MRK filing — read by section

Item 2. Management’s Discussion and Analysis

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 
 
 Business Development Transactions 
 Below is a summary of significant business development activity thus far in 2025. 
 In November 2025, Merck reached an agreement with Dr. Falk Pharma GmbH (Falk) to discontinue an existing contract concerning co-development and co-commercialization rights in certain territories for MK-8690 (formerly PRA-052), and for Merck to assume full responsibility for the development program going forward. MK-8690 is an investigational anti-CD30 ligand monoclonal antibody being evaluated by the Company in an early-stage clinical trial. Under the terms of the agreement, Merck and Falk have discontinued their collaboration based on their existing co-development contract resulting in Merck having secured global rights to MK-8690. In exchange, Falk will receive a $150 million upfront payment, which the Company will record as a charge to Research and development expenses in the fourth quarter of 2025, or approximately $0.05 per share. Falk is also eligible to receive a developmental milestone payment, as well as tiered low-single-digit royalties on sales in certain territories. 
 In October 2025, Merck acquired Verona Pharma plc (Verona Pharma), a biopharmaceutical company focused on respiratory diseases, for total consideration of approximately $10.5 billion (including payments to settle share-based equity awards). Through this acquisition, Merck acquired 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. The Company is in the process of determining the fair value of assets acquired and liabilities assumed in this transaction; however, it expects to capitalize most of the purchase price as an intangible asset for Ohtuvayre . There are no future contingent payments associated with the acquisition. 
 Also in October 2025, Merck and Blackstone Life Sciences (Blackstone) entered into a funding arrangement under which Blackstone will pay Merck $700 million (which is non-refundable, subject to the termination provisions of the agreement) to fund a portion of the Company’s development costs for MK-2870, sacituzumab tirumotecan (sac-TMT), expected to be incurred throughout 2026. The funding will be recognized as a reduction to Research and development expenses as Merck incurs applicable development costs for the sac-TMT program. Sac-TMT is an investigational trophoblast cell-surface antigen 2 (TROP2)-directed ADC being developed as part of an exclusive license and collaboration agreement with Kelun-Biotech that is currently in clinical development for the treatment of a variety of cancers. The agreement between Merck and Kelun-Biotech with respect to sac-TMT is unchanged by the new agreement with Blackstone. Merck will retain decision-making authority and control over the development, manufacturing, and commercial activities relating to sac-TMT provided for in the agreement with Kelun-Biotech, and Blackstone will not receive any rights to sac-TMT. Upon receipt of regulatory approval for an indication in the U.S. for first-line triple-negative-breast cancer (TroFuse-011 trial), Blackstone will be eligible to receive low-to-mid single-digit royalties on net sales of sac-TMT subsequent to such approval across all approved indications in Merck’s marketing territories. 
 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 made a $300 million payment to LaNova (which has been acquired by Sino Biopharmaceutical Limited) that was recorded as a charge to Research and development expenses in the third quarter and first nine months of 2025, or approximately $0.10 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 charge of $200 million to Research and development expenses in the first nine months of 2025, or approximately $0.06 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 . There are no future contingent payments associated with the acquisition. 
 
 Pricing and Tariffs 
 Global efforts toward health care cost containment continue to exert pressure on product pricing and market access worldwide. Changes to the U.S. health care system as part of health care reform, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, have contributed to pricing pressure. In 2021, the U.S. Congress passed the American Rescue Plan Act, which included a provision that eliminated the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. As a result of this provision, the Company paid state Medicaid programs more in rebates than it received on Medicaid sales of Januvia (sitagliptin), Janumet (sitagliptin and metformin HCl) and Janumet XR (sitagliptin and metformin HCl extended release) in 2024. 
 - 35 - 

 
 

 In 2022, the U.S. Congress passed the Inflation Reduction Act (IRA), which made significant changes to how drugs are covered and paid for under the Medicare program, including the creation of financial penalties for drugs whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits (which has taken effect in 2025), and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028). Government price setting may also impact pricing in the private market negatively affecting the Company’s performance. In 2023, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), selected Januvia for the first year of the IRA’s “Drug Price Negotiation Program” (Program). Pursuant to the IRA’s Program, a government price was set for Januvia , which will become effective on January 1, 2026. In January 2025, the U.S. 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. government regarding the IRA’s Program. 
 Additionally, increased utilization of the 340B Federal Drug Discount Program and restrictions on the Company’s ability to identify inappropriate discounts are having a negative impact on Company performance. Furthermore, the Executive Branch and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs. 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 nine 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. 
 The U.S. government has implemented tariffs on certain foreign imports into the U.S. 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 less than $100 million of additional expenses in 2025 (which will be primarily reflected within Cost of sales ). 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 may 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 
 Sales 
 
 Three Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange Nine Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange 
 ($ in millions) 2025 2024 % Change 2025 2024 % Change 
 United States $ 10,012 $ 8,736 15 % 15 % $ 27,371 $ 24,089 14 % 14 % 
 International 7,264 7,922 (8) % (9) % 21,240 24,455 (13) % (12) % 
 Total $ 17,276 $ 16,657 4 % 3 % $ 48,611 $ 48,544 — % 1 % 

 U.S. plus international may not equal total due to rounding. 
 Worldwide sales were $17.3 billion in the third quarter of 2025, an increase of 4% compared with the third quarter of 2024. Global sales were $48.6 billion in the first nine months of 2025, up slightly compared with the same period of 2024. The sales increase in both periods reflects growth in oncology, cardiovascular, diabetes, and animal health, partially offset by declines in vaccines, immunology, and virology. 
 Growth in the oncology franchise in both the third quarter and first nine months of 2025 was largely due to the performance of Keytruda (pembrolizumab) and Welireg (belzutifan), as well as higher alliance revenue from Koselugo (selumetinib), resulting from an amendment to the collaboration agreement, and Lynparza (olaparib). The sales increase in the cardiovascular franchise in both periods was largely attributable to the ongoing launch of Winrevair (sotatercept-csrk) and growth in the diabetes franchise was largely due to Januvia . Animal health sales growth in both periods was largely due to the performance of livestock products. The vaccines revenue decline in both the third quarter and first nine months of 2025 was primarily due to lower combined Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine Recombinant) and Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) sales, partially offset by the ongoing U.S. launch of Capvaxive (Pneumococcal 21-valent Conjugate Vaccine) and initial stocking of Enflonsia (clesrovimab-cfor) related to the U.S. launch. 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 largely due to lower sales of Lagevrio (molnupiravir). 
 - 36 - 

 
 

 See Note 15 to the condensed consolidated financial statements for details on sales of the Company’s products. A discussion of performance for select products in the franchises follows. All product or service marks appearing in type form different from that of the surrounding text are trademarks or service marks owned, licensed to, promoted or distributed by Merck, its subsidiaries or affiliates, except as noted. All other trademarks or service marks are those of their respective owners. 
 
