The Company expects competitive pressure for Isentress/Isentress HD to continue.

Diabetes

	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2022		2021		% Change				2022		2021		% Change
Januvia/Janumet	$	1,233	$	1,261	(2)	%	3	%	$	2,466	$	2,556	(4)	%	1	%

Worldwide combined sales of Januvia and Janumet, medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 2% and 4% in the second quarter and first six months of 2022, respectively, primarily reflecting the unfavorable effect of foreign exchange, lower demand in the U.S. and lower pricing in certain international markets. The declines were partially offset by higher demand in China and Latin America, as well as the impact of a prior year unfavorable adjustment to rebate reserves in the U.S. The Company anticipates U.S. pricing pressure will unfavorably affect sales of Januvia and Janumet in future periods. Januvia and Janumet lost market exclusivity with respect to the compound patent in China in July 2022, although not with respect to the salt formulation patent, which extends until June 2024. In addition, the Company will lose market exclusivity in the EU in September 2022 and in the U.S. in January 2023. The Company anticipates sales of Januvia and Janumet in these markets will decline substantially following the loss of exclusivity. Combined sales of Januvia and Janumet in China, Europe and the U.S. represented 10%, 22% and 32%, respectively, of total combined Januvia and Janumet sales for the first six months of 2022.

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Animal Health Segment

	Three Months Ended June 30,						% Change Excluding Foreign Exchange		Six Months Ended June 30,						% Change Excluding Foreign Exchange
($ in millions)	2022		2021		% Change				2022		2021		% Change
Livestock	$	826	$	821	1	%	6	%	$	1,658	$	1,640	1	%	7	%
Companion Animal	641		651		(2)	%	3	%	1,291		1,250		3	%	7	%

Sales of livestock products grew 1% in both the second quarter and first six months of 2022 primarily due to higher demand globally for ruminant and poultry products. Sales of companion animal products declined 2% in the second quarter of 2022 and grew 3% in first six months of 2022. Excluding the unfavorable effect of foreign exchange in both periods, companion animal sales performance primarily reflects higher demand for the Bravecto (fluralaner) line of products. Sales of the Bravecto line of products represented approximately 20% of animal health sales in the first six months of 2022.

Costs, Expenses and Other

	Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2022		2021		% Change		2022		2021		% Change
Cost of sales	$	4,216	$	3,104	36	%	$	9,596	$	6,303	52	%
Selling, general and administrative	2,512		2,281		10	%	4,834		4,468		8	%
Research and development	2,798		4,321		(35)	%	5,374		6,732		(20)	%
Restructuring costs	142		82		73	%	194		380		(49)	%
Other (income) expense, net	438		(103)		*		1,148		(558)		*
	$	10,106	$	9,685	4	%	$	21,146	$	17,325	22	%

*Calculation not meaningful.

Cost of Sales

Cost of sales increased 36% and 52% in the second quarter and first six months of 2022, respectively. Cost of sales includes $622 million and $2.3 billion in the second quarter and first six months of 2022 related to the collaboration with Ridgeback for Lagevrio (see Note 4 to the condensed consolidated financial statements). Cost of sales also includes the amortization of intangible assets recorded in connection with acquisitions, collaborations and licensing arrangements, which totaled $447 million and $342 million in the second quarter of 2022 and 2021, respectively, and $1.1 billion and $837 million in the first six months of 2022 and 2021, respectively. Amortization expense in the first six months of 2022 and 2021 includes $250 million and $153 million, respectively, of cumulative catch-up amortization related to Merck’s collaborations with AstraZeneca and Bayer, respectively, (see Note 4 to the condensed consolidated financial statements). Additionally, costs in the second quarter and first six months of 2021 include charges of $37 million and $225 million, respectively, related to the discontinuation of COVID-19 development programs. Also included in cost of sales are expenses associated with restructuring activities which amounted to $67 million and $38 million in the second quarter of 2022 and 2021, respectively, and $113 million and $65 million in the first six months of 2022 and 2021, 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 2022 compared with 72.8% in the second quarter of 2021. Gross margin was 68.5% in the first six months of 2022 compared with 71.4% in the first six months of 2021. The gross margin declines reflect the impact of Lagevrio (which has a lower gross margin due to profit sharing with Ridgeback as discussed in Note 4 to the condensed consolidation financial statements), as well as higher inventory write-offs, manufacturing costs and amortization of intangible assets (noted above). The gross margin declines in 2022 were partially offset by the favorable effects of product mix, charges in 2021 related to the discontinuation of COVID-19 development programs and foreign exchange.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses increased 10% and 8% in the second quarter and first six months of 2022, respectively, primarily due to higher promotional, selling and administrative costs, including compensation and benefits, as well as higher acquisition-related costs and restructuring costs, partially offset by the favorable effect of foreign exchange. SG&A expenses in the second quarter and first six months of 2022 include restructuring costs of $27 million and $48 million, respectively, related primarily to accelerated depreciation for facilities to be closed or divested.

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Research and Development

Research and development (R&D) expenses decreased 35% and 20% in the second quarter and first six months of 2022, respectively, primarily due to a $1.7 billion charge in the prior year periods related to the acquisition of Pandion Therapeutics, Inc. (Pandion). The declines were partially offset by higher clinical development spending, higher compensation and benefit costs, as well as increased investments in technology in support of the digital enablement of Merck’s research operations, partially offset by the favorable effect of foreign exchange.

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 $1.9 billion and $1.8 billion for the second quarter of 2022 and 2021, respectively, and were $3.7 billion and $3.5 billion for the first six months of 2022 and 2021, 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 $880 million and $750 million for the second quarter of 2022 and 2021, respectively, and $1.6 billion and $1.4 billion for the first six months of 2022 and 2021, respectively. Additionally, R&D expenses in the second quarter and first six months of 2021 include $1.8 billion of charges for acquisitions, including $1.7 billion for the acquisition of Pandion as noted above.

Restructuring Costs

In 2019, Merck approved a global restructuring program (Restructuring Program) as part of a worldwide initiative focused 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 actions currently contemplated under the 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 $3.5 billion. Merck expects to record charges of approximately $550 million for the full year of 2022 related to the Restructuring Program. The Company anticipates the actions under the Restructuring Program will result in annual net cost savings of approximately $900 million by the end of 2023.

Restructuring costs, primarily representing separation and other related costs associated with these restructuring activities, were $142 million and $82 million for the second quarter of 2022 and 2021, respectively, and $194 million and $380 million for the first six months of 2022 and 2021, 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, facility 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 $258 million and $128 million in the second quarter of 2022 and 2021, respectively, and $384 million and $462 million for the first six months of 2022 and 2021, respectively, related to restructuring program activities (see Note 5 to the condensed consolidated financial statements).

Other (Income) Expense, Net

Other (income) expense, net, was $438 million of expense in the second quarter of 2022 compared with $103 million of income in the second quarter of 2021. Other (income) expense, net, was $1.1 billion of expense for the first six months of 2022 compared with $558 million of income for the first six months of 2021. The change in both periods is primarily due to net unrealized losses from investments in equity securities recorded in the second quarter and first six months of 2022 compared with net unrealized gains from investments in equity securities recorded in the second quarter and first six months of 2021. Other (income) expense, net, in the second quarter and first six months of 2022 also reflect higher pension settlement costs compared with the same periods of 2021.

For details on the components of Other (income) expense, net, see Note 11 to the condensed consolidated financial statements.

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Segment Profits
	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
Pharmaceutical segment profits	$	9,173	$	7,257	$	18,673	$	13,845
Animal Health segment profits	571		552		1,156		1,124
Other	(5,257)		(6,092)		(10,481)		(10,265)
Income from Continuing Operations Before Taxes	$	4,487	$	1,717	$	9,348	$	4,704

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as SG&A expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as SG&A and R&D expenses 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, R&D expenses incurred by 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 costs related to restructuring activities and acquisition and divestiture-related costs, including the amortization of intangible assets and amortization of purchase accounting adjustments, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. 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 increased 26% and 35% in the second quarter and first six months of 2022, respectively, reflecting higher sales, partially offset by higher promotional and administrative costs and the unfavorable effect of foreign exchange. Animal Health segment profits grew 3% in the second quarter of 2022 reflecting favorable product mix and lower R&D costs, partially offset by higher selling and administrative costs and the unfavorable effect of foreign exchange. Animal Health segment profits grew 3% in the first six months of 2022 reflecting higher sales, partially offset by higher selling and administrative costs and the unfavorable effect of foreign exchange.

Taxes on Income

The effective income tax rates from continuing operations were 12.0% and 29.3% for the second quarter of 2022 and 2021, respectively, and 11.7% and 15.8% for the first six months of 2022 and 2021, respectively. The effective income tax rates from continuing operations reflect the beneficial impact of foreign earnings. Additionally, the effective income tax rates from continuing operations in the second quarter and first six months of 2021 reflect the unfavorable effect of a charge for the acquisition of Pandion for which no tax benefit was recognized. The effective income tax rate from continuing operations for the first six months of 2021 also reflects a net tax benefit of $207 million related to the settlement of certain federal income tax matters as discussed below.

In the first quarter of 2021, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2015-2016 U.S. federal income tax returns. As a result, the Company was required to make a payment of $190 million (of which $172 million related to continuing operations and $18 million related to discontinued operations). 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 $236 million net tax benefit in the first six months of 2021 (of which $207 million related to continuing operations and $29 million related to discontinued operations). This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination.

Non-GAAP Income and Non-GAAP EPS from Continuing Operations

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 since management uses non-GAAP measures to assess 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, income and losses from investments in equity securities, 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 a non-GAAP EPS metric. Management uses non-GAAP measures internally for planning and forecasting purposes

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and to measure the performance of the Company along with other metrics. In addition, senior management’s annual compensation is derived in part using a non-GAAP pretax income metric. 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 U.S. (GAAP).

In 2022, the Company changed the treatment of certain items for purposes of its non-GAAP reporting. Historically, Merck’s non-GAAP results excluded expenses for upfront and milestone payments related to collaborations and licensing agreements, as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions, to the extent the charges were considered by the Company to be significant to the results of a particular period (as well as any related adjustments recorded in a subsequent period). Beginning in 2022, Merck’s non-GAAP results will no longer exclude charges related to these items. Prior periods have been recast to conform to the current presentation.

A reconciliation between GAAP financial measures and non-GAAP financial measures (from continuing operations) is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions except per share amounts)	2022		2021		2022		2021
Income from continuing operations before taxes as reported under GAAP	$	4,487	$	1,717	$	9,348	$	4,704
Increase (decrease) for excluded items:
Acquisition and divestiture-related costs	530		503		1,168		1,000
Restructuring costs	258		128		384		462
Loss (income) from investments in equity securities, net	234		(258)		918		(819)
Other items:
Charges for the discontinuation of COVID-19 development programs	—		37		—		225
Non-GAAP income from continuing operations before taxes	5,509		2,127		11,818		5,572
Taxes on income from continuing operations as reported under GAAP	538		503		1,092		741
Estimated tax benefit on excluded items (1)	223		65		552		113
Net tax (expense) benefit from the settlement of certain federal income tax matters	—		(1)		—		207
Non-GAAP taxes on income from continuing operations	761		567		1,644		1,061
Non-GAAP net income from continuing operations	4,748		1,560		10,174		4,511
Less: Net income attributable to noncontrolling interests as reported under GAAP	5		1		2		5
Non-GAAP net income from continuing operations attributable to Merck & Co., Inc.	$	4,743	$	1,559	$	10,172	$	4,506
EPS assuming dilution from continuing operations as reported under GAAP	$	1.55	$	0.48	$	3.25	$	1.56
EPS difference	0.32		0.13		0.76		0.21
Non-GAAP EPS assuming dilution from continuing operations	$	1.87	$	0.61	$	4.01	$	1.77

(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.

Acquisition and Divestiture-Related Costs

Non-GAAP income and non-GAAP EPS exclude the impact of certain amounts recorded in connection with acquisitions and divestitures of businesses. 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 acquisitions and divestitures of businesses. Non-GAAP income and non-GAAP EPS also exclude amortization of intangible assets related to collaborations and licensing arrangements.

Restructuring Costs

Non-GAAP income and non-GAAP EPS exclude costs related to restructuring actions (see Note 5 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, facility 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.

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Income and Losses from Investments in Equity Securities

Non-GAAP income and non-GAAP EPS exclude realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds.

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. Typically, these 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 2021 are charges related to the discontinuation of COVID-19 development programs (see Note 3 to the condensed consolidated financial statements) and a net tax benefit related to the settlement of certain federal income tax matters (see Note 12 to the condensed consolidated financial statements).

Research and Development Update

The Company currently has several candidates under regulatory review in the U.S. and internationally.

MK-4482, Lagevrio, is an investigational oral antiviral medicine for the treatment of mild to moderate COVID-19 in adults who are at risk for progressing to severe disease. Merck is developing Lagevrio in collaboration with Ridgeback. The FDA granted Emergency Use Authorization for Lagevrio in December 2021; as updated in February 2022, to authorize Lagevrio for the treatment of mild to moderate COVID-19 in adults with positive results of direct SARS-CoV-2 viral testing, and who are at high risk for progression to severe COVID-19, including hospitalization or death, and for whom alternative COVID-19 treatment options approved or authorized by the FDA are not accessible or clinically appropriate. The authorization is based on the Phase 3 MOVe-OUT trial. Lagevrio is not approved for any use in the U.S. and is authorized only for the duration of the declaration that circumstances exist justifying the authorization of its emergency use under the Food, Drug and Cosmetic Act, unless the authorization is terminated or revoked sooner. Lagevrio has also received Conditional Marketing Authorization in the UK and Special Approval for Emergency in Japan. In November 2021, the European Medicines Agency (EMA) issued a positive scientific opinion for Lagevrio, which is intended to support national decision-making on the possible use of Lagevrio prior to marketing authorization. In October 2021, the EMA initiated a rolling review for Lagevrio for the treatment of COVID-19 in adults. Merck plans to work with the Committee for Medicinal Products for Human Use (CHMP) of the EMA to complete the rolling review process to facilitate initiating the formal review of the Marketing Authorization Application. Applications to other regulatory bodies are underway. Lagevrio is also being evaluated for post-exposure prophylaxis in the Phase 3 MOVe-AHEAD trial, which is evaluating the efficacy and safety of Lagevrio for the prevention of COVID-19 in adults who reside with a person with COVID-19.

MK-7264, gefapixant, is an investigational, orally administered, selective P2X3 receptor antagonist, for the treatment of refractory chronic cough or unexplained chronic cough in adults under review by the FDA and EMA. The marketing applications for gefapixant are based on results from the COUGH-1 and COUGH-2 clinical trials. In January 2022, the FDA issued a Complete Response Letter (CRL) regarding Merck’s New Drug Application for gefapixant. In the CRL, the FDA requested additional information related to the cough counting system that was used to assess efficacy. The CRL was not related to the safety of gefapixant. The Company is performing additional analyses and anticipates submitting this information to the FDA in the first half of 2023 in response to the CRL. The review period in the EU has been extended pending the receipt of additional information from the Company. The Company plans to submit the information to the EMA in the first half of 2023.

V114, (Pneumococcal 15-valent Conjugate Vaccine), is an investigational 15-valent pneumococcal conjugate vaccine under review in Japan for use in both adults and pediatric patients. V114 is also under review in the EU for pediatric patients. V114, Vaxneuvance, was approved by the EC in 2021 for use in individuals 18 years of age and older.

MK-3475, Keytruda, is an anti-PD-1 therapy approved for the treatment of many cancers that is in clinical development for expanded indications. These approvals were the result of a broad clinical development program that currently consists of more than 1,750 clinical trials, including more than 1,300 trials that combine Keytruda with other cancer treatments. These studies encompass more than 30 cancer types including: biliary, estrogen receptor positive breast cancer, cervical, colorectal, cutaneous squamous cell, endometrial, esophageal, gastric, glioblastoma, head and neck, hepatocellular, Hodgkin lymphoma, non-Hodgkin lymphoma, non-small-cell lung, small-cell lung, melanoma, mesothelioma, ovarian, prostate, renal, triple-negative breast, and urothelial, many of which are currently in Phase 3 clinical development. Further trials are being planned for other cancers.

Keytruda is under review by the FDA for the treatment of patients with previously treated advanced HCC. This submission is based on data from the Phase 3 KEYNOTE-394 trial along with supportive data from the KEYNOTE-240 and KEYNOTE-224 trials. Keytruda is approved for this indication in the U.S. under the FDA’s accelerated approval process. This submission is to convert the accelerated approval to full (regular) approval.

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Keytruda is also under review by the FDA for the adjuvant treatment of patients with stage IB (≥4 centimeters), II or IIIA NSCLC following complete surgical resection. The supplemental BLA is based on data from the pivotal Phase 3 KEYNOTE-091 trial, also known as EORTC-1416-LCG/ETOP-8-15 – PEARLS. The FDA set a Prescription Drug User Fee Act date of January 29, 2023, however, further data may be provided during the review process that may delay this date. Keytruda is also under review for this indication in the EU.

Keytruda is under review in Japan in combination with chemotherapy as neoadjuvant treatment, and then continued as monotherapy as adjuvant treatment after surgery for adults with locally advanced, or early-stage TNBC at high risk of recurrence based on results from the Phase 3 KEYNOTE-522 trial.

Keytruda is also under review in Japan in combination with chemotherapy, with or without bevacizumab, for the treatment of persistent, recurrent or metastatic cervical cancer in adults whose tumors express PD-L1 based on results from the Phase 3 KEYNOTE-826 trial.

Additionally, Keytruda is under review in Japan for the adjuvant treatment of patients with RCC at intermediate-high or high risk of recurrence following nephrectomy (surgical removal of a kidney) based on data from the Phase 3 KEYNOTE-564 trial.

In July 2022, Merck announced that the Phase 3 KEYNOTE-412 trial evaluating Keytruda with concurrent chemoradiation therapy (CRT) followed by Keytruda as maintenance therapy (the Keytruda regimen), did not meet its primary endpoint of event-free survival for the treatment of patients with unresected locally advanced HNSCC. At the final analysis of the study, there was an improvement in event-free survival for patients who received the Keytruda regimen compared to placebo plus CRT; however, these results did not meet statistical significance per the pre-specified statistical plan. Results will be presented at an upcoming medical meeting.

In August 2022, Merck announced that the Phase 3 KEYNOTE-921 trial evaluating Keytruda in combination with chemotherapy (docetaxel) compared to chemotherapy alone did not meet its dual primary endpoints of overall survival and radiographic progression-free survival for the treatment of patients with metastatic castration-resistant prostate cancer. In the study, there were modest trends toward an improvement in both overall survival and radiographic progression-free survival for patients who received Keytruda plus chemotherapy compared with chemotherapy alone; however, these results did not meet statistical significance per the pre-specified statistical plan. Results will be presented at an upcoming medical meeting.

MK-7339, Lynparza, is an oral PARP inhibitor currently approved for certain types of advanced ovarian, breast, pancreatic and prostate cancers being co-developed for multiple cancer types as part of a collaboration with AstraZeneca.

Lynparza is under review in Japan for the adjuvant treatment of patients with gBRCAm, HER2-negative high-risk early breast cancer who have been treated with neoadjuvant or adjuvant chemotherapy. Additionally, Lynparza is under review in the EU and Japan for the treatment of certain patients with metastatic castration-resistant prostate cancer based on the PROpel clinical trial.

In March 2022, Merck announced that it would stop the Phase 3 KEYLYNK-010 trial investigating Keytruda in combination with Lynparza for the treatment of patients with metastatic castration-resistant prostate cancer who progressed after treatment with chemotherapy and either abiraterone acetate or enzalutamide. Merck has discontinued the study following the recommendation of an independent Data Monitoring Committee (DMC) after the DMC reviewed data from a planned interim analysis. At the interim analysis, the combination of Keytruda and Lynparza did not demonstrate a benefit in overall survival, one of the study’s dual primary endpoints, compared to the control arm of either abiraterone acetate or enzalutamide. The trial’s other dual primary endpoint, radiographic progression free survival, was evaluated at an earlier interim analysis and did not demonstrate improvement compared to the control arm. Data from this study will be presented at an upcoming scientific congress.

In July 2022, Merck announced it will stop the Phase 3 LYNK-003 trial investigating Lynparza with or without bevacizumab for the treatment of patients with unresectable or metastatic colorectal cancer who have not progressed following first-line induction. This action follows the recommendation of an independent DMC, after the DMC reviewed the data from a planned interim analysis. At the pre-specified interim analysis for progression-free survival, the efficacy of Lynparza as a monotherapy and in combination with bevacizumab relative to control met the criteria for futility by the DMC and accordingly, both experimental arms will be discontinued. Data from this study will be shared in a future scientific forum.

MK-7902, Lenvima, is an oral receptor tyrosine kinase inhibitor being developed as part of a collaboration with Eisai. Merck and Eisai are studying the Keytruda plus Lenvima combination through the LEAP (LEnvatinib And Pembrolizumab) clinical program.

In August 2022, Merck and Eisai announced that the Phase 3 LEAP-002 trial investigating Keytruda plus Lenvima versus Lenvima monotherapy did not meet its dual primary endpoints of overall survival and progression-free survival as a first-line treatment for patients with unresectable hepatocellular carcinoma (uHCC). There were trends toward improvement in overall survival and progression-free survival for patients who received Keytruda plus Lenvima versus Lenvima monotherapy;

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however, these results did not meet statistical significance per the pre-specified statistical plan. The median overall survival of the Lenvima monotherapy arm in LEAP-002 was longer than that observed in previously reported clinical trials evaluating Lenvima monotherapy in uHCC. Merck and Eisai plan to present these data at an upcoming medical conference.

In June 2022, Merck announced the presentation of positive results from a Phase 1/2 study evaluating the safety, tolerability and immunogenicity of V116, the Company’s investigational 21-valent pneumococcal conjugate vaccine (PCV), in pneumococcal vaccine-naïve adults 18-49 years of age (Phase 1) and 50 years of age and older (Phase 2). In both populations, V116 met the primary immunogenicity objectives and was well-tolerated with an overall safety profile generally comparable to Pneumovax 23 (Pneumococcal Vaccine Polyvalent) across age groups. In April 2022, Merck announced that V116 received Breakthrough Therapy Designation from the FDA for the prevention of invasive pneumococcal disease and pneumococcal pneumonia caused by Streptococcus pneumoniae serotypes 3, 6A/C, 7F, 8, 9N, 10A, 11A, 12F, 15A, 15B/C, 16F, 17F, 19A, 20, 22F, 23A, 23B, 24F, 31, 33F, 35B in adults 18 years of age and older. The Breakthrough Therapy Designation is an FDA program designed to expedite the development and review of products intended for serious or life-threatening conditions. To qualify for this designation, preliminary clinical evidence must indicate that the product may demonstrate substantial improvement over currently available options on at least one clinically significant endpoint. Enrollment in the Phase 3 STRIDE-3 trial evaluating V116 in vaccine-naive adults has begun.

The charts below reflect the Company’s research pipeline as of August 2, 2022. Candidates shown in Phase 3 include 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 additional claims, line extensions or formulations for in-line products are not shown.

