EX-99.1 2 tm2322190d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

News Release

Merck Announces Second-Quarter 2023 Financial Results

Sales Reflect Sustained Underlying Growth, Particularly in Oncology and Vaccines

Total Worldwide Sales Were $15.0 Billion, an Increase of 3% From Second Quarter 2022; Excluding LAGEVRIO, Growth Was 11%; Excluding LAGEVRIO and the Impact of Foreign Exchange, Growth Was 14%

○

KEYTRUDA Sales Grew 19% to $6.3 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 21%

○

GARDASIL/GARDASIL 9 Sales Grew 47% to $2.5 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 53%

○

LAGEVRIO Sales Declined 83% to $203 Million; Excluding the Impact of Foreign Exchange, Sales Declined 82%

GAAP Loss per Share Was $2.35; Non-GAAP Loss per Share Was $2.06; GAAP and Non-GAAP Loss per Share Include a Charge of $4.02 per Share for the Acquisition of Prometheus

Presented Compelling Data in Earlier Stages of Cancer at 2023 ASCO Annual Meeting, Including:

Positive Phase 3 Results From KEYNOTE-671 Trial

Promising New Data From Phase 2b KEYNOTE-942/mRNA-4157-P201 Trial in Collaboration With Moderna

Announced Positive Results From Two Phase 3 Trials Evaluating V116

Submitted Biologics License Application to the U.S. FDA for Sotatercept

Full-Year 2023 Financial Outlook

Raises and Narrows Expected Worldwide Sales Range To Be Between $58.6 Billion and $59.6 Billion, Including Negative Impact of Foreign Exchange of Approximately 2 Percentage Points; Outlook Includes Approximately $1.0 Billion of LAGEVRIO Sales

Now Expects Non-GAAP EPS To Be Between $2.95 and $3.05, Including the Negative Impact of Foreign Exchange of Approximately 5 Percentage Points; Outlook Reflects Negative Impact From One-Time Charge of $10.2 Billion, or $4.02 per Share, for the Acquisition of Prometheus

RAHWAY, N.J., Aug. 1, 2023 – Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the second quarter of 2023.

"We continue to make great progress as we advance our broad and deep pipeline, raise the bar of innovation, and bring forward leading-edge science to save and improve lives around the world," said Robert M. Davis, chairman and chief executive officer, Merck. "We delivered robust underlying growth during the second quarter and are well positioned to achieve strong full-year results. I am proud of our talented, diverse and dedicated global team that continues to focus on creating value for patients and all our stakeholders now and well into the future.”

- 2 -

Financial Summary

	Second Quarter
$ in millions, except EPS amounts	2023			2022		Change			Change Ex- Exchange
Sales	$	15,035		$	14,593		3	%		7	%
GAAP net (loss) income¹		(5,975	)		3,944		**N/M			N/M
Non-GAAP net (loss) income that excludes certain items^1,2*		(5,220	)		4,743		N/M			N/M
GAAP EPS		(2.35	)		1.55		N/M			N/M
Non-GAAP EPS that excludes certain items^2*		(2.06	)		1.87		N/M			N/M
Refer to table on page 6. *Not meaningful

Generally Accepted Accounting Principles (GAAP) loss / earnings per share (EPS) assuming dilution was a loss per share of $2.35 for the second quarter of 2023. Non-GAAP loss per share was $2.06 for the second quarter of 2023. Both GAAP and non-GAAP loss per share were due to a charge for the acquisition of Prometheus Biosciences, Inc. (Prometheus) of $4.02 per share. Additionally, both GAAP and non-GAAP loss per share in the second quarter of 2023 were unfavorably affected by lower sales of LAGEVRIO and the impact of foreign exchange compared with the second quarter of 2022.

Non-GAAP EPS excludes acquisition- and divestiture-related costs and costs related to restructuring programs, as well as income and losses from investments in equity securities.

Year-to-date results can be found in the attached tables.

¹Net (loss) income attributable to Merck & Co., Inc.

²Merck is providing certain 2023 and 2022 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results because management uses non-GAAP results to assess performance. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using a non-GAAP pre-tax income metric. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the non-GAAP adjustments, see Table 2a attached to this release.

