What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-05 compared with 2025-05-02 · 299 added, 176 removed, 384 unchanged (55% of the section changed)

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Below is a summary of significant business development activity thus far in 2025.

In March 2025, Merck and Jiangsu Hengrui Pharmaceuticals Co., Ltd.

(Hengrui Pharma) announced that the companies have entered into an exclusive license agreement for HRS-5346, an investigational oral small molecule Lipoprotein(a) inhibitor, which is currently being evaluated in a Phase 2 clinical trial in China.

Under the agreement, Hengrui Pharma granted Merck exclusive rights to develop, manufacture and commercialize HRS-5346 worldwide, excluding the Greater China region.

Hengrui Pharma will receive an upfront payment of $200 million and is eligible to receive future contingent payments associated with certain developmental, regulatory and sales-based milestones, as well as tiered royalties on future net sales of HRS-5346, if approved.

Closing of the proposed transaction is subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions.

Merck expects to record a pretax charge of $200 million to Research and development expenses, or approximately $0.06 per share, upon closing, which is anticipated in the second quarter of 2025.

Also in March 2025, Merck acquired the Dundalk, Ireland facility of WuXi Vaccines (a wholly owned subsidiary of WuXi Biologics), which was accounted for as an asset acquisition.

In July 2025, Merck entered into a definitive agreement to acquire Verona Pharma plc (Verona Pharma), a biopharmaceutical company focused on respiratory diseases, for $107 per American Depository Share (each of which represents eight Verona Pharma ordinary shares) for a total transaction value of approximately $10 billion.

Through this acquisition, Merck will acquire Ohtuvayre (ensifentrine), a first-in-class selective dual inhibitor of phosphodiesterases 3 and 4 (PDE3 and PDE4), which was approved in the U.S.

in June 2024 for the maintenance treatment of chronic obstructive pulmonary disease (COPD) in adult patients and is also being evaluated in clinical trials for the treatment of non-cystic fibrosis bronchiectasis.

Closing of the acquisition is expected in the fourth quarter of 2025, but is subject to certain conditions, including approval under the Hart-Scott-Rodino Antitrust Improvements Act, approval of Verona Pharma’s shareholders, sanction by the High Court of Justice of England and Wales and other customary conditions.

If the proposed transaction closes, the Company expects to capitalize most of the purchase price as an intangible asset for Ohtuvayre.

Also in July 2025, the technology transfer for MK-2010 (LM-299), a novel investigational PD-1/vascular endothelial growth factor (VEGF) bispecific antibody that was licensed from LaNova Medicines Ltd (LaNova) in 2024, was completed.

Accordingly, Merck will make a $300 million payment to LaNova, which will be recorded as a charge to Research and development expenses in the third quarter of 2025, or approximately $0.09 per share.

In May 2025, Merck and Jiangsu Hengrui Pharmaceuticals Co., Ltd.

(Hengrui Pharma) closed an exclusive license agreement for MK-7262 (HRS-5346), an investigational oral small molecule Lipoprotein(a) inhibitor, which is currently being evaluated in a Phase 2 clinical trial in China.

Under the agreement, Hengrui Pharma granted Merck exclusive rights to develop, manufacture and commercialize MK-7262 (HRS-5346) worldwide, excluding the Greater China region.

Merck recorded a pretax charge of $200 million to Research and development expenses in the second quarter of 2025, or approximately $0.07 per share, for the upfront payment.

Hengrui Pharma is also eligible to receive future contingent payments associated with certain developmental, regulatory and sales-based milestones, as well as tiered royalties on future net sales of MK-7262 (HRS-5346), if approved.

In March 2025, Merck acquired the Dundalk, Ireland facility of WuXi Vaccines (a wholly owned subsidiary of WuXi Biologics), which was accounted for as an asset acquisition.

Merck paid $437 million at closing which, combined with previous consideration transferred under a prior manufacturing arrangement with WuXi Vaccines related to this facility, resulted in $759 million being recorded as assets under construction within Property, Plant and Equipment .

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Department of HHS, through the CMS, announced that Janumet and Janumet XR would be in included in the second year of the IRA’s Program, with government price setting to become effective on January 1, 2027.

As a result of the passage of H.R.1 - One Big Beautiful Bill Act (OBBBA), the Company believes that Keytruda will not be eligible to be selected in 2026 for government price setting under the IRA, which would become effective on January 1, 2028.

Instead, Keytruda will now be eligible to be selected in 2027 for government price setting to become effective on January 1, 2029.

The Company has sued the U.S.

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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 three months of 2025 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs.

In addition, the Company’s sales performance in the first six months of 2025 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs.

The Company anticipates all of these actions and additional actions in the future will continue to negatively affect sales and profits.

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The impact of the tariffs on Merck’s business depends on a number of factors including the duration, scope and amount of the tariffs, as well as the extent of any measures that have been or will be taken by any affected countries, including tariffs imposed by foreign governments.

At this time, the Company anticipates that tariffs implemented to date will result in approximately $200 million of additional expenses in 2025 (which will be primarily reflected within Cost of sales ) the vast majority of which relate to China, largely related to the importation of products into China.

However, future changes to tariffs could have a further adverse effect on the Company’s business.

In particular, the U.S.

government has indicated that it intends to impose tariffs on pharmaceutical products, although the specific amount and timing of any such future tariffs has not been provided.

government has indicated that it intends to impose tariffs on pharmaceutical products.

In addition, in May 2025, the U.S.

government announced an executive order that seeks to impose a “Most Favored Nation” drug pricing policy.

The policy would tie drug reimbursement in the U.S.

to the drug price in certain foreign developed countries and could result in reduced prices and reimbursement for certain of the Company’s products in the U.S.

The impact of this executive order to the Company is uncertain and will be dependent upon many factors, including if and how this drug pricing policy is implemented.

Operating Results

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United States $ 8,836 $ 7,876 12 % 12 % $ 17,359 $ 15,354 13 % 13 %

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Total $ 15,806 $ 16,112 (2) % (2) % $ 31,335 $ 31,887 (2) % — %

Worldwide sales were $15.5 billion in the first quarter of 2025, a decrease of 2% compared with the first quarter of 2024, reflecting declines in vaccines, virology and immunology, partially offset by growth in oncology, cardiovascular, diabetes and animal health.

The decline in vaccines was primarily due to lower combined Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine and Recombinant) /Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) sales, partially offset by the U.S.

plus international may not equal total due to rounding.

Worldwide sales were $15.8 billion and $31.3 billion in the second quarter and first six months of 2025, respectively, declines of 2% compared with the same periods of 2024.

The declines reflect lower sales in vaccines, immunology, and virology, partially offset by growth in oncology, cardiovascular, and animal health.

Higher revenue in diabetes also partially offset the sales decline in the first six months of 2025.

The declines in vaccines revenue in both the second quarter and first six months of 2025 were primarily due to lower combined Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine and Recombinant) /Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) sales, partially offset by the U.S.

launch of Capvaxive (Pneumococcal 21-valent Conjugate Vaccine).

The decline in virology was primarily due to lower sales of Lagevrio (molnupiravir) and the decline in immunology resulted from the transfer of marketing rights for Remicade and Simponi back to Johnson & Johnson on October 1, 2024.

Growth in the oncology franchise was largely due to the performance of Keytruda (pembrolizumab) and Welireg (belzutifan), growth in the cardiovascular franchise was largely attributable to the ongoing launch of Winrevair (sotatercept-csrk), and the increase in diabetes was due to Januvia .

The declines in immunology in both periods resulted from the transfer of marketing rights for Simponi (golimumab) and Remicade (infliximab) back to Johnson & Johnson on October 1, 2024, and the declines in virology were primarily due to lower sales of Lagevrio (molnupiravir).

Growth in the oncology franchise in both the second quarter and first six months of 2025 was largely due to the performance of Keytruda (pembrolizumab) and Welireg (belzutifan), as well as higher alliance revenue from Lynparza (olaparib).

Growth in the cardiovascular franchise in both periods was largely attributable to the ongoing launch of Winrevair (sotatercept-csrk).

The increase in diabetes franchise sales in the first six months of 2025 was due to Januvia .

See Note 14 to the condensed consolidated financial statements for details on sales of the Company’s products.

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Keytruda $ 7,956 $ 7,270 9 % 9 % $ 15,161 $ 14,217 7 % 8 %

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(2) Alliance revenue for Reblozyl represents royalties (see Note 3 to the condensed consolidated financial statements).

Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved in over 40 indications in the U.S., including 18 tumor types and 2 tumor-agnostic indications, and has similarly been approved in markets worldwide for many of these indications.

of these indications.

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 4% in the first quarter of 2025.

Global sales of Keytruda grew 9% and 7% in the second quarter and first six months of 2025, respectively.

Keytruda sales growth in the U.S.

reflects higher demand and pricing, partially offset by an approximate $250 million negative impact due to the timing of wholesaler purchases.

Demand was driven by increased utilization across earlier-stage indications, including in certain types of high-risk early-stage triple-negative breast cancer (TNBC), renal cell carcinoma (RCC), and non-small-cell lung cancer (NSCLC), as well as higher demand across the multiple approved metastatic indications, in particular for the treatment of certain types of urothelial and endometrial cancers.

Keytruda sales growth in international markets reflects higher demand predominately for the TNBC, NSCLC and RCC earlier-stage indications, as well as uptake in gastric, urothelial, and cervical cancer metastatic indications.

The 2025 launch and reimbursement of new indications for Keytruda in the EU is having a negative impact on pricing in those markets.

in both periods reflects higher demand and pricing.

sales growth in the year-to-date period reflects an approximate $200 million negative impact due to the timing of wholesaler purchases.

Demand in the U.S.

in both periods was driven by increased utilization across the multiple approved metastatic indications, in particular for the treatment of certain types of urothelial and endometrial cancers, as well as higher demand across earlier-stage indications, including in certain types of non-small-cell lung cancer (NSCLC), renal cell carcinoma (RCC), cervical cancer, and high-risk early-stage triple-negative breast cancer (TNBC).

Keytruda sales growth in international markets reflects higher demand predominately for the TNBC, NSCLC and RCC earlier-stage indications, as well as uptake in urothelial, gastric, and cervical cancer metastatic indications.

The 2025 launch and reimbursement of new indications for Keytruda in the European Union (EU) is having a negative impact on pricing in those markets.

In addition, a biosimilar of Keytruda has launched in Argentina.

Keytruda has received the following regulatory approvals thus far in 2025.

Date Approval

China’s National Medical Products Administration (NMPA) approval in combination with Padcev (enfortumab vedotin-ejfv), an antibody-drug conjugate, for the treatment of adults with locally advanced or metastatic urothelial carcinoma, based on the KEYNOTE-A39 trial that was conducted in collaboration with Seagen (now Pfizer Inc.) and Astellas.

China’s National Medical Products Administration (NMPA) approval in combination with enfortumab vedotin, an antibody-drug conjugate, for the treatment of adults with locally advanced or metastatic urothelial carcinoma, based on the KEYNOTE-A39 trial that was conducted in collaboration with Seagen (now Pfizer Inc.) and Astellas.

European Commission (EC) approval in combination with pemetrexed and platinum chemotherapy for the first-line treatment of adult patients with unresectable non epithelioid malignant pleural mesothelioma, based on the IND.227/KEYNOTE-483 trial.

Japan’s Ministry of Health, Labor and Welfare (MHLW) approval in combination with trastuzumab and chemotherapy for the first-line treatment of patients with unresectable, advanced or recurrent HER2 positive gastric or gastroesophageal junction adenocarcinoma, based on the KEYNOTE-811 trial.

Japan’s MHLW approval in combination with pemetrexed and platinum chemotherapy for unresectable, advanced or recurrent metastatic malignant pleural mesothelioma, based on the IND.227/KEYNOTE-483 trial.

Food and Drug Administration (FDA) approval for the treatment of adult patients with resectable locally advanced head and neck squamous cell carcinoma whose tumors express PD-L1 CPS (≥1) as determined by an FDA-approved test, as a single agent as neoadjuvant treatment, continued as adjuvant treatment in combination with radiotherapy with or without cisplatin and then as a single agent, based on the KEYNOTE-689 trial.

The Company is a party to license agreements pursuant to which the Company pays royalties on net sales of Keytruda .

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The royalty expenses are included in Cost of sales .

Lynparza (olaparib) is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed and commercialized as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see Note 3 to the condensed consolidated financial statements).

Lynparza is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed and commercialized as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see Note 3 to the condensed consolidated financial statements).

Lynparza is approved for the treatment of certain types of advanced or recurrent ovarian, early or metastatic breast, metastatic pancreatic and metastatic castration-resistant prostate cancers.

Alliance revenue related to Lynparza increased 7% in the first

quarter of 2025 primarily due to higher demand in the U.S.

and certain international markets.

Alliance revenue related to Lynparza increased 17% and 12% in the second quarter and first six months of 2025, respectively, primarily due to higher demand in several international markets and in the U.S.

In January 2025, China’s NMPA approved Lynparza as adjuvant treatment for adult patients with germline BRCA -mutated, human epidermal growth factor receptor 2 (HER2)-negative high-risk early breast cancer, based on the OlympiA trial.

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(Eisai) (see Note 3 to the condensed consolidated financial statements).

Lenvima is approved for the treatment of certain types of thyroid cancer, RCC, hepatocellular carcinoma, in combination with everolimus for certain patients with advanced RCC, and in combination with Keytruda for certain patients with advanced endometrial carcinoma or advanced RCC.

Alliance revenue related to Lenvima increased 1% in the first quarter of 2025 primarily reflecting higher demand in the U.S.

Sales of Welireg , for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors and certain adult patients with previously treated advanced RCC, rose 62% in the first quarter of 2025.

Lenvima is approved for the treatment of certain types of thyroid cancer, RCC, hepatocellular carcinoma (HCC), in combination with everolimus for certain patients with advanced RCC, and in combination with Keytruda for certain patients with advanced endometrial carcinoma or advanced RCC.

Alliance revenue related to Lenvima increased 6% and 4% in the second quarter and first six months of 2025, respectively, primarily due to higher sales in the U.S.

reflecting increased demand that was partially offset by lower pricing.

In June 2025, Lenvima plus Keytruda was approved in China in combination with transarterial chemoembolization for the treatment of patients with unresectable, non-metastatic HCC based on the LEAP-012 clinical trial.

Sales of Welireg , for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors, certain adult patients with previously treated advanced RCC, and certain patients with pheochromocytoma and paraganglioma, rose 29% and 42% in the second quarter and first six months of 2025, respectively.

Sales growth was primarily due to higher demand in the U.S.

reflecting in part continued uptake of the RCC indication following approval by the U.S.

Food and Drug Administration (FDA) in 2023.

In February 2025, the EC conditionally approved Welireg as monotherapy both for the treatment of adult patients with VHL disease who require therapy for associated, localized RCC, central nervous system hemangioblastomas, or pancreatic neuroendocrine tumors, and for whom localized procedures are unsuitable, and for the treatment of adult patients with advanced clear cell RCC that progressed following two or more lines of therapy that included a PD-1 or PD-L1 inhibitor and at least two vascular endothelial growth factor targeted therapies.

The EC approval of these two indications is based on results from the LITESPARK-004 and LITESPARK-005 trials.

The conditional approval of Welireg will be valid for one year, subject to yearly renewal, pending certain additional clinical data.

and early launch uptake in certain EU markets, partially offset by lower pricing in the U.S.

Welireg has received the following regulatory approvals thus far in 2025.

Date Approval

February 2025

EC conditional approval as monotherapy for the treatment of adult patients with VHL disease who require therapy for associated, localized RCC, central nervous system hemangioblastomas, or pancreatic neuroendocrine tumors, and for whom localized procedures are unsuitable, based on the LITESPARK-004 trial.

February 2025

EC conditional approval for the treatment of adult patients with advanced clear cell RCC that progressed following two or more lines of therapy that included a PD-1 or PD-L1 inhibitor and at least two vascular endothelial growth factor targeted therapies, based on the LITESPARK-005 trial.

FDA approval for the treatment of adult and pediatric patients (12 years and older) with locally advanced, unresectable, or metastatic pheochromocytoma and paraganglioma, based on the LITESPARK-015 trial.

Japan’s MHLW approval as monotherapy for the treatment of adult patients with VHL disease-associated tumors, based on the LITESPARK-004 trial.

Japan’s MHLW approval for the treatment of adults with radically unresectable or metastatic RCC that has progressed after chemotherapy, based on the LITESPARK-005 trial.