 Pharmaceutical Segment 
 Oncology 
 
 Three Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange Nine Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange 
 ($ in millions) 2025 2024 % Change 2025 2024 % Change 
 Keytruda $ 8,142 $ 7,429 10 % 8 % $ 23,303 $ 21,646 8 % 8 % 
 Alliance Revenue - Lynparza (1) 
 379 337 12 % 12 % 1,061 947 12 % 12 % 
 Alliance Revenue - Lenvima (1) 
 258 251 3 % 2 % 781 755 3 % 3 % 
 Welireg 196 139 42 % 41 % 496 349 42 % 42 % 
 Alliance Revenue - Reblozyl (2) 
 136 100 36 % 36 % 361 261 39 % 39 % 
 Alliance Revenue - Koselugo (3) 
 214 39 * * 301 114 * * 

 * > 100% 
 (1) Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 3 to the condensed consolidated financial statements). 
 (2) Alliance revenue for Reblozyl represents royalties (see Note 3 to the condensed consolidated financial statements). 
 (3) Alliance revenue for Koselugo in both periods of 2025 primarily includes a $150 million upfront payment and a $50 million regulatory milestone recorded in connection with an amendment to the collaboration agreement, which revised the payment structure. Alliance revenue in both periods of 2024 represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs. (See Note 3 to the condensed consolidated financial statements for more information on this collaboration, including the above referenced amendment.) 
 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. 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 10% and 8% in the third quarter and first nine months of 2025, respectively. Keytruda sales growth in the U.S. in both periods reflects higher demand and net pricing. 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, endometrial, and head and neck cancers, as well as higher demand across earlier-stage indications, including in certain types of non-small cell lung cancer (NSCLC), cervical cancer, triple-negative breast cancer (TNBC), and renal cell carcinoma (RCC). U.S. Keytruda sales in the third quarter of 2025 reflect a benefit of approximately $100 million due to the timing of wholesaler purchases, partially offset by other channel movements. 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, cervical, and endometrial 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 
 January 2025 
 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. 
 
 April 2025 
 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. 
 
 May 2025 
 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 human epidermal growth factor receptor 2 (HER2) positive gastric or gastroesophageal junction adenocarcinoma, based on the KEYNOTE-811 trial. 
 
 May 2025 
 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. 
 
 June 2025 
 U.S. Food and Drug Administration (FDA) approval for the treatment of adult patients with resectable locally advanced head and neck squamous cell carcinoma (HNSCC) whose tumors express PD-L1 Combined Positive Score (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. 
 
 October 2025 
 EC approval as monotherapy for the treatment of resectable locally advanced HNSCC as neoadjuvant treatment, continued as adjuvant treatment in combination with radiation therapy with or without concomitant cisplatin and then as monotherapy in adults whose tumors express PD-L1 with a CPS ≥1, based on the KEYNOTE-689 trial. 
 

 - 37 - 

 
 

 The Company is a party to license agreements pursuant to which the Company pays royalties on net sales of Keytruda . Under the terms of the more significant of these agreements, Merck pays a royalty of 2.5% on worldwide net sales of Keytruda ; this royalty expires on December 31, 2026. The Company pays an additional 2% royalty on worldwide net sales of Keytruda to another third party, the termination date of which varies by country; this royalty expired in the U.S. in September 2024 and expired in several major European markets in the third quarter of 2025, with the royalty set to expire in the remaining major European markets in the fourth quarter of 2025. The royalty expenses are included in Cost of sales . 
 In September 2025, the FDA approved Keytruda Qlex (pembrolizumab and berahyaluronidase alfa-pmph) injection for subcutaneous administration across most solid tumor indications for Keytruda , and subsequently approved Keytruda Qlex for the treatment of certain adult patients with resectable locally advanced HNSCC so that Keytruda Qlex is now approved across all solid tumor indications for Keytruda . 
 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 12% in both the third quarter and first nine months of 2025, primarily due to higher demand in the U.S. and certain international markets. In January 2025, China’s NMPA approved Lynparza as adjuvant treatment for adult patients with germline BRCA -mutated, HER2-negative high-risk early breast cancer, based on the OlympiA trial. 
 Lenvima (lenvatinib) is an oral receptor tyrosine kinase inhibitor being developed and commercialized as part of a collaboration with Eisai Co., Ltd. (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 (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 3% in both the third quarter and first nine months of 2025, primarily due to higher sales in the U.S. reflecting increased demand that was partially offset by lower net 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 42% in both the third quarter and first nine months of 2025 primarily due to higher demand in the U.S. and continued launch uptake in certain international markets, particularly in the EU, partially offset by lower net 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. 
 
 May 2025 
 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. 
 
 June 2025 
 Japan’s MHLW approval as monotherapy for the treatment of adult patients with VHL disease-associated tumors, based on the LITESPARK-004 trial. 
 
 June 2025 
 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. 
 Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein that is being commercialized through a global collaboration with Bristol-Myers Squibb Company (BMS) (see Note 3 to the condensed consolidated financial statements). Reblozyl is approved for the treatment of anemia in certain rare blood disorders. Alliance revenue related to this collaboration (consisting of royalties) increased 36% and 39% in the third quarter and first nine months of 2025, respectively, primarily due to strong underlying sales performance. 
 Koselugo is an oral, selective MEK inhibitor approved for the treatment of patients with neurofibromatosis type 1 who have symptomatic inoperable plexiform neurofibromas. Koselugo is part of a collaboration with AstraZeneca. The increase in alliance revenue in both the third quarter and first nine months of 2025 is due to the recognition of a $150 million upfront payment and a $50 million milestone due to an amendment to the collaboration agreement that (subject to an annual election by AstraZeneca) discontinued the revenue and cost sharing provisions of the collaboration, and changed the payment structure. See Note 3 to the condensed consolidated financial statements for additional information. 
 - 38 - 

 
 

 Vaccines 
 
 Three Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange Nine Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange 
 ($ in millions) 2025 2024 % Change 2025 2024 % Change 
 Gardasil/Gardasil 9 
 $ 1,749 $ 2,306 (24) % (25) % $ 4,202 $ 7,032 (40) % (40) % 
 ProQuad 273 274 — % (1) % 668 717 (7) % (7) % 
 M-M-R II 
 123 129 (5) % (6) % 387 346 12 % 12 % 
 Varivax 288 301 (4) % (5) % 777 828 (6) % (6) % 
 Vaxneuvance 226 239 (6) % (7) % 685 647 6 % 6 % 
 Capvaxive 
 244 47 * 
 * 
 480 47 * 
 * 
 