- 3 -

Second-Quarter Sales Performance

The following table reflects sales of the company’s top products and significant performance drivers.

	Second Quarter
$ in millions	2023		2022		Change			Change Ex-Exchange			Commentary
Total Sales	$	15,035	$	14,593		3	%		7	%
Pharmaceutical		13,457		12,756		6	%		8	%	Increase driven by growth in oncology, vaccines and hospital acute care, partially offset by lower sales in virology due to LAGEVRIO, and in diabetes. Excluding LAGEVRIO, growth of 14%. Excluding LAGEVRIO and unfavorable impact of foreign exchange, growth of 17%.
KEYTRUDA		6,271		5,252		19	%		21	%	Growth from continued strong global momentum in metastatic indications, including certain types of non-small cell lung cancer (NSCLC), renal cell carcinoma (RCC), head and neck squamous cell carcinoma and triple-negative breast cancer (TNBC), and increased uptake across earlier-stage indications, including certain types of neoadjuvant/adjuvant TNBC in the U.S.
GARDASIL / GARDASIL 9		2,458		1,674		47	%		53	%	Growth largely due to strong global demand, particularly in China.
JANUVIA / JANUMET		864		1,233		-30	%		-28	%	Decline primarily due to generic competition in several international markets, particularly in Europe, and lower demand and pricing in the U.S.
PROQUAD, M-M-R II and VARIVAX		582		578		1	%		1	%	Relatively flat compared with prior year.
BRIDION		502		426		18	%		19	%	Growth primarily due to increased demand, particularly in the U.S., reflecting an increase in market share among neuromuscular blockade reversal agents.
Lynparza*		310		275		13	%		15	%	Growth driven primarily by increased demand in certain international markets.
Lenvima*		242		231		5	%		6	%	Growth primarily due to higher demand in the U.S., partially offset by lower demand in China.
LAGEVRIO		203		1,177		-83	%		-82	%	Decrease largely attributable to lower sales in Japan and nonrecurrence of sales in the U.K.
SIMPONI		180		181		-1	%		-1	%	Relatively flat compared with prior year.
VAXNEUVANCE		168		12		***N/M			N/M		Growth driven largely by continued uptake in pediatric indication following launch in the U.S.
Animal Health		1,456		1,467		-1	%		2	%	Excluding unfavorable impact of foreign exchange, growth primarily driven by higher pricing in both Livestock and Companion Animal product portfolios.
Livestock		807		826		-2	%		2	%	Excluding unfavorable impact of foreign exchange, growth due to higher pricing, as well as higher demand for swine and poultry products, partially offset by lower demand for ruminant products, due in part to reduced herd sizes.
Companion Animal		649		641		1	%		2	%	Growth driven by higher pricing, including for the BRAVECTO line of products, partially offset by supply challenges for certain companion animal vaccines. Sales of BRAVECTO were $326 million and $309 million in the current and prior quarters, respectively, which represented growth of 5% or 7% excluding unfavorable impact of foreign exchange.
Other Revenues**		122		370		-67	%		-19	%	Decline primarily due to impact of revenue hedging. Excluding unfavorable impact of foreign exchange, decline due to lower royalties and milestone payments received for out-licensing arrangements.

*Alliance revenue for this product represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

**Other revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities.

***Not meaningful

- 4 -

Second-Quarter Expense, EPS and Related Information

The table below presents selected expense information.

$ in millions	GAAP		Acquisition- and Divestiture- Related Costs³			Restructuring Costs		(Income) Loss From Investments in Equity Securities		Non- GAAP²
Second Quarter 2023
Cost of sales	$	4,024	$	467		$	32	$	-	$	3,525
Selling, general and administrative		2,702		25			52		-		2,625
Research and development		13,321		9			1		-		13,311
Restructuring costs		151		-			151		-		-
Other (income) expense, net		172		(3	)		-		194		(19	)

Second Quarter 2022
Cost of sales	$	4,216	$	451		$	67	$	-	$	3,698
Selling, general and administrative		2,512		65			27		-		2,420
Research and development		2,798		12			22		-		2,764
Restructuring costs		142		-			142		-		-
Other (income) expense, net		438		2			-		234		202

GAAP Expense, EPS and Related Information

Gross margin was 73.2% for the second quarter of 2023 compared with 71.1% for the second quarter of 2022. The increase was primarily due to lower LAGEVRIO sales, which have a low gross margin, as well as the favorable impact of product mix. The gross margin increase was partially offset by the unfavorable impact of foreign exchange.