Phase 2
Cancer MK-0482(3)      Non-Small-Cell Lung MK-1026 (nemtabrutinib)      Hematological Malignancies MK-1200 Neoplasm Malignant MK-1308 (quavonlimab)(2) Non-Small-Cell Lung MK-1308A (quavonlimab+pembrolizumab) Advanced Solid Tumors Colorectal Hepatocellular Melanoma Small-Cell Lung MK-2140 (zilovertamab vedotin) Breast Gastric Hematological Malignancies Non-Small-Cell Lung Ovarian Pancreatic Solid Tumors MK-2870(1)(3) Neoplasm Malignant MK-3475 Keytruda Advanced Solid Tumors MK-4280 (favezelimab)(2)      Hematological Malignancies      Non-Small-Cell Lung MK-4280A (favezelimab+pembrolizumab)      Renal Cell      Small-Cell Lung MK-4830(2)         Colorectal      Melanoma Non-Small-Cell Lung Renal Cell      Small-Cell Lung MK-5684(1) Neoplasm Malignant MK-5890(3)      Non-Small-Cell Lung      Small-Cell Lung	Cancer MK-6440 (ladiratuzumab vedotin)(1)(3) Breast Esophageal Gastric Head and Neck Melanoma Non-Small-Cell Lung Prostate Small-Cell Lung MK-6482 Welireg(3) Biliary Colorectal Hepatocellular Pancreatic Rare cancers Von Hippel-Lindau Disease-Associated Tumors (EU) MK-7119 Tukysa(1) Advanced Solid Tumors Biliary Bladder Cervical Colorectal Endometrial Gastric Non-Small-Cell Lung MK-7339 Lynparza(1)(3) Advanced Solid Tumors MK-7684 (vibostolimab)(2) Melanoma MK-7684A (vibostolimab+pembrolizumab) Biliary Breast Cervical Colorectal Endometrial Esophageal Head and Neck Hematological Malignancies Hepatocellular Prostate	Cancer MK-7902 Lenvima(1)(2) Biliary Glioblastoma Pancreatic Prostate Small-Cell Lung V937 Breast Cutaneous Squamous Cell Head and Neck Melanoma Solid Tumors Cardiovascular MK-2060 Chikungunya Virus Vaccine V184 HIV-1 Infection MK-8591B (islatravir+MK-8507)(4) MK-8591D (islatravir+lenacapavir)(1)(4) Hypercholesterolemia MK-0616 Nonalcoholic Steatohepatitis (NASH) MK-3655 MK-6024 Overgrowth Syndrome MK-7075 (miransertib) Pulmonary Arterial Hypertension MK-5475 Schizophrenia MK-8189 Treatment Resistant Depression MK-1942

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Phase 3 (Phase 3 entry date)	Under Review
Antiviral COVID-19      MK-4482 Lagevrio (U.S.) (May 2021)(1)(5) Cancer MK-1308A (quavonlimab+pembrolizumab) Renal Cell (April 2021) MK-3475 Keytruda Biliary (September 2019) Cutaneous Squamous Cell (August 2019) (EU) Gastric (May 2015) (EU) Hepatocellular (May 2016) (EU) Mesothelioma (May 2018) Ovarian (December 2018) Prostate (May 2019) Small-Cell Lung (May 2017) MK-3475 (pembrolizumab subcutaneous) Non-Small-Cell Lung (August 2021) MK-4280A (favezelimab+pembrolizumab) Colorectal (November 2021) MK-6482 Welireg(3) Renal Cell (February 2020) MK-7119 Tukysa(1) Breast (October 2019) MK-7339 Lynparza(1)(3) Non-Small-Cell Lung (June 2019) Small-Cell Lung (December 2020) MK-7684A (vibostolimab+pembrolizumab) Non-Small-Cell Lung (April 2021) Small-Cell Lung (March 2022) MK-7902 Lenvima(1)(2) Colorectal (April 2021) Esophageal (July 2021) Gastric (December 2020) Head and Neck (February 2020) Melanoma (March 2019) Non-Small-Cell Lung (March 2019) HIV-1 Infection      MK-8591A (doravirine+islatravir) (February 2020)(4) HIV-1 Prevention MK-8591 (islatravir) (February 2021)(4) Pneumococcal Vaccine Adult V116 (July 2022) Pulmonary Arterial Hypertension MK-7962 (sotatercept) (January 2021) Respiratory Syncytial Virus MK-1654 (clesrovimab) (November 2021)	New Molecular Entities/Vaccines Antiviral COVID-19 MK-4482 Lagevrio (EU)(1) Cough MK-7264 (gefapixant) (U.S.)(6) (EU) Pneumococcal Vaccine Adult/Pediatric V114 (JPN)	Certain Supplemental Filings Cancer MK-3475 Keytruda • Second-Line Hepatocellular Cancer (KEYNOTE-394) (U.S.) • Adjuvent Non-Small-Cell Lung Cancer (KEYNOTE-091) (U.S.) (EU) • High-Risk Early-Stage Triple-Negative Breast Cancer (KEYNOTE-522) (JPN) • Cervical Cancer (KEYNOTE-826) (JPN) • Adjuvent Renal Cell Cancer (KEYNOTE-564) (JPN) MK-7339 Lynparza(1) • BRCA-Mutated HER2-Negative Adjuvant Breast Cancer (OlympiA) (JPN) • First-Line Metastatic Prostate Cancer (PROpel) (EU) (JPN) MK-7902 Lenvima(1)(2) • First-Line Metastatic Hepatocellular Carcinoma          (KEYNOTE-524) (U.S.)(7)
	Footnotes: (1) Being developed in a collaboration. (2) Being developed in combination with Keytruda. (3) Being developed as monotherapy and/or in combination with Keytruda. (4) On FDA clinical hold. (5) Available in the U.S. under Emergency Use Authorization. (6) In response to the CRL received from the FDA for this application in January 2022, Merck is performing additional analyses and anticipates submitting this information to the FDA in the first half of 2023. (7) In July 2020, the FDA issued a CRL for Merck’s and Eisai’s applications. Merck and Eisai intend to submit additional data when available to the FDA.

Liquidity and Capital Resources

($ in millions)	June 30, 2022			December 31, 2021
Cash and investments	$	10,366		$	8,466
Working capital	8,948			6,394
Total debt to total liabilities and equity	29.6		%	31.3		%

Cash provided by operating activities of continuing operations was $9.1 billion in the first six months of 2022 compared with $3.2 billion in the first six months of 2021 reflecting stronger operating performance, including the impact of Lagevrio (see Note 4 to the condensed consolidated financial statements). Cash provided by operating activities of continuing operations in the first six months of 2022 was reduced by $1.7 billion of milestone payments related to collaborations compared with $357 million of milestone and option payments related to collaborations in the first six months of 2021. Cash provided by operating activities of continuing operations continues to be the Company’s primary source of funds to finance operating needs, with excess cash serving as the primary source of funds to finance capital expenditures, treasury stock purchases and dividends paid to shareholders. As a result of the mandatory change in R&D capitalization rules that are effective for tax years beginning after December 31, 2021 (related to the Tax Cuts and Jobs Act of 2017), the Company expects taxes paid in the U.S. to increase significantly for the full year of 2022.

Cash used in investing activities of continuing operations was $2.3 billion in the first six months of 2022 compared with $3.3 billion in the first six months of 2021. The lower use of cash in investing activities was primarily due to lower cash used for acquisitions, partially offset by higher purchases of securities and other investments.

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Cash used in financing activities of continuing operations was $4.9 billion in the first six months of 2022 compared with cash provided by financing activities of continuing operations of $164 million in the first six months of 2021. The change was primarily due to the cash distribution in 2021 received from Organon in connection with the spin-off (see Note 2 to the condensed consolidated financial statements) coupled with net repayments of short-term borrowings in the prior year period.

Capital expenditures totaled $2.1 billion in both the first six months of 2022 and the first six months of 2021.

The Company has accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. The Company factored $1.9 billion and $2.8 billion of accounts receivable at June 30, 2022 and December 31, 2021, respectively, under these factoring arrangements, which reduced outstanding accounts receivable. The cash received from the financial institutions is reported within operating activities in the Condensed Consolidated Statement of Cash Flows. In certain of these factoring arrangements, for ease of administration, the Company will collect customer payments related to the factored receivables, which it then remits to the financial institutions. The net cash flows relating to these collections are reported as financing activities in the Condensed Consolidated Statement of Cash Flows.

Dividends paid to stockholders were $3.5 billion and $3.3 billion for the first six months of 2022 and 2021, respectively. In May 2022, the Board of Directors declared a quarterly dividend of $0.69 per share on the Company’s stock for the third quarter that was paid in July 2022. In July 2022, the Board of Directors declared a quarterly dividend of $0.69 per share on the Company’s stock for the fourth quarter that will be paid in October 2022.

In February 2022, the Company’s $1.25 billion, 2.35% notes matured in accordance with their terms and were repaid. In January 2021, the Company’s $1.15 billion, 3.875% notes matured in accordance with their terms and were repaid.

In 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. The Company did not purchase any shares of its common stock during the first six months of 2022. As of June 30, 2022, the Company’s remaining share repurchase authorization was $5.0 billion.

The Company has a $6.0 billion credit facility that matures in June 2026. 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 Estimates

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, 2021 included in Merck’s Form 10‑K filed on February 25, 2022. See Note 1 to the condensed consolidated financial statements for information on the adoption of new accounting standards during 2022. A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates are disclosed in the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Merck’s Form 10-K. There have been no significant changes in the Company’s critical accounting estimates since December 31, 2021.

Recently Issued Accounting Standards

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes in market risk exposures that affect the disclosures presented in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s 2021 Form 10-K filed on February 25, 2022.

The economy of Turkey was recently determined to be hyperinflationary. Consequently, in accordance with U.S. GAAP, the Company’s monetary assets and liabilities that are subject to remeasurement as a result of the changes in the Turkish lira changed beginning in the second quarter of 2022. This change had an immaterial impact to Merck’s condensed consolidated financial statements.

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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, 2022, the Company’s disclosure controls and procedures are effective. For the second quarter of 2022, 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 approvals, product potential, development programs, environmental or other sustainability initiatives, and include statements related to the expected impact of the COVID-19 pandemic. One must carefully consider any 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, 2021, filed on February 25, 2022, in the Company’s Form 10-Q for the quarterly period ended March 31, 2022, filed on May 5, 2022, and in this Form 10-Q, 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 1A. Risk Factors

For a discussion of risks that affect the Company’s business, please refer to Part I, Item IA, “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the risk factors as previously disclosed in the Company’s Annual Report on Form 10-K, except as follows:

The ongoing war between Russia and Ukraine and related global disruptions could adversely affect the Company’s business, results of operations and financial condition.

The ongoing war between Russia and Ukraine, and the financial and economic sanctions imposed by the U.S., the European Union and other countries in response, are having pervasive direct and indirect effects on the global economy, and may adversely affect the Company’s business, results of operations and financial condition. The Company is working cross-functionally across the globe to monitor and mitigate interruptions to business continuity resulting from the war, including its impact on Merck’s supply chain, operations and clinical trials.

For humanitarian reasons, the Company is continuing to supply essential medicines and vaccines in Russia while working to maintain compliance with evolving international sanctions. Merck plans to donate profits resulting from its operations in Russia to humanitarian causes. The Company does not have research or manufacturing facilities in Russia, currently does not plan to make further investments in Russia, and has suspended screening and enrollment in ongoing clinical trials as well as planning for new studies in Russia, although the Company continues to treat patients already enrolled in

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existing clinical trials and collect data from these studies. The Company is also using its resources to help alleviate the humanitarian crisis in Ukraine, including through donations of funds and products.

The financial impacts of the war between Russia and Ukraine were immaterial to the Company’s consolidated financial statements for the second quarter and first six months of 2022. However, the degree to which the war and related disruptions will impact the Company’s results for the remainder of 2022 or beyond is difficult to predict and will depend on developments outside of the Company’s control, including, but not limited to, the duration and severity of the conflict, ongoing and additional financial and economic sanctions imposed by governments in response, restrictions on travel, regional instability, geopolitical shifts, and adverse effects on fuel and energy costs, supply chains, macroeconomic conditions, currency exchange rates and financial markets. Such developments may negatively impact the Company directly or indirectly as well as the parties with which the Company conducts business. In addition, the effects of the war between Russia and Ukraine could heighten other risks disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which could materially adversely affect the Company’s business, results of operations and financial condition.

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

Issuer purchases of equity securities for the three months ended June 30, 2022 were as follows:

ISSUER PURCHASES OF EQUITY SECURITIES

				($ in millions)
Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
April 1 - April 30	—	$0.00	—	$5,047
May 1 - May 31	—	$0.00	—	$5,047
June 1 - June 30	—	$0.00	—	$5,047
Total	—	$0.00	—

(1) The Company did not purchase any shares during the three months ended June 30, 2022 under the plan approved by the Board of Directors in October 2018 to purchase up to $10 billion of Merck’s common stock for its treasury.

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 March 22, 2022) – Incorporated by reference to Current Report on Form 8-K filed on March 25, 2022 (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.INS	—	XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	—	XBRL Taxonomy Extension Schema Document.
101.CAL	—	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	—	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	—	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	—	XBRL Taxonomy Extension Presentation Linkbase Document.
104	—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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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 4, 2022	/s/ Jennifer Zachary
	JENNIFER ZACHARY
	Executive Vice President and General Counsel
Date: August 4, 2022	/s/ Rita A. Karachun
	RITA A. KARACHUN
	Senior Vice President Finance - Global Controller

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EX-31.1

Exhibit 31.1

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 4, 2022

By:	/s/ Robert M. Davis
	ROBERT M. DAVIS Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Caroline Litchfield, 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 4, 2022

By:	/s/ Caroline Litchfield
	CAROLINE LITCHFIELD Executive Vice President, 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, 2022 (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.

Date: August 4, 2022	/s/ Robert M. Davis
	Name: Title:	ROBERT M. DAVIS Chief Executive Officer and President

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, 2022 (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 4, 2022	/s/ Caroline Litchfield
	Name: Title:	CAROLINE LITCHFIELD Executive Vice President, Chief Financial Officer

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Entity Registrant Name	Merck & Co., Inc.
Entity Incorporation, State or Country Code	NJ
Entity Tax Identification Number	22-1918501
Entity Address, Address Line One	126 East Lincoln Avenue
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Entity Information [Line Items]
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Trading Symbol	MRK
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

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CONDENSED CONSOLIDATED STATEMENT OF INCOME - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Statement [Abstract]
Sales	$ 14,593	$ 11,402	$ 30,494	$ 22,029
Costs, Expenses and Other
Cost of sales	4,216	3,104	9,596	6,303
Selling, general and administrative	2,512	2,281	4,834	4,468
Research and development	2,798	4,321	5,374	6,732
Restructuring costs	142	82	194	380
Other (income) expense, net	438	(103)	1,148	(558)
Total Costs, Expenses and Other	10,106	9,685	21,146	17,325
Income from Continuing Operations Before Taxes	4,487	1,717	9,348	4,704
Taxes on Income from Continuing Operations	538	503	1,092	741
Net Income from Continuing Operations	3,949	1,214	8,256	3,963
Less: Net Income Attributable to Noncontrolling Interests	5	1	2	5
Net Income from Continuing Operations Attributable to Merck & Co., Inc.	3,944	1,213	8,254	3,958
Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests	0	332	0	766
Net Income Attributable to Merck & Co., Inc.	$ 3,944	$ 1,545	$ 8,254	$ 4,724
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations (in dollars per share)	$ 1.56	$ 0.48	$ 3.26	$ 1.56
Income from Discontinued Operations (in dollars per share)	0	0.13	0	0.30
Net Income (in dollars per share)	1.56	0.61	3.26	1.87
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations (in dollars per share)	1.55	0.48	3.25	1.56
Income from Discontinued Operations (in dollars per share)	0	0.13	0	0.30
Net Income (in dollars per share)	$ 1.55	$ 0.61	$ 3.25	$ 1.86

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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Comprehensive Income [Abstract]
Net Income Attributable to Merck & Co., Inc.	$ 3,944	$ 1,545	$ 8,254	$ 4,724
Other Comprehensive Income Net of Taxes:
Net unrealized gain on derivatives, net of reclassifications	183	10	246	240
Benefit plan net gain and prior service credit, net of amortization	246	1,403	278	1,484
Cumulative translation adjustment	(387)	132	(422)	(167)
Other comprehensive income (loss), net of taxes	42	1,545	102	1,557
Comprehensive Income Attributable to Merck & Co., Inc.	$ 3,986	$ 3,090	$ 8,356	$ 6,281

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CONDENSED CONSOLIDATED BALANCE SHEET - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Current Assets
Cash and cash equivalents	$ 9,675	$ 8,096
Short-term investments	453	0
Accounts receivable (net of allowance for doubtful accounts of $82 in 2022 and $62 in 2021)	9,643	9,230
Inventories (excludes inventories of $2,764 in 2022 and $2,194 in 2021 classified in Other assets - see Note 7)	5,535	5,953
Other current assets	6,810	6,987
Total current assets	32,116	30,266
Investments	238	370
Property, Plant and Equipment, at cost, net of accumulated depreciation of $17,798 in 2022 and $18,192 in 2021	20,059	19,279
Goodwill	21,213	21,264
Other Intangibles, Net	22,497	22,933
Other Assets	10,972	11,582
Total Assets	107,095	105,694
Current Liabilities
Loans payable and current portion of long-term debt	2,979	2,412
Trade accounts payable	3,482	4,609
Accrued and other current liabilities	13,501	13,859
Income taxes payable	1,438	1,224
Dividends payable	1,768	1,768
Total current liabilities	23,168	23,872
Long-Term Debt	28,684	30,690
Deferred Income Taxes	2,974	3,441
Other Noncurrent Liabilities	8,951	9,434
Merck & Co., Inc. Stockholders’ Equity
Common stock, $0.50 par value Authorized - 6,500,000,000 shares Issued - 3,577,103,522 shares in 2022 and 2021	1,788	1,788
Other paid-in capital	44,115	44,238
Retained earnings	58,437	53,696
Accumulated other comprehensive loss	(4,327)	(4,429)
Stockholders' equity before deduction for treasury stock	100,013	95,293
Less treasury stock, at cost: 1,043,894,068 shares in 2022 and 1,049,499,023 shares in 2021	56,770	57,109
Total Merck & Co., Inc. stockholders’ equity	43,243	38,184
Noncontrolling Interests	75	73
Total equity	43,318	38,257
Liabilities and Equity	$ 107,095	$ 105,694

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CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 82	$ 62
Inventories classified in Other assets	2,764	2,194
Accumulated depreciation	$ 17,798	$ 18,192
Common stock, par value (in dollars per share)	$ 0.50	$ 0.50
Common stock, authorized (shares)	6,500,000,000	6,500,000,000
Common stock, issued (in shares)	3,577,103,522	3,577,103,522
Treasury stock (in shares)	1,043,894,068	1,049,499,023

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash Flows from Operating Activities of Continuing Operations
Net income from continuing operations	$ 8,256	$ 3,963
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities of continuing operations:
Amortization	1,163	871
Depreciation	895	749
Intangible asset impairment charges	23	0
Loss (income) from investments in equity securities, net	991	(854)
Charge for the acquisition of Pandion Therapeutics, Inc.	0	1,556
Deferred income taxes	(600)	29
Share-based compensation	257	243
Other	776	328
Net changes in assets and liabilities	(2,698)	(3,655)
Net Cash Provided by Operating Activities of Continuing Operations	9,063	3,230
Cash Flows from Investing Activities of Continuing Operations
Capital expenditures	(2,113)	(2,068)
Purchases of securities and other investments	(705)	(1)
Proceeds from sales of securities and other investments	374	386
Acquisition of Pandion Therapeutics, Inc., net of cash acquired	0	(1,554)
Other acquisitions, net of cash acquired	0	(90)
Other	194	16
Net Cash Used in Investing Activities of Continuing Operations	(2,250)	(3,311)
Cash Flows from Financing Activities of Continuing Operations
Net change in short-term borrowings	0	(3,983)
Payments on debt	(1,250)	(1,153)
Distribution from Organon & Co.	0	9,000
Purchases of treasury stock	0	(239)
Dividends paid to stockholders	(3,515)	(3,318)
Proceeds from exercise of stock options	109	51
Other	(207)	(194)
Net Cash (Used in) Provided by Financing Activities of Continuing Operations	(4,863)	164
Cash Flows from Discontinued Operations
Net cash provided by operating activities	0	1,051
Net cash used in investing activities	0	(134)
Net cash used in financing activities	0	(504)
Net Cash Flows Provided by Discontinued Operations	0	413
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash	(364)	(19)
Net Increase in Cash, Cash Equivalents and Restricted Cash	1,586	477
Cash, Cash Equivalents and Restricted Cash at Beginning of Year (includes restricted cash of $71 and $103 at January 1, 2022 and 2021, respectively, included in Other current assets)	8,167	8,153
Cash, Cash Equivalents and Restricted Cash at End of Period (includes restricted cash of $78 and $55 at June 30, 2022 and 2021, respectively, included in Other current assets)	$ 9,753	$ 8,630

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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021	Jun. 30, 2021	Dec. 31, 2020
Statement of Cash Flows [Abstract]
Restricted cash	$ 78	$ 71	$ 55	$ 103

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Basis of Presentation

6 Months Ended

Jun. 30, 2022

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 (U.S.) (GAAP) 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 25, 2022.

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.

Reclassifications — Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

Spin-Off of Organon & Co.

On June 2, 2021, Merck completed the spin-off of products from its women’s health, biosimilars and established brands businesses into a new, independent, publicly traded company named Organon & Co. (Organon) through a distribution of Organon’s publicly traded stock to Company shareholders. The distribution is expected to qualify and has been treated as tax-free to the Company and its shareholders for U.S. federal income tax purposes. The established brands included in the transaction consisted of dermatology, non-opioid pain management, respiratory, select cardiovascular products, as well as the rest of Merck’s diversified brands franchise. Merck’s existing research pipeline programs continue to be owned and developed within Merck as planned. The historical results of the businesses that were contributed to Organon in the spin-off have been reflected as discontinued operations in the Company’s consolidated financial statements through the date of the spin-off (see Note 2).

Recently Adopted Accounting Standards

In August 2020, the Financial Accounting Standards Board (FASB) issued amended guidance on the accounting for convertible instruments and contracts in an entity’s own equity. The guidance removes the separation model for convertible debt instruments and preferred stock, amends requirements for conversion options to be classified in equity as well as amends diluted earnings per share (EPS) calculations for certain convertible debt instruments. The Company adopted the new guidance on January 1, 2022 using a modified retrospective approach. There was no impact to the Company’s consolidated financial statements upon adoption.

In November 2021, the FASB issued new guidance to increase the transparency of transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The guidance requires annual disclosures of such transactions to include the nature of the transactions and the significant terms and conditions, the accounting treatment and the impact to a company’s financial statements. The Company adopted the new guidance on January 1, 2022 on a prospective basis. There was no material impact to the Company’s consolidated financial statements upon adoption.

Recently Issued Accounting Standards Not Yet Adopted

In March 2020, the FASB issued optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for accounting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time between January 1, 2020 through December 31, 2022. The Company is currently evaluating the impact of adoption on its consolidated financial statements. The Company has evaluated all material contracts that may be affected by LIBOR cessation, including debt-related contracts, leases, business development and licensing arrangements, royalty and other agreements. The Company has amended certain agreements and continues to review any remaining agreements for potential impacts. With regard to debt-related exposures in particular, the Company’s four remaining interest rate swaps linked to LIBOR will mature in September 2022. The Company will transition its LIBOR-based debt to an alternative reference rate upon LIBOR discontinuance. Based on its evaluation thus far, the Company does not anticipate a material impact to its consolidated financial statements as a result of reference rate reform.

In October 2021, the FASB issued amended guidance that requires acquiring entities to recognize and measure contract assets and liabilities in a business combination in accordance with existing revenue recognition guidance. The amended guidance is effective for interim and annual periods in 2023 and is to be applied prospectively. Early adoption is permitted on a retrospective basis to the beginning of the fiscal year of adoption. The adoption of this guidance will not have an impact on the

Company’s consolidated financial statements for prior acquisitions; however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations.In June 2022, the FASB issued guidance related to the fair value measurement of an equity security subject to contractual restrictions that prohibit the sale of the equity security. The new guidance also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The amended guidance is effective for interim and annual periods in 2024 and is to be applied prospectively. Early adoption is permitted for both interim and annual periods. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

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Spin-Off of Organon & Co.

6 Months Ended

Jun. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

Spin-Off of Organon & Co.

Spin-Off of Organon & Co.

On June 2, 2021, Merck completed the spin-off of Organon through a distribution of Organon’s publicly traded stock to Company shareholders. In connection with the spin-off, each Merck shareholder received one tenth of a share of Organon’s common stock for each share of Merck common stock held by such shareholder. The distribution is expected to qualify and has been treated as tax free to Merck and its shareholders for U.S. federal income tax purposes. Indebtedness of $9.5 billion principal amount, consisting of term loans and senior notes, was issued in 2021 in connection with the spin-off and assumed by Organon. Merck is no longer the obligor of any Organon debt or financing arrangements. Cash proceeds of $9.0 billion were distributed by Organon to Merck in connection with the spin-off.

Also in connection with the spin-off, Merck and Organon entered into a separation and distribution agreement and also entered into various other agreements to effect the spin-off and provide a framework for the relationship between Merck and Organon after the spin-off, including a transition services agreement (TSA), manufacturing and supply agreements (MSAs), trademark license agreements, intellectual property license agreements, an employee matters agreement, a tax matters agreement and certain other commercial agreements. Under the TSA, Merck is providing Organon various services and, similarly, Organon is providing Merck various services. The provision of services under the TSA generally will terminate within 25 months following the spin-off; however, the provision of certain services has been extended to 31 months. Merck and Organon also entered into a series of interim operating agreements pursuant to which in various jurisdictions where Merck held licenses, permits and other rights in connection with marketing, import and/or distribution of Organon products prior to the separation, Merck is continuing to market, import and distribute such products until such time as the relevant licenses and permits are transferred to Organon. Under such interim operating agreements and in accordance with the separation and distribution agreement, Merck is continuing operations in the affected markets on behalf of Organon, with Organon receiving all of the economic benefits and burdens of such activities. Additionally, Merck and Organon entered into a number of MSAs pursuant to which Merck is (a) manufacturing and supplying certain active pharmaceutical ingredients for Organon, (b) manufacturing and supplying certain formulated pharmaceutical products for Organon, and (c) packaging and labeling certain finished pharmaceutical products for Organon. Similarly, Organon and Merck entered into a number of MSAs pursuant to which Organon is (a) manufacturing and supplying certain formulated pharmaceutical products for Merck, and (b) packaging and labeling certain finished pharmaceutical products for Merck. The terms of the MSAs range in initial duration from four years to ten years.

Amounts included in the condensed consolidated statement of income for the above MSAs include sales of $95 million and $194 million and related cost of sales of $103 million and $208 million for the three and six months ended June 30, 2022, respectively. Amounts included in the condensed consolidated statement of income for the TSAs were immaterial for the three and six months ended June 30, 2022. The amounts included in the condensed consolidated statement of income for the MSAs and TSAs in the three and six months ended June 30, 2021 were immaterial.