 * > 100% 
 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 24% and 40% in the third quarter and first nine months of 2025, respectively. The sales declines were 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. The declines were partially offset by higher sales in the U.S. due to higher net pricing, favorable U.S. Centers for Disease Control and Prevention (CDC) purchasing patterns and, for the year-to-date period, higher demand. In the first nine months of 2025, higher demand in certain international markets also partially offset the sales decline. 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. (Zhifei), to disease and control prevention institutions and correspondingly into the points of vaccination compared with prior quarters of 2024, resulting in above normal inventory levels at Zhifei. Accordingly, the Company shipped less than its contracted doses to Zhifei in the latter part of 2024. 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 and, given continued lower demand and elevated inventory levels in China, in mid-2025, the Company determined it would 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. In April 2025, China’s NMPA approved Gardasil 9 for use in males 16-26 years of age to help prevent certain HPV-related cancers and diseases. In May 2025, a nine-valent HPV vaccine produced by a local manufacturer received regulatory approval in China for use in females 9-45 years of age. In August 2025, the Company’s nine-valent HPV vaccine was approved for use in males nine years of age and older in Japan where it will be marketed under the trademark Silgard 9. 
 Gardasil 9 is currently indicated in the U.S. for a two-dose regimen in adolescents aged 9-14 and a three-dose regimen for those aged 15-45. In June 2024, the CDC’s Advisory Committee on Immunization Practices (ACIP) announced the formation of an HPV vaccines workgroup. In October 2024, the ACIP workgroup 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. Under the terms of the more significant of these agreements, Merck pays a 7% royalty on net sales of Gardasil/Gardasil 9 in the U.S.; this royalty expires in December 2028. 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, were relatively flat in the third quarter of 2025 and declined 7% in the first nine 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. The net effect of the borrowing and partial replenishment resulted in a $49 million reduction of ProQuad sales in the first nine 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, in the third quarter of 2025 were comparable to sales in the third quarter of 2024. Sales of M-M-R II grew 12% in the first nine months of 2025 primarily due to higher sales in the U.S. largely reflecting higher net pricing and increased demand due to measles outbreaks. Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), declined 4% and 6% in the third quarter and first nine months of 2025, respectively, primarily due to lower sales in the U.S. largely driven by lower demand and, for the year-to-date period, unfavorable CDC Stockpile activity, partially offset by higher net pricing. The unfavorable impact to Varivax sales from CDC Stockpile activity was offset by CDC Stockpile activity for other products 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. 
 In September 2025, the ACIP voted to recommend that children under the age of four years receive protection from varicella (chickenpox) as a standalone immunization rather than in combination with measles, mumps, and rubella (MMR) vaccination. Previously, a combined measles, mumps, rubella and varicella virus (MMRV) vaccine could be used based on shared clinical decision-making between doctors and parents for the first dose, which was typically for children aged 12-15 months. The ACIP also voted that MMRV will not be available for administration to children under the age of four years through 
 - 39 - 

 
 

 the Vaccines for Children (VFC) program. These provisional recommendations were subsequently adopted by the interim CDC Director and are now final. MMR and varicella vaccines remain recommended and funded through the VFC program for both the first and second doses. The Company is the only manufacturer in the U.S. of MMRV vaccine ( ProQuad ) and varicella vaccine ( Varivax ). The Company anticipates any negative effect of these recommendations to sales of ProQuad will be immaterial. 
 Worldwide sales of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help protect against invasive pneumococcal disease caused by certain serotypes, declined 6% in the third quarter of 2025 primarily due to lower demand in Japan due to competitive pressure, partially offset by higher demand in Europe. U.S. sales of Vaxneuvance were nearly flat in the third quarter of 2025 as lower demand due to competitive pressure was largely offset by favorable public and private sector purchasing patterns. Worldwide sales of Vaxneuvance grew 6% in the first nine months of 2025 primarily due to public and private sector purchasing patterns in the U.S., as well as higher demand 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. U.S. Vaxneuvance sales in the first nine months of 2025 benefited from approximately $70 million of favorable CDC Stockpile activity, of which approximately $60 million 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. Merck is a party to license agreements pursuant to which the Company pays royalties on sales of Vaxneuvance . Under the terms of the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Vaxneuvance through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales . 
 Sales of Capvaxive were $244 million and $480 million in the third quarter and first nine months of 2025, respectively, due to continued uptake following launch in the U.S. in the third quarter of 2024, as well as seasonal inventory build. In June 2024, the FDA approved Capvaxive for the prevention of invasive pneumococcal disease and pneumococcal pneumonia caused by certain serotypes in individuals 18 years of age and older. Capvaxive was also approved in the EU in March 2025 and in Japan in August 2025. The timing of availability of Capvaxive in individual EU countries will depend on multiple factors including the completion of reimbursement procedures. The U.S., EU, and Japan 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 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; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales. 
 In June 2025, the FDA approved Enflonsia (clesrovimab-cfor), a preventive, long-acting monoclonal antibody, for the prevention of respiratory syncytial virus (RSV) lower respiratory tract disease in neonates (newborns) and infants who are born during or entering their first RSV season. The FDA approval was based on the results from the pivotal CLEVER and SMART clinical trials. Also in June 2025, the CDC’s ACIP voted to recommend Enflonsia as an option for the prevention of RSV lower respiratory tract disease in infants younger than eight months of age who are born during or entering their first RSV season. These provisional recommendations were adopted by the CDC Director and are now official. The CDC’s ACIP also voted to include Enflonsia in the VFC program. Sales of Enflonsia in the U.S. were $79 million in the third quarter of 2025 consisting of inventory stocking. 
 Hospital Acute Care 
 
 Three Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange Nine Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange 
 ($ in millions) 2025 2024 % Change 2025 2024 % Change 
 Bridion $ 439 $ 420 5 % 4 % $ 1,341 $ 1,315 2 % 2 % 
 Prevymis 266 208 28 % 25 % 702 570 23 % 23 % 
 Dificid 
 43 96 (55) % (55) % 222 261 (15) % (15) % 

 Worldwide sales of Bridion (sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, grew 5% and 2% in the third quarter and first nine months of 2025, respectively, as higher demand and net pricing in the U.S. was partially 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. Bridion will lose market exclusivity in the U.S. in July 2026; accordingly, the Company anticipates a significant decline in U.S. sales of Bridion thereafter. 
 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 28% and 23% in the third quarter and first nine months of 2025, respectively, primarily due to higher demand in the U.S. and the launch of new indications in certain international markets, 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, declined 55% and 15% in the third quarter and first nine months of 2025, respectively, primarily due to generic competition in the U.S. Dificid lost market exclusivity in the U.S. in July 2025; accordingly, the Company is experiencing a significant decline in U.S. sales of Dificid and expects the decline to continue. 
 - 40 - 

 
 

 Cardiovascular 
 
 Three Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange Nine Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange 
 ($ in millions) 2025 2024 % Change 2025 2024 % Change 
 Winrevair 
 $ 360 $ 149 * * $ 976 $ 219 * * 
 Alliance Revenue - 
 Adempas/Verquvo (1) 
 112 102 9 % 9 % 340 306 11 % 11 % 
 Adempas 82 72 14 % 7 % 229 214 7 % 5 % 