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

- 5 -

Selling, general and administrative (SG&A) expenses were $2.7 billion in the second quarter of 2023, an increase of 8% compared with the second quarter of 2022. The increase was primarily due to higher administrative costs, including higher compensation and benefit costs, and higher promotional spending, partially offset by lower acquisition- and divestiture- related costs and the favorable impact of foreign exchange.

Research and development (R&D) expenses were $13.3 billion in the second quarter of 2023 compared with $2.8 billion in the second quarter of 2022. The increase was primarily due to a $10.2 billion charge for the acquisition of Prometheus. The remaining increase was driven by higher compensation and benefit costs, reflecting in part increased headcount, higher investments in discovery research and early drug development, and higher clinical development spending.

Other (income) expense, net, was $172 million of expense in the second quarter of 2023 compared with $438 million of expense in the second quarter of 2022, primarily due to lower net losses from investments in equity securities and lower pension settlement costs.

The income tax provision for the second quarter of 2023 was $637 million on a pretax loss of $5.3 billion, resulting in an effective tax rate of (11.9)%. This effective tax rate includes a 25.1 percentage point unfavorable impact of the charge for the acquisition of Prometheus, for which no tax benefit was recorded.

GAAP loss per share was $2.35 for the second quarter of 2023 compared with earnings per share of $1.55 for the second quarter of 2022.

Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 76.6% for the second quarter of 2023 compared with 74.7% for the second quarter of 2022. The increase was primarily due to lower LAGEVRIO sales, which have a low gross margin, as well as the favorable impact of product mix. The gross margin increase was partially offset by the unfavorable impact of foreign exchange.

Non-GAAP SG&A expenses were $2.6 billion in the second quarter of 2023, an increase of 8% compared with the second quarter of 2022. The increase was primarily due to higher administrative costs, including higher compensation and benefit costs, and higher promotional spending, partially offset by the favorable impact of foreign exchange.

Non-GAAP R&D expenses were $13.3 billion in the second quarter of 2023 compared with $2.8 billion in the second quarter of 2022. The increase was primarily due to a $10.2 billion charge for the acquisition of Prometheus. The remaining increase was driven by higher compensation and benefit costs, reflecting in part increased headcount, higher investments in discovery research and early drug development, and higher clinical development spending.

Non-GAAP other (income) expense, net, was $19 million of income in the second quarter of 2023 compared with $202 million of expense in the second quarter of 2022, primarily due to lower pension settlement costs.

- 6 -

The non-GAAP income tax provision for the second quarter of 2023 was $810 million on a pretax loss of $4.4 billion, resulting in a non-GAAP effective tax rate of (18.4)%. This effective tax rate includes a 32.5 percentage point unfavorable impact of the charge for the acquisition of Prometheus, for which no tax benefit was recorded.

Non-GAAP loss per share was $2.06 for the second quarter of 2023 compared with earnings per share of $1.87 for the second quarter of 2022.

A reconciliation of GAAP to non-GAAP net (loss) income and EPS is provided in the table that follows.

	Second Quarter
$ in millions, except EPS amounts	2023			2022
EPS
GAAP EPS	$	(2.35	)	$	1.55
Difference		0.29			0.32
Non-GAAP EPS that excludes items listed below²	$	(2.06	)	$	1.87

Net (Loss) Income
GAAP net (loss) income¹	$	(5,975	)	$	3,944
Difference		755			799
Non-GAAP net (loss) income that excludes items listed below^1,2	$	(5,220	)	$	4,743

Excluded Items:
Acquisition- and divestiture-related costs³	$	498		$	530
Restructuring costs		236			258
Loss from investments in equity securities		194			234
Increase to net loss / decrease to net income before taxes		928			1,022
Estimated income tax (benefit) expense		(173	)		(223	)
Increase to net loss / decrease to net income	$	755		$	799