The amounts due from Organon under all of the above agreements were $649 million and $964 million at June 30, 2022 and December 31, 2021, respectively, and are reflected in Other current assets. The amounts due to Organon under these agreements were $357 million and $400 million at June 30, 2022 and December 31, 2021, respectively, and are included in Accrued and other current liabilities.

The results of the women’s health, biosimilars and established brands businesses (previously included in the Pharmaceutical segment) that were contributed to Organon in the spin-off, as well as interest expense related to the debt issuance in 2021, have been reflected as discontinued operations in the Company’s condensed consolidated statement of income as Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests for periods prior to the spin-off on June 2, 2021. Merck incurred separation costs of $307 million and $556 million for the three and six months ended June 30, 2021, respectively, related to the spin-off of Organon, which are also included in Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests. These costs primarily relate to professional fees for separation activities within finance, tax, legal and information technology functions, as well as investment banking fees.

Details of Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests are as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
($ in millions)	2021 (1)
Sales	$	1,059	$	2,512
Costs, Expenses and Other
Cost of sales	318		789
Selling, general and administrative	431		877
Research and development	50		103
Restructuring costs	—		1
Other (income) expense, net	(23)		(15)
	776		1,755
Income from discontinued operations before taxes	283		757
Income tax benefit	(49)		(12)
Income from discontinued operations, net of taxes	332		769
Less: Income of discontinued operations attributable to noncontrolling interests	—		3
	$	332	$	766

(1)    Reflects amounts through the June 2, 2021 spin-off date.

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Acquisitions, Research Collaborations and License Agreements

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [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 2022, Merck and Orion Corporation (Orion) announced a global co-development and co-commercialization agreement for Orion’s investigational candidate ODM-208 (MK-5684) and other drugs targeting cytochrome P450 11A1 (CYP11A1), an enzyme important in steroid production. ODM-208 is an oral, non-steroidal inhibitor of CYP11A1 currently being evaluated in a Phase 2 clinical trial for the treatment of patients with metastatic castration-resistant prostate cancer. Merck made an upfront payment to Orion of $290 million, which will be recorded in Research and development expenses in the third quarter of 2022. Orion will be responsible for the manufacture of clinical and commercial supply of ODM-208. In addition, the contract provides both parties with an option to convert the initial co-development and co-commercialization agreement into a global exclusive license to Merck. If the option is exercised, Merck would assume full responsibility for all past development and commercialization expenses associated with the program since inception of the agreement, as well as all future development and commercialization expenses. In addition, Orion would be eligible to receive milestone payments associated with progress in the development and commercialization of ODM-208 as well as tiered double-digit royalties on sales if the product is approved.

Also in July 2022, Merck and Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. (Kelun-Biotech) closed a license and collaboration agreement in which Merck gained exclusive worldwide rights for the development, manufacture and commercialization of an investigational antibody drug conjugate (ADC) (MK-1200) for the treatment of solid tumors. Under the terms of the agreement, Merck and Kelun-Biotech will collaborate on the early clinical development of the investigational ADC. Merck will make an upfront payment of $35 million, which will be recorded in Research and development expenses in the third quarter of 2022. Kelun-Biotech is also eligible to receive future contingent milestone payments aggregating up to $82 million in developmental milestones, $334 million in regulatory milestones, and $485 million in sales-based milestones. The agreement also provides for Merck to pay tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on future net sales.

In May 2022, in connection with an existing arrangement, Merck exercised its option to obtain an exclusive license outside of China for the development, manufacture and commercialization of Kelun-Biotech’s trophoblast antigen 2 (TROP2)-targeting ADC programs, including its lead compound, SKB-264 (MK-2870). SKB-264 is currently being evaluated in Phase 2 trials for non-small-cell lung cancer and advanced solid tumors. Under the terms of the agreement, Merck and Kelun-Biotech

will collaborate on certain early clinical development plans, including evaluating the potential of SKB-264 as a monotherapy and in combination with Keytruda (pembrolizumab) for advanced solid tumors. Upon option exercise, Merck made a payment of $30 million, which was recorded in Research and development expenses in the second quarter of 2022, and agreed to make additional payments of $30 million upon completion of specified project activities and $25 million upon technology transfer. Merck also agreed to make quarterly payments in 2022 and 2023 aggregating $101 million to fund Kelun-Biotech’s ongoing research and development activities. In addition, Kelun-Biotech is eligible to receive future contingent milestone payments (which includes all program compounds) aggregating up to $90 million in developmental milestones, $290 million in first commercial sale milestones, and $780 million in sales-based milestones. The agreement also provides for Merck to pay tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on future net sales.

In April 2021, Merck acquired Pandion Therapeutics, Inc. (Pandion), a clinical-stage biotechnology company developing novel therapeutics designed to address the unmet needs of patients living with autoimmune diseases. Pandion is advancing a pipeline of precision immune modulators targeting critical immune control nodes. Total consideration paid of $1.9 billion included $147 million of transaction costs primarily comprised of share-based compensation payments to settle equity awards. The transaction was accounted for as an acquisition of an asset. Merck recorded net assets of $156 million (primarily cash) and Research and development expenses of $1.7 billion in the second quarter and first six months of 2021 related to the transaction. There are no future contingent payments associated with the acquisition.

In January 2021, Merck entered into an exclusive license and research collaboration agreement with Artiva Biotherapeutics, Inc. (Artiva) to discover, develop and manufacture CAR-NK cells that target certain solid tumors using Artiva’s proprietary platform. Merck and Artiva agreed to engage in up to three different research programs, each covering a collaboration target. Merck has sole responsibility for all development and commercialization activities (including regulatory filing and approval). Under the terms of the agreement, Merck made an upfront payment of $30 million, which was included in Research and development expenses in the first six months of 2021, for license and other rights for the first two collaboration targets and agreed to make another upfront payment of $15 million for license and other rights for the third collaboration target when it is selected by Merck and accepted by Artiva. In addition, Artiva is eligible to receive future contingent milestone payments (which span all three collaboration targets), aggregating up to: $217.5 million in developmental milestones, $570 million in regulatory milestones, and $1.05 billion in sales-based milestones. The agreement also provides for Merck to pay tiered royalties ranging from 7% to 14% on future sales.

As part of Merck’s 2020 acquisition of OncoImmune, Merck obtained MK-7110, a therapeutic candidate that was being evaluated for the treatment of patients hospitalized with COVID-19. In 2021, Merck received feedback from the U.S. Food and Drug Administration (FDA) that additional data would be needed to support a potential Emergency Use Authorization application and therefore the Company did not expect MK-7110 would become available until the first half of 2022. Given this timeline and the technical, clinical and regulatory uncertainties, the availability of a number of medicines for patients hospitalized with COVID-19, and the need to concentrate Merck’s resources on accelerating the development and manufacture of the most viable therapeutics and vaccines, Merck decided to discontinue development of MK-7110 for the treatment of COVID-19. Due to the discontinuation, the Company recorded charges of $37 million and $207 million in the second quarter and first six months of 2021, respectively, which are reflected in Cost of sales and relate to fixed assets and materials written off, as well as the recognition of liabilities for purchase commitments.

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Collaborative Arrangements

6 Months Ended

Jun. 30, 2022

Collaborative Arrangements [Abstract]

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 2017, Merck and AstraZeneca PLC (AstraZeneca) entered into a global strategic oncology collaboration to co-develop and co-commercialize AstraZeneca’s Lynparza (olaparib) for multiple cancer types. 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 are also jointly developing and commercializing AstraZeneca’s Koselugo (selumetinib) for multiple indications. Under the terms of the agreement, AstraZeneca and Merck will share the development and commercialization costs for Lynparza and Koselugo monotherapy and non-PD-L1/PD-1 combination therapy opportunities.

Profits from Lynparza and Koselugo product sales generated through monotherapies or combination therapies are shared equally. AstraZeneca is the principal on Lynparza and Koselugo sales transactions. Merck records its share of Lynparza and Koselugo product sales, net of cost of sales and commercialization costs, as alliance revenue and its share of development costs associated with the collaboration as part of Research and development expenses. 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 and also made payments over a multi-year period for certain license options. In addition, the agreement provides for contingent payments from Merck to AstraZeneca related to the successful achievement of sales-based and regulatory milestones.

In the first quarter of 2022, Merck determined it was probable that sales of Lynparza in the future would trigger a $600 million sales-based milestone payment from Merck to AstraZeneca. Accordingly, Merck recorded a $600 million liability and a corresponding increase to the intangible asset related to Lynparza. Merck also recognized $250 million of cumulative amortization catch-up expense related to the recognition of this milestone in the first quarter of 2022. In the first six months of 2022, Merck made a sales-based milestone payment to AstraZeneca (which had been previously accrued for) of $400 million. As of June 30, 2022, sales-based milestone payments accrued but not yet paid totaled $600 million. Potential future sales-based milestone payments of $2.1 billion have not yet been accrued as they are not deemed by the Company to be probable at this time. In the first six months of 2022, Lynparza received a regulatory approval triggering a capitalized milestone payment of $175 million from Merck to AstraZeneca. Potential future regulatory milestone payments of $1.3 billion remain under the agreement.

The intangible asset balance related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) was $1.5 billion at June 30, 2022 and is included in Other Intangibles, Net. 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)	2022		2021		2022		2021
Alliance revenue - Lynparza	$	275	$	248	$	541	$	475
Alliance revenue - Koselugo	24		8		33		14
Total alliance revenue	$	299	$	256	$	574	$	489
Cost of sales (1)	62		42		361		84
Selling, general and administrative	46		43		90		83
Research and development	25		31		51		60
($ in millions)					June 30, 2022		December 31, 2021
Receivables from AstraZeneca included in Other current assets					$	300	$	271
Payables to AstraZeneca included in Trade accounts payable and Accrued and other current liabilities (2)					12		415
Payables to AstraZeneca included in Other Noncurrent Liabilities (2)					600		—

(1) Represents amortization of capitalized milestone payments. Amount in the first six months of 2022 includes $250 million of cumulative amortization catch-up expense as noted above.

(2) Includes accrued milestone payments.

Eisai

In 2018, Merck and Eisai Co., Ltd. (Eisai) announced a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima (lenvatinib), 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 Keytruda. Eisai records Lenvima product sales globally (Eisai is the principal on Lenvima sales transactions) and Merck and Eisai share applicable 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 are shared by the two companies in accordance with the collaboration agreement and reflected in Research and development expenses. Certain expenses incurred solely by Merck or Eisai are not shareable under the collaboration agreement, including costs incurred in excess of agreed upon caps and costs related to certain combination studies of Keytruda and Lenvima.

Under the agreement, Merck made an upfront payment to Eisai and also made payments over a multi-year period for certain option rights (of which the final $125 million option payment was made in March 2021). In addition, the agreement provides for contingent payments from Merck to Eisai related to the successful achievement of sales-based and regulatory milestones. In the first six months of 2022, Merck made sales-based milestone payments to Eisai (which had been previously accrued for) aggregating $600 million. Potential future sales-based milestone payments of $2.6 billion have not yet been accrued as they are not deemed by the Company to be probable at this time. In the first six months of 2022, Lenvima received a regulatory approval triggering a capitalized milestone payment of $25 million from Merck to Eisai. In July 2022, Merck made

an additional $25 million capitalized regulatory approval milestone payment, which was accrued for as of June 30, 2022. There are no regulatory milestone payments remaining under the agreement.

The intangible asset balance related to Lenvima (which includes capitalized sales-based and regulatory milestone payments) was $920 million at June 30, 2022 and is included in Other Intangibles, Net. 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)	2022		2021		2022		2021
Alliance revenue - Lenvima	$	231	$	181	$	459	$	310
Cost of sales (1)	53		47		106		94
Selling, general and administrative	42		31		73		54
Research and development	47		57		104		121
($ in millions)					June 30, 2022		December 31, 2021
Receivables from Eisai included in Other current assets					$	247	$	200
Payables to Eisai included in Accrued and other current liabilities (2)					25		625

(1) Represents amortization of capitalized milestone payments.

(2) Includes accrued milestone 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 (riociguat). The two companies have implemented a joint development and commercialization strategy. The collaboration also includes development of Bayer’s Verquvo (vericiguat), which was approved in the U.S. in January 2021, in Japan in June 2021 and in the EU in July 2021. Under the agreement, Bayer commercializes Adempas in the Americas, while Merck commercializes in the rest of the world. For Verquvo, Merck commercializes in the U.S. and Bayer commercializes in the rest of the world. Both companies share in development costs and profits on sales. Merck records sales of Adempas and Verquvo in its marketing territories, as well as alliance revenue. Alliance revenue represents Merck’s share of profits from sales of Adempas and Verquvo in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs. Cost of sales includes Bayer’s share of profits from sales in Merck’s marketing territories.

In addition, the agreement provided for contingent payments from Merck to Bayer related to the successful achievement of sales-based milestones. In January 2022, Merck made the final $400 million sales-based milestone payment under this collaboration to Bayer.

The intangible asset balances related to Adempas (which includes the acquired intangible asset balance, as well as capitalized sales-based milestone payments attributed to Adempas) and Verquvo (which reflects the portion of the final sales-based milestone payment that was attributed to Verquvo) were $691 million and $60 million, respectively, at June 30, 2022 and are included in Other Intangibles, Net. The assets are being amortized over their estimated useful lives (through 2027 for Adempas and through 2031 for Verquvo) 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)	2022		2021		2022		2021
Alliance revenue - Adempas/Verquvo	$	98	$	74	$	170	$	149
Net sales of Adempas recorded by Merck	63		74		124		129
Net sales of Verquvo recorded by Merck	6		1		9		1
Total sales	$	167	$	149	$	303	$	279
Cost of sales (1)	54		67		103		275
Selling, general and administrative	42		34		65		51
Research and development	17		13		34		20
($ in millions)					June 30, 2022		December 31, 2021
Receivables from Bayer included in Other current assets					$	144	$	114
Payables to Bayer included in Accrued and other current liabilities (2)					74		472

(1) Includes amortization of intangible assets. Amount in the first six months of 2021 includes $153 million of cumulative amortization catch-up expense. In addition, cost of sales includes Bayer’s share of profits from sales in Merck’s marketing territories.

(2) Amount as of December 31, 2021 includes accrued milestone payment.

Ridgeback Biotherapeutics LP

In 2020, Merck and Ridgeback Biotherapeutics LP (Ridgeback), a closely held biotechnology company, entered into a collaboration agreement to develop Lagevrio (molnupiravir), an orally available antiviral candidate in clinical development for the treatment of patients with COVID-19. Merck gained exclusive worldwide rights to develop and commercialize Lagevrio and related molecules.

Under the terms of the agreement, Ridgeback received an upfront payment and is eligible to receive future contingent payments dependent upon the achievement of certain developmental and regulatory approval milestones. The agreement also provides for Merck to reimburse Ridgeback for a portion of certain third-party contingent milestone payments and royalties on net sales, which is part of the profit share calculation. Merck is the principal on sales transactions, recognizing sales and related costs, with profit sharing amounts recorded within Cost of sales. Profits from the collaboration are split equally between the partners. Reimbursements from Ridgeback for its share of research and development costs (deducted from Ridgeback’s share of profits) are reflected as decreases to Research and development expenses.

Lagevrio has received multiple authorizations or approvals worldwide and Merck has entered into advance purchase and supply agreements for Lagevrio in nearly 40 markets. As of June 30, 2022, the Company has 1.1 million remaining courses to be supplied under these agreements.

Summarized financial information related to this collaboration is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
Lagevrio sales	$	1,177	$	—	$	4,424	$	—
Cost of sales (1)	622		6		2,338		52
Selling, general and administrative	30		4		65		7
Research and development	15		68		21		110
($ in millions)					June 30, 2022		December 31, 2021
Payables to Ridgeback included in Accrued and other current liabilities (2)					$	683	$	283

(1) Includes royalty expense and amortization of capitalized milestone payments.

(2) Includes accrued royalty and milestone payments.

Bristol Myers Squibb

Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein obtained as part of Merck’s November 2021 acquisition of Acceleron Pharma Inc. that is being developed and commercialized through a global collaboration with Bristol Myers Squibb (BMS). Reblozyl is approved in the U.S., Europe, Canada and Australia for the treatment of anemia in certain rare blood disorders and is also being evaluated for additional indications for hematology therapies. BMS is the principal on sales transactions for Reblozyl; however, Merck co-promotes Reblozyl (and will co-promote

all future products approved under this collaboration) in North America, which is reimbursed by BMS. Merck receives a 20% sales royalty from BMS which could increase to a maximum of 24% based on sales levels. This royalty will be reduced by 50% upon the earlier of patent expiry or generic entry on an indication-by-indication basis in each market. Additionally, Merck is eligible to receive future contingent sales-based milestone payments of up to $80 million. Merck recorded alliance revenue of $33 million (consisting of royalties) within Sales in the second quarter of 2022 related to this collaboration. Merck recorded alliance revenue of $86 million in the first six months of 2022, which includes royalties of $66 million, as well as the receipt of a regulatory approval milestone payment of $20 million.

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Restructuring

6 Months Ended

Jun. 30, 2022

Restructuring and Related Activities [Abstract]

Restructuring

Restructuring

In 2019, Merck approved a global restructuring program (Restructuring Program) as part of a worldwide initiative focused 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 actions currently contemplated under the 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 $3.5 billion. The Company estimates that approximately 70% of the cumulative pretax costs will result in cash outlays, primarily related to employee separation expense and facility shut-down costs. Approximately 30% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested.

The Company recorded total pretax costs of $258 million and $128 million in the second quarter of 2022 and 2021, respectively, and $384 million and $462 million for the first six months of 2022 and 2021, respectively, related to restructuring program activities. Since inception of the Restructuring Program through June 30, 2022, Merck has recorded total pretax accumulated costs of approximately $3.0 billion. For the full year of 2022, the Company expects to record charges of approximately $550 million related to the Restructuring Program. 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, 2022								Six Months Ended June 30, 2022
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation		Other		Total
Cost of sales	$	—	$	17	$	50	$	67	$	—	$	35	$	78	$	113
Selling, general and administrative	—		8		19		27		—		12		36		48
Research and development	—		22		—		22		—		29		—		29
Restructuring costs	106		—		36		142		132		—		62		194
	$	106	$	47	$	105	$	258	$	132	$	76	$	176	$	384

	Three Months Ended June 30, 2021								Six Months Ended June 30, 2021
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation		Other		Total
Cost of sales	$	—	$	11	$	27	$	38	$	—	$	21	$	44	$	65
Selling, general and administrative	—		2		—		2		—		4		—		4
Research and development	—		6		—		6		—		13		—		13
Restructuring costs	64		—		18		82		293		—		87		380
	$	64	$	19	$	45	$	128	$	293	$	38	$	131	$	462

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 program. 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 2022 and 2021 includes asset abandonment, facility shut-down and other related costs, as well as pretax gains and losses resulting from the sales of facilities and related assets. Additionally, other activity includes certain employee-related costs associated with pension and other postretirement benefit plans (see Note 10) and share-based compensation.

The following table summarizes the charges and spending relating to restructuring program activities for the six months ended June 30, 2022:

($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total
Restructuring reserves January 1, 2022	$	596	$	—	$	41	$	637
Expense	132		76		176		384
(Payments) receipts, net	(167)		—		(280)		(447)
Non-cash activity	—		(76)		90		14
Restructuring reserves June 30, 2022 (1)	$	561	$	—	$	27	$	588

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

XML

Financial Instruments

6 Months Ended

Jun. 30, 2022

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 of 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 changes 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, Japanese yen and Chinese renminbi. 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 are recorded in Accumulated Other Comprehensive Loss (AOCL) 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, Japanese yen, British pound, Canadian dollar and Swiss franc. For exposures in developing country currencies, including the Chinese renminbi, the Company will enter into forward contracts to 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 a portion of 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 unrealized gains or losses on these contracts are recorded in foreign currency translation adjustment within OCI and remain in AOCL 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 components). Changes in fair value of the excluded components are recognized in OCI. The Company recognizes in earnings the initial value of the excluded components 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)	2022		2021		2022		2021		2022		2021		2022		2021
Net Investment Hedging Relationships
Foreign exchange contracts	$	(31)	$	(3)	$	(46)	$	(28)	$	(1)	$	(4)	$	(2)	$	(8)
Euro-denominated notes	(128)		45		(181)		(122)		—		—		—		—

(1) No amounts were reclassified from AOCL 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.

In February 2022, five interest rate swaps with a total notional amount of $1.25 billion matured. These swaps effectively converted the Company’s $1.25 billion, 2.35% fixed-rate notes due 2022 to variable rate debt. At June 30, 2022, the Company was a party to four 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, 2022
($ in millions)	Par Value of Debt		Number of Interest Rate Swaps Held	Total Swap Notional Amount
2.40% notes due 2022	$	1,000	4	$	1,000

The interest rate swap contracts are designated hedges of the fair value changes in the notes attributable to changes in the benchmark 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. See Note 1 for a discussion of the pending discontinuation of LIBOR as part of reference rate reform. 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 Condensed 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, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Balance Sheet Line Item in which Hedged Item is Included
Loans payable and current portion of long-term debt	$	999	$	2,263	$	(1)	$	13

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, 2022						December 31, 2021
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
($ in millions)		Asset		Liability				Asset		Liability
Derivatives Designated as Hedging Instruments	Balance Sheet Caption
Interest rate swap contracts	Other current assets	$	1	$	—	$	1,000	$	14	$	—	$	2,250
Foreign exchange contracts	Other current assets	467		—		6,751		271		—		6,778
Foreign exchange contracts	Other Assets	57		—		1,334		43		—		1,551
Foreign exchange contracts	Accrued and other current liabilities	—		2		510		—		24		1,623
Foreign exchange contracts	Other Noncurrent Liabilities	—		1		126		—		1		43
		$	525	$	3	$	9,721	$	328	$	25	$	12,245
Derivatives Not Designated as Hedging Instruments	Balance Sheet Caption
Foreign exchange contracts	Other current assets	$	407	$	—	$	10,931	$	221	$	—	$	10,073
Foreign exchange contracts	Accrued and other current liabilities	—		131		7,074		—		96		10,640
		$	407	$	131	$	18,005	$	221	$	96	$	20,713
		$	932	$	134	$	27,726	$	549	$	121	$	32,958

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, 2022				December 31, 2021
($ in millions)	Asset		Liability		Asset		Liability
Gross amounts recognized in the condensed consolidated balance sheet	$	932	$	134	$	549	$	121
Gross amounts subject to offset in master netting arrangements not offset in the condensed consolidated balance sheet	(123)		(123)		(110)		(110)
Cash collateral received	(527)		—		(164)		—
Net amounts	$	282	$	11	$	275	$	11

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

	Three Months Ended June 30,												Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021		2022		2021		2022		2021		2022		2021		2022		2021
Financial Statement Line Items in which Effects of Fair Value or Cash Flow Hedges are Recorded	Sales				Other (income) expense, net (1)				Other comprehensive income (loss)				Sales				Other (income) expense, net (1)				Other comprehensive income (loss)
	$	14,593	$	11,402	$	438	$	(103)	$	42	$	1,545	$	30,494	$	22,029	$	1,148	$	(558)	$	102	$	1,557
(Gain) loss on fair value hedging relationships
Interest rate swap contracts
Hedged items	—		—		(4)		(9)		—		—		—		—		(14)		(19)		—		—
Derivatives designated as hedging instruments	—		—		1		(1)		—		—		—		—		4		—		—		—
Impact of cash flow hedging relationships
Foreign exchange contracts
Amount of gain (loss) recognized in OCI on derivatives	—		—		—		—		403		(58)		—		—		—		—		551		121
Increase (decrease) in Sales as a result of AOCL reclassifications	172		(71)		—		—		(172)		71		239		(183)		—		—		(239)		183
Interest rate contracts
Amount of gain recognized in Other (income) expense, net on derivatives	—		—		—		—		—		—		—		—		(1)		(1)		—		—
Amount of loss recognized in OCI on derivatives	—		—		—		—		—		—		—		—		—		—		(1)		(1)

(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)		2022		2021		2022		2021
Derivatives Not Designated as Hedging Instruments	Income Statement Caption
Foreign exchange contracts (1)	Other (income) expense, net	$	(64)	$	167	$	(36)	$	217
Foreign exchange contracts (2)	Sales	(36)		14		(38)		10

(1) These derivative contracts primarily mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates. Amounts in 2021 include a loss on forward exchange contracts entered into in conjunction with the spin-off of Organon.

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

At June 30, 2022, the Company estimates $463 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 AOCL 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, 2022								December 31, 2021
	Amortized Cost		Gross Unrealized				Fair Value		Amortized Cost		Gross Unrealized				Fair Value
($ in millions)			Gains		Losses						Gains		Losses
Commercial paper	$	334	$	—	$	—	$	334	$	—	$	—	$	—	$	—
U.S. government and agency securities	72		—		—		72		80		—		—		80
Corporate notes and bonds	4		—		—		4		4		—		—		4
Foreign government bonds	2		—		—		2		2		—		—		2
Total debt securities	$	412	$	—	$	—	$	412	$	86	$	—	$	—	$	86
Publicly traded equity securities (1)							1,530								1,647
Total debt and publicly traded equity securities							$	1,942							$	1,733

(1) Unrealized net (gains) losses of $(25) million and $194 million were recorded in Other (income) expense, net in the second quarter and first six months of 2022, respectively, on equity securities still held at June 30, 2022. Unrealized net losses of $18 million and $199 million were recorded in Other (income) expense, net in the second quarter and first six months of 2021, respectively, on equity securities still held at June 30, 2021.