The EC conditional approvals of Welireg noted above will be valid for one year, subject to yearly renewal, pending certain additional clinical data.

Timing for commercial availability of Welireg in individual EU countries will depend on multiple factors, including the completion of national reimbursement procedures.

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Reblozyl is approved for the treatment of anemia in certain rare blood disorders.

Alliance revenue related to this collaboration (consisting of royalties) increased 68% in the first quarter of 2025 primarily due to strong underlying sales performance, as well a favorable true-up of the previous quarter’s estimated royalty amount.

Alliance revenue related to this collaboration (consisting of royalties) increased 19% and 40% in the second quarter and first six months of 2025, respectively, primarily due to strong underlying sales performance.

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Gardasil/Gardasil 9

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Vaxneuvance 229 189 21 % 20 % 459 408 13 % 13 %

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), declined 41% in the first quarter of 2025 primarily driven by lower demand in China, partially offset by higher demand in most other international markets, particularly in Japan due to a national catch-up immunization program, and by higher pricing and demand in the U.S.

Demand in Japan is expected to decline significantly in future periods given that the last date to initiate the first dose in the national immunization program catch-up cohort was March 2025.

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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), declined 55% in the second quarter of 2025 primarily driven by lower demand in China (discussed below) and in Japan, reflecting in part that the last date to initiate the first dose in Japan’s national immunization program catch-up cohort was in March 2025.

Timing of public sector purchases in certain international markets also contributed to the second quarter 2025 Gardasil/Gardasil 9 sales decline.

Sales performance in the U.S.

in the second quarter of 2025 reflects higher pricing and demand, which was largely offset by the unfavorable effect of public sector buying patterns.

Gardasil/Gardasil 9 sales declined 48% in the first six months of 2025 primarily driven by lower demand in China (discussed below), partially offset by higher demand in certain international markets, as well as higher sales in the U.S.

Sales performance in the U.S.

in the first six months of 2025 reflects higher pricing and demand, which was partially offset by the unfavorable effect of public sector buying patterns.

Beginning in mid-2024, the Company observed a significant decline in shipments from its distributor and commercialization partner in China, Chongqing Zhifei Biological Products Co., Ltd.

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Lower demand in China persisted and, at the end of 2024, overall channel inventory levels in China remained elevated at above normal levels.

Therefore, the Company made a decision to temporarily pause shipments to China beginning in February 2025 through at least the middle of the year and, as a result, combined sales of Gardasil/Gardasil 9 will decline significantly in 2025 compared with 2024.

Therefore, the Company made a decision to temporarily pause shipments to China beginning in February 2025 and, given continued lower demand and elevated inventory levels in China thus far in 2025, the Company has determined it will not make any further shipments to China through at least the end of 2025.

As a result, combined sales of Gardasil/Gardasil 9 will decline significantly in 2025 compared with 2024.

In January 2025, China’s NMPA approved Gardasil for use in males 9-26 years of age to help prevent certain HPV-related cancers and diseases.

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for a two-dose regimen in adolescents aged 9-14 and a three-dose regimen for those aged 15-45.

Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP) has stated that at its meeting in June 2025 it intends to discuss and, potentially, vote on a change to the dose recommendation, which could include a reduction in the number of recommended doses.

Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP) has stated that it intends to discuss and, potentially, vote on a change to the dose recommendation, which could include a reduction in the number of recommended doses.

A number of countries outside the U.S., predominately low- and middle-income countries, have implemented a reduced dosing schedule for HPV vaccination.

The Company is a party to license agreements pursuant to which the Company pays royalties on sales of Gardasil/Gardasil 9.

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The royalty expenses are included in Cost of sales .

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, declined 41% in the first quarter of 2025.

As a result of manufacturing delays, in January 2025, the Company borrowed doses of ProQuad from the CDC Pediatric Vaccine Stockpile.

The borrowing reduced sales of ProQuad in the first quarter of 2025 by approximately $70 million.

These doses are being used to support routine vaccination 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 62% in the first quarter of 2025 primarily due to higher sales in the U.S.

largely reflecting private sector buy-in due to measles outbreaks, as well as higher pricing.

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), declined 5% in the first quarter of 2025 primarily due to lower demand in the U.S.

and declines in certain international markets, partially offset by higher pricing in the U.S.

declined 11% in the first six months of 2025.

As a result of manufacturing delays, in January 2025, the Company borrowed doses of ProQuad from the CDC Pediatric Vaccine Stockpile (CDC Stockpile), which are being used to support routine vaccination in the U.S.

The Company partially replenished the borrowing in the second quarter of 2025, which increased U.S.

sales of ProQuad by $24 million.

The net effect of the borrowing and partial replenishment resulted in a $49 million reduction of ProQuad sales in the first six months of 2025.

Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella, declined 15% in the second quarter of 2025 primarily due to lower sales in the U.S.

reflecting private sector buy-out, partially offset by higher demand due to measles outbreaks.

Sales of M-M-R II grew 22% in the first six months of 2025 primarily due to higher sales in the U.S.

largely reflecting higher pricing and increased demand due to measles outbreaks.

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), declined 10% and 7% in the second quarter and first six months of 2025, respectively, primarily due to lower sales in the U.S.

largely driven by unfavorable CDC Stockpile activity and lower demand, partially offset by higher pricing.

The unfavorable impact to Varivax sales from CDC Stockpile activity was offset by other CDC Stockpile activity as noted below.

The Company has experienced manufacturing delays related to ProQuad and Varivax .

As a result, the Company anticipates that some international markets will experience supply constraints during 2025.

Worldwide sales of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help protect against invasive pneumococcal disease caused by certain serotypes, grew 5% in the first quarter of 2025 primarily due to continued uptake following launches in the pediatric indication in Europe and certain countries in the Asia Pacific region, partially offset by lower demand in the U.S.

due to competitive pressure.

Worldwide sales of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help protect against invasive pneumococcal disease caused by certain serotypes, grew 21% in the second quarter of 2025 primarily due to approximately $60 million of favorable CDC Stockpile activity in the U.S.

and higher demand in certain international markets, partially offset by lower demand in the U.S.

and Japan due to competitive pressure.

The benefit to Vaxneuvance sales from CDC Stockpile activity was offset by a drawdown of CDC Stockpile inventory for Varivax (noted above) and RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), which resulted in a net neutral transaction.

Worldwide sales of Vaxneuvance grew 13% in the first six months of 2025 reflecting favorable CDC stockpile activity in the U.S.

and continued uptake following launches in the pediatric indication in Europe and certain countries in the Asia Pacific region, partially offset by lower demand in the U.S.

and Japan due to competitive pressure.

Merck is a party to license agreements pursuant to which the Company pays royalties on sales of Vaxneuvance .

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The royalty expenses are included in Cost of sales .

Sales of Capvaxive were $107 million in the first quarter of 2025 due to continued uptake following launch in the U.S.

Sales of Capvaxive were $129 million and $236 million in the second quarter and first six months of 2025, respectively, due to continued uptake following launch in the U.S.

in the third quarter of 2024.

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The FDA and EC approvals were supported by results from the STRIDE clinical program, which evaluated Capvaxive in both vaccine-naïve and vaccine-experienced adult patient populations.

Merck is a party to certain third-party license agreements pursuant to which the Company pays royalties on sales of Capvaxive .

Merck is a party to license agreements pursuant to which the Company pays royalties on sales of Capvaxive .

Under the terms of the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Capvaxive through 2026;

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The royalty expenses are included in Cost of sales.

In June 2025, the CDC’s ACIP voted to recommend Enflonsia (clesrovimab-cfor), a preventive, long-acting monoclonal antibody, as an option for the prevention of respiratory syncytial virus (RSV) lower respiratory tract disease in infants younger than 8 months of age who are born during or entering their first RSV season.

The ACIP’s recommendation for Enflonsia is provisional and will be official once reviewed and finalized by the CDC Director.

The ACIP also voted to include Enflonsia in the Vaccines for Children Program.

The FDA approved Enflonsia earlier in June 2025 based on the pivotal CLEVER and SMART clinical trials.

Enflonsia became available for ordering by physicians and health care administrators in July 2025, with shipments expected to be delivered before the start of the 2025-2026 RSV season.