 * > 100% 
 (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 $360 million and $976 million in the third quarter and first nine months of 2025, respectively, largely reflecting higher sales in the U.S. due to continued uptake since launch in the second quarter of 2024, partially offset by lower net pricing in the U.S. (largely due to the Medicare Part D redesign that was part of the IRA) and the timing of distributor purchases. Sales growth also reflects early launch uptake in certain international markets, particularly in the EU. Following initial approval by the FDA in March 2024 based on the STELLAR trial, in October 2025, the FDA approved an update to the U.S. product label based on the ZENITH trial. Winrevair is now indicated for the treatment of adults with pulmonary arterial hypertension (PAH) (World Health Organization [WHO] Group 1 pulmonary hypertension) to improve exercise capacity and WHO functional class (FC), and reduce the risk of clinical worsening events, including hospitalization for PAH, lung transplantation and death. The recent approval expanded the indication to include components of the clinical worsening events: hospitalization for PAH, lung transplantation and death. In August 2024, the EC approved Winrevair , in combination with other PAH therapies, for the treatment of PAH in adult patients with WHO FC II to III, to improve exercise capacity based on the STELLAR trial. 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 by the end of 2025 for most markets in the EU. 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. The royalty expenses are included in Cost of sales . 
 Adempas (riociguat) and Verquvo (vericiguat) are part of a worldwide collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators (see Note 3 to the condensed consolidated financial statements). Adempas is approved for the treatment of certain types of PAH and chronic pulmonary hypertension. 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 9% and 11% in the third quarter and first nine 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 increased 14% and 7% in the third quarter and first nine months of 2025, respectively, largely due to higher demand. 
 Virology 
 
 Three Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange Nine Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange 
 ($ in millions) 2025 2024 % Change 2025 2024 % Change 
 Lagevrio $ 138 $ 383 (64) % (65) % $ 323 $ 843 (62) % (62) % 

 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 decreased 64% and 62% in the third quarter and first nine months of 2025, respectively, largely due to lower demand in several markets in the Asia Pacific region, particularly in Japan, and in the U.S. driven primarily by declining COVID-19 cases. 
 Immunology 
 
 Three Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange Nine Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange 
 ($ in millions) 2025 2024 % Change 2025 2024 % Change 
 Simponi 
 $ — $ 189 (100) % (100) % $ — $ 545 (100) % (100) % 
 Remicade 
 — 41 (100) % (100) % — 115 (100) % (100) % 

 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. 
 
 
 - 41 - 

 
 

 Diabetes 
 
 Three Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange Nine Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange 
 ($ in millions) 2025 2024 % Change 2025 2024 % Change 
 Januvia/Janumet $ 624 $ 482 29 % 29 % $ 2,043 $ 1,781 15 % 16 % 

 Worldwide combined sales of Januvia and Janumet , medicines that help lower blood sugar levels in adults with type 2 diabetes, grew 29% and 15% in the third quarter and first nine months of 2025, respectively, primarily due to higher net pricing in the U.S., including a favorable true-up to customer discounts in the year-to-date period. Sales growth in both periods was partially offset by lower demand in China, generic competition in most other international markets, and ongoing volume declines in the U.S. due to competitive pressure. 
 The American Rescue Plan Act enacted in the U.S. in 2021 included a provision that eliminated the statutory c ap on rebates drug manufacturers pay to Medicaid beginning in January 2024. As a result of this provision, the Company paid state Medicaid programs more in rebates than it received on Medicaid sales of Januvia , Janumet and Janumet XR in 2024. In early 2025, Merck lowered the list price of the Januvia family of products to more closely align them with net prices. The lower list price has reduced the rebate amount Merck pays to Medicaid, resulting in higher realized net pricing. The Company expects higher U.S. net sales of these products for full year 2025 compared with full year 2024. 
 While the key U.S. patent for Januvia , Janumet and Janumet XR claiming the sitagliptin compound expired in January 2023, as a result of favorable court rulings and settlement agreements related to a later expiring patent directed to the specific sitagliptin salt form of the products (see Note 8 to the condensed consolidated financial statements), the Company expects that Januvia and Janumet will not lose market exclusivity in the U.S. until May 2026 and Janumet XR will not lose market exclusivity in the U.S. until July 2026, although a non-automatically substitutable form of sitagliptin that differs from the form in the Company’s sitagliptin products has been approved by the FDA . Additionally, in 2023, the U.S. Department of HHS, through the CMS, announced that Januvia would be included in the first year of the IRA’s Program. Pursuant to the IRA’s Program, a government price was set for Januvia , which will become effective on January 1, 2026. 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 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. 
 
 Animal Health Segment 
 
 Three Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange Nine Months Ended
September 30, % Change 
Excluding 
Foreign
Exchange 
 ($ in millions) 2025 2024 % Change 2025 2024 % Change 
 Livestock $ 1,023 $ 886 16 % 14 % $ 2,909 $ 2,573 13 % 15 % 
 Companion Animal 592 601 (2) % (3) % 1,940 1,907 2 % 2 % 
 $ 1,615 $ 1,487 9 % 7 % $ 4,849 $ 4,480 8 % 10 % 

 Sales of livestock products grew 16% and 13% in the third quarter and first nine months of 2025, respectively, primarily due to higher demand across all species, as well as higher pricing. Sales growth in 2025 also benefited from the inclusion of sales from the July 2024 acquisition of the aqua business of Elanco Animal Health Incorporated. 
 Sales of companion animal products declined 2% in the third quarter of 2025 primarily due to lower demand, reflecting a reduction in veterinary visits and competitive pressure for parasiticides, partially offset by higher pricing, improved supply and new product launches. Sales of companion animal products grew 2% in the first nine months of 2025 due to higher pricing and improved supply, partially offset by lower demand. Sales of the Bravecto line of products were $262 million in the third quarter of 2025, representing a decline of 1%, or 3% excluding the effect of foreign exchange, compared with the third quarter of 2024. Sales of Bravecto were $925 million for the first nine months of 2025, essentially flat compared with the corresponding prior year period, both nominally and excluding the 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. 
 
 
 
 - 42 - 

 
 

 Costs, Expenses and Other 
 
 Three Months Ended
September 30, Nine Months Ended
September 30, 
 ($ in millions) 2025 2024 % Change 2025 2024 % Change 
 Cost of sales $ 3,855 $ 4,080 (6) % $ 10,831 $ 11,365 (5) % 
 Selling, general and administrative 2,633 2,731 (4) % 7,835 7,952 (1) % 
 Research and development 4,234 5,862 (28) % 11,903 13,354 (11) % 
 Restructuring costs 47 56 (16) % 676 258 * 
 Other (income) expense, net (238) (162) 47 % (281) (151) 86 % 
 $ 10,531 $ 12,567 (16) % $ 30,964 $ 32,778 (6) % 