At June 30, 2022 and June 30, 2021, the Company also had $671 million and $694 million, respectively, of equity investments without readily determinable fair values included in Other Assets. The Company records unrealized gains on these equity investments based on favorable observable price changes from transactions involving similar investments of the same investee and records unrealized losses based on unfavorable observable price changes, which are included in Other (income) expense, net. During the first six months of 2022, the Company recorded unrealized gains of $20 million and unrealized net losses of $1 million related to certain of these equity investments still held at June 30, 2022. During the first six months of 2021, the Company recorded unrealized gains of $75 million and unrealized losses of $1 million related to certain of these investments still held at June 30, 2021. Cumulative unrealized gains and cumulative unrealized losses based on observable price changes for investments in equity investments without readily determinable fair values still held at June 30, 2022 were $254 million and $8 million, respectively.

At June 30, 2022 and June 30, 2021, the Company also had $805 million and $1.0 billion, respectively, recorded in Other Assets for equity securities held through ownership interests in investment funds. Losses (gains) recorded in Other (income) expense, net relating to these investment funds were $302 million and $(238) million for the second quarter of 2022 and 2021, respectively, and were $811 million and $(502) million for the first six months of 2022 and 2021, respectively.

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
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
($ in millions)	June 30, 2022								December 31, 2021
Assets
Investments
Commercial paper	$	—	$	334	$	—	$	334	$	—	$	—	$	—	$	—
Foreign government bonds	—		2		—		2		—		2		—		2
Publicly traded equity securities	355		—		—		355		368		—		—		368
	355		336		—		691		368		2		—		370
Other assets (1)
U.S. government and agency securities	72		—		—		72		80		—		—		80
Corporate notes and bonds	4		—		—		4		4		—		—		4
Publicly traded equity securities	1,175		—		—		1,175		1,279		—		—		1,279
	1,251		—		—		1,251		1,363		—		—		1,363
Derivative assets (2)
Forward exchange contracts	—		576		—		576		—		351		—		351
Purchased currency options	—		355		—		355		—		184		—		184
Interest rate swaps	—		1		—		1		—		14		—		14
	—		932		—		932		—		549		—		549
Total assets	$	1,606	$	1,268	$	—	$	2,874	$	1,731	$	551	$	—	$	2,282
Liabilities
Other liabilities
Contingent consideration	$	—	$	—	$	542	$	542	$	—	$	—	$	777	$	777
Derivative liabilities (2)
Forward exchange contracts	—		133		—		133		—		120		—		120
Written currency options	—		1		—		1		—		1		—		1
	—		134		—		134		—		121		—		121
Total liabilities	$	—	$	134	$	542	$	676	$	—	$	121	$	777	$	898

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

(2)    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.

As of June 30, 2022 and December 31, 2021, Cash and cash equivalents included $8.6 billion and $6.8 billion of cash equivalents, respectively (which would be considered Level 2 in the fair value hierarchy).

Contingent Consideration

Summarized information about the changes in the fair value of liabilities for contingent consideration associated with business combinations is as follows:

($ in millions)	2022		2021
Fair value January 1	$	777	$	841
Changes in estimated fair value (1)	(114)		50
Payments	(119)		—
Other	(2)		(12)
Fair value June 30 (2)	$	542	$	879

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

(2) At June 30, 2022, $402 million of the liabilities relate to the 2016 termination of the Sanofi Pasteur MSD joint venture. As part of the termination, Merck recorded a liability for contingent future royalty payments of 11.5% on net sales of all Merck products that were previously sold by the joint venture through December 31, 2024. The fair value of this liability is determined utilizing the estimated amount and timing of projected cash flows using a risk-adjusted discount rate to present value the cash flows. As part of the Company’s routine assessment, the discount rate was reduced from 8% to 6% during the second quarter of 2022, which resulted in an immaterial increase to the liability. Balance at June 30, 2022 includes $131 million recorded as a current liability for amounts expected to be paid within the next 12 months.

The payments of contingent consideration in 2022 relate to the Sanofi Pasteur MSD liabilities described above.

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, 2022, was $29.0 billion compared with a carrying value of $31.7 billion and at December 31, 2021, was $35.7 billion compared with a carrying value of $33.1 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 U.S., Europe and China 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 has accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. The Company factored $1.9 billion and $2.8 billion of accounts receivable as of June 30, 2022 and December 31, 2021, respectively, under these factoring arrangements, which reduced outstanding accounts receivable. The cash received from the financial institutions is reported within operating activities in the Condensed Consolidated Statement of Cash Flows. In certain of these factoring arrangements, for ease of administration, the Company will collect customer payments related to the factored receivables, which it then remits to the financial institutions. As of June 30, 2022 and December 31, 2021, the Company had collected $28 million and $62 million, respectively, on behalf of the financial institutions, which is reflected as restricted cash in Other current assets and the related obligation to remit the cash within Accrued and other current liabilities. The Company remitted the cash to the financial institutions in July 2022 and January 2022, respectively. The net cash flows relating to these collections are reported as financing activities in the Condensed Consolidated Statement of Cash Flows. The cost of factoring such accounts receivable was de minimis.

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 collateral received by the Company from various counterparties was $527 million and $164 million at June 30, 2022 and December 31, 2021, respectively. The obligation to return such collateral is recorded in Accrued and other current liabilities.

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Inventories

6 Months Ended

Jun. 30, 2022

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consisted of:

($ in millions)	June 30, 2022		December 31, 2021
Finished goods	$	1,680	$	1,747
Raw materials and work in process	6,542		6,220
Supplies	217		196
Total (approximates current cost)	8,439		8,163
Decrease to LIFO cost	(140)		(16)
	$	8,299	$	8,147
Recognized as:
Inventories	$	5,535	$	5,953
Other assets	2,764		2,194

Amounts recognized as Other Assets are comprised almost entirely of raw materials and work in process inventories. At June 30, 2022 and December 31, 2021, these amounts included $2.4 billion and $1.9 billion, respectively, of inventories not

expected to be sold within one year. In addition, these amounts included $366 million and $256 million at June 30, 2022 and December 31, 2021, respectively, of inventories produced in preparation for product launches.

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Contingencies

6 Months Ended

Jun. 30, 2022

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 condition, 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.

Product Liability Litigation

Fosamax

As previously disclosed, Merck is a defendant in product liability lawsuits in the U.S. involving Fosamax (alendronate sodium) (Fosamax Litigation). As of June 30, 2022, approximately 3,450 cases are pending against Merck in either a federal multidistrict litigation (Femur Fracture MDL) 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 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. In May 2019, the U.S. Supreme Court 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. In November 2019, the Third Circuit remanded the cases back to the District Court in order to allow that court to determine in the first instance whether the plaintiffs’ state law claims are preempted by federal law under the standards described by the Supreme Court in its opinion. On March 23, 2022, the District Court granted Merck’s motion and ruled that plaintiffs’ failure to warn claims are preempted as a matter of law to the extent they assert that Merck should have added a warning or precaution regarding atypical femur fractures prior to September 2010. Plaintiffs have indicated that they do not intend to move forward with any other claims at this point and intend to appeal the District Court’s preemption ruling to the Third Circuit.

Discovery is presently stayed in the Femur Fracture MDL. As part of the spin-off of Organon, Organon is required to indemnify Merck for all liabilities relating to, arising from, or resulting from the Fosamax Litigation.

Januvia/Janumet

As previously disclosed, Merck is a defendant in product liability lawsuits in the U.S. involving Januvia (sitagliptin) and/or Janumet (sitagliptin and metformin HCl).

Most claims were filed in multidistrict litigation before the U.S. District Court for the Southern District of California (MDL). On March 9, 2021, the MDL Court issued an omnibus order granting defendants’ summary judgment motions based on preemption and failure to establish general causation, as well as granting defendants’ motions to exclude plaintiffs’ expert

witnesses. The plaintiffs appealed that order. Since that time, more than half of these claims have been dismissed with prejudice as to Merck, and on October 5, 2021, the U.S. Court of Appeals for the Ninth Circuit dismissed the appeal as to Merck and two of its codefendants. The MDL Court’s judgment is now final and no longer appealable with respect to remaining claims.

Outside of the MDL, the majority of claims were filed in coordinated proceedings before the Superior Court of California, County of Los Angeles (California State Court). On April 6, 2021, the court in California issued an omnibus order granting defendants’ summary judgment motions and also granting defendants’ motions to exclude plaintiffs’ expert witnesses. On May 31, 2022, the court entered judgment in favor of Merck as to all of the claims pending against Merck in that jurisdiction.

As of June 30, 2022, six 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 U.S. Supreme Court issued its opinion in Merck Sharp & Dohme Corp. v. Albrecht (relating to the Fosamax matter discussed above). Merck filed the opinion in Albrecht with the Illinois Supreme Court in June 2019. The petition for leave to appeal was decided in September 2019, in which the Illinois Supreme Court directed the intermediate appellate court to reconsider its earlier ruling. The Illinois Appellate Court issued a favorable decision concluding, consistent with Albrecht, that preemption presents a legal question to be resolved by the court. In May 2020, the Illinois Appellate Court issued a mandate to the state trial court, which, as of June 30, 2022, had not scheduled a case management conference or otherwise taken action.

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 any remaining lawsuits.

Governmental Proceedings

As previously disclosed, from time to time, the Company’s subsidiaries in China 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 U.S. 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, Schering-Plough 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 (ezetimibe) 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 (MDL) before Judge Rebecca Beach Smith in the Eastern District of Virginia.

In November 2019, the direct purchaser plaintiffs and the indirect purchaser plaintiffs filed motions for class certification. In August 2020, the district court granted in part the direct purchasers’ motion for class certification and certified a class of 35 direct purchasers. In August 2021, the Fourth Circuit vacated the district court’s class certification order and remanded for further proceedings consistent with the court’s ruling. In September 2021, the direct purchaser plaintiffs filed a renewed motion for class certification. On January 25, 2022, the magistrate judge recommended that the district court deny the motion for class certification. On February 8, 2022, the direct purchaser plaintiffs filed objections to the recommendation. On April 13, 2022, the district court denied the direct purchaser plaintiffs’ renewed motion for class certification. In August 2021, the district court granted certification of a class of indirect purchasers.

In 2020 and 2021, United Healthcare Services, Inc., Humana Inc., Centene Corporation and others, and Kaiser Foundation Health Plan, Inc. (collectively, the insurer plaintiffs), each filed a lawsuit in a jurisdiction outside of the Eastern District of Virginia against the Merck Defendants and others, making similar allegations as those made in the Zetia MDL, as well as additional allegations about Vytorin. These cases have been transferred to the Eastern District of Virginia to proceed with the Zetia MDL.

On February 9, 2022, the insurer plaintiffs filed amended complaints. On March 2, 2022, the Merck Defendants, jointly with other defendants, moved to dismiss certain aspects of the insurer plaintiffs’ complaints, including any claims for Vytorin damages.

In April 2022, the direct purchaser plaintiffs moved for an order setting a deadline for direct purchasers of Zetia not currently parties to the case to file cases against defendants in order for those cases to be coordinated for trial with the existing direct purchaser plaintiffs and other MDL plaintiff groups. The court granted that motion, setting a deadline of June 30, 2022 for unnamed direct purchasers to file claims. On June 30, 2022, 23 new entities, many related, brought new complaints against defendants or otherwise sought to intervene. Defendants’ summary judgment motions, filed in August 2020, are still pending. The court has scheduled trial for all plaintiffs other than the insurer plaintiffs for April 2023.

Rotavirus Vaccines Antitrust Litigation

As previously disclosed, MSD is a defendant in putative class action lawsuits filed in 2018 on behalf of direct purchasers of RotaTeq (Rotavirus Vaccine, Live, Oral, Pentavalent), alleging violations of federal antitrust laws. The cases were consolidated in the Eastern District of Pennsylvania. In January 2019, the court denied MSD’s motions to compel arbitration and to dismiss the consolidated complaint. In February 2019, MSD appealed the court’s order on arbitration to the Third Circuit. In October 2019, the Third Circuit vacated the district court’s order and remanded for limited discovery on the issue of arbitrability. On July 6, 2020, MSD filed a renewed motion to compel arbitration, and plaintiffs filed a cross motion for summary judgment as to arbitrability. On November 20, 2020, the district court denied MSD’s motion and granted plaintiffs’ motion. On December 4, 2020, MSD filed a notice of appeal to the Third Circuit. On March 21, 2022, the Third Circuit reversed the order of the district court and remanded with the instruction that the court grant MSD’s motion to compel arbitration. On April 4, 2022, plaintiffs filed a petition for panel rehearing or rehearing en banc, and on May 25, 2022, the Third Circuit denied the petition. On July 1, 2022, the district court stayed the case in favor of arbitration of plaintiffs’ claims.

Bravecto Litigation

As previously disclosed, in January 2020, the Company was served with a complaint in the U.S. District Court for the District of New Jersey. Following motion practice, the plaintiffs filed a second amended complaint on July 1, 2021, seeking to certify a nationwide class action of purchasers or users of Bravecto (fluralaner) products in the U.S. or its territories between May 1, 2014 and July 1, 2021. Plaintiffs contend Bravecto causes neurological events in dogs and cats and alleges violations of the New Jersey Consumer Fraud Act, breach of warranty, product liability, and related theories. The Company moved to dismiss or, alternatively, to strike the class allegations from the second amended complaint, and that motion is pending. A similar case was filed in Quebec, Canada in May 2019. The Superior Court certified a class of dog owners in Quebec who gave Bravecto Chew to their dogs between February 16, 2017 and November 2, 2018 whose dogs experienced one of the conditions in the post-marketing adverse reactions section of the labeling approved on November 2, 2018. The Company and plaintiffs each appealed the class certification decision. The Court of Appeal of Quebec heard the appeal on February 7, 2022 and issued a decision on April 25, 2022 allowing both parties’ appeals in part. The Company sought leave to appeal to the Supreme Court of Canada.

340B Program Litigation

Merck has filed a complaint in the U.S. District Court for the District of Columbia to challenge the letter Merck received from the Health Resources and Services Administration (HRSA) in May 2022 regarding Merck’s 340B Program integrity initiative. HRSA’s letter to Merck asserts that Merck is in violation of the 340B statute. HRSA further claims that continued failure to provide the 340B price to covered entities using contract pharmacies may result in civil monetary penalties for each instance of alleged overcharging, in addition to repayment for any instance of overcharging. The letter is very similar to letters HRSA has sent to other manufacturers, which letters have been held to be unlawful by multiple federal courts. Merck disagrees with HRSA’s assertion. Merck remains committed to the 340B Program and to providing 340B discounts to eligible covered entities. Merck’s 340B Program integrity initiative is consistent with the requirements of the 340B statute and is intended to ensure the integrity and sustainability of the 340B statute by reducing prohibited duplicate discounts and diversion and putting patients back at the center of the program. Merck continues to offer all of the Company’s covered outpatient drugs to all 340B covered entities for purchase at or below the 340B ceiling price.

Patent Litigation

From time to time, generic manufacturers of pharmaceutical products file abbreviated New Drug Applications (NDAs) with the 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 accounted for as business combinations, potentially significant intangible asset impairment charges.

Bridion — As previously disclosed, between January and November 2020, the Company received multiple Paragraph IV Certification Letters under the Hatch-Waxman Act notifying the Company that generic drug companies have filed applications to the FDA seeking pre-patent expiry approval to sell generic versions of Bridion (sugammadex) Injection. In March, April and December 2020, the Company filed patent infringement lawsuits in the U.S. District Courts for the District of New Jersey and the Northern District of West Virginia against those generic companies. All actions in the District of New Jersey have been consolidated. These lawsuits, which assert one or more patents covering sugammadex and methods of using sugammadex, automatically stay FDA approval of the generic applications until June 2023 or until adverse court decisions, if any, whichever may occur earlier. The West Virginia action remains stayed. The U.S. District Court for the District of New Jersey has set a bench trial in this matter beginning on October 12, 2022.

The Company has settled with four generic companies providing that these generic companies can bring their generic versions of Bridion to the market in January 2026 (which may be delayed by any applicable pediatric exclusivity) or earlier under certain circumstances. The Company has agreed to stay the lawsuit filed against two generic companies, which in exchange agreed to be bound by a judgment on the merits of the consolidated action in the District of New Jersey. One of the generic companies in the consolidated action requested dismissal of the action against it and the Company did not oppose this request, which was subsequently granted by the court. The Company does not expect this company to bring its generic version of Bridion to the market before January 2026 or later, depending on any applicable pediatric exclusivity, unless the Company receives an adverse court decision.

Januvia, Janumet, Janumet XR — As previously disclosed, the FDA has granted pediatric exclusivity with respect to Januvia, Janumet, and Janumet XR (sitagliptin and metformin HCl extended-release), which provides a further six months of exclusivity in the U.S. beyond the expiration of all patents listed in the FDA’s Orange Book. Adding this exclusivity to the term of the key patent protection extends exclusivity on these products to January 2023. The Company currently anticipates that sales of Januvia and Janumet in the U.S. will decline significantly after this date. However, Januvia, Janumet, and Janumet XR contain sitagliptin phosphate monohydrate and the Company has another patent covering certain phosphate salt and polymorphic forms of sitagliptin (2027 salt/polymorph patent), which, if determined to be valid, would preclude generic manufacturers from making sitagliptin phosphate salt and polymorphic forms until 2027 with the expiration of that patent, plus pediatric exclusivity. In 2019, 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 the 2027 salt/polymorph patent. 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, but prior to the expiration of the 2027 salt/polymorph patent, and a later granted patent owned by the Company covering the Janumet formulation where its term plus the pediatric exclusivity ends in 2029. The Company also filed a patent infringement lawsuit against Mylan in the Northern District of West Virginia. The Judicial Panel on Multidistrict Litigation entered an order transferring 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.

Prior to the beginning of the scheduled October 2021 trial in the U.S. District Court for the District of Delaware on invalidity issues, the Company settled with all defendants scheduled to participate in that trial. In the Company’s case against Mylan, a bench trial was held in December 2021 in the U.S. District Court for the Northern District of West Virginia, and the closing arguments were held on April 13, 2022.

In total, the Company has settled with 22 generic companies providing that these generic companies can bring their generic versions of Januvia and Janumet to the market in May 2026 or earlier under certain circumstances, and their generic versions of Janumet XR to the market in July 2026 or earlier under certain circumstances.

Additionally, in 2019, Mylan filed a petition for Inter Partes Review (IPR) at the U.S. Patent and Trademark Office (USPTO) seeking invalidity of some, but not all, of the claims of the 2027 salt/polymorph patent. The USPTO instituted IPR proceedings in May 2020, finding a reasonable likelihood that the challenged claims are not valid. A trial was held in February 2021 and a final decision was rendered in May 2021, holding that all of the challenged claims were not invalid. Mylan has appealed the USPTO’s decision to the U.S. Court of Appeals for the Federal Circuit, and a hearing was held on August 2, 2022.

In March 2021, the Company filed a patent infringement lawsuit in the U.S. District Court for the District of Delaware against Zydus Worldwide DMCC, Zydus Pharmaceuticals (USA) Inc., and Cadila Healthcare Ltd. (collectively, Zydus). In that lawsuit, the Company alleged infringement of the 2027 salt/polymorph patent based on the filing of Zydus’s application seeking approval of its sitagliptin tablets. The U.S. District Court for the District of Delaware has set a three-day bench trial in this matter beginning on October 31, 2022.

Generic companies have sought revocation of the Supplementary Protection Certificate (SPC) for Janumet in the following European countries: Austria, Bulgaria, Czech Republic, Estonia, Finland, France, Hungary, Italy, Portugal, Romania, Slovakia, Slovenia, and Sweden. If the generic companies are successful, Janumet could lose market exclusivity in these countries at the same time as the expiry of Januvia pediatric market exclusivity in September 2022. In February 2022, a Finnish court referred certain questions to the European Court of Justice that could determine the validity of the Janumet SPCs in Europe. In June 2021, a German court decided that the SPC for Janumet is invalid, which decision the Company has appealed. The validity of the Janumet SPC was upheld in the Czech Republic in March 2022 in a first instance decision, which has been appealed. In June 2022, a Romanian court decided that the SPC for Janumet was invalid in a first instance decision.

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 condition, 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, 2022 and December 31, 2021 of approximately $235 million and $230 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.

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Equity

6 Months Ended

Jun. 30, 2022

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, 2021	3,577	$	1,788	$	39,613	$	48,888	$	(6,622)	1,046	$	(56,722)	$	94	$	27,039
Net income attributable to Merck & Co., Inc.	—	—		—		1,545		—		—	—		—		1,545
Other comprehensive income, net of taxes	—	—		—		—		1,545		—	—		—		1,545
Cash dividends declared on common stock ($0.65 per share)	—	—		—		(1,656)		—		—	—		—		(1,656)
Treasury stock shares purchased	—	—		—		—		—		3	(239)		—		(239)
Spin-off of Organon & Co.	—	—		4,643		—		449		—	—		(1)		5,091
Share-based compensation plans and other	—	—		(217)		—		—		(5)	279		—		62
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		1		1
Balance at June 30, 2021	3,577	$	1,788	$	44,039	$	48,777	$	(4,628)	1,044	$	(56,682)	$	94	$	33,388
Balance at April 1, 2022	3,577	$	1,788	$	44,275	$	56,252	$	(4,369)	1,049	$	(57,063)	$	70	$	40,953
Net income attributable to Merck & Co., Inc.	—	—		—		3,944		—		—	—		—		3,944
Other comprehensive income, net of taxes	—	—		—		—		42		—	—		—		42
Cash dividends declared on common stock ($0.69 per share)	—	—		—		(1,759)		—		—	—		—		(1,759)
Share-based compensation plans and other	—	—		(160)		—		—		(5)	293		—		133
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		5		5
Balance at June 30, 2022	3,577	$	1,788	$	44,115	$	58,437	$	(4,327)	1,044	$	(56,770)	$	75	$	43,318

	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, 2021	3,577	$	1,788	$	39,588	$	47,362	$	(6,634)	1,047	$	(56,787)	$	87	$	25,404
Net income attributable to Merck & Co., Inc.	—	—		—		4,724		—		—	—		—		4,724
Other comprehensive income, net of taxes	—	—		—		—		1,557		—	—		—		1,557
Cash dividends declared on common stock ($1.30 per share)	—	—		—		(3,309)		—		—	—		—		(3,309)
Treasury stock shares purchased	—	—		—		—		—		3	(239)		—		(239)
Spin-off of Organon & Co.	—	—		4,643		—		449		—	—		(1)		5,091
Share-based compensation plans and other	—	—		(192)		—		—		(6)	344		—		152
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		8		8
Balance at June 30, 2021	3,577	$	1,788	$	44,039	$	48,777	$	(4,628)	1,044	$	(56,682)	$	94	$	33,388
Balance at January 1, 2022	3,577	$	1,788	$	44,238	$	53,696	$	(4,429)	1,049	$	(57,109)	$	73	$	38,257
Net income attributable to Merck & Co., Inc.	—	—		—		8,254		—		—	—		—		8,254
Other comprehensive income, net of taxes	—	—		—		—		102		—	—		—		102
Cash dividends declared on common stock ($1.38 per share)	—	—		—		(3,513)		—		—	—		—		(3,513)
Share-based compensation plans and other	—	—		(123)		—		—		(5)	339		—		216
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		2		2
Balance at June 30, 2022	3,577	$	1,788	$	44,115	$	58,437	$	(4,327)	1,044	$	(56,770)	$	75	$	43,318

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Pension and Other Postretirement Benefit Plans

6 Months Ended

Jun. 30, 2022

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefit Plans

The Company has defined benefit pension plans covering eligible employees in the U.S. and in certain of its international subsidiaries. The net periodic benefit cost of such plans (including certain costs reported as part of discontinued operations in the first six months of 2021) consisted of the following components: 

	Three Months Ended June 30,								Six Months Ended June 30,
	2022				2021				2022				2021
($ in millions)	U.S.		International		U.S.		International		U.S.		International		U.S.		International
Service cost	$	99	$	72	$	98	$	87	$	198	$	147	$	198	$	179
Interest cost	103		37		106		30		206		75		202		59
Expected return on plan assets	(197)		(98)		(191)		(104)		(393)		(199)		(379)		(209)
Amortization of unrecognized prior service credit	(8)		(3)		(11)		(4)		(16)		(7)		(20)		(9)
Net loss amortization	56		25		58		38		112		50		142		78
Termination benefits	1		—		52		2		1		—		53		3
Curtailments	4		—		9		(27)		8		—		16		(27)
Settlements	101		—		—		2		101		—		—		2
	$	159	$	33	$	121	$	24	$	217	$	66	$	212	$	76

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)	2022		2021		2022		2021
Service cost	$	12	$	13	$	25	$	26
Interest cost	11		11		23		22
Expected return on plan assets	(21)		(20)		(43)		(39)
Amortization of unrecognized prior service credit	(25)		(25)		(50)		(50)
Termination benefits	—		37		—		37
Curtailments	—		(27)		—		(28)
	$	(23)	$	(11)	$	(45)	$	(32)

Net periodic benefit cost (credit) for pension and other postretirement benefit plans in the second quarter and first six months of 2021 includes expenses for curtailments, settlements and termination benefits provided to certain employees in connection with the spin-off of Organon.