Pipeline and Portfolio Highlights

Merck’s expansive research efforts resulted in continued progress across its broad pipeline and portfolio. In oncology, the company reached regulatory milestones across different stages of cancer and shared positive results from a range of clinical trials. Notably, Merck presented data on four approved medicines and two pipeline candidates in more than 25 types of cancer at the 2023 American Society of Clinical Oncology (ASCO) Annual Meeting, including investigational data for KEYTRUDA that demonstrates its progress in earlier stages of disease.

Further, in vaccines, Merck announced positive topline results demonstrating that V116, an investigational 21-valent pneumococcal conjugate vaccine specifically designed for adults, met key immunogenicity and safety endpoints in two Phase 3 trials. In cardiovascular, Merck submitted a Biologics License Application to the U.S. Food and Drug Administration (FDA) for sotatercept, Merck’s novel investigational activin signaling inhibitor for the treatment of adults with pulmonary arterial hypertension (World Health Organization Group 1). In chronic cough, Merck received an acceptance from the FDA for the resubmission of the New Drug Application for gefapixant and assigned a target action date of Dec. 27, 2023.

- 7 -

Merck also completed the acquisition of Prometheus, which will accelerate the company’s growing presence in immunology and add diversity to its pipeline. Prometheus’ leading clinical candidate, MK-7240, formerly known as PRA-023, creates an opportunity for Merck to transform the treatment of immune-mediated diseases.

Notable recent news releases on Merck’s pipeline and portfolio are provided in the table that follows.

Oncology	FDA Approved Lynparza Plus Abiraterone and Prednisone or Prednisolone for Treatment of Adult Patients With BRCA-Mutated Metastatic Castration-Resistant Prostate Cancer	(Read Announcement)
	FDA Accepted Application for Merck’s KEYTRUDA Plus Chemotherapy as Treatment for Advanced or Unresectable Biliary Tract Cancer	(Read Announcement)
	Merck’s KEYTRUDA Plus Chemotherapy Before Surgery and Continued as a Single Agent After Surgery Reduced the Risk of Event-Free Survival Events by 42% Versus Pre-Operative Chemotherapy in Resectable Stage II, IIIA or IIIB NSCLC	(Read Announcement)
	Merck and Moderna Initiated Phase 3 Study Evaluating V940 (mRNA-4157) In Combination With KEYTRUDA for Adjuvant Treatment of Patients With Resected High-Risk (Stage IIB-IV) Melanoma	(Read Announcement)
	Merck and Moderna Announced mRNA-4157 (V940) in Combination With KEYTRUDA Demonstrated a Statistically Significant and Clinically Meaningful Improvement in Distant Metastasis-Free Survival in Patients With High-Risk Stage III/IV Melanoma Following Complete Resection Versus KEYTRUDA	(Read Announcement)
	KEYTRUDA Plus Chemotherapy Significantly Improved Overall Survival Versus Chemotherapy Alone as First-Line Treatment for Unresectable Advanced Pleural Mesothelioma	(Read Announcement)
	KEYTRUDA Plus Lenvima Demonstrated Long-Term, Durable Survival Benefit Versus Sunitinib as First-Line Treatment for Patients With Advanced RCC	(Read Announcement)
	Merck Announced Phase 3 KEYNOTE-A18 Trial Met Primary Endpoint of Progression-Free Survival (PFS) in Patients With Newly Diagnosed High-Risk Locally Advanced Cervical Cancer	(Read Announcement)
	KEYTRUDA Plus Trastuzumab and Chemotherapy Met Primary Endpoint of PFS as First-Line Treatment in Patients With HER2-Positive Advanced Gastric or Gastroesophageal Junction Adenocarcinoma	(Read Announcement)
Vaccines	Merck Announced V116, an Investigational, 21-Valent Pneumococcal Conjugate Vaccine Specifically Designed for Adults, Met Key Immunogenicity and Safety Endpoints in Two Phase 3 Trials	(Read Announcement)
Other Pipeline Updates	FDA Approved New Indication for Merck’s PREVYMIS for Prevention of Cytomegalovirus Disease in High-Risk Adult Kidney Transplant Recipients	(Read Announcement)
	Merck Presented Phase 2a Data for Efinopegdutide (MK-6024), an Investigational GLP-1/Glucagon Receptor Co-agonist, in Patients With Nonalcoholic Fatty Liver Disease, at EASL 2023; Additionally, Efinopegdutide Was Granted Fast Track Designation by the FDA for the Treatment of Nonalcoholic Steatohepatitis (NASH)	(Read Announcement)
	Merck Received Positive European Union Committee for Medicinal Products for Human Use (CHMP) Opinion for Gefapixant	(Read Announcement)