 * > 100% 
 Cost of Sales 
 Cost of sales declined 6% and 5% in the third quarter and first nine months of 2025, respectively. Cost of sales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $621 million and $625 million in the third quarter of 2025 and 2024, respectively, and $1.8 billion and $1.7 billion in the first nine months of 2025 and 2024, respectively. Also included in Cost of s ales are expenses associated with restructuring activities, which amounted to $110 million and $192 million in the third quarter of 2025 and 2024, respectively, and $311 million and $374 million in the first nine 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 77.7% in the third quarter of 2025 compared with 75.5% in the third quarter of 2024. The gross margin improvement was primarily due to the favorable effect of product mix and lower restructuring costs, partially offset by higher inventory write-offs and the unfavorable effect of foreign exchange. Gross margin was 77.7% in the first nine months of 2025 compared with 76.6% in the first nine months of 2024. The gross margin improvement was primarily due to the favorable effect of product mix and lower restructuring costs, partially offset by higher inventory write-offs, higher amortization of intangible assets, and the unfavorable effect of foreign exchange. 
 Selling, General and Administrative 
 Selling, general and administrative (SG&A) expenses declined 4% in the third quarter of 2025 primarily due to lower administrative, restructuring, and selling costs, partially offset by the unfavorable impact of foreign exchange. SG&A expenses in the first nine months of 2025 declined 1% compared with the corresponding period of 2024 primarily driven by lower restructuring, selling, administrative, and acquisition-related costs, as well as the favorable effect of foreign exchange, partially offset by higher promotional costs. 
 Research and Development 
 Research and development (R&D) expenses declined 28% and 11% in the third quarter and first nine months of 2025, respectively, primarily due to lower charges for business development activity. 
 Significant business development transactions in 2025 include charges of: 
 • $300 million for completion of the technology transfer for MK-2010 (LM-299) from LaNova (third quarter and first nine months of 2025) 
 • $200 million for a license agreement with Hengrui Pharma (first nine months of 2025) 
 • $100 million for the achievement of a developmental milestone related to the 2024 EyeBio acquisition (first nine months of 2025) 
 Significant business development transactions in 2024 include charges of: 
 • $1.35 billion for the acquisition of EyeBio and $100 million for the achievement of a related developmental milestone (third quarter and first nine months of 2024) 
 • $750 million for the acquisition of MK-1045 (formerly CN201) from Curon (third quarter and first nine months of 2024) 
 • $656 million for the acquisition of Harpoon (first nine months of 2024) 
 The declines in R&D expenses in the third quarter and first nine months of 2025 were partially offset by higher clinical development spending, higher restructuring costs 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 $2.7 billion and $2.5 billion for the third quarter of 2025 and 2024, respectively, and $8.0 billion and $7.4 billion for the first nine 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 LaNova and Hengrui Pharma noted above), charges for transactions 
 - 43 - 

 
 

 accounted for as asset acquisitions (including the charges for the acquisitions of EyeBio, MK-1045, and 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 $1.3 billion and $3.3 billion for the third quarter of 2025 and 2024, respectively, and $3.6 billion and $5.9 billion for the first nine months of 2025 and 2024, respectively. R&D expenses also include restructuring costs of $233 million and $286 million in the third quarter and first nine months of 2025, respectively, associated with contractual termination costs. 
 Restructuring Costs 
 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. Approximately 60% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. The remainder of the costs will result in cash outlays, relating primarily to facility shut-down costs. 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 $47 million and $56 million for the third quarter of 2025 and 2024, respectively, and $676 million and $258 million for the first nine 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. Other expenses in Restructuring costs include facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement, and termination charges associated with pension and other postretirement benefit plans and share-based compensation plan costs. For segment reporting, restructuring costs are unallocated expenses. 
 Additional costs associated with the Company’s restructuring activities are included in Cost of sales , Selling, general and administrative expenses and Research and development costs. The Company recorded aggregate pretax costs of $390 million and $279 million in the third quarter of 2025 and 2024, respectively, and $1.3 billion and $701 million for the first nine 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 $238 million of income in the third quarter of 2025 compared with $162 million of income in the third quarter of 2024. The favorable quarter-over-quarter change was primarily due to income from investments in equity securities in the third quarter of 2025 (primarily due to the Company’s investment in Sichuan Kelun-Biotech Biopharmaceutical Co Ltd., Kelun-Biotech) compared with losses from investments in equity securities in the third quarter of 2024, partially offset by the receipt of a $170 million upfront payment from Daiichi Sankyo in 2024 related to the expansion of the existing development and commercialization agreement. Other (income) expense, net was $281 million of income in the first nine months of 2025 compared with $151 million of income in the first nine months of 2024. The favorable period-over-period change primarily reflects higher income from investments in equity securities (primarily due to the Company’s investment in Kelun-Biotech), partially offset by the receipt of an upfront payment in 2024 from Daiichi Sankyo noted above. 
 For details on the components of Other (income) expense, net see Note 11 to the condensed consolidated financial statements. 
 - 44 - 

 
 

 
 Segment Profits 
 Three Months Ended
September 30, Nine Months Ended
September 30, 
 ($ in millions) 2025 2024 2025 2024 
 Pharmaceutical segment profits $ 12,538 $ 11,547 $ 34,264 33,651 
 Animal Health segment profits 511 510 1,737 1,574 
 Non-segment activity 
 (6,304) (7,967) (18,354) (19,459) 
 Income Before Taxes 
 $ 6,745 $ 4,090 $ 17,647 $ 15,766 

 Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as SG&A expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as SG&A and R&D expenses directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, R&D expenses incurred by MRL, or general and administrative expenses not directly incurred by the segments, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. Also excluded from the determination of segment profits are costs related to restructuring activities and acquisition- and divestiture-related costs, including the amortization of intangible assets and amortization of purchase accounting adjustments, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Additionally, segment profits do not reflect other expenses from corporate and manufacturing cost centers and other miscellaneous income or expense. These unallocated items are reflected in “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 grew 9% in the third quarter of 2025, primarily due to higher sales, lower cost of sales, the favorable effect of foreign exchange, as well as lower selling and administrative costs. Pharmaceutical segment profits grew 2% in the first nine months of 2025, primarily due to lower cost of sales, as well as lower administrative and selling costs, partially offset by the unfavorable effect of foreign exchange. Animal Health segment profits were essentially flat the third quarter of 2025 as higher sales were offset by higher cost of sales and increased R&D expenses. Animal Health segment profits rose 10% in the first nine months of 2025 primarily due to higher sales, partially offset by higher R&D expenses and selling costs, as well as the unfavorable effect of foreign exchange. 
 Taxes on Income 
 The effective income tax rates of 14.2% and 13.3% for the third quarter and first nine months of 2025, respectively, reflect the favorable impacts of geographical mix of income and expense, as well as certain discrete items. 
 The effective income tax rate of 22.7% for the third quarter of 2024 reflects a 7.2 percentage point combined unfavorable impact of charges related to the acquisitions of EyeBio and MK-1045, which had minimal tax benefits. The effective income tax rate of 15.1% for the first nine months of 2024 reflects a 2.1 percentage point combined unfavorable impact of charges related to the acquisitions of Harpoon, EyeBio and MK-1045, which had minimal tax benefits. The effective income tax rate for the first nine months of 2024 also reflects a 1.6 percentage point favorable impact 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. 
 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, in July 2025, the OBBBA was enacted into law, which had an immaterial impact to the effective tax rates for the third quarter and first nine months of 2025. 
 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. These amounts are exclusive of any interest that may be due. The Company disagrees with the proposed adjustments and will vigorously contest the NOPAs through all available administrative and, if necessary, judicial proceedings. It is expected to take a number of years to reach resolution of this matter. If the Company is ultimately unsuccessful in defending its position, the impact could be material to its financial statements. The statute of limitations for assessments with respect to the 2019 and 2020 federal tax return years expired in June 2024 (as noted above) and October 2024, respectively. The IRS is also currently conducting examinations of the Company’s tax returns for the years 2021 and 2022. In addition, various state and foreign examinations are in progress. 
 