In connection with restructuring actions (see Note 5), termination charges were recorded on pension plans related to expanded eligibility for certain employees exiting Merck. Also, in connection with these restructuring activities, curtailments and settlements were recorded on certain pension plans. In addition, lump sum payments to U.S. pension plan participants triggered a partial settlement resulting in a charge of $101 million in the second quarter and first six months of 2022. This partial settlement triggered a remeasurement of some of the Company’s U.S. pension plans. This remeasurement, which was calculated using discount rates and asset values as of June 30, 2022, resulted in a net decrease of $165 million to net pension liabilities and also resulted in a related adjustment to AOCL.

The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 11), 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 or in Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests if related to the spin-off of Organon (each as noted above).

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Other (Income) Expense, Net

6 Months Ended

Jun. 30, 2022

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)	2022		2021		2022		2021
Interest income	$	(15)	$	(9)	$	(22)	$	(20)
Interest expense	240		202		483		401
Exchange losses	86		114		124		155
Loss (income) from investments in equity securities, net (1)	284		(280)		991		(854)
Net periodic defined benefit plan (credit) cost other than service cost	(27)		(110)		(148)		(199)
Other, net	(130)		(20)		(280)		(41)
	$	438	$	(103)	$	1,148	$	(558)

(1)    Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds. Unrealized gains and losses from investments that are directly owned are determined at the end of the reporting period, while gains and losses from ownership interests in investment funds are accounted for on a one quarter lag. The Company estimates that losses of approximately $135 million will be recorded in the third quarter of 2022 from ownership interests in investment funds.

Interest paid for the six months ended June 30, 2022 and 2021 was $449 million and $363 million, respectively.

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Taxes on Income

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Taxes on Income

Taxes on Income

The effective income tax rates from continuing operations were 12.0% and 29.3% for the second quarter of 2022 and 2021, respectively, and 11.7% and 15.8% for the first six months of 2022 and 2021, respectively. The effective income tax rates from continuing operations reflect the beneficial impact of foreign earnings. Additionally, the effective income tax rates from continuing operations in the second quarter and first six months of 2021 reflect the unfavorable effect of a charge for the acquisition of Pandion for which no tax benefit was recognized. The effective income tax rate from continuing operations for the first six months of 2021 also reflects a net tax benefit of $207 million related to the settlement of certain federal income tax matters as discussed below.

In the first quarter of 2021, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2015-2016 U.S. federal income tax returns. As a result, the Company was required to make a payment of $190 million (of which $172 million related to continuing operations and $18 million related to discontinued operations). 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 $236 million net tax benefit in the first six months of 2021 (of which $207 million related to continuing operations and $29 million related to discontinued operations). This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination.

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Earnings Per Share

6 Months Ended

Jun. 30, 2022

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)	2022		2021		2022		2021
Net Income from Continuing Operations Attributable to Merck & Co., Inc.	$	3,944	$	1,213	$	8,254	$	3,958
Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests	—		332		—		766
Net Income Attributable to Merck & Co., Inc.	$	3,944	$	1,545	$	8,254	$	4,724
Average common shares outstanding	2,531		2,533		2,529		2,532
Common shares issuable (1)	9		7		9		8
Average common shares outstanding assuming dilution	2,540		2,540		2,538		2,540
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations	$	1.56	$	0.48	$	3.26	$	1.56
Income from Discontinued Operations	—		0.13		—		0.30
Net Income	$	1.56	$	0.61	$	3.26	$	1.87
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations	$	1.55	$	0.48	$	3.25	$	1.56
Income from Discontinued Operations	—		0.13		—		0.30
Net Income	$	1.55	$	0.61	$	3.25	$	1.86

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

For the second quarter of 2022 and 2021, 2 million and 12 million, respectively, and for the first six months of 2022 and 2021, 6 million and 11 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.

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Other Comprehensive Income (Loss)

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

Changes in each component of other comprehensive income (loss) are as follows:

	Three Months Ended June 30,
($ in millions)	Derivatives			Employee Benefit Plans			Foreign Currency Translation Adjustment		Accumulated Other Comprehensive Loss
Balance April 1, 2021, net of taxes	$	(36)		$	(4,459)		$	(2,127)	$	(6,622)
Other comprehensive income (loss) before reclassification adjustments, pretax	(59)			1,767			140		1,848
Tax	13			(400)			(8)		(395)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	(46)			1,367			132		1,453
Reclassification adjustments, pretax	71		(1)	55		(2)	—		126
Tax	(15)			(19)			—		(34)
Reclassification adjustments, net of taxes	56			36			—		92
Other comprehensive income (loss), net of taxes	10			1,403			132		1,545
Spin-off of Organon (see Note 2)	—			28			421		449
Balance June 30, 2021, net of taxes	$	(26)		$	(3,028)		$	(1,574)	$	(4,628)
Balance April 1, 2022, net of taxes	$	207		$	(2,711)		$	(1,865)	$	(4,369)
Other comprehensive income (loss) before reclassification adjustments, pretax	403			168			(365)		206
Tax	(85)			(35)			(22)		(142)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	318			133			(387)		64
Reclassification adjustments, pretax	(171)		(1)	144		(2)	—		(27)
Tax	36			(31)			—		5
Reclassification adjustments, net of taxes	(135)			113			—		(22)
Other comprehensive income (loss), net of taxes	183			246			(387)		42
Balance June 30, 2022, net of taxes	$	390		$	(2,465)		$	(2,252)	$	(4,327)

	Six Months Ended June 30,
($ in millions)	Derivatives			Employee Benefit Plans			Foreign Currency Translation Adjustment		Accumulated Other Comprehensive Loss
Balance January 1, 2021, net of taxes	$	(266)		$	(4,540)		$	(1,828)	$	(6,634)
Other comprehensive income (loss) before reclassification adjustments, pretax	121			1,763			(71)		1,813
Tax	(25)			(401)			(96)		(522)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	96			1,362			(167)		1,291
Reclassification adjustments, pretax	182		(1)	142		(3)	—		324
Tax	(38)			(20)			—		(58)
Reclassification adjustments, net of taxes	144			122			—		266
Other comprehensive income (loss), net of taxes	240			1,484			(167)		1,557
Spin-off of Organon (see Note 2)	—			28			421		449
Balance June 30, 2021, net of taxes	$	(26)		$	(3,028)		$	(1,574)	$	(4,628)
Balance January 1, 2022, net of taxes	$	144		$	(2,743)		$	(1,830)	$	(4,429)
Other comprehensive income (loss) before reclassification adjustments, pretax	551			169			(383)		337
Tax	(116)			(37)			(39)		(192)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	435			132			(422)		145
Reclassification adjustments, pretax	(239)		(1)	189		(3)	—		(50)
Tax	50			(43)			—		7
Reclassification adjustments, net of taxes	(189)			146			—		(43)
Other comprehensive income (loss), net of taxes	246			278			(422)		102
Balance June 30, 2022, net of taxes	$	390		$	(2,465)		$	(2,252)	$	(4,327)

(1) Primarily relates to foreign currency cash flow hedges that were reclassified from AOCL to Sales.

(2) Includes net amortization of prior service cost and actuarial gains and losses included in net periodic benefit cost (see Note 10).

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Segment Reporting

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company’s operations are principally managed on a product basis and include two operating segments, which are the Pharmaceutical and Animal Health segments, both of which are 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. 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.

The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceutical and vaccine products, as well as health management solutions and services, for the prevention, treatment and control of disease in all major livestock and companion animal species. The Company also offers an extensive suite of digitally connected identification, traceability and monitoring products. The Company sells its products to veterinarians, distributors and animal producers.

Sales of the Company’s products were as follows:

	Three Months Ended June 30,												Six Months Ended June 30,
	2022						2021						2022						2021
($ 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	$	3,197	$	2,055	$	5,252	$	2,347	$	1,829	$	4,176	$	5,976	$	4,085	$	10,061	$	4,528	$	3,548	$	8,076
Alliance revenue-Lynparza (1)	143		132		275		124		124		248		283		257		541		242		233		475
Alliance revenue-Lenvima (1)	128		103		231		88		93		181		284		175		459		173		137		310
Alliance revenue-Reblozyl (2)	28		5		33		—		—		—		55		30		86		—		—		—
Vaccines
Gardasil/Gardasil 9	428		1,245		1,674		454		781		1,234		846		2,287		3,133		766		1,385		2,151
ProQuad/M-M-R II/Varivax	434		143		578		386		130		516		805		243		1,047		718		246		965
RotaTeq	98		75		173		111		97		208		273		116		389		229		137		366
Pneumovax 23	94		59		153		100		52		152		212		114		325		173		150		323
Vaqta	16		19		35		22		34		56		45		25		71		47		43		90
Hospital Acute Care
Bridion	237		190		426		197		190		387		432		389		821		364		363		727
Prevymis	47		56		103		37		56		93		87		110		197		72		103		174
Primaxin	—		64		64		—		60		60		1		122		122		—		125		125
Dificid	63		3		66		32		2		34		113		6		119		56		4		61
Noxafil	16		45		60		14		52		66		25		92		118		29		104		133
Invanz	2		45		46		(4)		52		48		2		96		99		—		104		104
Cancidas	2		39		42		1		53		54		4		91		95		3		108		111
Zerbaxa	22		24		46		(2)		1		(1)		40		36		76		(4)		(5)		(9)
Cardiovascular
Alliance revenue-Adempas/Verquvo (3)	88		10		98		81		(7)		74		159		11		170		149		—		149
Adempas	—		63		63		—		74		74		—		124		124		—		129		129
Virology
Lagevrio	—		1,177		1,177		—		—		—		1,523		2,901		4,424		—		—		—
Isentress/Isentress HD	67		80		147		74		118		192		128		177		305		145		256		401
Neuroscience
Belsomra	19		50		69		14		63		78		39		98		137		32		125		157
Immunology
Simponi	—		181		181		—		202		202		—		366		366		—		416		416
Remicade	—		53		53		—		75		75		—		114		114		—		160		160
Diabetes
Januvia	301		455		756		284		500		784		626		909		1,535		632		961		1,593
Janumet	105		371		476		74		403		477		168		762		931		158		805		962
Other pharmaceutical (4)	191		288		479		213		299		512		372		628		998		429		640		1,069
Total Pharmaceutical segment sales	5,726		7,030		12,756		4,647		5,333		9,980		12,498		14,364		26,863		8,941		10,277		19,218
Animal Health:
Livestock	164		662		826		161		659		821		335		1,322		1,658		318		1,322		1,640
Companion Animals	313		328		641		298		353		651		616		676		1,291		578		672		1,250
Total Animal Health segment sales	477		990		1,467		459		1,012		1,472		951		1,998		2,949		896		1,994		2,890
Total segment sales	6,203		8,020		14,223		5,106		6,345		11,452		13,449		16,362		29,812		9,837		12,271		22,108
Other (5)	35		335		370		(6)		(44)		(50)		128		555		682		53		(132)		(79)
	$	6,238	$	8,355	$	14,593	$	5,100	$	6,301	$	11,402	$	13,577	$	16,917	$	30,494	$	9,890	$	12,139	$	22,029

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

(1)    Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 4).

(2)    Alliance revenue for Reblozyl represents royalties and, for the year-to-date period, a payment received related to the achievement of a regulatory milestone (see Note 4).

(3)    Alliance revenue for Adempas/Verquvo represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 4).

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

(5)    Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales (including sales to Organon). Other for the six months ended June 30, 2022 and 2021 also includes $146 million and $56 million, respectively, related to upfront and contingent milestone payments received by Merck for out-licensing arrangements.

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 $3.0 billion and $3.1 billion for the three months ended June 30, 2022 and 2021, respectively, and $5.9 billion and $6.0 billion for the six months ended June 30, 2022 and 2021, respectively.

Consolidated sales by geographic area where derived are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
United States	$	6,238	$	5,100	$	13,577	$	9,890
Europe, Middle East and Africa	3,582		3,333		7,942		6,569
China	1,372		975		2,515		1,697
Japan	1,114		661		2,103		1,291
Asia Pacific (other than China and Japan)	1,008		594		1,938		1,168
Latin America	642		532		1,249		1,032
Other	637		207		1,170		382
	$	14,593	$	11,402	$	30,494	$	22,029

A reconciliation of segment profits to Income from Continuing Operations Before Taxes is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
Segment profits:
Pharmaceutical segment	$	9,173	$	7,257	$	18,673	$	13,845
Animal Health segment	571		552		1,156		1,124
Total segment profits	9,744		7,809		19,829		14,969
Other profits	260		(79)		454		(113)
Unallocated:
Interest income	15		9		22		20
Interest expense	(240)		(202)		(483)		(401)
Amortization	(463)		(357)		(1,163)		(871)
Depreciation	(431)		(332)		(809)		(673)
Research and development	(2,652)		(4,175)		(5,097)		(6,480)
Restructuring costs	(142)		(82)		(194)		(380)
Other unallocated, net	(1,604)		(874)		(3,211)		(1,367)
	$	4,487	$	1,717	$	9,348	$	4,704

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 intangible assets and 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 measurement of liabilities for contingent consideration, and other miscellaneous income or expense items.

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of PresentationThe 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 (U.S.) (GAAP) 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 25, 2022. 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.

Reclassifications

Reclassifications — Certain reclassifications have been made to prior year amounts to conform to the current year presentation

Recently Adopted Accounting Standards and Recently Issued Accounting Standards Not Yet Adopted

Recently Adopted Accounting Standards

In August 2020, the Financial Accounting Standards Board (FASB) issued amended guidance on the accounting for convertible instruments and contracts in an entity’s own equity. The guidance removes the separation model for convertible debt instruments and preferred stock, amends requirements for conversion options to be classified in equity as well as amends diluted earnings per share (EPS) calculations for certain convertible debt instruments. The Company adopted the new guidance on January 1, 2022 using a modified retrospective approach. There was no impact to the Company’s consolidated financial statements upon adoption.

In November 2021, the FASB issued new guidance to increase the transparency of transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. The guidance requires annual disclosures of such transactions to include the nature of the transactions and the significant terms and conditions, the accounting treatment and the impact to a company’s financial statements. The Company adopted the new guidance on January 1, 2022 on a prospective basis. There was no material impact to the Company’s consolidated financial statements upon adoption.

Recently Issued Accounting Standards Not Yet Adopted

In March 2020, the FASB issued optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting and subsequently issued clarifying amendments. The guidance provides optional expedients and exceptions for accounting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR) or another reference rate expected to be discontinued because of reference rate reform. The optional guidance is effective upon issuance and can be applied on a prospective basis at any time between January 1, 2020 through December 31, 2022. The Company is currently evaluating the impact of adoption on its consolidated financial statements. The Company has evaluated all material contracts that may be affected by LIBOR cessation, including debt-related contracts, leases, business development and licensing arrangements, royalty and other agreements. The Company has amended certain agreements and continues to review any remaining agreements for potential impacts. With regard to debt-related exposures in particular, the Company’s four remaining interest rate swaps linked to LIBOR will mature in September 2022. The Company will transition its LIBOR-based debt to an alternative reference rate upon LIBOR discontinuance. Based on its evaluation thus far, the Company does not anticipate a material impact to its consolidated financial statements as a result of reference rate reform.

In October 2021, the FASB issued amended guidance that requires acquiring entities to recognize and measure contract assets and liabilities in a business combination in accordance with existing revenue recognition guidance. The amended guidance is effective for interim and annual periods in 2023 and is to be applied prospectively. Early adoption is permitted on a retrospective basis to the beginning of the fiscal year of adoption. The adoption of this guidance will not have an impact on the

Company’s consolidated financial statements for prior acquisitions; however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations.In June 2022, the FASB issued guidance related to the fair value measurement of an equity security subject to contractual restrictions that prohibit the sale of the equity security. The new guidance also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The amended guidance is effective for interim and annual periods in 2024 and is to be applied prospectively. Early adoption is permitted for both interim and annual periods. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

Legal Costs

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

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Spin-Off of Organon & Co. (Tables)

6 Months Ended

Jun. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations

Details of Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests are as follows:

	Three Months Ended June 30,		Six Months Ended June 30,
($ in millions)	2021 (1)
Sales	$	1,059	$	2,512
Costs, Expenses and Other
Cost of sales	318		789
Selling, general and administrative	431		877
Research and development	50		103
Restructuring costs	—		1
Other (income) expense, net	(23)		(15)
	776		1,755
Income from discontinued operations before taxes	283		757
Income tax benefit	(49)		(12)
Income from discontinued operations, net of taxes	332		769
Less: Income of discontinued operations attributable to noncontrolling interests	—		3
	$	332	$	766

(1)    Reflects amounts through the June 2, 2021 spin-off date.

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Collaborative Arrangements (Tables)

6 Months Ended

Jun. 30, 2022

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)	2022		2021		2022		2021
Alliance revenue - Lynparza	$	275	$	248	$	541	$	475
Alliance revenue - Koselugo	24		8		33		14
Total alliance revenue	$	299	$	256	$	574	$	489
Cost of sales (1)	62		42		361		84
Selling, general and administrative	46		43		90		83
Research and development	25		31		51		60
($ in millions)					June 30, 2022		December 31, 2021
Receivables from AstraZeneca included in Other current assets					$	300	$	271
Payables to AstraZeneca included in Trade accounts payable and Accrued and other current liabilities (2)					12		415
Payables to AstraZeneca included in Other Noncurrent Liabilities (2)					600		—

(1) Represents amortization of capitalized milestone payments. Amount in the first six months of 2022 includes $250 million of cumulative amortization catch-up expense as noted above.

(2) Includes accrued milestone payments.

Summarized financial information related to this collaboration is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
Alliance revenue - Lenvima	$	231	$	181	$	459	$	310
Cost of sales (1)	53		47		106		94
Selling, general and administrative	42		31		73		54
Research and development	47		57		104		121
($ in millions)					June 30, 2022		December 31, 2021
Receivables from Eisai included in Other current assets					$	247	$	200
Payables to Eisai included in Accrued and other current liabilities (2)					25		625

(1) Represents amortization of capitalized milestone payments.

(2) Includes accrued milestone payments.

Summarized financial information related to this collaboration is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
Alliance revenue - Adempas/Verquvo	$	98	$	74	$	170	$	149
Net sales of Adempas recorded by Merck	63		74		124		129
Net sales of Verquvo recorded by Merck	6		1		9		1
Total sales	$	167	$	149	$	303	$	279
Cost of sales (1)	54		67		103		275
Selling, general and administrative	42		34		65		51
Research and development	17		13		34		20
($ in millions)					June 30, 2022		December 31, 2021
Receivables from Bayer included in Other current assets					$	144	$	114
Payables to Bayer included in Accrued and other current liabilities (2)					74		472

(1) Includes amortization of intangible assets. Amount in the first six months of 2021 includes $153 million of cumulative amortization catch-up expense. In addition, cost of sales includes Bayer’s share of profits from sales in Merck’s marketing territories.

(2) Amount as of December 31, 2021 includes accrued milestone payment.

Summarized financial information related to this collaboration is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
Lagevrio sales	$	1,177	$	—	$	4,424	$	—
Cost of sales (1)	622		6		2,338		52
Selling, general and administrative	30		4		65		7
Research and development	15		68		21		110
($ in millions)					June 30, 2022		December 31, 2021
Payables to Ridgeback included in Accrued and other current liabilities (2)					$	683	$	283

(1) Includes royalty expense and amortization of capitalized milestone payments.

(2) Includes accrued royalty and milestone payments.

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Restructuring (Tables)

6 Months Ended

Jun. 30, 2022

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, 2022								Six Months Ended June 30, 2022
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation		Other		Total
Cost of sales	$	—	$	17	$	50	$	67	$	—	$	35	$	78	$	113
Selling, general and administrative	—		8		19		27		—		12		36		48
Research and development	—		22		—		22		—		29		—		29
Restructuring costs	106		—		36		142		132		—		62		194
	$	106	$	47	$	105	$	258	$	132	$	76	$	176	$	384

	Three Months Ended June 30, 2021								Six Months Ended June 30, 2021
($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total		Separation Costs		Accelerated Depreciation		Other		Total
Cost of sales	$	—	$	11	$	27	$	38	$	—	$	21	$	44	$	65
Selling, general and administrative	—		2		—		2		—		4		—		4
Research and development	—		6		—		6		—		13		—		13
Restructuring costs	64		—		18		82		293		—		87		380
	$	64	$	19	$	45	$	128	$	293	$	38	$	131	$	462

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, 2022:

($ in millions)	Separation Costs		Accelerated Depreciation		Other		Total
Restructuring reserves January 1, 2022	$	596	$	—	$	41	$	637
Expense	132		76		176		384
(Payments) receipts, net	(167)		—		(280)		(447)
Non-cash activity	—		(76)		90		14
Restructuring reserves June 30, 2022 (1)	$	561	$	—	$	27	$	588

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

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Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2022

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)	2022		2021		2022		2021		2022		2021		2022		2021
Net Investment Hedging Relationships
Foreign exchange contracts	$	(31)	$	(3)	$	(46)	$	(28)	$	(1)	$	(4)	$	(2)	$	(8)
Euro-denominated notes	(128)		45		(181)		(122)		—		—		—		—

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

Summary of Interest Rate Swaps Held

At June 30, 2022, the Company was a party to four 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, 2022
($ in millions)	Par Value of Debt		Number of Interest Rate Swaps Held	Total Swap Notional Amount
2.40% notes due 2022	$	1,000	4	$	1,000

Amounts Recorded on Balance Sheet Related to Fair Value Hedges

The table below presents the location of amounts recorded on the Condensed 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, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Balance Sheet Line Item in which Hedged Item is Included
Loans payable and current portion of long-term debt	$	999	$	2,263	$	(1)	$	13

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, 2022						December 31, 2021
		Fair Value of Derivative				U.S. Dollar Notional		Fair Value of Derivative				U.S. Dollar Notional
($ in millions)		Asset		Liability				Asset		Liability
Derivatives Designated as Hedging Instruments	Balance Sheet Caption
Interest rate swap contracts	Other current assets	$	1	$	—	$	1,000	$	14	$	—	$	2,250
Foreign exchange contracts	Other current assets	467		—		6,751		271		—		6,778
Foreign exchange contracts	Other Assets	57		—		1,334		43		—		1,551
Foreign exchange contracts	Accrued and other current liabilities	—		2		510		—		24		1,623
Foreign exchange contracts	Other Noncurrent Liabilities	—		1		126		—		1		43
		$	525	$	3	$	9,721	$	328	$	25	$	12,245
Derivatives Not Designated as Hedging Instruments	Balance Sheet Caption
Foreign exchange contracts	Other current assets	$	407	$	—	$	10,931	$	221	$	—	$	10,073
Foreign exchange contracts	Accrued and other current liabilities	—		131		7,074		—		96		10,640
		$	407	$	131	$	18,005	$	221	$	96	$	20,713
		$	932	$	134	$	27,726	$	549	$	121	$	32,958

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, 2022				December 31, 2021
($ in millions)	Asset		Liability		Asset		Liability
Gross amounts recognized in the condensed consolidated balance sheet	$	932	$	134	$	549	$	121
Gross amounts subject to offset in master netting arrangements not offset in the condensed consolidated balance sheet	(123)		(123)		(110)		(110)
Cash collateral received	(527)		—		(164)		—
Net amounts	$	282	$	11	$	275	$	11

Location and Amount of Pretax Gains and Losses of Derivatives

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

	Three Months Ended June 30,												Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021		2022		2021		2022		2021		2022		2021		2022		2021
Financial Statement Line Items in which Effects of Fair Value or Cash Flow Hedges are Recorded	Sales				Other (income) expense, net (1)				Other comprehensive income (loss)				Sales				Other (income) expense, net (1)				Other comprehensive income (loss)
	$	14,593	$	11,402	$	438	$	(103)	$	42	$	1,545	$	30,494	$	22,029	$	1,148	$	(558)	$	102	$	1,557
(Gain) loss on fair value hedging relationships
Interest rate swap contracts
Hedged items	—		—		(4)		(9)		—		—		—		—		(14)		(19)		—		—
Derivatives designated as hedging instruments	—		—		1		(1)		—		—		—		—		4		—		—		—
Impact of cash flow hedging relationships
Foreign exchange contracts
Amount of gain (loss) recognized in OCI on derivatives	—		—		—		—		403		(58)		—		—		—		—		551		121
Increase (decrease) in Sales as a result of AOCL reclassifications	172		(71)		—		—		(172)		71		239		(183)		—		—		(239)		183
Interest rate contracts
Amount of gain recognized in Other (income) expense, net on derivatives	—		—		—		—		—		—		—		—		(1)		(1)		—		—
Amount of loss recognized in OCI on derivatives	—		—		—		—		—		—		—		—		—		—		(1)		(1)

(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)		2022		2021		2022		2021
Derivatives Not Designated as Hedging Instruments	Income Statement Caption
Foreign exchange contracts (1)	Other (income) expense, net	$	(64)	$	167	$	(36)	$	217
Foreign exchange contracts (2)	Sales	(36)		14		(38)		10

(1) These derivative contracts primarily mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates. Amounts in 2021 include a loss on forward exchange contracts entered into in conjunction with the spin-off of Organon.