Hospital Acute Care

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Bridion $ 461 $ 455 1 % 1 % $ 902 $ 895 1 % 1 %

Prevymis 228 188 21 % 20 % 436 362 20 % 21 %

Worldwide sales of Bridion (sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, were nearly flat in the first quarter of 2025 as higher demand and pricing in the U.S.

was offset by lower demand in several international markets due to generic competition, particularly in Japan and the EU.

96 92 5 % 5 % 179 165 8 % 9 %

Worldwide sales of Bridion (sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, grew 1% in both the second quarter and first six months of 2025 as higher demand and pricing in the U.S.

was offset by lower demand in most international markets due to generic competition, particularly in Japan and the EU.

The patents that provided market exclusivity for Bridion in the EU and Japan expired in July 2023 and January 2024, respectively.

Accordingly, the Company is experiencing sales declines of Bridion in these markets and expects the declines to continue.

Worldwide sales of Prevymis (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in certain high risk adult and pediatric recipients of an allogenic hematopoietic stem cell transplant and for prophylaxis of CMV disease in certain high risk adult and pediatric recipients of a kidney transplant, grew 19% in the first quarter of 2025 largely due to higher demand in the U.S.

Worldwide sales of Prevymis (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in certain high risk adult and pediatric recipients of an allogenic hematopoietic stem cell transplant and for prophylaxis of CMV disease in certain high risk adult and pediatric recipients of a kidney transplant, grew 21% and 20% in the second quarter and first six months of 2025, respectively, largely due to higher demand in the U.S.

and EU, partially offset by lower demand in China due to generic competition.

Worldwide sales of Dificid (fidaxomicin), a medicine for the treatment of C.

difficile -associated diarrhea, grew 5% and 8% in the second quarter and first six months of 2025, respectively, primarily due to higher sales in the U.S.

Timing of purchases in certain international markets also contributed to sales growth in the first six months of 2025.

Dificid lost market exclusivity in the U.S.

in July 2025;

accordingly, the Company anticipates a significant decline in U.S.

sales of Dificid for the remainder of 2025 and thereafter.

Cardiovascular

Three Months Ended

March 31, % Change

($ in millions) 2025 2024 % Change

June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2025 2024 % Change 2025 2024 % Change

$ 336 $ 70 * * $ 615 $ 70 * *

Alliance Revenue - Adempas/Verquvo (1)

Alliance Revenue -

Adempas/Verquvo (1)

123 106 16 % 16 % 229 203 12 % 12 %

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(1) Alliance revenue for Adempas and 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 3 to the condensed consolidated financial statements).

Sales of Winrevair were $280 million in the first quarter of 2025 primarily reflecting continued uptake in the U.S.

Sales of Winrevair were $336 million and $615 million in the second quarter and first six months of 2025, respectively, primarily reflecting continued uptake in the U.S.

since launch in the second quarter of 2024.

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Winrevair has since launched in certain international markets, including certain markets in the EU.

Timing for commercial availability of Winrevair in the remaining EU countries will depend on multiple factors,

including the completion of national reimbursement procedures, which is expected to occur in the second half of 2025.

Timing for commercial availability of Winrevair in the remaining EU countries will depend on multiple factors, including the completion of national reimbursement procedures, which is expected to occur in the second half of 2025.

In June 2025, Japan’s MHLW approved sotatercept for the treatment of adults with PAH where it will be marketed under the trademark Airwin .

Winrevair is the subject of a licensing agreement pursuant to which Merck pays a 22% royalty on net sales of Winrevair to BMS.

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Verquvo is approved 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.

Alliance revenue from the collaboration grew 8% in the first quarter of 2025 primarily reflecting higher demand in Bayer’s marketing territories.

Alliance revenue from the collaboration grew 16% and 12% in the second quarter and first six months of 2025, respectively, primarily reflecting higher demand in Bayer’s marketing territories.

Revenue also includes sales of Adempas and Verquvo in Merck’s marketing territories.

Sales of Adempas in Merck’s marketing territories were nearly flat in the first quarter of 2025.

Sales of Adempas in Merck’s marketing territories increased 10% and 4% in the second quarter and first six months of 2025, respectively, largely due to higher demand.

Three Months Ended

March 31, % Change

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June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2025 2024 % Change 2025 2024 % Change

Lagevrio $ 83 $ 110 (25) % (27) % $ 185 $ 460 (60) % (59) %

Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback Biotherapeutics LP (Ridgeback) (see Note 3 to the condensed consolidated financial statements).

Sales of Lagevrio declined 71% in the first quarter of 2025 primarily due to lower demand in several markets in the Asia Pacific region, particularly in Japan.

Sales of Lagevrio decreased 25% and 60% in the second quarter and first six months of 2025, respectively, primarily due to lower demand in several markets in the Asia Pacific region, particularly in Japan, driven largely by declining COVID-19 cases.

Three Months Ended

March 31, % Change

($ in millions) 2025 2024 % Change

June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2025 2024 % Change 2025 2024 % Change

$ — $ 172 (100) % (100) % $ — $ 356 (100) % (100) %

— 35 (100) % (100) % — 74 (100) % (100) %

Simponi (golimumab) and Remicade (infliximab) are treatments for certain inflammatory diseases that the Company marketed in Europe, Russia and Türkiye.

Simponi and Remicade are treatments for certain inflammatory diseases that the Company marketed in Europe, Russia and Türkiye.

The Company’s marketing rights with respect to these products reverted to Johnson & Johnson on October 1, 2024, subsequent to which the Company is no longer recognizing sales of these products.

Three Months Ended

March 31, % Change

($ in millions) 2025 2024 % Change

June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2025 2024 % Change 2025 2024 % Change

Januvia/Janumet $ 623 $ 629 (1) % — % $ 1,419 $ 1,299 9 % 11 %

Worldwide combined sales of Januvia and Janumet , medicines that help lower blood sugar levels in adults with type 2 diabetes, increased 19% in the first quarter of 2025 primarily due to higher net pricing in the U.S., including a favorable true-up to customer discounts, partially offset by the ongoing impact of the loss of exclusivity in most international markets, as well as continuing volume declines in the U.S.

due to competitive pressure.

Worldwide combined sales of Januvia and Janumet , medicines that help lower blood sugar levels in adults with type 2 diabetes, in the second quarter of 2025 were comparable with sales in the same period of 2024.

Lower demand in China, the ongoing impacts of generic competition in most other international markets, and lower demand in the U.S.

due to competitive pressure were largely offset by higher net pricing in the U.S.

Global combined sales of Januvia and Janumet increased 9% in the first six months of 2025 primarily due to higher net pricing in the U.S., including a favorable true-up to customer discounts, partially offset by the ongoing impacts of generic competition in most international markets, continuing volume declines in the U.S.

due to competitive pressure, as well as lower demand in China.

The American Rescue Plan Act enacted in the U.S.

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Also, in January 2025, the U.S.

Department of HHS, through the CMS, announced that Janumet and Janumet XR would be included in the second year of the IRA’s Program, with government price setting to become effective on January 1, 2027.

The Company has sued the U.S.

government regarding the IRA’s Program.

As a result of the anticipated patent expiries in 2026, the government price setting in 2026 and 2027 noted above, as well as ongoing competitive pressure, the Company anticipates significant sales declines for Januvia , Janumet and Janumet XR in the U.S.

As a result of the anticipated patent expiries in 2026, the government price setting to take effect in 2026 and 2027 noted above, as well as ongoing competitive pressure, the Company anticipates significant sales declines for Januvia , Janumet and Janumet XR in the U.S.

in 2026 and thereafter.

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Three Months Ended

March 31, % Change

($ in millions) 2025 2024 % Change

June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2025 2024 % Change 2025 2024 % Change

Livestock $ 961 $ 837 15 % 16 % $ 1,885 $ 1,686 12 % 16 %

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$ 1,646 $ 1,482 11 % 11 % $ 3,234 $ 2,993 8 % 11 %

Sales of livestock products grew 9% in the first quarter of 2025 primarily due to higher demand across all species, a benefit from the timing of ruminant product sales, as well as the inclusion of sales from the July 2024 acquisition of the aqua business of Elanco Animal Health Incorporated.

Sales of companion animal products were essentially flat in the first quarter of 2025.

Sales of the Bravecto (fluralaner) line of products were $327 million for the first quarter of 2025, representing a decline of 1% compared with the corresponding prior year period, or growth of 2% excluding the unfavorable effect of foreign exchange.