 
 - 45 - 

 
 

 Non-GAAP Income and Non-GAAP EPS 
 Non-GAAP income and non-GAAP earnings per share (EPS) are alternative views of the Company’s performance that Merck is providing because management believes this information enhances investors’ understanding of the Company’s results since management uses non-GAAP measures to assess performance. Non-GAAP income and non-GAAP EPS exclude certain items because of the nature of these items and the impact that they have on the analysis of underlying business performance and trends. The excluded items (which should not be considered non-recurring) consist of acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities, and certain other items. These excluded items are significant components in understanding and assessing financial performance. 
 Non-GAAP income and non-GAAP EPS are important internal measures for the Company. Senior management receives a monthly analysis of operating results that includes a non-GAAP EPS metric. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the performance of the Company along with other metrics. In addition, annual employee compensation, including senior management’s compensation, is derived in part using a non-GAAP pretax income metric. Since non-GAAP income and non-GAAP EPS are not measures determined in accordance with GAAP, they have no standardized meaning prescribed by GAAP and, therefore, may not be comparable to the calculation of similar measures of other companies. The information on non-GAAP income and non-GAAP EPS should be considered in addition to, but not as a substitute for or superior to, net income and EPS prepared in accordance with generally accepted accounting principles in the U.S. (GAAP). 
 A reconciliation between GAAP financial measures and non-GAAP financial measures is as follows: 
 
 Three Months Ended
September 30, Nine Months Ended
September 30, 
 ($ in millions except per share amounts) 2025 2024 2025 2024 
 Income before taxes as reported under GAAP 
 $ 6,745 $ 4,090 $ 17,647 $ 15,766 
 Increase (decrease) for excluded items: 
 Acquisition- and divestiture-related costs 659 679 1,900 1,808 
 Restructuring costs 390 279 1,274 701 
 (Income) loss from investments in equity securities, net 
 (344) 58 (512) (107) 
 Non-GAAP income before taxes 
 7,450 5,106 20,309 18,168 
 Income tax provision as reported under GAAP 958 929 2,346 2,377 
 Estimated tax benefit on excluded items (1) 
 128 188 468 445 
 Tax (expense) benefit resulting primarily from audit reserve adjustments 
 (86) — 60 — 
 Tax benefit resulting from the expiration of the statute of limitations for assessments related to the 2019 federal tax return year 
 — — — 259 
 Non-GAAP income tax provision 1,000 1,117 2,874 3,081 
 Non-GAAP net income 
 6,450 3,989 17,435 15,087 
 Less: Net income attributable to noncontrolling interests as reported under GAAP 2 4 10 15 
 Non-GAAP net income attributable to Merck & Co., Inc. 
 $ 6,448 $ 3,985 $ 17,425 $ 15,072 
 EPS assuming dilution as reported under GAAP (2) 
 $ 2.32 $ 1.24 $ 6.08 $ 5.26 
 EPS difference 0.26 0.33 0.85 0.67 
 Non-GAAP EPS assuming dilution (2) 
 $ 2.58 $ 1.57 $ 6.93 $ 5.93 

 (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 third quarter of 2025 and 2024 by $0.10 and $0.79 per share, respectively, and for the first nine months of 2025 and 2024 by $0.16 and $1.05 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 
 Non-GAAP income and non-GAAP EPS exclude the impact of certain amounts recorded in connection with acquisitions and divestitures of businesses. These amounts include the amortization of intangible assets, as well as intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also excluded are integration, transaction, and certain other costs associated with acquisitions and divestitures. Non-GAAP income and non-GAAP EPS also exclude amortization of intangible assets related to collaborations and licensing arrangements. 
 Restructuring Costs 
 Non-GAAP income and non-GAAP EPS exclude costs related to restructuring actions (see Note 4 to the condensed consolidated financial statements). 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, 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. 
 - 46 - 

 
 

 Income and Losses from Investments in Equity Securities 
 Non-GAAP income and non-GAAP EPS exclude realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds. 
 Certain Other Items 
 Non-GAAP income and non-GAAP EPS exclude certain other items. These items are adjusted for after evaluating them on an individual basis, considering their quantitative and qualitative aspects. Typically, these items are unusual in nature, significant to the results of a particular period or not indicative of future operating results. Excluded from non-GAAP income and non-GAAP EPS in 2025 is tax (expense) benefit resulting primarily from audit reserve 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 
 The Company currently has several candidates under regulatory review in the U.S. and internationally. 
 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. MK-3475A is under review in the EU. In September 2025, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) recommended approval of a new subcutaneous route of administration and a new pharmaceutical form (solution for injection) for Keytruda which, if approved, would be marketed in the EU as Keytruda SC. The CHMP recommendation will now be reviewed by the EC for marketing authorization in the EU, Iceland, Liechtenstein and Norway, and a final decision is expected in the fourth quarter of 2025. 
 MK-8591A, doravirine/islatravir, an investigational, once-daily, oral, two-drug regimen for adults with HIV-1 infection that is virologically suppressed on antiretroviral therapy, is under review by the FDA. The FDA set a Prescription Drug User Fee Act (PDUFA), or target action, 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. 
 MK-1654, Enflonsia , a prophylactic long-acting monoclonal antibody designed to protect infants from RSV disease during their first RSV season is under review in the EU and Japan. In September 2025, the CHMP of the EMA recommended the approval of Enflonsia for the prevention of RSV lower respiratory tract disease in neonates (newborns) and infants during their first RSV season. The CHMP recommendation, which is supported by results from the pivotal Phase 2b/3 CLEVER trial and the Phase 3 SMART trial, was sent to the EC for review for marketing authorization in the EU, Iceland, Liechtenstein and Norway. In October 2025, Merck informed the EMA and other health authorities, including the FDA, that Merck had identified a data entry issue related to solicited complaints (injection site pain, injection site swelling, injection site erythema, drowsiness, irritability, and/or lost appetite) that is not expected to meaningfully impact the favorable risk-benefit profile of Enflonsia . The Company is further reviewing the data and will provide an update to the EMA and other health authorities in the near future. On October 31, 2025, the EC informed Merck that it would return the CHMP opinion to the EMA to allow the CHMP to assess Merck’s update when it becomes available. This step is expected to delay a final EC decision on the marketing authorization for Enflonsia . Merck remains confident in the robustness of the CLEVER and SMART trials as pivotal studies for Enflonsia and the risk benefit profile of Enflonsia. 
 MK-3475, Keytruda , is an anti-PD-1 therapy approved for the treatment of many cancers that is in clinical development for expanded indications. These studies encompass more than 30 cancer types including: 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 review in Japan for the treatment of patients with resectable locally advanced HNSCC 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 application is based on data from the Phase 3 KEYNOTE-689 trial. 
 Keytruda and Keytruda Qlex (MK-3475A) are each under FDA priority review in combination with Padcev (enfortumab vedotin-ejfv) for the treatment of patients with muscle-invasive bladder cancer who are ineligible for cisplatin-based chemotherapy. The FDA set a PDUFA date of April 7, 2026, marking the first concurrent review of both Keytruda and Keytruda Qlex for the same novel indication. The supplemental biologics license applications (BLAs) are based on data from the Phase 3 KEYNOTE-905 trial, which was conducted in collaboration with Pfizer and Astellas. 
 Keytruda is also under priority review by the FDA in combination with chemotherapy with or without bevacizumab for the treatment of patients with platinum-resistant recurrent ovarian cancer. The FDA set a PDUFA date of February 20, 2026. The supplemental BLA is based on data from the Phase 3 KEYNOTE-B96 trial. KEYNOTE-B96 is also under review in the EU and Japan. 
 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) 
 - 47 - 