- 8 -

Full-Year 2023 Financial Outlook

The following table summarizes the company’s full-year financial outlook.

Sales*		$58.6 to $59.6 billion
Non-GAAP Gross margin²		Approximately 77%
Non-GAAP Operating expenses^2**		$34.0 to $34.6 billion
Non-GAAP Other (income) expense, net²		Approximately $100 million
Non-GAAP Effective tax rate^2***		30.5% to 31.5%
Non-GAAP EPS^2****		$2.95 to $3.05
Share count (assuming dilution)		2.55 billion

*Includes approximately $1.0 billion of LAGEVRIO sales. The company does not have any non-GAAP adjustments to sales.

**Includes an aggregate $11.6 billion of R&D expenses related to the Prometheus and Imago BioSciences, Inc. (Imago) acquisitions and upfront payment for the license and collaboration agreement with Kelun-Biotech (a holding subsidiary of Sichuan Kelun Pharmaceutical Co., Ltd). Outlook does not assume any additional significant potential business development transactions.

***Includes a negative impact of 15 percentage points from the one-time charge for the acquisition of Prometheus.

****Includes $4.53 of one-time charges related to the Prometheus and Imago acquisitions and upfront payment to Kelun-Biotech.

Merck has not provided a reconciliation of forward-looking non-GAAP gross margin, non-GAAP operating expenses, non-GAAP other (income) expense, net, non-GAAP effective tax rate and non-GAAP EPS to the most directly comparable GAAP measures, given it cannot predict with reasonable certainty the amounts necessary for such a reconciliation, including intangible asset impairment charges, legal settlements, and gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds, without unreasonable effort. These items are inherently difficult to forecast and could have a significant impact on the company’s future GAAP results.

Merck continues to experience strong global demand for key growth products, particularly in oncology and vaccines. As a result, Merck is raising and narrowing its full-year sales outlook. Merck now expects full-year sales to be between $58.6 billion and $59.6 billion, including a negative impact of foreign exchange of approximately 2 percentage points, at mid-July 2023 exchange rates. This full-year outlook continues to include approximately $1.0 billion of LAGEVRIO sales.

Merck’s full-year non-GAAP effective income tax rate is expected to be between 30.5% and 31.5%, including an unfavorable impact of approximately 15 percentage points from the non-tax deductible one-time charge for the acquisition of Prometheus.

Merck now expects its full-year non-GAAP EPS to be between $2.95 and $3.05, including a negative impact of foreign exchange of approximately 5 percentage points, at mid-July 2023 exchange rates. This revised non-GAAP EPS range reflects the following, which were not previously included in the outlook:

Additional strength in the business of approximately $0.24 per share.

A charge of $10.2 billion, or $4.02 per share, for the acquisition of Prometheus.

Estimated 2023 expense of approximately $0.14 per share to be incurred to finance the Prometheus acquisition and to advance the acquired assets.

- 9 -

A less than 1%, or approximately $0.02 per share, incremental negative impact of foreign exchange.

The non-GAAP EPS range excludes acquisition- and divestiture-related costs and costs related to restructuring programs, as well as income and losses from investments in equity securities, and a previously disclosed charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Tuesday, Aug. 1, at 8 a.m. ET via this weblink. A replay of the webcast, along with the sales and earnings news release, supplemental financial disclosures, prepared remarks and slides highlighting the results, will be available at www.merck.com.