Sales of livestock products grew 15% and 12% in the second quarter and first six months of 2025, respectively, primarily due to higher demand across all species, as well as the inclusion of sales from the July 2024 acquisition of the aqua business of Elanco Animal Health Incorporated.

Sales in 2025 also benefited from improved supply.

Sales of companion animal products grew 6% and 3% in the second quarter and first six months of 2025, respectively, due to higher pricing.

Sales in 2025 also benefited from improved supply.

Sales of the Bravecto (fluralaner) line of products were $335 million in the second quarter of 2025, representing growth of 1% compared with the second quarter of 2024, both nominally and excluding the effect of foreign exchange.

Sales of Bravecto were $662 million for the first six months of 2025, essentially flat compared with the corresponding prior year period, or growth of 1% excluding the unfavorable effect of foreign exchange.

In July 2025, the FDA approved Bravecto Quantum (fluralaner for extended-release injectable suspension), a once-yearly injectable product to treat and protect dogs from fleas and ticks.

Also in July 2025, the EC approved Numelvi (atinvicitinib) tablets for dogs, a once-daily, second-generation Janus kinase (JAK) inhibitor indicated for the treatment of pruritus associated with allergic dermatitis including atopic dermatitis and treatment of clinical manifestations of atopic dermatitis.

Costs, Expenses and Other

Three Months Ended

($ in millions) 2025 2024 % Change

June 30, Six Months Ended

($ in millions) 2025 2024 % Change 2025 2024 % Change

Cost of sales $ 3,557 $ 3,745 (5) % $ 6,976 $ 7,285 (4) %

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Cost of Sales

Cost of s ales declined 3% in the first quarter of 2025.

Cost of s ales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $620 million and $462 million in the first quarter of 2025 and 2024, respectively.

Also included in Cost of s ales are expenses associated with restructuring activities, which amounted to $36 million and $116 million in the first quarter of 2025 and 2024, respectively, primarily reflecting accelerated depreciation and asset impairment charges related to the planned sale or closure of manufacturing facilities.

Cost of s ales declined 5% and 4% in the second quarter and first six months of 2025, respectively.

Cost of s ales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $599 million and $603 million in the second quarter of 2025 and 2024, respectively, and $1.2 billion and $1.1 billion in the first six months of 2025 and 2024, respectively.

Also included in Cost of s ales are expenses associated with restructuring activities, which amounted to $165 million and $66 million in the second quarter of 2025 and 2024, respectively, and $201 million and $182 million in the first six months of 2025 and 2024, respectively, primarily reflecting accelerated depreciation and asset impairment charges related to manufacturing facilities to be fully or partially closed or divested, as well as contractual termination costs.

Separation costs associated with manufacturing-related headcount reductions have been incurred and are reflected in Restructuring costs as discussed below.

Gross margin was 78.0% in the first quarter of 2025 compared with 77.6% in the first quarter of 2024.

The gross margin improvement was primarily due to the favorable effects of product mix and lower restructuring costs, partially offset by higher amortization of intangible assets and the unfavorable effect of foreign exchange.

Gross margin was 77.5% in the second quarter of 2025 compared with 76.8% in the second quarter of 2024.

The gross margin improvement was primarily due to the favorable effect of product mix, partially offset by higher restructuring costs and inventory write-offs.

Gross margin was 77.7% in the first six months of 2025 compared with 77.2% in the first six months of 2024.

The gross margin improvement was primarily due to the favorable effect of product mix, partially offset by higher amortization of intangible assets and inventory write-offs.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses increased 3% in the first quarter of 2025 primarily due to higher administrative and promotional costs, partially offset by the favorable effect of foreign exchange.

Selling, general and administrative (SG&A) expenses declined 3% in the second quarter of 2025 primarily due to lower administrative, restructuring, and promotional costs.

SG&A expenses in the first six months of 2025 were comparable with the corresponding period of 2024 as lower restructuring costs and the favorable effect of foreign exchange were largely offset by higher administrative and promotional costs.

Research and Development

Research and development (R&D) expenses declined 9% in the first quarter of 2025 primarily due to a $656 million charge in the first quarter of 2024 for the acquisition of Harpoon Therapeutics, Inc.

(Harpoon) and the favorable effect of foreign exchange.

The decline in R&D expenses was partially offset by a $100 million charge in the first quarter of 2025 associated with the achievement of a developmental milestone related to the 2024 acquisition of Eyebiotech Limited, higher compensation and benefit costs (reflecting in part increased headcount), as well as higher clinical development spending, and increased investment in discovery research and early drug development.

R&D expenses are comprised of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $2.5 billion and $2.4 billion for the first quarter of 2025 and 2024, respectively.

Also included in R&D expenses are Animal Health research costs, upfront and milestone payments for collaboration and licensing agreements, charges for transactions accounted for as asset acquisitions (including the charge for the acquisition of Harpoon noted above), and costs incurred by other divisions in support of R&D activities, including depreciation, production and general and administrative, which in the aggregate were $1.1 billion and $1.6 billion for the first quarter of 2025 and 2024, respectively.

Research and development (R&D) expenses increased 16% in the second quarter of 2025 primarily due to a $200 million charge for an upfront payment made in connection with the closing of a license agreement with Hengrui Pharma, increased clinical development spending, higher compensation and benefit costs (reflecting in part increased headcount), and higher restructuring costs.

R&D expenses increased 2% in the first six months of 2025 primarily due to increased clinical development spending, higher compensation and benefit costs (reflecting in part increased headcount), and higher restructuring costs.

The increase in R&D expenses for first six months of 2025 was partially offset by lower charges for business development transactions, which in 2025 include a $200 million charge related to the closing of a license agreement with Hengrui Pharma and a $100 million charge associated with the achievement of a developmental milestone related to the 2024 acquisition of Eyebiotech Limited (EyeBio), compared with a $656 million charge in the first six months of 2024 for the acquisition of Harpoon Therapeutics, Inc.

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 $2.8 billion and $2.5 billion for the second quarter of 2025 and 2024, respectively, and $5.3 billion and $4.9 billion for the first six months of 2025 and 2024, respectively.

Also included in R&D expenses are Animal Health research costs, upfront and milestone payments for collaboration and licensing agreements (including the charges related to Hengrui Pharma and EyeBio noted above), charges for transactions accounted for as asset acquisitions (including the charge for the acquisition of Harpoon noted above), and costs incurred by other divisions in support of R&D activities, including depreciation, production and general and administrative, which in the aggregate were $1.2 billion and $955 million for the second quarter of 2025 and 2024, respectively, and $2.3 billion and $2.5 billion for the first six months of 2025 and 2024, respectively.

Restructuring Costs

and also optimize the Animal Health global manufacturing network to improve supply reliability and increase efficiency.

In July 2025, the Company approved a new restructuring program (2025 Restructuring Program) designed to position the Company for its next chapter of growth and to successfully advance its pipeline and launch new products across multiple therapeutic areas.

As part of this program, the Company expects to eliminate certain positions in sales and administrative organizations, as well as research and development.

The Company will, however, continue to hire employees into new roles across all strategic growth areas of the business.

In addition, the Company will reduce its global real estate footprint and

continue to optimize its manufacturing network, aligning the geography of its global manufacturing footprint to its customers and reflecting changes in the Company’s business.

Most actions contemplated under the 2025 Restructuring Program are expected to be largely completed by the end of 2027, with the exception of certain manufacturing actions, which are expected to be substantially completed by the end of 2029.

The cumulative pretax costs to be incurred by the Company to implement the program are estimated to be approximately $3.0 billion, of which approximately 60% will be cash, relating primarily to employee separation expense and contractual termination costs.

The remainder of the costs will be non-cash, relating primarily to the accelerated depreciation of facilities.

The Company expects the actions under the 2025 Restructuring Program to result in annual cost savings of approximately $1.7 billion, which will be substantially realized by the end of 2027.

The 2025 Restructuring Program is part of the Company’s multiyear optimization initiative anticipated to achieve $3.0 billion in annual cost savings by the end of 2027, which will be fully reinvested into strategic growth areas of the business.

In January 2024, the Company approved a restructuring program (2024 Restructuring Program) intended to continue the optimization of the Company’s Human Health global manufacturing network as the future pipeline shifts to new modalities and also optimize the Animal Health global manufacturing network to improve supply reliability and increase efficiency.

The actions contemplated under the 2024 Restructuring Program are expected to be substantially completed by the end of 2031, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $4.0 billion.