 
 

 for enlicitide compared to placebo (CORALreef HeFH) and compared to other oral non-statin therapies (CORALreef AddOn). In September 2025, Merck announced positive topline results from the Phase 3 CORALreef Lipids trial evaluating the safety and efficacy of enlicitide decanoate for the treatment of adults with hypercholesterolemia on a moderate or high intensity statin (or with documented statin intolerance). The CORALreef Lipids trial successfully met all primary and key secondary endpoints. Results from the three Phase 3 trials in the CORALreef clinical development program will be presented at a future scientific congress. 
 In October 2025, Merck acquired Verona Pharma. Through this acquisition, Merck acquired Ohtuvayre (ensifentrine) (MK-5884), 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 COPD in adult patients. Ohtuvayre is being evaluated in a clinical trial for the treatment of non-cystic fibrosis bronchiectasis. Additionally, MK-5884A, a fixed-dose combination of ensifentrine and glycopyrrolate (a long-acting muscarinic antagonist), is currently in development for the maintenance treatment of COPD. Following completion of the Verona Pharma acquisition, Merck made the decision to withdraw the applications for marketing authorization in the EU and UK for Ohtuvayre in the maintenance treatment of COPD in adults, with plans to resubmit at a future date. This decision is based on the assessment that the current applications for Ohtuvayre in the EU and UK are not aligned with business objectives and portfolio strategy. This decision does not impact ongoing trials assessing ensifentrine. 
 In August 2025, Merck announced results evaluating Verquvo in adult patients with stable chronic heart failure and reduced ejection fraction (HFrEF). The Phase 3 VICTOR trial comparing the efficacy of Verquvo to placebo in patients with HFrEF without a recent worsening heart failure event treated with guideline-directed medical therapy did not reach statistical significance for its primary endpoint of combined time to first event of cardiovascular death or hospitalization for heart failure. In a separate pre-specified pooled analysis of patient-level data from the complementary Phase 3 VICTOR and VICTORIA trials, Verquvo reduced the risk of the composite primary endpoint of cardiovascular death or heart failure hospitalization across these patients with a broad range of disease severity. Results from both analyses were presented in August 2025 at the European Society of Cardiology Congress 2025. 
 The chart below reflects the Company’s research pipeline as of November 3, 2025. Candidates shown in Phase 3 include the date such candidate entered into Phase 3 development. Candidates shown in Phase 2 include the most advanced compound with a specific mechanism or, if listed compounds have the same mechanism, they are each currently intended for commercialization in a given therapeutic area. Small molecules and biologics are given MK-number designations and vaccine candidates are given V-number designations. Except as otherwise noted, candidates in Phase 1, additional indications in the same therapeutic area (other than with respect to cancer and immunology) and additional claims, line extensions or formulations for in-line products are not shown. 
 
 Phase 2 
 Alzheimer’s Disease 
 MK-1167 
 MK-2214 
 Atherosclerosis 
 MK-7262 
 Cancer 
 MK-1022 (patritumab deruxtecan) (1)(3) 
 Biliary 
 Bladder 
 Cervical 
 Colorectal 
 Endometrial 
 Esophageal 
 Gastric 
 Head and Neck 
 Hepatocellular 
 Melanoma 
 Non-Small Cell lung 
 Ovarian 
 Pancreatic 
 Prostate 
 MK-2400 (ifinatamab deruxtecan) (1) 
 Biliary 
 Bladder 
 Breast 
 Cervical 
 Colorectal 
 Endometrial 
 Head and Neck 
 Hepatocellular 
 Melanoma 
 Non-Small Cell Lung 
 Ovarian 
 Pancreatic 
 Cancer 
 MK-2870 (sacituzumab tirumotecan) (1)(3) 
 Biliary 
 Bladder 
 Colorectal 
 Esophageal 
 Neoplasm Malignant 
 Pancreatic 
 MK-3120 
 Bladder 
 MK-3475 Keytruda 
 Prostate 
 MK-3475A Keytruda Qlex 
 Hematological Malignancies (U.S.) 
 MK-5684 (opevesostat) 
 Breast 
 Endometrial 
 Ovarian 
 MK-5909 (raludotatug deruxtecan) (1) 
 Biliary 
 Bladder 
 Cervical 
 Colorectal 
 Endometrial 
 Gastric 
 Non-Small Cell Lung 
 Ovarian 
 Pancreatic 
 Renal Cell 
 Small Cell Lung 
 MK-6070 (gocatamig) 
 Small Cell Lung 
 MK-6482 Welireg 
 Breast 
 V940 (intismeran autogene) (1)(2) 
 Bladder 
 Renal Cell 
 Chronic Obstructive Pulmonary Disease 
 MK-5884A (ensifentrine+glycopyrrolate) 
 Eye Disorders 
 MK-8748 
 HIV-1 Infection 
 MK-8591B (islatravir+ulonivirine) 
 Immunology 
 MK-7240 (tulisokibart) 
 Axial Spondyloarthritis 
 Hidradenitis Suppurativa 
 Rheumatoid Arthritis 
 Systemic Sclerosis 
 Metabolic Dysfunction-Associated Steatohepatitis (MASH) 
 MK-6024 (efinopegdutide) 
 Pulmonary Hypertension-Chronic Obstructive Pulmonary Disease 
 MK-5475 
 Pulmonary Hypertension Due To Left Heart Disease 
 MK-7962 Winrevair 
 
 
 
 
 

 - 48 - 

 
 