All participants may join the call by dialing (888) 769-8514 (U.S. and Canada Toll-Free) or (517) 308-9208 and using the access code 8206435.

About Merck

At Merck, known as MSD outside of the United States and Canada, we are unified around our purpose: We use the power of leading-edge science to save and improve lives around the world. For more than 130 years, we have brought hope to humanity through the development of important medicines and vaccines. We aspire to be the premier research-intensive biopharmaceutical company in the world – and today, we are at the forefront of research to deliver innovative health solutions that advance the prevention and treatment of diseases in people and animals. We foster a diverse and inclusive global workforce and operate responsibly every day to enable a safe, sustainable and healthy future for all people and communities. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.

Forward-Looking Statement of Merck & Co., Inc., Rahway, N.J., USA

This news release of Merck & Co., Inc., Rahway, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline candidates that the candidates will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

- 10 -

Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of the global outbreak of novel coronavirus disease (COVID-19); the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2022, and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

Appendix

Generic product names are provided below.

Pharmaceutical

BRIDION (sugammadex)

GARDASIL (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant)

GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant)

JANUMET (sitagliptin and metformin HCl)

JANUVIA (sitagliptin)

KEYTRUDA (pembrolizumab)

LAGEVRIO (molnupiravir)

Lenvima (lenvatinib)

Lynparza (olaparib)

M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live)

PREVYMIS (letermovir)

PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live)

SIMPONI (golimumab)

VARIVAX (Varicella Virus Vaccine Live)

VAXNEUVANCE (Pneumococcal 15-valent Conjugate Vaccine)

Animal Health

BRAVECTO (fluralaner)

###

- 11 -

Media Contacts: Investor Contacts:

Robert Josephson

(203) 914-2372

robert.josephson@merck.com

Michael Levey

(215) 872-1462

michael.levey@merck.com

Peter Dannenbaum

(732) 594-1579

peter.dannenbaum@merck.com

Steven Graziano

(732) 594-1583

steven.graziano@merck.com

CONSOLIDATED STATEMENT OF OPERATIONS - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1

	GAAP									GAAP
	2Q23			2Q22			% Change			June YTD 2023			June YTD 2022			% Change
Sales	$	15,035		$	14,593			3	%	$	29,522		$	30,494			-3	%

Costs, Expenses and Other
Cost of sales		4,024			4,216			-5	%		7,951			9,596			-17	%
Selling, general and administrative		2,702			2,512			8	%		5,182			4,834			7	%
Research and development		13,321			2,798			*			17,597			5,374			*
Restructuring costs		151			142			6	%		218			194			12	%
Other (income) expense, net		172			438			-61	%		259			1,148			-77	%
(Loss) Income Before Taxes		(5,335	)		4,487			*			(1,685	)		9,348			*
Income Tax Provision		637			538						1,462			1,092
Net (Loss) Income		(5,972	)		3,949			*			(3,147	)		8,256			*
Less: Net Income Attributable to Noncontrolling Interests		3			5						7			2
Net (Loss) Income Attributable to Merck & Co., Inc.	$	(5,975	)	$	3,944			*		$	(3,154	)	$	8,254			*

(Loss) Earnings per Common Share Assuming Dilution ⁽¹⁾	$	(2.35	)	$	1.55			*		$	(1.24	)	$	3.25			*

Average Shares Outstanding Assuming Dilution ⁽¹⁾		2,539			2,540						2,539			2,538
Tax Rate		-11.9	%		12.0	%					-86.8	%		11.7	%

* 100% or greater

⁽¹⁾ Because the company recorded a net loss in the second quarter and first six months of 2023, no potential dilutive common shares were used in the computation of loss per common share assuming dilution as the effect would have been anti-dilutive.

MERCK & CO., INC.