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The remainder of the costs will result in cash outlays, relating primarily to facility shut-down costs.

The Company expects to record charges of approximately $550 million in 2025 related to the 2024 Restructuring Program and anticipates the actions under the 2024 Restructuring Program will result in cumulative annual net cost savings of approximately $750 million by the end of 2031.

As Merck continues to assess its business, it is likely to take further actions in 2025 to drive productivity across the Company while continuing to make disciplined investments in its expansive pipeline to drive growth.

Restructuring costs , primarily representing separation and other costs associated with these restructuring activities, were $69 million and $123 million for the first quarter of 2025 and 2024, respectively.

The Company expects the actions under the 2024 Restructuring Program will result in cumulative annual net cost savings of approximately $750 million by the end of 2031.

Restructuring costs , primarily representing separation and other costs associated with these restructuring activities, were $560 million and $80 million for the second quarter of 2025 and 2024, respectively, and $629 million and $202 million for the first six months of 2025 and 2024, respectively.

Separation costs incurred were associated with actual headcount reductions, as well as estimated expenses under existing severance programs for involuntary headcount reductions that were probable and could be reasonably estimated.

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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 $105 million and $246 million in the first quarter of 2025 and 2024, respectively, related to restructuring program activities.

The Company recorded aggregate pretax costs of $779 million and $177 million in the second quarter of 2025 and 2024, respectively, and $884 million and $422 million for the first six months of 2025 and 2024, respectively, related to restructuring program activities.

See Note 4 to the condensed consolidated financial statements for additional details.

Other (Income) Expense, Net

Other (income) expense, net was $35 million of income in the first quarter of 2025, comparable with $33 million of income in the first quarter of 2024.

Other (income) expense, net was $7 million of income in the second quarter of 2025 compared with $42 million of expense in the second quarter of 2024.

The favorable quarter-over-quarter change was primarily due to higher income from investments in equity securities.

Other (income) expense, net was $43 million of income in the first six months of 2025 compared with $12 million of expense in the first six months of 2024.

The favorable period-over-period change primarily reflects lower net interest expense.

For details on the components of Other (income) expense, net see Note 10 to the condensed consolidated financial statements.

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Three Months Ended

June 30, Six Months Ended

($ in millions) 2025 2024 2025 2024

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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.

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 “Non-segment activity” in the above table.

Also included in “Non-segment activity” are miscellaneous corporate profits (losses), as well as operating profits (losses) related to third-party manufacturing arrangements.

Pharmaceutical segment profits declined 2% in the first quarter of 2025 primarily due to lower sales, higher promotional costs and the unfavorable effect of foreign exchange, partially offset by lower administrative and selling costs.

Animal Health segment profits rose 14% in the first quarter of 2025 primarily due to higher sales, partially offset by the unfavorable effect of foreign exchange.

Pharmaceutical segment profits declined 2% in the second quarter of 2025, primarily due to lower sales, partially offset by lower administrative and selling costs, and the favorable effect of foreign exchange.

Pharmaceutical segment profits declined 2% in the first six months of 2025, primarily due to lower sales and the unfavorable effect of foreign exchange, partially offset by lower administrative and selling costs.

Animal Health segment profits rose 17% and 15% in the second quarter and first six months of 2025, respectively, primarily due to higher sales, partially offset by higher R&D, selling and administrative costs.

The increase in Animal Health segment profits for the first six months of 2025 was also partially offset by the unfavorable effect of foreign exchange.

Taxes on Income

The effective income tax rate of 13.9% for the first quarter of 2025 reflects the favorable impacts of geographical mix of income and expense, as well as certain discrete items.

The effective income tax rate of 15.9% for the first quarter of 2024 reflects a 1.6 percentage point unfavorable impact of a charge for the acquisition of Harpoon for which no tax benefit was recognized.

The effective income tax rates of 11.4% and 12.7% for the second quarter and first six months of 2025, respectively, reflect a 2.9 percentage point favorable impact and a 1.4 percentage point favorable impact, respectively, due to $146 million of tax benefits resulting primarily from favorable audit adjustments.

The effective income tax rates in both the second quarter and first six months of 2025 also reflect the favorable impacts of geographical mix of income and expense, as well as certain discrete items.

The effective income tax rates of 9.1% and 12.4% for the second quarter and first six months of 2024, respectively, reflect a 4.3 percentage point favorable impact and a 2.2 percentage point favorable impact, respectively, due to a $259 million reduction in reserves for unrecognized income tax benefits resulting from the expiration in June 2024 of the statute of limitations for assessments related to the 2019 federal tax return year.

The effective income tax rate for the first six months of 2024 also reflects a 0.7 percentage point unfavorable impact of a charge for the acquisition of Harpoon for which no tax benefit was recognized.

While many jurisdictions in which Merck operates have adopted the global minimum tax provision of the Organization for Economic Cooperation and Development (OECD) Pillar 2, effective for tax years beginning in January 2024, it resulted in a minimal impact to the Company’s 2024 effective income tax rate due to the accounting for the tax effects of intercompany transactions.

The Company expects the impact of the global minimum tax to be approximately 2% for full year 2025.

In addition, beginning in 2026, the tax rates on foreign earnings and export income are scheduled to increase under existing provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) and may result in an increase to the Company’s effective income tax rate.

The Internal Revenue Service (IRS) is currently conducting examinations of the Company’s tax returns for the years 2017 and 2018, including the one-time transition tax enacted under the TCJA.

On April 21, 2025, Merck received Notices of Proposed Adjustment (NOPAs) that would increase the amount of the one-time transition tax on certain undistributed earnings of foreign subsidiaries by approximately $1.3 billion.

In addition, in July 2025, the OBBBA was enacted into law.

The Company is currently evaluating the effects of the OBBBA but does not expect a material tax impact.

The Internal Revenue Service (IRS) is currently conducting examinations of the Company’s tax returns for the years 2017 and 2018, including the one-time transition tax enacted under the Tax Cuts and Jobs Act of 2017 (TCJA).

In April 2025, Merck received Notices of Proposed Adjustment (NOPAs) that would increase the amount of the one-time transition tax on certain undistributed earnings of foreign subsidiaries by approximately $1.3 billion.

In addition, the NOPAs included penalties of approximately $260 million.

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Three Months Ended

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($ in millions except per share amounts) 2025 2024 2025 2024

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Income from investments in equity securities, net

(61) (49) (168) (165)

Non-GAAP income before taxes

6,311 6,767 12,859 13,061

Income tax provision as reported under GAAP 571 545 1,388 1,447

Estimated tax benefit on excluded items (1)

227 148 340 257

Tax benefits resulting primarily from favorable audit adjustments

Tax benefit resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year

Non-GAAP income tax provision 944 952 1,874 1,963

Non-GAAP net income

5,367 5,815 10,985 11,098

Net income attributable to noncontrolling interests as reported under GAAP 1 6 8 11

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

(2) GAAP and non-GAAP EPS were negatively affected in the first quarter of 2024 by $0.26 per share for a charge related to pre-approval assets obtained in a transaction accounted for as an asset acquisition.

(2) GAAP and non-GAAP EPS were negatively affected in the second quarter of 2025 by $0.07 per share, and for the first six months of 2025 and 2024 by $0.07 and $0.26 per share, respectively, of charges for certain upfront payments related to collaborations and licensing arrangements, as well as charges related to pre-approval assets obtained in transactions accounted for as asset acquisitions.

Acquisition- and Divestiture-Related Costs

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Non-GAAP income and non-GAAP EPS exclude costs related to restructuring actions (see Note 4 to the condensed consolidated financial statements).

These amounts include employee separation costs and accelerated depreciation associated with facilities to be closed or divested.

These amounts include employee separation costs and accelerated depreciation associated with facilities to be fully or partially 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 impairment, 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.

Restructuring costs also include asset impairment, facility shut-down, contractual termination, 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.

Income and Losses from Investments in Equity Securities

4 unchanged sentences

Typically, these items are unusual in nature, significant to the results of a particular period or not indicative of future operating results.

There were no such items in either the first quarter of 2025 or 2024.

Excluded from non-GAAP income and non-GAAP EPS in 2025 are tax benefits resulting primarily from favorable audit adjustments.

Excluded from non-GAAP income and non-GAAP EPS in 2024 is a benefit due to a reduction in reserves for unrecognized income tax benefits resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year.