 
 Phase 3 (Phase 3 entry date) Under Review 
 Antiviral COVID-19 
 MK-4482 Lagevrio (U.S.) (May 2021) (1)(4) 
 Cancer 
 MK-1022 (patritumab deruxtecan) (1) 
 Breast (July 2025) 
 MK-1026 (nemtabrutinib) 
 Hematological Malignancies (March 2023) 
 MK-1084 (2) 
 Colorectal (July 2025) 
 Non-Small Cell Lung (May 2024) 
 MK-1308A (quavonlimab+pembrolizumab) 
 Renal Cell (April 2021) 
 MK-2140 (zilovertamab vedotin) 
 Hematological Malignancies (September 2024) 
 MK-2400 (ifinatamab deruxtecan) (1) 
 Esophageal (March 2025) 
 Prostate (May 2025) 
 Small Cell Lung (July 2024) 
 MK-2870 (sacituzumab tirumotecan) (1)(3) 
 Breast (April 2024) 
 Cervical (July 2024) 
 Endometrial (December 2023) 
 Gastric (May 2024) 
 Non-Small Cell Lung (November 2023) 
 Ovarian (April 2025) 
 MK-3475 Keytruda 
 Hepatocellular (May 2016) (EU) 
 Small Cell Lung (May 2017) 
 MK-3543 (bomedemstat) 
 Myeloproliferative Disorders (December 2023) 
 MK-5684 (opevesostat) 
 Prostate (December 2023) 
 MK-7339 Lynparza (1)(2) 
 Non-Small Cell Lung (June 2019) 
 Small Cell Lung (December 2020) 
 V940 (intismeran autogene) (1)(2) 
 Melanoma (July 2023) 
 Non-Small Cell Lung (December 2023) 
 Dengue Fever Virus Vaccine 
 V181 (June 2025) 
 Diabetic Macular Edema 
 MK-3000 (5) 
 HIV-1 Infection 
 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 
 MK-0616 (enlicitide decanoate) (August 2023) 
 Immunology 
 MK-7240 (tulisokibart) 
 Crohn’s Disease (June 2024) 
 Ulcerative Colitis (October 2023) 
 New Molecular Entities 
 Ca ncer 
 MK-3475A Keytruda Qlex 
 Previously Approved Tumors (EU) (7) 
 HIV-1 Infection 
 MK-8591A (doravirine+islatravir) (U.S.) (JPN) 
 Respiratory Syncytial Virus 
 MK-1654 Enflonsia (EU) (JPN) 
 
 
 
 
 
 
 
 
 
 
 
 
 Certain Supplemental Filings 
 Cancer 
 MK-3475 Keytruda 
 • Resectable Locally Advanced Head and Neck Squamous Cell Carcinoma 
 (KEYNOTE-689) (JPN) 
 • Muscle-Invasive Bladder Cancer Ineligible for Cisplatin-Based Chemotherapy 
 (KEYNOTE-905) (U.S.) 
 • Platinum-Resistant Recurrent Ovarian Cancer 
 (KEYNOTE-B96) (U.S.) (EU) (JPN) 
 MK-3475A Keytruda Qlex 
 • Muscle-Invasive Bladder Cancer Ineligible for Cisplatin-Based Chemotherapy 
 (KEYNOTE-905) (U.S.) 
 
 
 
 
 
 Footnotes: 
 (1) Being developed in a collaboration. 
 (2) Being developed in combination with Keytruda . 
 (3) Being developed as monotherapy and/or in combination with Keytruda. 
 (4) Available in the U.S. under Emergency Use Authorization. 
 (5) Program is in a Phase 2/3 study that commenced in August 2024. 
 (6) On FDA partial clinical hold for higher doses of islatravir than those used in current clinical trials. 
 (7) MK-3475A to be marketed under the trade name Keytruda SC in the EU. 
 
 
 
 
 
 
 

 
 Analysis of Liquidity and Capital Resources 
 
 ($ in millions) September 30, 2025 December 31, 2024 
 Cash and investments $ 19,331 $ 14,152 
 Working capital 18,929 10,362 
 Total debt to total liabilities and equity 31.9 % 31.7 % 

 Cash provided by operating activities was $13.6 billion in the first nine months of 2025 compared with $18.0 billion in the first nine months of 2024. Cash provided by operating activities was reduced by $2.0 billion and $370 million for upfront and milestone payments related to certain collaborations, licensing agreements, and acquisitions in the first nine 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 $2.5 billion in the first nine months of 2025 compared with $6.3 billion in the first nine 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 $6.7 billion in the first nine months of 2025 compared with $4.0 billion in the first nine months of 2024. The higher use of cash in financing activities was primarily due to higher purchases of treasury stock, 
 - 49 - 

 
 

 higher payments on long-term debt, higher dividends paid to shareholders, and lower proceeds from the exercise of stock options, partially offset by higher proceeds from long-term debt. 
 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 September 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. In certain of these factoring arrangements, for ease of administration, the Company will collect customer payments related to the factored receivables, which it then remits to the financial institutions. The net cash flows relating to these collections are reported as financing activities in the Condensed Consolidated Statement of Cash Flows. 
 In September 2025, the Company issued $6.0 billion aggregate principal amount of senior unsecured notes consisting of $500 million of floating rate notes due 2027, $750 million of 3.85% notes due 2027, $750 million of 4.15% notes due 2030, $1.0 billion of 4.55% notes due 2032, $1.75 billion of 4.95% notes due 2035, and $1.25 billion of 5.70% notes due 2055. The Company used the net proceeds of the offering for general corporate purposes, including to fund a portion of the approximately $10.5 billion cash consideration and related fees and expenses payable in connection with Merck’s acquisition of Verona Pharma in October 2025 (see Note 2 to the condensed consolidated financial statements). 
 In February 2025, the Company’s $2.5 billion, 2.75% notes matured in accordance with their terms and were repaid. 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 $6.2 billion and $5.9 billion for the first nine months of 2025 and 2024, respectively. 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 July 2025, Merck’s Board of Directors declared a quarterly dividend of $0.81 per share on the Company’s outstanding common stock for the fourth quarter that was paid in October 2025. 
 In 2018, Merck’s Board of Directors authorized purchases of up to $10 billion of Merck’s common stock for its treasury. 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. 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 nine months of 2025, the Company purchased $3.8 billion (46 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 September 30, 2025, the Company’s remaining share repurchase authorization was $8.6 billion. 
 The Company has a $6.0 billion credit facility that matures in May 2030. The facility provides backup liquidity for the Company’s commercial paper borrowing facility and is to be used for general corporate purposes. The Company has not drawn funding from this facility. 
 
 Critical Accounting Estimates 
 The Company’s significant accounting policies, which include management’s best estimates and judgments, are included in Note 2 to the consolidated financial statements for the year ended December 31, 2024 included in Merck’s Form 10‑K filed on February 25, 2025. A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates is included in the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Merck’s Form 10-K. There have been no significant changes in the Company’s critical accounting estimates since December 31, 2024. 
 
 Recently Issued Accounting Standards 
 For a discussion of recently issued accounting standards, see Note 1 to the condensed consolidated financial statements. 
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk 
 There have been no material changes in market risk exposures that affect the disclosures presented in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s 2024 Form 10-K filed on February 25, 2025.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
Merck & Co., Inc. 10-Q

Item 2. Management’s Discussion and Analysis