(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, 2022								December 31, 2021
	Amortized Cost		Gross Unrealized				Fair Value		Amortized Cost		Gross Unrealized				Fair Value
($ in millions)			Gains		Losses						Gains		Losses
Commercial paper	$	334	$	—	$	—	$	334	$	—	$	—	$	—	$	—
U.S. government and agency securities	72		—		—		72		80		—		—		80
Corporate notes and bonds	4		—		—		4		4		—		—		4
Foreign government bonds	2		—		—		2		2		—		—		2
Total debt securities	$	412	$	—	$	—	$	412	$	86	$	—	$	—	$	86
Publicly traded equity securities (1)							1,530								1,647
Total debt and publicly traded equity securities							$	1,942							$	1,733

(1) Unrealized net (gains) losses of $(25) million and $194 million were recorded in Other (income) expense, net in the second quarter and first six months of 2022, respectively, on equity securities still held at June 30, 2022. Unrealized net losses of $18 million and $199 million were recorded in Other (income) expense, net in the second quarter and first six months of 2021, respectively, on equity securities still held at June 30, 2021.

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
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
($ in millions)	June 30, 2022								December 31, 2021
Assets
Investments
Commercial paper	$	—	$	334	$	—	$	334	$	—	$	—	$	—	$	—
Foreign government bonds	—		2		—		2		—		2		—		2
Publicly traded equity securities	355		—		—		355		368		—		—		368
	355		336		—		691		368		2		—		370
Other assets (1)
U.S. government and agency securities	72		—		—		72		80		—		—		80
Corporate notes and bonds	4		—		—		4		4		—		—		4
Publicly traded equity securities	1,175		—		—		1,175		1,279		—		—		1,279
	1,251		—		—		1,251		1,363		—		—		1,363
Derivative assets (2)
Forward exchange contracts	—		576		—		576		—		351		—		351
Purchased currency options	—		355		—		355		—		184		—		184
Interest rate swaps	—		1		—		1		—		14		—		14
	—		932		—		932		—		549		—		549
Total assets	$	1,606	$	1,268	$	—	$	2,874	$	1,731	$	551	$	—	$	2,282
Liabilities
Other liabilities
Contingent consideration	$	—	$	—	$	542	$	542	$	—	$	—	$	777	$	777
Derivative liabilities (2)
Forward exchange contracts	—		133		—		133		—		120		—		120
Written currency options	—		1		—		1		—		1		—		1
	—		134		—		134		—		121		—		121
Total liabilities	$	—	$	134	$	542	$	676	$	—	$	121	$	777	$	898

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

(2)    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 the fair value of liabilities for contingent consideration associated with business combinations is as follows:

($ in millions)	2022		2021
Fair value January 1	$	777	$	841
Changes in estimated fair value (1)	(114)		50
Payments	(119)		—
Other	(2)		(12)
Fair value June 30 (2)	$	542	$	879

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

(2) At June 30, 2022, $402 million of the liabilities relate to the 2016 termination of the Sanofi Pasteur MSD joint venture. As part of the termination, Merck recorded a liability for contingent future royalty payments of 11.5% on net sales of all Merck products that were previously sold by the joint venture through December 31, 2024. The fair value of this liability is determined utilizing the estimated amount and timing of projected cash flows using a risk-adjusted discount rate to present value the cash flows. As part of the Company’s routine assessment, the discount rate was reduced from 8% to 6% during the second quarter of 2022, which resulted in an immaterial increase to the liability. Balance at June 30, 2022 includes $131 million recorded as a current liability for amounts expected to be paid within the next 12 months.

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Inventories (Tables)

6 Months Ended

Jun. 30, 2022

Inventory Disclosure [Abstract]

Inventories

Inventories consisted of:

($ in millions)	June 30, 2022		December 31, 2021
Finished goods	$	1,680	$	1,747
Raw materials and work in process	6,542		6,220
Supplies	217		196
Total (approximates current cost)	8,439		8,163
Decrease to LIFO cost	(140)		(16)
	$	8,299	$	8,147
Recognized as:
Inventories	$	5,535	$	5,953
Other assets	2,764		2,194

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Equity (Tables)

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Schedule of 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, 2021	3,577	$	1,788	$	39,613	$	48,888	$	(6,622)	1,046	$	(56,722)	$	94	$	27,039
Net income attributable to Merck & Co., Inc.	—	—		—		1,545		—		—	—		—		1,545
Other comprehensive income, net of taxes	—	—		—		—		1,545		—	—		—		1,545
Cash dividends declared on common stock ($0.65 per share)	—	—		—		(1,656)		—		—	—		—		(1,656)
Treasury stock shares purchased	—	—		—		—		—		3	(239)		—		(239)
Spin-off of Organon & Co.	—	—		4,643		—		449		—	—		(1)		5,091
Share-based compensation plans and other	—	—		(217)		—		—		(5)	279		—		62
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		1		1
Balance at June 30, 2021	3,577	$	1,788	$	44,039	$	48,777	$	(4,628)	1,044	$	(56,682)	$	94	$	33,388
Balance at April 1, 2022	3,577	$	1,788	$	44,275	$	56,252	$	(4,369)	1,049	$	(57,063)	$	70	$	40,953
Net income attributable to Merck & Co., Inc.	—	—		—		3,944		—		—	—		—		3,944
Other comprehensive income, net of taxes	—	—		—		—		42		—	—		—		42
Cash dividends declared on common stock ($0.69 per share)	—	—		—		(1,759)		—		—	—		—		(1,759)
Share-based compensation plans and other	—	—		(160)		—		—		(5)	293		—		133
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		5		5
Balance at June 30, 2022	3,577	$	1,788	$	44,115	$	58,437	$	(4,327)	1,044	$	(56,770)	$	75	$	43,318

	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, 2021	3,577	$	1,788	$	39,588	$	47,362	$	(6,634)	1,047	$	(56,787)	$	87	$	25,404
Net income attributable to Merck & Co., Inc.	—	—		—		4,724		—		—	—		—		4,724
Other comprehensive income, net of taxes	—	—		—		—		1,557		—	—		—		1,557
Cash dividends declared on common stock ($1.30 per share)	—	—		—		(3,309)		—		—	—		—		(3,309)
Treasury stock shares purchased	—	—		—		—		—		3	(239)		—		(239)
Spin-off of Organon & Co.	—	—		4,643		—		449		—	—		(1)		5,091
Share-based compensation plans and other	—	—		(192)		—		—		(6)	344		—		152
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		8		8
Balance at June 30, 2021	3,577	$	1,788	$	44,039	$	48,777	$	(4,628)	1,044	$	(56,682)	$	94	$	33,388
Balance at January 1, 2022	3,577	$	1,788	$	44,238	$	53,696	$	(4,429)	1,049	$	(57,109)	$	73	$	38,257
Net income attributable to Merck & Co., Inc.	—	—		—		8,254		—		—	—		—		8,254
Other comprehensive income, net of taxes	—	—		—		—		102		—	—		—		102
Cash dividends declared on common stock ($1.38 per share)	—	—		—		(3,513)		—		—	—		—		(3,513)
Share-based compensation plans and other	—	—		(123)		—		—		(5)	339		—		216
Net income attributable to noncontrolling interests	—	—		—		—		—		—	—		2		2
Balance at June 30, 2022	3,577	$	1,788	$	44,115	$	58,437	$	(4,327)	1,044	$	(56,770)	$	75	$	43,318

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Pension and Other Postretirement Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2022

Pension Plans

Defined Benefit Plan Disclosure [Line Items]

Net Benefit Costs

The Company has defined benefit pension plans covering eligible employees in the U.S. and in certain of its international subsidiaries. The net periodic benefit cost of such plans (including certain costs reported as part of discontinued operations in the first six months of 2021) consisted of the following components: 

	Three Months Ended June 30,								Six Months Ended June 30,
	2022				2021				2022				2021
($ in millions)	U.S.		International		U.S.		International		U.S.		International		U.S.		International
Service cost	$	99	$	72	$	98	$	87	$	198	$	147	$	198	$	179
Interest cost	103		37		106		30		206		75		202		59
Expected return on plan assets	(197)		(98)		(191)		(104)		(393)		(199)		(379)		(209)
Amortization of unrecognized prior service credit	(8)		(3)		(11)		(4)		(16)		(7)		(20)		(9)
Net loss amortization	56		25		58		38		112		50		142		78
Termination benefits	1		—		52		2		1		—		53		3
Curtailments	4		—		9		(27)		8		—		16		(27)
Settlements	101		—		—		2		101		—		—		2
	$	159	$	33	$	121	$	24	$	217	$	66	$	212	$	76

Other Postretirement Benefit Plans

Defined Benefit Plan Disclosure [Line Items]

Net Benefit Costs

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)	2022		2021		2022		2021
Service cost	$	12	$	13	$	25	$	26
Interest cost	11		11		23		22
Expected return on plan assets	(21)		(20)		(43)		(39)
Amortization of unrecognized prior service credit	(25)		(25)		(50)		(50)
Termination benefits	—		37		—		37
Curtailments	—		(27)		—		(28)
	$	(23)	$	(11)	$	(45)	$	(32)

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Other (Income) Expense, Net (Tables)

6 Months Ended

Jun. 30, 2022

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)	2022		2021		2022		2021
Interest income	$	(15)	$	(9)	$	(22)	$	(20)
Interest expense	240		202		483		401
Exchange losses	86		114		124		155
Loss (income) from investments in equity securities, net (1)	284		(280)		991		(854)
Net periodic defined benefit plan (credit) cost other than service cost	(27)		(110)		(148)		(199)
Other, net	(130)		(20)		(280)		(41)
	$	438	$	(103)	$	1,148	$	(558)

(1)    Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds. Unrealized gains and losses from investments that are directly owned are determined at the end of the reporting period, while gains and losses from ownership interests in investment funds are accounted for on a one quarter lag. The Company estimates that losses of approximately $135 million will be recorded in the third quarter of 2022 from ownership interests in investment funds.

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2022

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)	2022		2021		2022		2021
Net Income from Continuing Operations Attributable to Merck & Co., Inc.	$	3,944	$	1,213	$	8,254	$	3,958
Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests	—		332		—		766
Net Income Attributable to Merck & Co., Inc.	$	3,944	$	1,545	$	8,254	$	4,724
Average common shares outstanding	2,531		2,533		2,529		2,532
Common shares issuable (1)	9		7		9		8
Average common shares outstanding assuming dilution	2,540		2,540		2,538		2,540
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations	$	1.56	$	0.48	$	3.26	$	1.56
Income from Discontinued Operations	—		0.13		—		0.30
Net Income	$	1.56	$	0.61	$	3.26	$	1.87
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations	$	1.55	$	0.48	$	3.25	$	1.56
Income from Discontinued Operations	—		0.13		—		0.30
Net Income	$	1.55	$	0.61	$	3.25	$	1.86

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

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Other Comprehensive Income (Loss) (Tables)

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Changes in AOCI by Component

Changes in each component of other comprehensive income (loss) are as follows:

	Three Months Ended June 30,
($ in millions)	Derivatives			Employee Benefit Plans			Foreign Currency Translation Adjustment		Accumulated Other Comprehensive Loss
Balance April 1, 2021, net of taxes	$	(36)		$	(4,459)		$	(2,127)	$	(6,622)
Other comprehensive income (loss) before reclassification adjustments, pretax	(59)			1,767			140		1,848
Tax	13			(400)			(8)		(395)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	(46)			1,367			132		1,453
Reclassification adjustments, pretax	71		(1)	55		(2)	—		126
Tax	(15)			(19)			—		(34)
Reclassification adjustments, net of taxes	56			36			—		92
Other comprehensive income (loss), net of taxes	10			1,403			132		1,545
Spin-off of Organon (see Note 2)	—			28			421		449
Balance June 30, 2021, net of taxes	$	(26)		$	(3,028)		$	(1,574)	$	(4,628)
Balance April 1, 2022, net of taxes	$	207		$	(2,711)		$	(1,865)	$	(4,369)
Other comprehensive income (loss) before reclassification adjustments, pretax	403			168			(365)		206
Tax	(85)			(35)			(22)		(142)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	318			133			(387)		64
Reclassification adjustments, pretax	(171)		(1)	144		(2)	—		(27)
Tax	36			(31)			—		5
Reclassification adjustments, net of taxes	(135)			113			—		(22)
Other comprehensive income (loss), net of taxes	183			246			(387)		42
Balance June 30, 2022, net of taxes	$	390		$	(2,465)		$	(2,252)	$	(4,327)

	Six Months Ended June 30,
($ in millions)	Derivatives			Employee Benefit Plans			Foreign Currency Translation Adjustment		Accumulated Other Comprehensive Loss
Balance January 1, 2021, net of taxes	$	(266)		$	(4,540)		$	(1,828)	$	(6,634)
Other comprehensive income (loss) before reclassification adjustments, pretax	121			1,763			(71)		1,813
Tax	(25)			(401)			(96)		(522)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	96			1,362			(167)		1,291
Reclassification adjustments, pretax	182		(1)	142		(3)	—		324
Tax	(38)			(20)			—		(58)
Reclassification adjustments, net of taxes	144			122			—		266
Other comprehensive income (loss), net of taxes	240			1,484			(167)		1,557
Spin-off of Organon (see Note 2)	—			28			421		449
Balance June 30, 2021, net of taxes	$	(26)		$	(3,028)		$	(1,574)	$	(4,628)
Balance January 1, 2022, net of taxes	$	144		$	(2,743)		$	(1,830)	$	(4,429)
Other comprehensive income (loss) before reclassification adjustments, pretax	551			169			(383)		337
Tax	(116)			(37)			(39)		(192)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	435			132			(422)		145
Reclassification adjustments, pretax	(239)		(1)	189		(3)	—		(50)
Tax	50			(43)			—		7
Reclassification adjustments, net of taxes	(189)			146			—		(43)
Other comprehensive income (loss), net of taxes	246			278			(422)		102
Balance June 30, 2022, net of taxes	$	390		$	(2,465)		$	(2,252)	$	(4,327)

(1) Primarily relates to foreign currency cash flow hedges that were reclassified from AOCL to Sales.

(2) Includes net amortization of prior service cost and actuarial gains and losses included in net periodic benefit cost (see Note 10).

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Sales from Products

Sales of the Company’s products were as follows:

	Three Months Ended June 30,												Six Months Ended June 30,
	2022						2021						2022						2021
($ 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	$	3,197	$	2,055	$	5,252	$	2,347	$	1,829	$	4,176	$	5,976	$	4,085	$	10,061	$	4,528	$	3,548	$	8,076
Alliance revenue-Lynparza (1)	143		132		275		124		124		248		283		257		541		242		233		475
Alliance revenue-Lenvima (1)	128		103		231		88		93		181		284		175		459		173		137		310
Alliance revenue-Reblozyl (2)	28		5		33		—		—		—		55		30		86		—		—		—
Vaccines
Gardasil/Gardasil 9	428		1,245		1,674		454		781		1,234		846		2,287		3,133		766		1,385		2,151
ProQuad/M-M-R II/Varivax	434		143		578		386		130		516		805		243		1,047		718		246		965
RotaTeq	98		75		173		111		97		208		273		116		389		229		137		366
Pneumovax 23	94		59		153		100		52		152		212		114		325		173		150		323
Vaqta	16		19		35		22		34		56		45		25		71		47		43		90
Hospital Acute Care
Bridion	237		190		426		197		190		387		432		389		821		364		363		727
Prevymis	47		56		103		37		56		93		87		110		197		72		103		174
Primaxin	—		64		64		—		60		60		1		122		122		—		125		125
Dificid	63		3		66		32		2		34		113		6		119		56		4		61
Noxafil	16		45		60		14		52		66		25		92		118		29		104		133
Invanz	2		45		46		(4)		52		48		2		96		99		—		104		104
Cancidas	2		39		42		1		53		54		4		91		95		3		108		111
Zerbaxa	22		24		46		(2)		1		(1)		40		36		76		(4)		(5)		(9)
Cardiovascular
Alliance revenue-Adempas/Verquvo (3)	88		10		98		81		(7)		74		159		11		170		149		—		149
Adempas	—		63		63		—		74		74		—		124		124		—		129		129
Virology
Lagevrio	—		1,177		1,177		—		—		—		1,523		2,901		4,424		—		—		—
Isentress/Isentress HD	67		80		147		74		118		192		128		177		305		145		256		401
Neuroscience
Belsomra	19		50		69		14		63		78		39		98		137		32		125		157
Immunology
Simponi	—		181		181		—		202		202		—		366		366		—		416		416
Remicade	—		53		53		—		75		75		—		114		114		—		160		160
Diabetes
Januvia	301		455		756		284		500		784		626		909		1,535		632		961		1,593
Janumet	105		371		476		74		403		477		168		762		931		158		805		962
Other pharmaceutical (4)	191		288		479		213		299		512		372		628		998		429		640		1,069
Total Pharmaceutical segment sales	5,726		7,030		12,756		4,647		5,333		9,980		12,498		14,364		26,863		8,941		10,277		19,218
Animal Health:
Livestock	164		662		826		161		659		821		335		1,322		1,658		318		1,322		1,640
Companion Animals	313		328		641		298		353		651		616		676		1,291		578		672		1,250
Total Animal Health segment sales	477		990		1,467		459		1,012		1,472		951		1,998		2,949		896		1,994		2,890
Total segment sales	6,203		8,020		14,223		5,106		6,345		11,452		13,449		16,362		29,812		9,837		12,271		22,108
Other (5)	35		335		370		(6)		(44)		(50)		128		555		682		53		(132)		(79)
	$	6,238	$	8,355	$	14,593	$	5,100	$	6,301	$	11,402	$	13,577	$	16,917	$	30,494	$	9,890	$	12,139	$	22,029

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

(1)    Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 4).

(2)    Alliance revenue for Reblozyl represents royalties and, for the year-to-date period, a payment received related to the achievement of a regulatory milestone (see Note 4).

(3)    Alliance revenue for Adempas/Verquvo represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 4).

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

(5)    Other is primarily comprised of miscellaneous corporate revenues, including revenue hedging activities, as well as third-party manufacturing sales (including sales to Organon). Other for the six months ended June 30, 2022 and 2021 also includes $146 million and $56 million, respectively, related to upfront and contingent milestone payments received by Merck for out-licensing arrangements.

Consolidated Sales 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)	2022		2021		2022		2021
United States	$	6,238	$	5,100	$	13,577	$	9,890
Europe, Middle East and Africa	3,582		3,333		7,942		6,569
China	1,372		975		2,515		1,697
Japan	1,114		661		2,103		1,291
Asia Pacific (other than China and Japan)	1,008		594		1,938		1,168
Latin America	642		532		1,249		1,032
Other	637		207		1,170		382
	$	14,593	$	11,402	$	30,494	$	22,029

Reconciliation of Segment Profits to Income before Taxes

A reconciliation of segment profits to Income from Continuing Operations Before Taxes is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in millions)	2022		2021		2022		2021
Segment profits:
Pharmaceutical segment	$	9,173	$	7,257	$	18,673	$	13,845
Animal Health segment	571		552		1,156		1,124
Total segment profits	9,744		7,809		19,829		14,969
Other profits	260		(79)		454		(113)
Unallocated:
Interest income	15		9		22		20
Interest expense	(240)		(202)		(483)		(401)
Amortization	(463)		(357)		(1,163)		(871)
Depreciation	(431)		(332)		(809)		(673)
Research and development	(2,652)		(4,175)		(5,097)		(6,480)
Restructuring costs	(142)		(82)		(194)		(380)
Other unallocated, net	(1,604)		(874)		(3,211)		(1,367)
	$	4,487	$	1,717	$	9,348	$	4,704

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Basis of Presentation (Details)	Jun. 30, 2022 interest_rate_swap
Interest rate swap contracts
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Number of interest rate swaps linked to LIBOR	4

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Spin-Off of Organon & Co. - Narrative (Details) $ in Millions		3 Months Ended		6 Months Ended
	Jun. 02, 2021 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Consideration received	$ 9,000
Disposal group, other expense		$ 307		$ 556
Organon & Co.
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Stock conversion ratio	0.1
Revenue from related party		95	$ 0	194	$ 0
Related party amount in cost of sales		103	$ 0	208	$ 0
Due from related parties, current		649		649		$ 964
Due to related parties, current		$ 357		$ 357		$ 400
Minimum | Transition services agreement
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Period of continuing involvement after disposal	25 months
Minimum | Manufacturing and supply agreements
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Period of continuing involvement after disposal	4 years
Maximum | Transition services agreement
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Period of continuing involvement after disposal	31 months
Maximum | Manufacturing and supply agreements
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Period of continuing involvement after disposal	10 years
Organon & Co.
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Face amount of debt	$ 9,500

XML

Spin-Off of Organon & Co. - Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Discontinued Operations and Disposal Groups [Abstract]
Sales		$ 1,059		$ 2,512
Costs, Expenses and Other
Cost of sales		318		789
Selling, general and administrative		431		877
Research and development		50		103
Restructuring costs		0		1
Other (income) expense, net		(23)		(15)
Operating expenses		776		1,755
Income from discontinued operations before taxes		283		757
Income tax benefit		(49)		(12)
Income from discontinued operations, net of taxes		332		769
Less: Income of discontinued operations attributable to noncontrolling interests		0		3
Income from discontinued operations, net of taxes and amounts attributable to noncontrolling interests	$ 0	$ 332	$ 0	$ 766

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Acquisitions, Research Collaborations and License Agreements (Details) - USD ($) $ in Millions	1 Months Ended				3 Months Ended		6 Months Ended
	Jul. 31, 2022	May 31, 2022	Apr. 30, 2021	Jan. 31, 2021	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Business Acquisition [Line Items]
Research and development					$ 2,798.0	$ 4,321.0	$ 5,374.0	$ 6,732.0
Pandion Therapeutics
Business Acquisition [Line Items]
Research and development								1,700.0
Consideration transferred, asset acquisition			$ 1,900.0
Transaction cost, asset acquisition			147.0
Asset Acquisition, Other Assets and Liabilities Recognized, Net			$ 156.0
Orion Corporation | Licensing Agreements | Subsequent Event
Business Acquisition [Line Items]
Upfront and milestone payments	$ 290.0
Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. | Licensing Agreements
Business Acquisition [Line Items]
Upfront and milestone payments		$ 30.0
Milestone payments to be made to a collaborative partner		30.0
Milestone payment to be made to a collaborative partner		25.0
Research and development payments to be made to a collaborative partner		101.0
Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. | Licensing Agreements | Subsequent Event
Business Acquisition [Line Items]
Upfront and milestone payments	35.0
Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. | Licensing Agreements | Development Milestones
Business Acquisition [Line Items]
Contingent milestone payments collaborative arrangement		90.0
Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. | Licensing Agreements | Development Milestones | Subsequent Event
Business Acquisition [Line Items]
Contingent milestone payments collaborative arrangement	82.0
Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. | Licensing Agreements | Regulatory Milestones | Subsequent Event
Business Acquisition [Line Items]
Contingent milestone payments collaborative arrangement	334.0
Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. | Licensing Agreements | Sales-Based Milestones
Business Acquisition [Line Items]
Contingent milestone payments collaborative arrangement		780.0
Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. | Licensing Agreements | Sales-Based Milestones | Subsequent Event
Business Acquisition [Line Items]
Contingent milestone payments collaborative arrangement	$ 485.0
Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd. | Licensing Agreements | First Commercial Sale Milestones
Business Acquisition [Line Items]
Contingent milestone payments collaborative arrangement		$ 290.0
Artiva Biotherapeutics, Inc. | Licensing Agreements
Business Acquisition [Line Items]
Upfront and milestone payments				$ 30.0
Upfront and milestone payments to be made				$ 15.0
Artiva Biotherapeutics, Inc. | Licensing Agreements | Minimum
Business Acquisition [Line Items]
Royalty rate				7.00%
Artiva Biotherapeutics, Inc. | Licensing Agreements | Maximum
Business Acquisition [Line Items]
Royalty rate				14.00%
Artiva Biotherapeutics, Inc. | Licensing Agreements | Development Milestones
Business Acquisition [Line Items]
Contingent milestone payments collaborative arrangement				$ 217.5
Artiva Biotherapeutics, Inc. | Licensing Agreements | Regulatory Milestones
Business Acquisition [Line Items]
Contingent milestone payments collaborative arrangement				570.0
Artiva Biotherapeutics, Inc. | Licensing Agreements | Sales-Based Milestones
Business Acquisition [Line Items]
Contingent milestone payments collaborative arrangement				$ 1,050.0
COVID-19
Business Acquisition [Line Items]
Charges related to program discontinuation						$ 37.0		$ 207.0

XML

Collaborative Arrangements - Narrative (Details) course in Millions, $ in Millions	1 Months Ended		3 Months Ended			6 Months Ended
	Jan. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Jun. 30, 2022 USD ($) course	Mar. 31, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) market course	Jun. 30, 2021 USD ($)
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Amortization						$ 1,163	$ 871
Number of markets (more than) | market						40
Remaining minimum courses committed (in courses) | course			1.1			1.1
Sales			$ 14,593		$ 11,402	$ 30,494	22,029
Operating Segments
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sales			14,223		11,452	29,812	22,108
Operating Segments | Pharmaceutical
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sales			12,756		9,980	26,863	19,218
Lynparza
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Amortization				$ 250
Lynparza | Other Noncurrent Assets
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Finite-lived intangible assets			1,500			1,500
Lenvima | Operating Segments | Pharmaceutical
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sales			231		181	459	310
Lenvima | Other Noncurrent Assets
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Finite-lived intangible assets			920			920
Verquvo | Other Intangible Assets
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Finite-lived intangible assets			60			60
Adempas | Operating Segments | Pharmaceutical
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sales			63		74	124	129
Adempas | Other Intangible Assets
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Finite-lived intangible assets			691			691
Alliance Revenue - Reblozyl | Operating Segments | Pharmaceutical
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sales			33		$ 0	86	$ 0
AstraZeneca | Sales-Based Milestones | Lynparza
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Probable contingent payments				600
Liabilities				$ 600
Milestone payments accrued but not yet paid			600			600
AstraZeneca | Collaborative Arrangement, Transaction with Party to Collaborative Arrangement | Lynparza
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sales-based milestone payments						400
Potential future sales-based milestone payments			2,100			2,100
Potential future regulatory milestone payments			1,300			1,300
Capitalized milestone payment						175
Eisai
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
License option payment related to collaborative arrangement		$ 125
Eisai | Collaborative Arrangement, Transaction with Party to Collaborative Arrangement | Lenvima
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sales-based milestone payments						600
Potential future sales-based milestone payments			2,600			2,600
Milestone payment accrued			$ 25			25
Capitalized milestone payment						$ 25
Bayer AG | Collaborative Arrangement, Transaction with Party to Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sales-based milestone payments	$ 400
Bristol Myers Squibb | Licensing Agreements
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Royalty rate, deduction						0.50
Royalties						$ 66
Bristol Myers Squibb | Licensing Agreements | Sales-Based Milestones
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Contingent milestone payments collaborative arrangement						80
Bristol Myers Squibb | Licensing Agreements | Regulatory Milestones
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Contingent milestone payments collaborative arrangement						$ 20
Bristol Myers Squibb | Licensing Agreements | Minimum
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Royalty rate						20.00%
Bristol Myers Squibb | Licensing Agreements | Maximum
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Royalty rate						24.00%

XML

Collaborative Arrangements - Financial Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sales	$ 14,593	$ 11,402	$ 30,494	$ 22,029
Cost of sales	4,216	3,104	9,596	6,303
Selling, general and administrative	2,512	2,281	4,834	4,468
Research and development	2,798	4,321	5,374	6,732
Payables included in Accrued and other liabilities	23,168		23,168		$ 23,872
Other current assets | AstraZeneca | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Receivables included in Other current assets	300		300		271
Other current assets | Eisai | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Receivables included in Other current assets	247		247		200
Other current assets | Bayer AG | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Receivables included in Other current assets	144		144		114
Accounts Payable and Accrued Liabilities | AstraZeneca | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payables included in Accrued and other liabilities	12		12		415
Accounts Payable and Accrued Liabilities | Eisai | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payables included in Accrued and other liabilities	25		25		625
Accounts Payable and Accrued Liabilities | Bayer AG | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payables included in Accrued and other liabilities	74		74		472
Accounts Payable and Accrued Liabilities | Ridgeback Biotherapeutics LP | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payables included in Accrued and other liabilities	683		683		283
Other Noncurrent Liabilities | AstraZeneca | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Payables included in Other Noncurrent Liabilities	600		600		$ 0
Revenue | AstraZeneca | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Alliance revenue - profit sharing	299	256	574	489
Revenue | AstraZeneca | Collaborative Arrangement | Alliance revenue - Lynparza
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Alliance revenue - profit sharing	275	248	541	475
Revenue | AstraZeneca | Collaborative Arrangement | Alliance revenue - Koselugo
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Alliance revenue - profit sharing	24	8	33	14
Revenue | Eisai | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Alliance revenue - profit sharing	231	181	459	310
Revenue | Bayer AG | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Alliance revenue - profit sharing	98	74	170	149
Sales	167	149	303	279
Revenue | Bayer AG | Collaborative Arrangement | Adempas
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Net sales by Merck	63	74	124	129
Revenue | Bayer AG | Collaborative Arrangement | Verquvo
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Net sales by Merck	6	1	9	1
Revenue | Ridgeback Biotherapeutics LP | Collaborative Arrangement | Lagevrio
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Sales	1,177	0	4,424	0
Cost of sales | AstraZeneca | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cost of sales	62	42	361	84
Amortization of intangible assets			250
Cost of sales | Eisai | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cost of sales	53	47	106	94
Cost of sales | Bayer AG | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cost of sales	54	67	103	275
Amortization of intangible assets				153
Cost of sales | Ridgeback Biotherapeutics LP | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cost of sales	622	6	2,338	52
Selling, general and administrative | AstraZeneca | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Selling, general and administrative	46	43	90	83
Selling, general and administrative | Eisai | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Selling, general and administrative	42	31	73	54
Selling, general and administrative | Bayer AG | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Selling, general and administrative	42	34	65	51
Selling, general and administrative | Ridgeback Biotherapeutics LP | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Selling, general and administrative	30	4	65	7
Research and development | AstraZeneca | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research and development	25	31	51	60
Research and development | Eisai | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research and development	47	57	104	121
Research and development | Bayer AG | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research and development	17	13	34	20
Research and development | Ridgeback Biotherapeutics LP | Collaborative Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research and development	$ 15	$ 68	$ 21	$ 110

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Restructuring - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2022
Restructuring Cost and Reserve [Line Items]
Expected restructuring and related cost	$ 3,500		$ 3,500
Estimate of cumulative pre tax costs that will result in cash outlays			70.00%
Estimate of cumulative pre tax costs that will be noncash			30.00%
Total pretax restructuring costs	258	$ 128	$ 384	$ 462
Cumulative costs since program inception	$ 3,000		$ 3,000
Forecast
Restructuring Cost and Reserve [Line Items]
Expected restructuring and related cost					$ 550

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Restructuring - Charges Activities by Type of Cost (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	$ 258	$ 128	$ 384	$ 462
Separation Costs
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	106	64	132	293
Accelerated Depreciation
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	47	19	76	38
Other
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	105	45	176	131
Cost of sales
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	67	38	113	65
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	17	11	35	21
Cost of sales | Other
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	50	27	78	44
Selling, general and administrative
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	27	2	48	4
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	8	2	12	4
Selling, general and administrative | Other
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	19	0	36	0
Research and development
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	22	6	29	13
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	22	6	29	13
Research and development | Other
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	0	0	0	0
Restructuring costs
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	142	82	194	380
Restructuring costs | Separation Costs
Restructuring Cost and Reserve [Line Items]
Total pretax restructuring costs	106	64	132	293
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	$ 36	$ 18	$ 62	$ 87

XML

Restructuring - Activities by Program (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Restructuring Reserve [Roll Forward]
Restructuring reserve, beginning balance			$ 637
Expense	$ 258	$ 128	384	$ 462
(Payments) receipts, net			(447)
Non-cash activity			14
Restructuring reserve, ending balance	588		588
Separation Costs
Restructuring Reserve [Roll Forward]
Restructuring reserve, beginning balance			596
Expense	106	64	132	293
(Payments) receipts, net			(167)
Non-cash activity			0
Restructuring reserve, ending balance	561		561
Accelerated Depreciation
Restructuring Reserve [Roll Forward]
Restructuring reserve, beginning balance			0
Expense	47	19	76	38
(Payments) receipts, net			0
Non-cash activity			(76)
Restructuring reserve, ending balance	0		0
Other
Restructuring Reserve [Roll Forward]
Restructuring reserve, beginning balance			41
Expense	105	$ 45	176	$ 131
(Payments) receipts, net			(280)
Non-cash activity			90
Restructuring reserve, ending balance	$ 27		$ 27

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Financial Instruments - Narrative (Details)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022 USD ($) interest_rate_swap	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) interest_rate_swap	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)	Feb. 28, 2022 USD ($) interest_rate_swap
Derivative [Line Items]
Total swap notional amount	$ 27,726,000,000		$ 27,726,000,000		$ 32,958,000,000
Pretax net unrealized gains on derivatives maturing within next 12 months estimated to be reclassified from AOCI to sales			463,000,000
Equity investments without readily determinable fair values	671,000,000	$ 694,000,000	671,000,000	$ 694,000,000
Unrealized gains recognized on investments in equity securities without readily determinable fair value			20,000,000	75,000,000
Unrealized losses recognized on investments in equity securities without readily determinable fair values			1,000,000	1,000,000
Cumulative unrealized gains on investments	254,000,000		254,000,000
Cumulative unrealized losses on investments	8,000,000		8,000,000
Equity securities, noncurrent	805,000,000	1,000,000,000	805,000,000	1,000,000,000
Loss (income) from investments in equity securities, net	284,000,000	(280,000,000)	991,000,000	(854,000,000)
Fair value of loans payable and long-term debt, including current portion	29,000,000,000		29,000,000,000		35,700,000,000
Debt, carrying amount	31,700,000,000		31,700,000,000		33,100,000,000
Factored accounts receivable	1,900,000,000				2,800,000,000
Restricted cash	28,000,000		28,000,000		62,000,000
Cash collateral received from counterparties	527,000,000		527,000,000		164,000,000
Equity Funds
Derivative [Line Items]
Loss (income) from investments in equity securities, net	302,000,000	$ (238,000,000)	811,000,000	$ (502,000,000)
Level 2
Derivative [Line Items]
Cash equivalents	$ 8,600,000,000		$ 8,600,000,000		6,800,000,000
2.35% Notes Due 2022
Derivative [Line Items]
Face amount of debt						$ 1,250,000,000
Stated interest rate						2.35%
Interest rate swap contracts
Derivative [Line Items]
Number of interest rate swaps held (in interest rate swaps) | interest_rate_swap	4		4			5
Total swap notional amount						$ 1,250,000,000
Derivatives Designated as Hedging Instruments
Derivative [Line Items]
Total swap notional amount	$ 9,721,000,000		$ 9,721,000,000		12,245,000,000
Derivatives Not Designated as Hedging Instruments
Derivative [Line Items]
Total swap notional amount	$ 18,005,000,000		$ 18,005,000,000		$ 20,713,000,000
Maximum | Derivatives Designated as Hedging Instruments
Derivative [Line Items]
Maximum average period of maturities of contracts in years (less than)			2 years
Maximum | Derivatives Not Designated as Hedging Instruments
Derivative [Line Items]
Maximum average period of maturities of contracts in years (less than)			1 year

XML

Financial Instruments - Effect of Net Investment Hedges (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Foreign exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income	$ (31)	$ (3)	$ (46)	$ (28)
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	(1)	(4)	(2)	(8)
Euro-denominated notes
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income	(128)	45	(181)	(122)
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, 2022 USD ($) interest_rate_swap	Feb. 28, 2022 USD ($) interest_rate_swap	Dec. 31, 2021 USD ($)
Derivative [Line Items]
Total swap notional amount	$ 27,726,000,000		$ 32,958,000,000
Interest rate swap contracts
Derivative [Line Items]
Number of Interest Rate Swaps Held (in interest rate swaps) | interest_rate_swap	4	5
Total swap notional amount		$ 1,250,000,000
2.40% notes due 2022 | Interest rate swap contracts
Derivative [Line Items]
Stated interest rate	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

XML

Financial Instruments - Fair Value Hedges (Details) - Loans payable and current portion of long-term debt - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Carrying Amount of Hedged Liabilities	$ 999	$ 2,263
Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount	$ (1)	$ 13

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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, 2022	Dec. 31, 2021
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	$ 932	$ 549
Fair Value of Derivative, Liability	134	121
U.S Dollar Notional Amount	27,726	32,958
Derivatives Designated as Hedging Instruments
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	525	328
Fair Value of Derivative, Liability	3	25
U.S Dollar Notional Amount	9,721	12,245
Derivatives Not Designated as Hedging Instruments
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	407	221
Fair Value of Derivative, Liability	131	96
U.S Dollar Notional Amount	18,005	20,713
Interest Rate Contract | Derivatives Designated as Hedging Instruments | Other current assets
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	1	14
U.S Dollar Notional Amount	1,000	2,250
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Other current assets
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	467	271
U.S Dollar Notional Amount	6,751	6,778
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Other Assets
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	57	43
U.S Dollar Notional Amount	1,334	1,551
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Accrued and other current liabilities
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Liability	2	24
U.S Dollar Notional Amount	510	1,623
Foreign exchange contracts | Derivatives Designated as Hedging Instruments | Other Noncurrent Liabilities
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Liability	1	1
U.S Dollar Notional Amount	126	43
Foreign exchange contracts | Derivatives Not Designated as Hedging Instruments | Other current assets
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Asset	407	221
U.S Dollar Notional Amount	10,931	10,073
Foreign exchange contracts | Derivatives Not Designated as Hedging Instruments | Accrued and other current liabilities
Derivatives, Fair Value [Line Items]
Fair Value of Derivative, Liability	131	96
U.S Dollar Notional Amount	$ 7,074	$ 10,640

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Financial Instruments - Information on Derivative Positions Subject to Master Netting Arrangements as if they were Presented on a Net Basis (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Gross amounts recognized in the consolidated balance sheet, asset	$ 932	$ 549
Gross amount subject to offset in master netting arrangements not offset in the condensed balance sheet, asset	(123)	(110)
Cash collateral received, asset	(527)	(164)
Net amounts, asset	282	275
Gross amounts recognized in the consolidated balance sheet, liability	134	121
Gross amount subject to offset in master netting arrangements not offset in the condensed balance sheet, liability	(123)	(110)
Cash collateral received, liability	0	0
Net amounts, liability	$ 11	$ 11

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Financial Instruments - Location and Amount of Pretax (Gains) Losses of Derivatives (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Derivative Instruments, Gain (Loss) [Line Items]
Sales	$ 14,593	$ 11,402	$ 30,494	$ 22,029
Other (income) expense, net	438	(103)	1,148	(558)
Other comprehensive income (loss)	42	1,545	102	1,557
Interest rate swap contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI on derivatives	0	0	(1)	(1)
Interest rate swap contracts | Other (income) expense, net
Derivative Instruments, Gain (Loss) [Line Items]
Hedged items	(4)	(9)	(14)	(19)
Derivatives designated as hedging instruments	1	(1)	4	0
Amount of gain recognized in Other (income) expense, net on derivatives	0	0	(1)	(1)
Foreign exchange contracts
Derivative Instruments, Gain (Loss) [Line Items]
Amount of gain (loss) recognized in OCI on derivatives	403	(58)	551	121
Increase (decrease) in Sales as a result of AOCL reclassifications	(172)	71	(239)	183
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	$ 172	$ (71)	$ 239	$ (183)

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Financial Instruments - Income Statement Effects on Derivatives Not Designated as Hedging Instruments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Currency Swap | Other (income) expense, net
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Derivative Pretax (Gain) Loss Recognized in Income	$ (64)	$ 167	$ (36)	$ 217
Foreign Exchange Future | Sales
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Derivative Pretax (Gain) Loss Recognized in Income	$ (36)	$ 14	$ (38)	$ 10

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Financial Instruments - Information on Available-for-sale Investments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	$ 412		$ 412		$ 86
Debt securities, unrealized gains	0		0		0
Debt securities, unrealized losses	0		0		0
Debt securities, fair value	412		412		86
Publicly traded equity securities, fair value	1,530		1,530		1,647
Total debt and publicly traded equity securities, fair value	1,942		1,942		1,733
Unrealized net (gains) losses	(25)	$ 18	194	$ 199
Commercial paper
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	334		334		0
Debt securities, unrealized gains	0		0		0
Debt securities, unrealized losses	0		0		0
Debt securities, fair value	334		334		0
U.S. government and agency securities
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	72		72		80
Debt securities, unrealized gains	0		0		0
Debt securities, unrealized losses	0		0		0
Debt securities, fair value	72		72		80
Corporate notes and bonds
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	4		4		4
Debt securities, unrealized gains	0		0		0
Debt securities, unrealized losses	0		0		0
Debt securities, fair value	4		4		4
Foreign government bonds
Debt Securities, Available-for-sale [Line Items]
Debt securities, amortized cost	2		2		2
Debt securities, unrealized gains	0		0		0
Debt securities, unrealized losses	0		0		0
Debt securities, fair value	$ 2		$ 2		$ 2

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Financial Instruments - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021	Jun. 30, 2021	Dec. 31, 2020
Assets
Foreign government bonds	$ 412	$ 86
Publicly traded equity securities	1,530	1,647
Derivative assets	932	549
Liabilities
Contingent consideration	542	777	$ 879	$ 841
Derivative liabilities	134	121
Commercial paper
Assets
Foreign government bonds	334	0
Foreign government bonds
Assets
Foreign government bonds	2	2
U.S. government and agency securities
Assets
Foreign government bonds	72	80
Corporate notes and bonds
Assets
Foreign government bonds	4	4
Fair Value, Measurements, Recurring
Assets
Investments	691	370
Other assets	1,251	1,363
Derivative assets	932	549
Total assets	2,874	2,282
Liabilities
Contingent consideration	542	777
Derivative liabilities	134	121
Total liabilities	676	898
Fair Value, Measurements, Recurring | Foreign exchange contracts
Assets
Derivative assets	576	351
Liabilities
Derivative liabilities	133	120
Fair Value, Measurements, Recurring | Interest rate swaps
Assets
Derivative assets	1	14
Fair Value, Measurements, Recurring | Currency options
Assets
Derivative assets	355	184
Liabilities
Derivative liabilities	1	1
Fair Value, Measurements, Recurring | Level 1
Assets
Investments	355	368
Other assets	1,251	1,363
Derivative assets	0	0
Total assets	1,606	1,731
Liabilities
Contingent consideration	0	0
Derivative liabilities	0	0
Total liabilities	0	0
Fair Value, Measurements, Recurring | Level 1 | Foreign exchange contracts
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Fair Value, Measurements, Recurring | Level 1 | Interest rate swaps
Assets
Derivative assets	0	0
Fair Value, Measurements, Recurring | Level 1 | Currency options
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Fair Value, Measurements, Recurring | Level 2
Assets
Investments	336	2
Other assets	0	0
Derivative assets	932	549
Total assets	1,268	551
Liabilities
Contingent consideration	0	0
Derivative liabilities	134	121
Total liabilities	134	121
Fair Value, Measurements, Recurring | Level 2 | Foreign exchange contracts
Assets
Derivative assets	576	351
Liabilities
Derivative liabilities	133	120
Fair Value, Measurements, Recurring | Level 2 | Interest rate swaps
Assets
Derivative assets	1	14
Fair Value, Measurements, Recurring | Level 2 | Currency options
Assets
Derivative assets	355	184
Liabilities
Derivative liabilities	1	1
Fair Value, Measurements, Recurring | Level 3
Assets
Investments	0	0
Other assets	0	0
Derivative assets	0	0
Total assets	0	0
Liabilities
Contingent consideration	542	777
Derivative liabilities	0	0
Total liabilities	542	777
Fair Value, Measurements, Recurring | Level 3 | Foreign exchange contracts
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Fair Value, Measurements, Recurring | Level 3 | Interest rate swaps
Assets
Derivative assets	0	0
Fair Value, Measurements, Recurring | Level 3 | Currency options
Assets
Derivative assets	0	0
Liabilities
Derivative liabilities	0	0
Fair Value, Measurements, Recurring | Commercial paper
Assets
Foreign government bonds	334	0
Fair Value, Measurements, Recurring | Commercial paper | Level 1
Assets
Foreign government bonds	0	0
Fair Value, Measurements, Recurring | Commercial paper | Level 2
Assets
Foreign government bonds	334	0
Fair Value, Measurements, Recurring | Commercial paper | Level 3
Assets
Foreign government bonds	0	0
Fair Value, Measurements, Recurring | Foreign government bonds
Assets
Foreign government bonds	2	2
Fair Value, Measurements, Recurring | Foreign government bonds | Level 1
Assets
Foreign government bonds	0	0
Fair Value, Measurements, Recurring | Foreign government bonds | Level 2
Assets
Foreign government bonds	2	2
Fair Value, Measurements, Recurring | Foreign government bonds | Level 3
Assets
Foreign government bonds	0	0
Fair Value, Measurements, Recurring | Publicly traded equity securities
Assets
Publicly traded equity securities	355	368
Other assets	1,175	1,279
Fair Value, Measurements, Recurring | Publicly traded equity securities | Level 1
Assets
Publicly traded equity securities	355	368
Other assets	1,175	1,279
Fair Value, Measurements, Recurring | Publicly traded equity securities | Level 2
Assets
Publicly traded equity securities	0	0
Other assets	0	0
Fair Value, Measurements, Recurring | Publicly traded equity securities | Level 3
Assets
Publicly traded equity securities	0	0
Other assets	0	0
Fair Value, Measurements, Recurring | U.S. government and agency securities
Assets
Other assets	72	80
Fair Value, Measurements, Recurring | U.S. government and agency securities | Level 1
Assets
Other assets	72	80
Fair Value, Measurements, Recurring | U.S. government and agency securities | Level 2
Assets
Other assets	0	0
Fair Value, Measurements, Recurring | U.S. government and agency securities | Level 3
Assets
Other assets	0	0
Fair Value, Measurements, Recurring | Corporate notes and bonds
Assets
Other assets	4	4
Fair Value, Measurements, Recurring | Corporate notes and bonds | Level 1
Assets
Other assets	4	4
Fair Value, Measurements, Recurring | Corporate notes and bonds | Level 2
Assets
Other assets	0	0
Fair Value, Measurements, Recurring | Corporate notes and bonds | Level 3
Assets
Other assets	$ 0	$ 0

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Financial Instruments - Information About Changes in Liabilities for Contingent Consideration (Details) $ in Millions	6 Months Ended
	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Mar. 31, 2022
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair value, beginning balance	$ 777	$ 841
Changes in estimated fair value	(114)	50
Payments	(119)	0
Other	(2)	(12)
Fair value, ending balance	542	879
Contingent consideration	542	$ 879
Current liability	131
Sanofi Pasteur
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair value, ending balance	402
Contingent consideration	$ 402
Contingent consideration, measurement input, discount rate	0.115
Measurement Input, Discount Rate | Sanofi Pasteur
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Contingent consideration, measurement input, discount rate	0.06		0.08

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Inventories - Schedule of Inventories (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Finished goods	$ 1,680	$ 1,747
Raw materials and work in process	6,542	6,220
Supplies	217	196
Total (approximates current cost)	8,439	8,163
Decrease to LIFO cost	(140)	(16)
Total current and noncurrent inventories	8,299	8,147
Recognized as:
Inventories	5,535	5,953
Other assets	$ 2,764	$ 2,194

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Inventories - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Inventory [Line Items]
Inventories classified in Other assets	$ 2,764	$ 2,194
Inventories Not Expected to be Sold Within One Year
Inventory [Line Items]
Inventories classified in Other assets	2,400	1,900
Inventories Produced in Preparation for Product Launches
Inventory [Line Items]
Inventories classified in Other assets	$ 366	$ 256

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Contingencies (Details) $ in Millions	1 Months Ended	6 Months Ended
	Mar. 31, 2014 case	Jun. 30, 2022 USD ($) case claim	Dec. 31, 2021 USD ($)	Aug. 31, 2020 claim
Legal Defense Costs
Loss Contingencies [Line Items]
Legal defense costs reserve | $		$ 235	$ 230
Zetia antitrust litigation
Loss Contingencies [Line Items]
Loss contingency, pending claims | claim				35
Zetia antitrust litigation | Pending Litigation
Loss Contingencies [Line Items]
Loss contingency, new claims filed | claim		23
Fosamax
Loss Contingencies [Line Items]
Loss contingency, pending claims		3,450
Fosamax | Femur Fracture Litigation | Federal
Loss Contingencies [Line Items]
Loss contingency, claims dismissed	650
Loss contingency, claims on appeal	515
Januvia | Other State Court
Loss Contingencies [Line Items]
Loss contingency, pending claims | claim		6
Januvia | Cases Company Agreed To Toll Statute Of Limitations
Loss Contingencies [Line Items]
Loss contingency, pending claims | claim		50
Bridion | Patents
Loss Contingencies [Line Items]
Loss contingency, claims settled		4
Bridion | Patents | Pending Litigation
Loss Contingencies [Line Items]
Loss contingency, pending claims		2
Januvia and Janumet | Patents
Loss Contingencies [Line Items]
Loss contingency, claims settled		22

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Equity - Rollforward Reconciliations (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock, beginning balance (in shares)			3,577,103,522
Treasury stock, beginning balance (in shares)			1,049,499,023
Equity, beginning balance	$ 40,953	$ 27,039	$ 38,257	$ 25,404
Net income attributable to Merck & Co., Inc.	3,944	1,545	8,254	4,724
Other comprehensive income, net of taxes	42	1,545	102	1,557
Cash dividends declared on common stock	(1,759)	(1,656)	(3,513)	(3,309)
Treasury stock shares purchased		(239)		(239)
Spin-off of Organon & Co.		5,091		5,091
Share-based compensation plans and other	133	62	216	152
Net income attributable to noncontrolling interests	$ 5	1	$ 2	8
Common stock, ending balance (in shares)	3,577,103,522		3,577,103,522
Treasury stock, ending balance (in shares)	1,043,894,068		1,043,894,068
Equity, ending balance	$ 43,318	$ 33,388	$ 43,318	$ 33,388
Cash dividends declared on common stock (in dollars per share)	$ 0.69	$ 0.65	$ 1.38	$ 1.30
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Common stock, 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
Common stock, 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	44,275	39,613	44,238	39,588
Spin-off of Organon & Co.		4,643		4,643
Share-based compensation plans and other	(160)	(217)	(123)	(192)
Equity, ending balance	44,115	44,039	44,115	44,039
Retained Earnings
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity, beginning balance	56,252	48,888	53,696	47,362
Net income attributable to Merck & Co., Inc.	3,944	1,545	8,254	4,724
Cash dividends declared on common stock	(1,759)	(1,656)	(3,513)	(3,309)
Equity, ending balance	58,437	48,777	58,437	48,777
Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity, beginning balance	(4,369)	(6,622)	(4,429)	(6,634)
Other comprehensive income, net of taxes	42	1,545	102	1,557
Spin-off of Organon & Co.		449		449
Equity, ending balance	$ (4,327)	$ (4,628)	$ (4,327)	$ (4,628)
Treasury Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Treasury stock, beginning balance (in shares)	1,049,000,000	1,046,000,000	1,049,000,000	1,047,000,000
Equity, beginning balance	$ (57,063)	$ (56,722)	$ (57,109)	$ (56,787)
Treasury stock shares purchased (in shares)		3,000,000		3,000,000
Treasury stock shares purchased		$ (239)		$ (239)
Share-based compensation plans and other (in shares)	(5,000,000)	(5,000,000)	(5,000,000)	(6,000,000)
Share-based compensation plans and other	$ 293	$ 279	$ 339	$ 344
Treasury stock, ending balance (in shares)	1,044,000,000	1,044,000,000	1,044,000,000	1,044,000,000
Equity, ending balance	$ (56,770)	$ (56,682)	$ (56,770)	$ (56,682)
Non- controlling Interests
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity, beginning balance	70	94	73	87
Spin-off of Organon & Co.		(1)		(1)
Net income attributable to noncontrolling interests	5	1	2	8
Equity, ending balance	$ 75	$ 94	$ 75	$ 94

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Pension and Other Postretirement Benefit Plans - Net Benefit Costs (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Other Postretirement Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 12	$ 13	$ 25	$ 26
Interest cost	11	11	23	22
Expected return on plan assets	(21)	(20)	(43)	(39)
Amortization of unrecognized prior service credit	(25)	(25)	(50)	(50)
Termination benefits	0	37	0	37
Curtailments	0	(27)	0	(28)
Net periodic benefit cost	(23)	(11)	(45)	(32)
U.S. | Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	99	98	198	198
Interest cost	103	106	206	202
Expected return on plan assets	(197)	(191)	(393)	(379)
Amortization of unrecognized prior service credit	(8)	(11)	(16)	(20)
Net loss amortization	56	58	112	142
Termination benefits	1	52	1	53
Curtailments	4	9	8	16
Settlements	101	0	101	0
Net periodic benefit cost	159	121	217	212
International | Pension Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	72	87	147	179
Interest cost	37	30	75	59
Expected return on plan assets	(98)	(104)	(199)	(209)
Amortization of unrecognized prior service credit	(3)	(4)	(7)	(9)
Net loss amortization	25	38	50	78
Termination benefits	0	2	0	3
Curtailments	0	(27)	0	(27)
Settlements	0	2	0	2
Net periodic benefit cost	$ 33	$ 24	$ 66	$ 76

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Pension and Other Postretirement Benefit Plans - Narrative (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2022
Retirement Benefits [Abstract]
Partial settlement charge	$ 101	$ 101
Decrease to pension liabilities due to remeasurement		$ 165

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Other (Income) Expense, Net - Schedule of Other (Income) Expense, Net (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Component of Other Income / Expense of Nonoperating [Line Items]
Interest income		$ (15)	$ (9)	$ (22)	$ (20)
Interest expense		240	202	483	401
Exchange losses		86	114	124	155
Loss (income) from investments in equity securities, net		284	(280)	991	(854)
Net periodic defined benefit plan (credit) cost other than service cost		(27)	(110)	(148)	(199)
Other, net		(130)	(20)	(280)	(41)
Other (income) expense, net		438	(103)	1,148	(558)
Unrealized net (gains) losses		$ (25)	$ 18	$ 194	$ 199
Forecast | Subsequent Event
Component of Other Income / Expense of Nonoperating [Line Items]
Unrealized net (gains) losses	$ 135

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Other (Income) Expense, Net - Narrative (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Other Income and Expenses [Abstract]
Interest paid	$ 449	$ 363

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Taxes on Income (Details) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Tax Examination [Line Items]
Effective income tax rate	12.00%	29.30%		11.70%	15.80%
Tax benefit resulting from acquisition		$ 0			$ 0
Internal Revenue Service (IRS) | Domestic Tax Authority
Income Tax Examination [Line Items]
Tax benefit recognized related to settlement					236,000,000
Income taxes paid			$ 190,000,000
Internal Revenue Service (IRS) | Domestic Tax Authority | Continuing Operations
Income Tax Examination [Line Items]
Tax benefit recognized related to settlement					207,000,000
Income taxes paid			172,000,000
Internal Revenue Service (IRS) | Domestic Tax Authority | Discontinued Operations
Income Tax Examination [Line Items]
Tax benefit recognized related to settlement					$ 29,000,000
Income taxes paid			$ 18,000,000

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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, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Earnings Per Share [Abstract]
Net Income from Continuing Operations Attributable to Merck & Co., Inc.	$ 3,944	$ 1,213	$ 8,254	$ 3,958
Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests	0	332	0	766
Net income attributable to Merck & Co., Inc., basic	3,944	1,545	8,254	4,724
Net income attributable to Merck & Co., Inc., diluted	$ 3,944	$ 1,545	$ 8,254	$ 4,724
Average common shares outstanding (in shares)	2,531	2,533	2,529	2,532
Common shares issuable (in shares)	9	7	9	8
Average common shares outstanding assuming dilution (in shares)	2,540	2,540	2,538	2,540
Basic Earnings per Common Share Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations (in dollars per share)	$ 1.56	$ 0.48	$ 3.26	$ 1.56
Income from Discontinued Operations (in dollars per share)	0	0.13	0	0.30
Net Income (in dollars per share)	1.56	0.61	3.26	1.87
Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc. Common Shareholders:
Income from Continuing Operations (in dollars per share)	1.55	0.48	3.25	1.56
Income from Discontinued Operations (in dollars per share)	0	0.13	0	0.30
Net Income (in dollars per share)	$ 1.55	$ 0.61	$ 3.25	$ 1.86

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Earnings Per Share - Narrative (Details) - shares shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Earnings Per Share [Abstract]
Antidilutive shares (in shares)	2	12	6	11

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Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	$ 40,953	$ 27,039	$ 38,257	$ 25,404
Other comprehensive income (loss) before reclassification adjustments, pretax	206	1,848	337	1,813
Tax	(142)	(395)	(192)	(522)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	64	1,453	145	1,291
Reclassification adjustments, pretax	(27)	126	(50)	324
Tax	5	(34)	7	(58)
Reclassification adjustments, net of taxes	(22)	92	(43)	266
Other comprehensive income (loss), net of taxes	42	1,545	102	1,557
Spin-off of Organon & Co.		5,091		5,091
Equity, ending balance	43,318	33,388	43,318	33,388
Derivatives
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	207	(36)	144	(266)
Other comprehensive income (loss) before reclassification adjustments, pretax	403	(59)	551	121
Tax	(85)	13	(116)	(25)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	318	(46)	435	96
Reclassification adjustments, pretax	(171)	71	(239)	182
Tax	36	(15)	50	(38)
Reclassification adjustments, net of taxes	(135)	56	(189)	144
Other comprehensive income (loss), net of taxes	183	10	246	240
Spin-off of Organon & Co.		0		0
Equity, ending balance	390	(26)	390	(26)
Employee Benefit Plans
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	(2,711)	(4,459)	(2,743)	(4,540)
Other comprehensive income (loss) before reclassification adjustments, pretax	168	1,767	169	1,763
Tax	(35)	(400)	(37)	(401)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	133	1,367	132	1,362
Reclassification adjustments, pretax	144	55	189	142
Tax	(31)	(19)	(43)	(20)
Reclassification adjustments, net of taxes	113	36	146	122
Other comprehensive income (loss), net of taxes	246	1,403	278	1,484
Spin-off of Organon & Co.		28		28
Equity, ending balance	(2,465)	(3,028)	(2,465)	(3,028)
Foreign Currency Translation Adjustment
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	(1,865)	(2,127)	(1,830)	(1,828)
Other comprehensive income (loss) before reclassification adjustments, pretax	(365)	140	(383)	(71)
Tax	(22)	(8)	(39)	(96)
Other comprehensive income (loss) before reclassification adjustments, net of taxes	(387)	132	(422)	(167)
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	(387)	132	(422)	(167)
Spin-off of Organon & Co.		421		421
Equity, ending balance	(2,252)	(1,574)	(2,252)	(1,574)
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Income (Loss) [Roll Forward]
Equity, beginning balance	(4,369)	(6,622)	(4,429)	(6,634)
Spin-off of Organon & Co.		449		449
Equity, ending balance	$ (4,327)	$ (4,628)	$ (4,327)	$ (4,628)

XML

Segment Reporting - Narrative (Details) $ in Billions	3 Months Ended		6 Months Ended
	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) segment	Jun. 30, 2021 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment			2
Sales discounts | $	$ 3.0	$ 3.1	$ 5.9	$ 6.0

XML

Segment Reporting - Sales from Products (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Segment Reporting Information [Line Items]
Sales	$ 14,593	$ 11,402	$ 30,494	$ 22,029
Revenue related to the sale of the marketing rights			146	56
U.S.
Segment Reporting Information [Line Items]
Sales	6,238	5,100	13,577	9,890
Int’l
Segment Reporting Information [Line Items]
Sales	8,355	6,301	16,917	12,139
Operating Segments
Segment Reporting Information [Line Items]
Sales	14,223	11,452	29,812	22,108
Operating Segments | U.S.
Segment Reporting Information [Line Items]
Sales	6,203	5,106	13,449	9,837
Operating Segments | Int’l
Segment Reporting Information [Line Items]
Sales	8,020	6,345	16,362	12,271
Corporate, Non-Segment
Segment Reporting Information [Line Items]
Sales	370	(50)	682	(79)
Corporate, Non-Segment | U.S.
Segment Reporting Information [Line Items]
Sales	35	(6)	128	53
Corporate, Non-Segment | Int’l
Segment Reporting Information [Line Items]
Sales	335	(44)	555	(132)
Pharmaceutical | Operating Segments
Segment Reporting Information [Line Items]
Sales	12,756	9,980	26,863	19,218
Pharmaceutical | Operating Segments | U.S.
Segment Reporting Information [Line Items]
Sales	5,726	4,647	12,498	8,941
Pharmaceutical | Operating Segments | Int’l
Segment Reporting Information [Line Items]
Sales	7,030	5,333	14,364	10,277
Pharmaceutical | Operating Segments | Keytruda
Segment Reporting Information [Line Items]
Sales	5,252	4,176	10,061	8,076
Pharmaceutical | Operating Segments | Keytruda | U.S.
Segment Reporting Information [Line Items]
Sales	3,197	2,347	5,976	4,528
Pharmaceutical | Operating Segments | Keytruda | Int’l
Segment Reporting Information [Line Items]
Sales	2,055	1,829	4,085	3,548
Pharmaceutical | Operating Segments | Alliance revenue - Lynparza
Segment Reporting Information [Line Items]
Sales	275	248	541	475
Pharmaceutical | Operating Segments | Alliance revenue - Lynparza | U.S.
Segment Reporting Information [Line Items]
Sales	143	124	283	242
Pharmaceutical | Operating Segments | Alliance revenue - Lynparza | Int’l
Segment Reporting Information [Line Items]
Sales	132	124	257	233
Pharmaceutical | Operating Segments | Alliance revenue - Lenvima
Segment Reporting Information [Line Items]
Sales	231	181	459	310
Pharmaceutical | Operating Segments | Alliance revenue - Lenvima | U.S.
Segment Reporting Information [Line Items]
Sales	128	88	284	173
Pharmaceutical | Operating Segments | Alliance revenue - Lenvima | Int’l
Segment Reporting Information [Line Items]
Sales	103	93	175	137
Pharmaceutical | Operating Segments | Alliance Revenue - Reblozyl
Segment Reporting Information [Line Items]
Sales	33	0	86	0
Pharmaceutical | Operating Segments | Alliance Revenue - Reblozyl | U.S.
Segment Reporting Information [Line Items]
Sales	28	0	55	0
Pharmaceutical | Operating Segments | Alliance Revenue - Reblozyl | Int’l
Segment Reporting Information [Line Items]
Sales	5	0	30	0
Pharmaceutical | Operating Segments | Gardasil/Gardasil 9
Segment Reporting Information [Line Items]
Sales	1,674	1,234	3,133	2,151
Pharmaceutical | Operating Segments | Gardasil/Gardasil 9 | U.S.
Segment Reporting Information [Line Items]
Sales	428	454	846	766
Pharmaceutical | Operating Segments | Gardasil/Gardasil 9 | Int’l
Segment Reporting Information [Line Items]
Sales	1,245	781	2,287	1,385
Pharmaceutical | Operating Segments | ProQuad/M-M-R II/Varivax
Segment Reporting Information [Line Items]
Sales	578	516	1,047	965
Pharmaceutical | Operating Segments | ProQuad/M-M-R II/Varivax | U.S.
Segment Reporting Information [Line Items]
Sales	434	386	805	718
Pharmaceutical | Operating Segments | ProQuad/M-M-R II/Varivax | Int’l
Segment Reporting Information [Line Items]
Sales	143	130	243	246
Pharmaceutical | Operating Segments | RotaTeq
Segment Reporting Information [Line Items]
Sales	173	208	389	366
Pharmaceutical | Operating Segments | RotaTeq | U.S.
Segment Reporting Information [Line Items]
Sales	98	111	273	229
Pharmaceutical | Operating Segments | RotaTeq | Int’l
Segment Reporting Information [Line Items]
Sales	75	97	116	137
Pharmaceutical | Operating Segments | Pneumovax 23
Segment Reporting Information [Line Items]
Sales	153	152	325	323
Pharmaceutical | Operating Segments | Pneumovax 23 | U.S.
Segment Reporting Information [Line Items]
Sales	94	100	212	173
Pharmaceutical | Operating Segments | Pneumovax 23 | Int’l
Segment Reporting Information [Line Items]
Sales	59	52	114	150
Pharmaceutical | Operating Segments | Vaqta
Segment Reporting Information [Line Items]
Sales	35	56	71	90
Pharmaceutical | Operating Segments | Vaqta | U.S.
Segment Reporting Information [Line Items]
Sales	16	22	45	47
Pharmaceutical | Operating Segments | Vaqta | Int’l
Segment Reporting Information [Line Items]
Sales	19	34	25	43
Pharmaceutical | Operating Segments | Bridion
Segment Reporting Information [Line Items]
Sales	426	387	821	727
Pharmaceutical | Operating Segments | Bridion | U.S.
Segment Reporting Information [Line Items]
Sales	237	197	432	364
Pharmaceutical | Operating Segments | Bridion | Int’l
Segment Reporting Information [Line Items]
Sales	190	190	389	363
Pharmaceutical | Operating Segments | Prevymis
Segment Reporting Information [Line Items]
Sales	103	93	197	174
Pharmaceutical | Operating Segments | Prevymis | U.S.
Segment Reporting Information [Line Items]
Sales	47	37	87	72
Pharmaceutical | Operating Segments | Prevymis | Int’l
Segment Reporting Information [Line Items]
Sales	56	56	110	103
Pharmaceutical | Operating Segments | Primaxin
Segment Reporting Information [Line Items]
Sales	64	60	122	125
Pharmaceutical | Operating Segments | Primaxin | U.S.
Segment Reporting Information [Line Items]
Sales	0	0	1	0
Pharmaceutical | Operating Segments | Primaxin | Int’l
Segment Reporting Information [Line Items]
Sales	64	60	122	125
Pharmaceutical | Operating Segments | Dificid
Segment Reporting Information [Line Items]
Sales	66	34	119	61
Pharmaceutical | Operating Segments | Dificid | U.S.
Segment Reporting Information [Line Items]
Sales	63	32	113	56
Pharmaceutical | Operating Segments | Dificid | Int’l
Segment Reporting Information [Line Items]
Sales	3	2	6	4
Pharmaceutical | Operating Segments | Noxafil
Segment Reporting Information [Line Items]
Sales	60	66	118	133
Pharmaceutical | Operating Segments | Noxafil | U.S.
Segment Reporting Information [Line Items]
Sales	16	14	25	29
Pharmaceutical | Operating Segments | Noxafil | Int’l
Segment Reporting Information [Line Items]
Sales	45	52	92	104
Pharmaceutical | Operating Segments | Invanz
Segment Reporting Information [Line Items]
Sales	46	48	99	104
Pharmaceutical | Operating Segments | Invanz | U.S.
Segment Reporting Information [Line Items]
Sales	2	(4)	2	0
Pharmaceutical | Operating Segments | Invanz | Int’l
Segment Reporting Information [Line Items]
Sales	45	52	96	104
Pharmaceutical | Operating Segments | Cancidas
Segment Reporting Information [Line Items]
Sales	42	54	95	111
Pharmaceutical | Operating Segments | Cancidas | U.S.
Segment Reporting Information [Line Items]
Sales	2	1	4	3
Pharmaceutical | Operating Segments | Cancidas | Int’l
Segment Reporting Information [Line Items]
Sales	39	53	91	108
Pharmaceutical | Operating Segments | Zerbaxa
Segment Reporting Information [Line Items]
Sales	46	(1)	76	(9)
Pharmaceutical | Operating Segments | Zerbaxa | U.S.
Segment Reporting Information [Line Items]
Sales	22	(2)	40	(4)
Pharmaceutical | Operating Segments | Zerbaxa | Int’l
Segment Reporting Information [Line Items]
Sales	24	1	36	(5)
Pharmaceutical | Operating Segments | Alliance revenue - Adempas/Verquvo
Segment Reporting Information [Line Items]
Sales	98	74	170	149
Pharmaceutical | Operating Segments | Alliance revenue - Adempas/Verquvo | U.S.
Segment Reporting Information [Line Items]
Sales	88	81	159	149
Pharmaceutical | Operating Segments | Alliance revenue - Adempas/Verquvo | Int’l
Segment Reporting Information [Line Items]
Sales	10	(7)	11	0
Pharmaceutical | Operating Segments | Adempas
Segment Reporting Information [Line Items]
Sales	63	74	124	129
Pharmaceutical | Operating Segments | Adempas | U.S.
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Pharmaceutical | Operating Segments | Adempas | Int’l
Segment Reporting Information [Line Items]
Sales	63	74	124	129
Pharmaceutical | Operating Segments | Lagevrio
Segment Reporting Information [Line Items]
Sales	1,177	0	4,424	0
Pharmaceutical | Operating Segments | Lagevrio | U.S.
Segment Reporting Information [Line Items]
Sales	0	0	1,523	0
Pharmaceutical | Operating Segments | Lagevrio | Int’l
Segment Reporting Information [Line Items]
Sales	1,177	0	2,901	0
Pharmaceutical | Operating Segments | Isentress/Isentress HD
Segment Reporting Information [Line Items]
Sales	147	192	305	401
Pharmaceutical | Operating Segments | Isentress/Isentress HD | U.S.
Segment Reporting Information [Line Items]
Sales	67	74	128	145
Pharmaceutical | Operating Segments | Isentress/Isentress HD | Int’l
Segment Reporting Information [Line Items]
Sales	80	118	177	256
Pharmaceutical | Operating Segments | Belsomra
Segment Reporting Information [Line Items]
Sales	69	78	137	157
Pharmaceutical | Operating Segments | Belsomra | U.S.
Segment Reporting Information [Line Items]
Sales	19	14	39	32
Pharmaceutical | Operating Segments | Belsomra | Int’l
Segment Reporting Information [Line Items]
Sales	50	63	98	125
Pharmaceutical | Operating Segments | Simponi
Segment Reporting Information [Line Items]
Sales	181	202	366	416
Pharmaceutical | Operating Segments | Simponi | U.S.
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Pharmaceutical | Operating Segments | Simponi | Int’l
Segment Reporting Information [Line Items]
Sales	181	202	366	416
Pharmaceutical | Operating Segments | Remicade
Segment Reporting Information [Line Items]
Sales	53	75	114	160
Pharmaceutical | Operating Segments | Remicade | U.S.
Segment Reporting Information [Line Items]
Sales	0	0	0	0
Pharmaceutical | Operating Segments | Remicade | Int’l
Segment Reporting Information [Line Items]
Sales	53	75	114	160
Pharmaceutical | Operating Segments | Januvia
Segment Reporting Information [Line Items]
Sales	756	784	1,535	1,593
Pharmaceutical | Operating Segments | Januvia | U.S.
Segment Reporting Information [Line Items]
Sales	301	284	626	632
Pharmaceutical | Operating Segments | Januvia | Int’l
Segment Reporting Information [Line Items]
Sales	455	500	909	961
Pharmaceutical | Operating Segments | Janumet
Segment Reporting Information [Line Items]
Sales	476	477	931	962
Pharmaceutical | Operating Segments | Janumet | U.S.
Segment Reporting Information [Line Items]
Sales	105	74	168	158
Pharmaceutical | Operating Segments | Janumet | Int’l
Segment Reporting Information [Line Items]
Sales	371	403	762	805
Pharmaceutical | Operating Segments | Other pharmaceutical
Segment Reporting Information [Line Items]
Sales	479	512	998	1,069
Pharmaceutical | Operating Segments | Other pharmaceutical | U.S.
Segment Reporting Information [Line Items]
Sales	191	213	372	429
Pharmaceutical | Operating Segments | Other pharmaceutical | Int’l
Segment Reporting Information [Line Items]
Sales	288	299	628	640
Animal Health | Operating Segments
Segment Reporting Information [Line Items]
Sales	1,467	1,472	2,949	2,890
Animal Health | Operating Segments | U.S.
Segment Reporting Information [Line Items]
Sales	477	459	951	896
Animal Health | Operating Segments | Int’l
Segment Reporting Information [Line Items]
Sales	990	1,012	1,998	1,994
Animal Health | Operating Segments | Livestock
Segment Reporting Information [Line Items]
Sales	826	821	1,658	1,640
Animal Health | Operating Segments | Livestock | U.S.
Segment Reporting Information [Line Items]
Sales	164	161	335	318
Animal Health | Operating Segments | Livestock | Int’l
Segment Reporting Information [Line Items]
Sales	662	659	1,322	1,322
Animal Health | Operating Segments | Companion Animals
Segment Reporting Information [Line Items]
Sales	641	651	1,291	1,250
Animal Health | Operating Segments | Companion Animals | U.S.
Segment Reporting Information [Line Items]
Sales	313	298	616	578
Animal Health | Operating Segments | Companion Animals | Int’l
Segment Reporting Information [Line Items]
Sales	$ 328	$ 353	$ 676	$ 672

XML

Segment Reporting - Consolidated Sales by Geographic Area (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenue from External Customer [Line Items]
Sales	$ 14,593	$ 11,402	$ 30,494	$ 22,029
United States
Revenue from External Customer [Line Items]
Sales	6,238	5,100	13,577	9,890
Europe, Middle East and Africa
Revenue from External Customer [Line Items]
Sales	3,582	3,333	7,942	6,569
China
Revenue from External Customer [Line Items]
Sales	1,372	975	2,515	1,697
Japan
Revenue from External Customer [Line Items]
Sales	1,114	661	2,103	1,291
Asia Pacific (other than China and Japan)
Revenue from External Customer [Line Items]
Sales	1,008	594	1,938	1,168
Latin America
Revenue from External Customer [Line Items]
Sales	642	532	1,249	1,032
Other
Revenue from External Customer [Line Items]
Sales	$ 637	$ 207	$ 1,170	$ 382

XML

Segment Reporting - Reconciliation of Segment Profits to Income before Taxes (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Segment Reporting Information [Line Items]
Profits	$ 4,487	$ 1,717	$ 9,348	$ 4,704
Interest income	15	9	22	20
Interest expense	(240)	(202)	(483)	(401)
Amortization			(1,163)	(871)
Depreciation			(895)	(749)
Research and development	(2,798)	(4,321)	(5,374)	(6,732)
Restructuring costs	(142)	(82)	(194)	(380)
Operating Segments
Segment Reporting Information [Line Items]
Profits	9,744	7,809	19,829	14,969
Operating Segments | Pharmaceutical segment
Segment Reporting Information [Line Items]
Profits	9,173	7,257	18,673	13,845
Operating Segments | Animal Health segment
Segment Reporting Information [Line Items]
Profits	571	552	1,156	1,124
Corporate, Non-Segment
Segment Reporting Information [Line Items]
Profits	260	(79)	454	(113)
Segment Reconciling Items
Segment Reporting Information [Line Items]
Interest income	15	9	22	20
Interest expense	(240)	(202)	(483)	(401)
Amortization	(463)	(357)	(1,163)	(871)
Depreciation	(431)	(332)	(809)	(673)
Research and development	(2,652)	(4,175)	(5,097)	(6,480)
Restructuring costs	(142)	(82)	(194)	(380)
Other unallocated, net	$ (1,604)	$ (874)	$ (3,211)	$ (1,367)