Research and Development Update

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and internationally.

MK-1022, patritumab deruxtecan, is a potential first-in-class HER3 directed DXd antibody drug conjugate (ADC), under review by the FDA for the treatment of adult patients with locally advanced or metastatic EGFR-mutated NSCLC previously treated with two or more systemic therapies.

The Biologics License Application (BLA) is based on the primary results from the HERTHENA-Lung01 pivotal Phase 2 trial and data results presented at the IASLC 2023 World Conference on Lung Cancer, which were simultaneously published in the Journal of Clinical Oncology.

In June 2024, the FDA issued a complete response letter (CRL) for the BLA due to findings pertaining to an inspection of a third-party manufacturing facility.

The CRL did not identify any issues with the efficacy or safety data submitted.

Patritumab deruxtecan (HER3-DXd) was discovered by Daiichi Sankyo and is being jointly developed by Daiichi Sankyo and Merck.

Merck is working with Daiichi Sankyo to address FDA feedback.

MK-3475A, pembrolizumab with berahyaluronidase alfa (MK-5180) for subcutaneous administration (subcutaneous pembrolizumab), is being evaluated for noninferiority with respect to pharmacokinetics to intravenous Keytruda in metastatic NSCLC.

The FDA accepted for review a BLA seeking approval of MK-3475A across all previously approved solid tumor indications for Keytruda and set a Prescription Drug User Fee Act (PDUFA), or target action, date of September 23, 2025.

The FDA accepted for review a Biologics License Application (BLA) seeking approval of MK-3475A across all previously

approved solid tumor indications for Keytruda and set a Prescription Drug User Fee Act (PDUFA), or target action, date of September 23, 2025.

The application is supported by data from the pivotal 3475A-D77 Phase 3 trial.

Additionally, the European Medicines Agency (EMA) has validated an extension application to introduce a new pharmaceutical form and new route of administration for Keytruda .

MK-6482, Welireg , is under review in Japan both for the treatment of adults with VHL disease based on the LITESPARK-004 clinical trial and for the treatment of certain adults with previously treated advanced RCC based on the LITESPARK-005 clinical trial.

Additionally, in January 2025, the FDA accepted for priority review a supplemental New Drug Application seeking approval of Welireg for the treatment of adult and pediatric patients (12 years and older) with advanced, unresectable, or metastatic pheochromocytoma and paraganglioma, based on the LITESPARK-015 trial.

The FDA set a PDUFA date of May 26, 2025.

MK-8591A, doravirine/islatravir, is an investigational, once-daily, oral, two-drug regimen for adults with HIV-1 infection that is virologically suppressed on antiretroviral therapy under review by the FDA.

The FDA set a PDUFA date of April 28, 2026 for the new drug application, which is based on findings of the Phase 3 MK-8591A-051 and MK-8591A-052 clinical trials.

MK-8591A is also under review in Japan.

V116, Capvaxive , a 21-valent pneumococcal conjugate vaccine designed to help prevent invasive pneumococcal disease and pneumococcal pneumonia caused by certain serotypes in adults, is under review in Japan.

The application is supported by results from the STRIDE clinical program, which evaluated V116 in both vaccine-naïve and vaccine-experienced adult patient populations.

MK-7962, Winrevair , Merck’s novel activin signaling inhibitor, is under review in Japan for the treatment of adult patients with PAH based on the Phase 3 STELLAR trial.

MK-1654, clesrovimab, is an investigational prophylactic long-acting monoclonal antibody designed to protect infants from respiratory syncytial virus (RSV) disease during their first RSV season.

In December 2024, the FDA accepted the BLA for clesrovimab and set a PDUFA date of June 10, 2025.

Clesrovimab is also under review in the EU.

MK-1654, Enflonsia , a prophylactic long-acting monoclonal antibody designed to protect infants from respiratory syncytial virus (RSV) disease during their first RSV season is under review in the EU and Japan.

MK-3475, Keytruda , is an anti-PD-1 therapy approved for the treatment of many cancers that is in clinical development for expanded indications.

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biliary, estrogen receptor positive breast, triple-negative breast, cervical, colorectal, endometrial, esophageal, gastric, glioblastoma, head and neck, hepatocellular, Hodgkin lymphoma, non-Hodgkin lymphoma, non-small-cell lung, small-cell lung, melanoma, malignant pleural mesothelioma, ovarian, prostate, renal, and urothelial, several of which are currently in Phase 3 clinical development.

Keytruda is under priority review by the FDA and also under review in Japan for the treatment of patients with resectable locally advanced head and neck squamous cell carcinoma as neoadjuvant treatment, then continued as adjuvant treatment in combination with standard of care radiotherapy with or without cisplatin and then as a single agent.

The FDA set a PDUFA date of June 23, 2025.

The supplemental BLA is based on data from the Phase 3 KEYNOTE-689 trial.

Keytruda is under review in Japan for the first-line treatment of adult patients with unresectable advanced or metastatic malignant pleural mesothelioma, based on the Phase 2/3 IND.227/KEYNOTE-483 trial.

The chart below reflects the Company’s research pipeline as of April 30, 2025.

Keytruda is under review in the EU and Japan for the treatment of patients with resectable locally advanced head and neck squamous cell carcinoma as neoadjuvant treatment, then continued as adjuvant treatment in combination with standard of care radiotherapy with or without cisplatin and then as a single agent.

The applications are based on data from the Phase 3 KEYNOTE-689 trial.

In July 2025, Merck announced the FDA granted priority review for a new supplemental BLA seeking approval to update the Winrevair U.S.

product label based on the Phase 3 ZENITH trial.

The FDA set a PDUFA date of October 25, 2025.

In ZENITH, Winrevair demonstrated a 76% reduction in the risk of a composite of all-cause death, lung transplantation, and hospitalization for PAH ≥24 hours compared to placebo.

Improvement was observed early in treatment with increasing benefit throughout the study.

The ZENITH trial was stopped early by an independent data monitoring committee for overwhelming efficacy.

In June 2025, Merck announced positive topline results from the first two of three Phase 3 clinical trials evaluating the safety and efficacy of MK-0616, enlicitide decanoate, an investigational, oral proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitor being evaluated for the treatment of adults with hyperlipidemia on lipid-lowering therapies, including at least a statin.

The CORALreef HeFH and CORALreef AddOn trials successfully met their primary and all key secondary endpoints, demonstrating statistically significant and clinically meaningful greater reductions in low-density lipoprotein cholesterol (LDL-C) for enlicitide compared to placebo (CORALreef HeFH) and compared to other oral non-statin therapies (CORALreef AddOn).

Results from the three Phase 3 trials in the CORALreef clinical development program will be presented at a future scientific congress.

In May 2025, Merck and Daiichi Sankyo announced that the BLA seeking accelerated approval in the U.S.

for MK-1022, patritumab deruxtecan (HER3-DXd), based on the HERTHENA-Lung01 Phase 2 trial for the treatment of adult patients with locally advanced or metastatic EGFR-mutated NSCLC previously treated with two or more systemic therapies, was voluntarily withdrawn.

The decision to withdraw the BLA was based on topline overall survival results from the confirmatory HERTHENA-Lung02 Phase 3 trial where overall survival did not meet statistical significance, as well as discussions with the FDA.

The decision is unrelated to the Complete Response Letter that was received in June 2024 outlining findings pertaining to an inspection of a third-party manufacturing facility.

Patritumab deruxtecan is a specifically engineered HER3 directed DXd antibody drug conjugate (ADC) discovered by Daiichi Sankyo and being developed jointly with Merck.

A comprehensive global clinical development program is underway evaluating the efficacy and safety of patritumab deruxtecan across cancers.

Trials in combination with other anticancer treatments are also underway.

A pre-specified interim analysis of the Phase 3 KEYNOTE-937 study found that compared to placebo, Keytruda did not show a statistically significant improvement in the primary endpoint of recurrence-free survival for certain patients with HCC.

Also, a pre-specified interim analysis of the Phase 3 LEAP-014 trial found that Keytruda plus Lenvima, in combination with platinum-based chemotherapy, did not show a statistically significant improvement in its primary endpoint of overall survival compared to Keytruda plus chemotherapy for the first-line treatment of patients with metastatic esophageal squamous cell carcinoma.

The chart below reflects the Company’s research pipeline as of August 1, 2025.