THREE AND SIX MONTHS ENDED JUNE 30, 2023 GAAP TO NON-GAAP RECONCILIATION

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2a

	GAAP			Acquisition and Divestiture- Related Costs ⁽¹⁾			Restructuring Costs ⁽²⁾			(Income) Loss from Investments in Equity Securities			Certain Other Items			Adjustment Subtotal			Non-GAAP
Second Quarter
Cost of sales	$	4,024			467			32									499		$	3,525
Selling, general and administrative		2,702			25			52									77			2,625
Research and development		13,321			9			1									10			13,311
Restructuring costs		151						151									151			-
Other (income) expense, net		172			(3	)					194						191			(19	)
Loss Before Taxes		(5,335	)		(498	)		(236	)		(194	)					(928	)		(4,407	)
Income Tax Provision (Benefit)		637			(91	)⁽⁴⁾		(38	)⁽⁴⁾		(44	)⁽⁴⁾					(173	)		810
Net Loss		(5,972	)		(407	)		(198	)		(150	)					(755	)		(5,217	)
Net Loss Attributable to Merck & Co., Inc.		(5,975	)		(407	)		(198	)		(150	)					(755	)		(5,220	)
Loss per Common Share Assuming Dilution⁽⁵⁾	$	(2.35	)		(0.16	)		(0.07	)		(0.06	)					(0.29	)	$	(2.06	)

Tax Rate		-11.9	%																	-18.4	%

June YTD
Cost of sales	$	7,951			1,012			61									1,073		$	6,878
Selling, general and administrative		5,182			45			53									98			5,084
Research and development		17,597			19			1									20			17,577
Restructuring costs		218						218									218			-
Other (income) expense, net		259			12						(235	)		573	⁽³⁾		350			(91	)
(Loss) Income Before Taxes		(1,685	)		(1,088	)		(333	)		235			(573	)		(1,759	)		74
Income Tax Provision (Benefit)		1,462			(196	)⁽⁴⁾		(56	)⁽⁴⁾		51	⁽⁴⁾		(60	)⁽⁴⁾		(261	)		1,723
Net Loss		(3,147	)		(892	)		(277	)		184			(513	)		(1,498	)		(1,649	)
Net Loss Attributable to Merck & Co., Inc.		(3,154	)		(892	)		(277	)		184			(513	)		(1,498	)		(1,656	)
Loss per Common Share Assuming Dilution⁽⁵⁾	$	(1.24	)		(0.35	)		(0.11	)		0.07			(0.20	)		(0.59	)	$	(0.65	)

Tax Rate		-86.8	%																	2,328.4	%

Only the line items that are affected by non-GAAP adjustments are shown.

Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing non-GAAP information enhances investors’ understanding of the company’s results because management uses non-GAAP measures to assess performance. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. In addition, senior management’s annual compensation is derived in part using a non-GAAP pretax income metric. The non-GAAP information presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

⁽¹⁾Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets. Amounts included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to acquisitions and divestitures. Amounts included in research and development expenses primarily reflect expenses for the amortization of intangible assets. Amounts included in other (income) expense, net, for the six-month period primarily reflect a $37 million loss on the sale of a business and an increase in the estimated fair value measurement of liabilities for contingent consideration related to the prior termination of the Sanofi-Pasteur MSD joint venture, partially offset by royalty income.

⁽²⁾Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs.

⁽³⁾ Reflects a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.

⁽⁴⁾ Represents the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

⁽⁵⁾ Because the company recorded a net loss in the second quarter and first six months of 2023, no potential dilutive common shares were used in the computation of loss per common share assuming dilution as the effect would have been anti-dilutive.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3

	2023						2022												2Q				June YTD
	1Q		2Q		June YTD		1Q		2Q		June YTD		3Q		4Q		Full Year		Nom %		Ex-Exch %		Nom %		Ex-Exch %
TOTAL SALES ⁽¹⁾	$	14,487	$	15,035	$	29,522	$	15,901	$	14,593	$	30,494	$	14,959	$	13,830	$	59,283		3		7		-3		-
PHARMACEUTICAL		12,721		13,457		26,179		14,107		12,756		26,863		12,963		12,180		52,005		6		8		-3		-
Oncology
Keytruda		5,795		6,271		12,065		4,809		5,252		10,061		5,426		5,450		20,937		19		21		20		23
Alliance Revenue – Lynparza ⁽²⁾		275		310		585		266		275		541		284		292		1,116		13		15		8		12
Alliance Revenue – Lenvima ⁽²⁾		232		242		474		227		231		459		202		216		876		5		6		3		5
Welireg		42		50		92		18		27		45		38		40		123		89		89		105		105
Alliance Revenue – Reblozyl ⁽³⁾		43		47		90		52		33		86		39		41		166		41		41		4		4
Vaccines ⁽⁴⁾
Gardasil / Gardasil 9		1,972		2,458		4,430		1,460		1,674		3,133		2,294		1,470		6,897		47		53		41		48
ProQuad / M-M-R II / Varivax		528		582		1,109		470		578		1,047		668		526		2,241		1		1		6		7
RotaTeq		297		131		428		216		173		389		256		139		783		-25		-24		10		13
Vaxneuvance		106		168		274		5		12		16		16		138		170		*		*		*		*
Pneumovax 23		96		92		188		173		153		325		131		145		602		-40		-38		-42		-39
Vaqta		40		42		82		36		35		71		64		39		173		20		20		16		17
Hospital Acute Care
Bridion		487		502		989		395		426		821		423		441		1,685		18		19		21		23
Prevymis		129		143		273		94		103		197		114		118		428		39		42		39		43
Dificid		65		76		141		52		66		119		77		67		263		14		14		19		19
Primaxin		80		53		133		58		64		122		63		54		239		-16		-12		9		17
Noxafil		60		55		116		57		60		118		62		58		238		-8		-3		-2		5
Zerbaxa		50		54		104		30		46		76		43		49		169		17		18		36		39
Cardiovascular
Alliance Revenue - Adempas/Verquvo ⁽⁵⁾		99		68		167		72		98		170		88		82		341		-31		-31		-2		-2
Adempas ⁽⁶⁾		59		65		125		61		63		124		57		57		238		3		5		-		5
Virology
Lagevrio		392		203		595		3,247		1,177		4,424		436		825		5,684		-83		-82		-87		-85
Isentress / Isentress HD		123		136		259		158		147		305		161		167		633		-7		-4		-15		-12
Neuroscience
Belsomra		56		63		119		69		69		137		62		59		258		-9		-4		-14		-7
Immunology
Simponi		180		180		359		186		181		366		173		166		706		-1		-1		-2		1
Remicade		51		48		99		61		53		114		49		44		207		-11		-10		-13		-10
Diabetes ⁽⁷⁾
Januvia		551		511		1,062		779		756		1,535		717		561		2,813		-33		-30		-31		-28
Janumet		329		354		683		454		476		931		417		353		1,700		-26		-23		-27		-24
Other Pharmaceutical ⁽⁸⁾		584		553		1,138		602		528		1,131		603		583		2,319		5		8		1		4
ANIMAL HEALTH		1,491		1,456		2,947		1,482		1,467		2,949		1,371		1,230		5,550		-1		2		-		4
Livestock		849		807		1,656		832		826		1,658		829		814		3,300		-2		2		-		5
Companion Animal		642		649		1,291		650		641		1,291		542		416		2,250		1		2		-		2
Other Revenues ⁽⁹⁾		275		122		396		312		370		682		625		420		1,728		-67		-19		-42		-20

*200% or greater

⁽¹⁾Only select products are shown.

⁽²⁾Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

⁽³⁾Alliance Revenue represents royalties and a milestone payment of $20 million received in the first quarter of 2022.

⁽⁴⁾Total Vaccines sales were $3,133 million and $3,557 million in the first and second quarter of 2023, respectively, and $2,481 million and $2,709 million in the first and second quarter of 2022, respectively.

⁽⁵⁾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.

⁽⁶⁾Net product sales in Merck's marketing territories.

⁽⁷⁾Total Diabetes sales were $950 million and $951 million in the first and second quarter of 2023, respectively, and $1,305 million and $1,300 million in the first and second quarter of 2022, respectively.

⁽⁸⁾Includes Pharmaceutical products not individually shown above.

⁽⁹⁾Other Revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities. Other Revenues related to the receipt of upfront and milestone payments for out-licensed products were $51 million and $3 million in the first and second quarter of 2023, respectively, and $114 million and $32 million in the first and second quarter of 2022, respectively.