Candidates shown in Phase 3 include the date such candidate entered into Phase 3 development.

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Except as otherwise noted, candidates in Phase 1, additional indications in the same therapeutic area (other than with respect to cancer and immunology) and additional claims, line extensions or formulations for in-line products are not shown.

Alzheimer’s Disease

MK-1022 (patritumab deruxtecan) (1)(3)

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Hepatocellular

MK-1308 (quavonlimab) (2)

Non-Small-Cell lung

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Hepatocellular

Non-Small-Cell Lung

MK-2870 (sacituzumab tirumotecan) (1)(3)

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MK-3475 Keytruda

Advanced Solid Tumors

MK-3475A (subcutaneous pembrolizumab)

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MK-5909 (raludotatug deruxtecan) (1)

Non-Small-Cell Lung

Small-Cell Lung

MK-6482 Welireg

V940 (intismeran autogene) (1)(2)

Dengue Fever Virus Vaccine

Eye Disorders

HIV-1 Infection

MK-8591B (islatravir+MK-8507)

HIV-1 Pre-Exposure Prophylaxis

MK-8591B (islatravir+ulonivirine)

MK-7240 (tulisokibart)

Hidradenitis Suppurativa

Systemic Sclerosis

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MK-1022 (patritumab deruxtecan) (1)

Non-Small-Cell Lung (May 2022) (EU)

Breast (July 2025)

MK-1026 (nemtabrutinib)

Hematological Malignancies (March 2023)

Colorectal (July 2025)

Non-Small-Cell Lung (May 2024)

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Esophageal (March 2025)

Prostate (May 2025)

Small-Cell Lung (July 2024)

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Small-Cell Lung (December 2020)

MK-7902 Lenvima (1)(2)

Esophageal (July 2021)

V940 (intismeran autogene) (1)(2)

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Non-Small-Cell Lung (December 2023)

Dengue Fever Virus Vaccine

V181 (June 2025)

Diabetic Macular Edema

HIV-1 Infection

MK-8591A (doravirine+islatravir) (February 2020) (6)

MK-8591A (doravirine+islatravir) (February 2020) (EU)

MK-8591D (islatravir+lenacapavir) (October 2024) (1)(6)

HIV-1 Pre-Exposure Prophylaxis

MK-8527 (July 2025)

Hypercholesterolemia

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New Molecular Entities

MK-1022 (patritumab deruxtecan) (1)(7)

Non-Small-Cell Lung (U.S.)

MK-3475A ( subcutaneous pembrolizumab )

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Previously Approved Tumors (EU)

MK-6482 Welireg

Renal Cell (JPN)

Von Hippel-Lindau (VHL) Disease (JPN)

HIV-1 Infection

MK-8591A (doravirine+islatravir) (U.S.) (JPN)

Pneumococcal Vaccine Adult

V116 Capvaxive (JPN)

Pulmonary Arterial Hypertension

MK-7962 Winrevair (JPN)

Respiratory Syncytial Virus

MK-1654 (clesrovimab) (U.S.) (EU)

MK-1654 Enflonsia (EU) (JPN)

Certain Supplemental Filings

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• Resectable Locally Advanced Head and Neck Squamous Cell Carcinoma

(KEYNOTE-689) (U.S.) (JPN)

• First-Line Unresectable Advanced or Metastatic Malignant Pleural Mesothelioma

(KEYNOTE-483) (JPN)

MK-6482 Welireg

• Advanced, Unresectable, or Metastatic Pheochromocytoma and Paraganglioma

(LITESPARK-015) (U.S.)

(KEYNOTE-689) (EU) (JPN)

Pulmonary Arterial Hypertension

MK-7962 Winrevair (ZENITH) (U.S.)

(1) Being developed in a collaboration.

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(6) On FDA partial clinical hold for higher doses of islatravir than those used in current clinical trials.

(7) In June 2024, the FDA issued a CRL for the BLA for patritumab deruxtecan.

Merck is working with Daiichi Sankyo to address FDA feedback .

Analysis of Liquidity and Capital Resources

($ in millions) March 31, 2025 December 31, 2024

($ in millions) June 30, 2025 December 31, 2024

Cash and investments $ 9,396 $ 14,152

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Total debt to total liabilities and equity 30.1 % 31.7 %

Cash provided by operating activities was $2.5 billion in the first three months of 2025 compared with $3.1 billion in the first three months of 2024.

Cash provided by operating activities was reduced by milestone payments related to certain collaborations of $700 million and $245 million in the first three months of 2025 and 2024, respectively.

Cash provided by operating activities was $5.8 billion in the first six months of 2025 compared with $8.7 billion in the first six months of 2024.

Cash provided by operating activities was reduced by $1.7 billion and $370 million for upfront and milestone payments related to certain collaborations, licensing agreements, and acquisitions in the first six months of 2025 and 2024, respectively.

Cash provided by operating activities 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 business development transactions, capital expenditures, dividends paid to shareholders and treasury stock purchases.

Cash used in investing activities was $1.5 billion in the first three months of 2025 compared with $1.4 billion in the first three months of 2024.

The higher use of cash in investing activities was primarily due to higher purchases of securities and other investments, and higher capital expenditures (including the acquisition of a facility from WuXi Vaccines discussed in Note 2 to the condensed consolidated financial statements), partially offset by lower cash used for acquisitions and higher proceeds from sales of securities and other investments.

Cash used in financing activities was $5.8 billion in the first three months of 2025 compared with $2.8 billion in the first three months of 2024.

The higher use of cash in financing activities was primarily due to higher payments on long-term debt, higher purchases of treasury stock, higher dividends paid to shareholders and lower proceeds from the exercise of stock options.

Cash used in investing activities was $2.3 billion in the first six months of 2025 compared with $2.4 billion in the first six months of 2024.

The lower use of cash in investing activities was primarily due to lower cash used for acquisitions and higher proceeds from sales of securities and other investments, partially offset by higher purchases of securities and other investments, and higher capital expenditures (including the acquisition of a facility from WuXi Vaccines discussed in Note 2 to the condensed consolidated financial statements).

Cash used in financing activities was $9.3 billion in the first six months of 2025 compared with $1.6 billion in the first six months of 2024.

The higher use of cash in financing activities was primarily due to lower proceeds from long-term debt, higher purchases of treasury stock, higher payments on long-term debt, higher dividends paid to shareholders and lower proceeds from the exercise of stock options.

The Company has accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable.

The Company factored $1.7 billion and $2.1 billion of accounts receivable at March 31, 2025 and

December 31, 2024, respectively, under these factoring arrangements, which reduced outstanding accounts receivable.

The Company factored $1.6 billion and $2.1 billion of accounts receivable at June 30, 2025 and December 31, 2024, 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.

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In March 2024, the Company’s $750 million, 2.90% notes matured in accordance with their terms and were repaid.

Dividends paid to stockholders were $2.1 billion and $2.0 billion for the first three months of 2025 and 2024, respectively.

In November 2024, Merck’s Board of Directors declared a quarterly dividend of $0.81 per share on the Company’s outstanding common stock for the first quarter that was paid in January 2025.

Dividends paid to stockholders were $4.1 billion and $3.9 billion for the first six months of 2025 and 2024, respectively.

In January 2025, Merck’s Board of Directors declared a quarterly dividend of $0.81 per share on the Company’s outstanding common stock for the second quarter that was paid in April 2025.

In May 2025, Merck’s Board of Directors declared a quarterly dividend of $0.81 per share on the Company’s outstanding common stock for the third quarter that was paid in July 2025.

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.

During the first three months of 2025, the Company purchased $1.2 billion (13 million shares) of its common stock for its treasury under this program.

The Company expects the pace of share repurchases to continue at this level for the remainder of 2025.

In January 2025, Merck’s Board of Directors authorized purchases of up to an additional $10 billion of Merck’s common stock for its treasury.

As of March 31, 2025, the Company’s remaining share repurchase authorization was $11.2 billion.

The treasury stock purchase authorizations have no time limit and will be made over time in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions.

During the first six months of 2025, the Company purchased $2.5 billion (29 million shares) of its common stock for its treasury under these programs.

The Company expects the pace of share repurchases to continue at this level for the remainder of 2025.

As of June 30, 2025, the Company’s remaining share repurchase authorization was $9.9 billion.

The Company has a $6.0 billion credit facility that matures in May 2030.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis