What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-24 compared with 2025-02-25 · 519 added, 446 removed, 1778 unchanged (35% of the section changed)

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Other Comprehensive Income (Loss) Net of Taxes:

Net unrealized income (loss) on derivatives, net of reclassifications

Net unrealized (loss) income on derivatives, net of reclassifications

( 347 ) 266 ( 97 )

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

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Consolidated Balance Sheet

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

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Consolidated Statement of Equity

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— — ( 7,551 ) — — — ( 7,551 )

Treasury stock shares purchased — — — — ( 1,346 ) — ( 1,346 )

Net income attributable to noncontrolling interests — — — — — 12 12

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— — 17,117 — — — 17,117

Other comprehensive loss, net of taxes — — — ( 393 ) — — ( 393 )

Other comprehensive income, net of taxes

— — — 216 — — 216

Cash dividends declared on common stock ($ 3.12 per share)

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

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Consolidated Statement of Cash Flows

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Intangible asset impairment charges 55 39 792

(Income) loss from investments in equity securities, net ( 14 ) ( 340 ) 1,419

Income from investments in equity securities, net

( 368 ) ( 14 ) ( 340 )

Charges for certain research and development asset acquisitions

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Purchases of securities and other investments ( 1,207 ) ( 519 ) ( 955 )

Proceeds from sales of securities and other investments 1,678 377 1,658

Proceeds from sale of Seagen Inc.

common stock — — 1,145

Proceeds from sales of securities and other investments 377 1,658 721

Acquisition of Verona Pharma plc, net of cash acquired

( 10,042 ) — —

Acquisition of Eyebiotech Limited, net of cash acquired

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

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Notes to Consolidated Financial Statements

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The operating results of the acquired business are reflected in the Company’s consolidated financial statements after the date of the acquisition.

If the Company determines the assets acquired do not meet the definition of a business under the acquisition method of accounting, the transaction will be accounted for as an acquisition of assets rather than a business combination and, therefore, no goodwill will be recorded.

In an asset acquisition, acquired in-process research and development (IPR&D) with no alternative future use is charged to expense and contingent consideration is not recognized at the acquisition date.

If the Company determines the assets acquired do not meet the definition of a business under the acquisition method of accounting, the transaction will be accounted for as an asset acquisition rather than a business combination and, therefore, no goodwill will be recorded.

In an asset acquisition, acquired in-process research and development (IPR&D) with no alternative future use is charged to expense, currently marketed products are capitalized as intangible assets, and contingent consideration is not recognized at the acquisition date.

Foreign Currency Translation — The net assets of international subsidiaries where the local currencies have been determined to be the functional currencies are translated into U.S.

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dollar has been determined to be the functional currency, non-monetary foreign currency

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assets and liabilities are translated using historical rates, while monetary assets and liabilities are translated at current rates, with the U.S.

dollar effects of rate changes included in Other (income) expense, net .

Cash Equivalents — Cash equivalents are comprised of certain highly liquid investments with original maturities of less than three months.

Cash Equivalents — Cash equivalents consist of certain highly liquid investments with original maturities of less than three months.

Inventories — Inventories are valued at the lower of cost or net realizable value.

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The nature of the Company’s business gives rise to several types of variable consideration including discounts and returns, which are estimated at the time of sale generally using the expected value method, although the most likely amount method is used for prompt pay discounts.

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In the U.S., sales discounts are issued to customers at the point-of-sale, through an intermediary wholesaler (known as chargebacks), or in the form of rebates.

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Outside of the U.S., variable consideration in the form of discounts and rebates are a combination of commercially-driven discounts in highly competitive product classes, discounts required to gain or maintain reimbursement, or legislatively mandated rebates.

In certain European countries, legislatively mandated rebates are calculated based on an estimate of the government’s total unbudgeted spending and the Company’s specific payback obligation.

In certain European countries, legislatively mandated rebates are calculated based on an estimate of the government’s total unbudgeted health care spending and the Company’s specific payback obligation.

Rebates may also be required based on specific product sales thresholds.

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Merck’s payment terms for U.S.

pharmaceutical customers are typically 36 days from receipt of invoice and for U.S.

animal health customers are typically 30 days from receipt of invoice;

pharmaceutical products are typically 35 days from receipt of invoice and for U.S.

animal health products are typically 30 days from receipt of invoice;

however, certain products have longer payment terms, including Keytruda ( pembrolizumab ) , which has payment terms of 90 days.

Payment terms for vaccine sales in the U.S.

Payment terms for vaccine products in the U.S.

typically range from 30 days to 60 days.

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These costs are included in Property, plant and equipment .

In addition, the Company capitalizes certain costs incurred to implement a cloud computing arrangement

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that is considered a service agreement, which are included in Other Assets .

Capitalized software costs are being amortized over periods ranging from 2 to 10 years, with the longer lives generally associated with enterprise-wide projects implemented over multiple years.

The Company also capitalizes certain costs incurred to implement cloud computing arrangements, which

are considered service agreements.

These costs are included in Other Assets .

Capitalized software costs are being amortized over periods ranging from 2 to 10 years (which include contract renewal periods for cloud computing arrangements that are reasonably certain to occur), with the longer lives generally associated with enterprise-wide projects implemented over multiple years.

Costs incurred during the preliminary project stage and post-implementation stage, as well as maintenance and training costs, are expensed as incurred.

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If the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill).

Acquired Intangibles — Intangibles acquired in a business combination include product rights, trade names and patents, licenses and other, which are initially recorded at fair value, assigned an estimated useful life, and amortized primarily on a straight-line basis over their estimated useful lives ranging from 2 to 24 years.

Acquired Intangibles — Intangibles acquired in business combinations and asset acquisitions include product rights, trade names and patents, licenses and other, which are initially recorded at fair value, assigned an estimated useful life, and amortized primarily on a straight-line basis over their estimated useful lives ranging from 2 to 24 years.

The Company periodically evaluates whether current facts or circumstances indicate that the carrying values of its acquired intangibles may not be recoverable.

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Profit sharing amounts it pays to its collaborative partners are recorded within Cost of sales .

When the collaborative partner is the principal on sales transactions with third parties, the Company records profit sharing amounts received from its collaborative partners as alliance revenue

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(within Sales ).

When the collaborative partner is the principal on sales transactions with

third parties, the Company records profit sharing amounts received from its collaborative partners as alliance revenue (within Sales ).

Alliance revenue is recorded net of cost of sales and includes an adjustment to share commercialization costs between the partners in accordance with the collaboration agreement.

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Research and development costs Merck incurs related to collaborations are recorded within Research and development expenses.

Cost reimbursements to the collaborative partner or payments received from the collaborative partner to share these costs pursuant to the terms of the collaboration agreements are recorded as increases or decreases to Research and development expenses.

In addition, the terms of the collaboration agreements may require the Company to make payments based upon the achievement of certain developmental, regulatory approval or commercial milestones.

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The amortization catch-up is calculated either from the time of the first regulatory approval for products that were unapproved at the time the collaboration was formed or, for new indications of approved products, from the time of the formation of the collaboration.

The related intangible asset that is recognized is amortized to Cost of sales over its remaining useful life, subject to impairment testing.

The related intangible asset that is recognized is amortized to Cost of sales over its estimated remaining useful life, subject to impairment testing.

Share-Based Compensation — The Company expenses all share-based payments to employees over the requisite service period based on the grant-date fair value of the awards.

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The Company accounts for the tax effects of the tax on global intangible low-taxed income (GILTI) of certain foreign subsidiaries in the income tax provision in the period the tax arises.

1 - One Big Beautiful Bill Act (OBBBA) renamed the provision for taxes on foreign earnings from GILTI to net controlled foreign corporation tested income (NCTI).

The Company’s policy for releasing disproportionate income tax effects from AOCL is to utilize the item-by-item approach.

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(GAAP) and, accordingly, include certain amounts that are based on management’s best estimates and judgments.

Estimates are used when accounting for amounts recorded in connection with acquisitions, including initial fair value determinations of assets and liabilities in a business combination (primarily IPR&D, other intangible assets and contingent consideration), as well as subsequent fair value measurements.

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based milestone payments and other reserves, pension and other postretirement benefit plan assumptions, share-based compensation assumptions, restructuring costs, impairments of long-lived assets (including intangible assets and goodwill) and investments, and taxes on income.

measurements.

Additionally, estimates are used in determining such items as provisions for sales discounts, rebates and returns, depreciable and amortizable lives, recoverability of inventories (including those produced in preparation for product launches), amounts recorded for contingencies, environmental liabilities, contingent sales-based milestone payments and other reserves, pension and other postretirement benefit plan assumptions, share-based compensation assumptions, restructuring costs, impairments of long-lived assets (including intangible assets and goodwill) and investments, and taxes on income.

Because of the uncertainty inherent in such estimates, actual results may differ from these estimates.

Recently Adopted Accounting Standards — In August 2023, the Financial Accounting Standards Board (FASB) issued amended guidance that requires a newly formed joint venture to recognize and initially measure its assets and liabilities at fair value upon formation.

The amended guidance includes exceptions to fair value measurement that are consistent with the accounting for business combinations guidance.

The Company adopted the guidance effective July 1, 2024 on a prospective basis.

There was no impact to the Company’s consolidated financial statements upon adoption.

In November 2023, the FASB issued guidance intended to improve reportable segment disclosure requirements, primarily through expanded disclosures for significant segment expenses.

The Company adopted the guidance effective for the 2024 annual period.

The guidance resulted in incremental disclosures to the Company’s segment reporting disclosures.

See Note 18 for further details.

Recently Issued Accounting Standards Not Yet Adopted — In December 2023, the FASB issued guidance intended to improve the transparency of income tax disclosures by requiring consistent categories and disaggregation of information in the effective income tax rate reconciliation and income taxes paid disclosures by jurisdiction.

Recently Adopted Accounting Standards — In December 2023, the Financial Accounting Standards Board (FASB) issued guidance intended to improve the transparency of income tax disclosures by requiring consistent categories and disaggregation of information in the effective income tax rate reconciliation and income taxes paid disclosures by jurisdiction.

The guidance also includes other amendments to improve the effectiveness of income tax disclosures by removing certain previously required disclosures.

The guidance is effective for 2025 annual reporting.

The guidance will result in incremental disclosures within the footnotes to the Company’s financial statements.

In November 2024, the FASB issued guidance intended to improve financial reporting by requiring entities to disclose additional information about specific expense categories at interim and annual reporting periods.

The Company elected to prospectively adopt the guidance effective for 2025 annual reporting.

The adoption primarily resulted in incremental disclosures to the Company’s income tax disclosures contained in Note 15.

In September 2025, the FASB issued amended guidance to reduce the complexity of evaluating whether contracts are derivatives by adding a scope exception (which may apply to certain R&D funding arrangements) to exclude from derivative accounting non-exchange-traded contracts with variables (underlyings) that are based on operations or activities specific to one of the parties to the contract.

The Company adopted the guidance on October 1, 2025, effective for full year 2025 on a prospective basis.

The Company did not have any contracts that were affected by the adoption of this new standard;

therefore, there was no impact to the Company’s consolidated financial statements upon adoption.

Recently Issued Accounting Standards Not Yet Adopted — In November 2024, the FASB issued guidance intended to improve financial reporting by requiring entities to disclose additional information about specific expense categories for interim and annual reporting periods.

The guidance is effective for 2027 annual reporting and 2028 interim reporting.

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The guidance, which can be applied on a prospective or retrospective basis, will result in incremental disclosures within the footnotes to the Company’s financial statements.

Acquisitions, Divestitures, Research Collaborations and Licensing Agreements

In December 2025, the FASB issued guidance that includes requirements for recognition of government grants in a Company’s financial statements as well as disclosure requirements, including the nature of the government grant received, the accounting policies used to account for the grant, and significant terms and conditions of the grant.

The guidance is effective for 2029 interim and annual reporting on a modified prospective, modified retrospective or retrospective approach.

Early adoption is permitted as of the beginning of an annual reporting period.

The Company is currently evaluating the impact of adoption on its consolidated financial statements.

Acquisitions, Research Collaborations and Licensing Agreements

The Company continues to pursue acquisitions and the establishment of external alliances such as research collaborations and licensing agreements to complement its internal research capabilities.

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Recent Transactions

In January 2025, Merck and WuXi Vaccines, a wholly owned subsidiary of WuXi Biologics, entered into a definitive agreement pursuant to which Merck will acquire WuXi Vaccines’ facility in Dundalk, Ireland for a payment of approximately $ 440 million at closing.

The transaction is expected to close in the first quarter of 2025, subject to the satisfaction of customary closing conditions.

In January 2026, Merck acquired Cidara Therapeutics, Inc.

(Cidara), a biotechnology company developing drug-Fc conjugate (DFC) therapeutics, for approximately $ 9.2 billion (including payments to settle share-based equity awards).

Cidara’s lead DFC candidate, MK-1406 (formerly CD388), is a long-acting antiviral designed to prevent seasonal and pandemic influenza.

MK-1406 is currently being evaluated among adult and adolescent participants who are at higher risk of developing complications from influenza.

Merck anticipates the transaction will be accounted for as an asset acquisition since MK-1406 is expected to account for substantially all of the fair value of the gross assets to be acquired (excluding cash and deferred income taxes).

Merck expects to record a charge of approximately $ 9.0 billion to Research and development expenses in the first quarter of 2026 for acquired IPR&D with no alternative future use.

There are no future contingent payments associated with the acquisition.

2025 Transactions

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, Merck made a $ 150 million upfront payment, which the Company recorded as a charge to Research and development expenses in 2025.

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 $ 10.4 billion (including payments to settle share-based equity awards).

Through this acquisition, Merck acquired Ohtuvayre (ensifentrine), an inhaled phosphodiesterases 3 and 4 (PDE3 and PDE4) inhibitor, which was approved in the U.S.

in June 2024 for the maintenance treatment of chronic obstructive pulmonary disease (COPD) in adults.

Ohtuvayre is also being evaluated in clinical trials for the treatment of non-cystic fibrosis bronchiectasis.

The transaction was accounted for as an asset acquisition since Ohtuvayre accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes).

Merck recorded an intangible asset of $ 12.1 billion for Ohtuvayre , cash of $ 495 million, inventories of $ 522 million (including $ 498 million of step-up to fair value), deferred tax liabilities of $ 2.7 billion and other net liabilities of $ 51 million.

The estimated fair value of the Ohtuvayre intangible asset was determined using an income approach.

Actual cash flows are likely to be different than those assumed.

The Ohtuvayre intangible asset will be amortized over its estimated useful life of nine years , subject to impairment testing.

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 up to $ 700 million in the fourth quarter of 2026 (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.

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.

Sac-TMT is an investigational trophoblast cell-surface antigen 2 (TROP2)-directed antibody drug conjugate (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 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.

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.

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

The agreement provided for an upfront payment of $ 200 million, which was recorded as a charge to Research and development expenses in 2025.

Hengrui Pharma is also eligible to receive future contingent developmental milestone payments of up to $ 92.5 million, regulatory milestone payments of up to $ 177.5 million, and sales-based milestone payments of up to $ 1.5 billion, as well as tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate 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.

2024 Transactions

In December 2024, Merck closed an exclusive global license to develop, manufacture and commercialize MK-2010 (LM-299), a novel investigational PD-1/vascular endothelial growth factor (VEGF) bispecific antibody from LaNova Medicines Ltd (LaNova).

Merck recorded a charge of $ 588 million to Research and development expenses in 2024 for the upfront payment, which was made in January 2025.

LaNova is also eligible to receive $ 300 million upon technology transfer, which is anticipated to be completed in 2025, as well as future contingent developmental milestone payments of up to $ 140 million, regulatory milestone payments of up to $ 860 million and sales-based milestone payments of up to $ 1.4 billion.

In 2025, the technology transfer for MK-2010 (LM-299) was completed.

Accordingly, Merck made a $ 300 million payment to LaNova (acquired by Sino Biopharmecutical Limited), which was recorded as a charge to Research and development expenses in 2025.

LaNova is also eligible to receive future contingent developmental milestone payments of up to $ 140 million, regulatory milestone payments of up to $ 860 million and sales-based milestone payments of up to $ 1.4 billion.

Also in December 2024, Merck closed an exclusive global license to develop, manufacture and commercialize MK-4082 (HS-10535), an investigational preclinical oral small molecule GLP-1 receptor agonist from Hansoh Pharma (Hansoh).

Merck recorded a charge of $ 112 million to Research and development expenses in 2024 for the upfront payment, which was made in February 2025.

Hansoh is also eligible to receive future contingent

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development-related milestone payments of up to $ 115 million, regulatory milestone payments of up to $ 315 million and sales-based milestone payments of up to $ 1.47 billion, as well as tiered royalties ranging from a high-single-digit rate to a low-double-digit rate on future net sales of MK-4082 (HS-10535), if approved.

Hansoh is also eligible to receive contingent development-related milestone payments of up to $ 115 million (of which $ 15 million was paid in 2025), regulatory milestone payments of up to $ 315 million and sales-based milestone payments of up to $ 1.47 billion, as well as tiered royalties ranging from a high-single-digit rate to a low-double-digit rate on future net sales of MK-4082 (HS-10535), if approved.

Under the agreement, Hansoh may co-promote or solely commercialize MK-4082 (HS-10535) in Chinese mainland, Hong Kong and Macau, subject to certain conditions.

In September 2024, Merck acquired MK-1045 (formally CN201), a novel investigational clinical-stage bispecific antibody for the treatment of B-cell associated diseases, from Curon Biopharmaceutical (Curon) for an upfront payment of $ 700 million.

In September 2024, Merck acquired MK-1045 (formerly CN201), a novel investigational clinical-stage bispecific antibody for the treatment of B-cell associated diseases, from Curon Biopharmaceutical (Curon) for an upfront payment of $ 700 million.

In addition, Curon is eligible to receive future contingent developmental milestone payments of up to $ 300 million and regulatory milestone payments of up to $ 300 million.

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There are no contingent payments associated with the acquisition, which was accounted for as a business combination.

The estimated fair values of assets acquired and liabilities assumed from the Elanco aqua business are as follows:

The estimated fair values of assets acquired and liabilities assumed from the Elanco aqua business (inclusive of measurement period adjustments) are as follows:

Property, plant and equipment

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Other product rights (useful lives 15 years) (1)

Deferred tax asset

Other assets and liabilities, net 23

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(2) The goodwill recognized is largely attributable to anticipated synergies expected to arise after the acquisition and was allocated to the Animal Health segment.

The goodwill is expected to be deductible for tax purposes.

This amount is expected to be deductible for tax purposes.

Also in July 2024, Merck acquired Eyebiotech Limited (EyeBio), a privately held ophthalmology-focused biotechnology company, for $ 1.2 billion (including payments to settle share-based equity awards) and also incurred $ 207 million of transaction costs.

The acquisition agreement also provides for former EyeBio shareholders to receive future contingent developmental milestone payments of up to $ 200 million (of which $ 100 million was triggered and paid in 2024 as noted below), regulatory milestone payments of up to $ 1.0 billion and sales-based milestone payments of up to $ 500 million.

The acquisition agreement also provides for former EyeBio shareholders to receive contingent developmental milestone payments of up to $ 1.0 billion (of which $ 200 million has since been paid associated with the achievement of milestones as noted below), regulatory milestone payments of up to $ 200 million and sales-based milestone payments of up to $ 500 million.

EyeBio’s development work focused on candidates for the prevention and treatment of vision loss associated with retinal vascular leakage, a known risk factor for retinal diseases.

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The transaction was accounted for as an asset acquisition since MK-3000 accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes).

Merck recorded net assets of $ 21 million, as well as a charge of $ 1.35 billion to Research and development expenses in 2024 related to the acquisition.

Additionally, a $ 100 million developmental milestone was triggered and paid in 2024 upon initiation of a Phase 2/3 clinical trial

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evaluating MK-3000 for the treatment of diabetic macular edema, which was also recorded as a charge to Research and development expenses.

Additionally in July 2024, Merck and Orion Corporation (Orion) announced the mutual exercise of an option to convert the companies’ ongoing co-development and co-commercialization agreement for opevesostat (MK-5684/ODM-208), an investigational cytochrome P450 11A1 (CYP11A1) inhibitor in Phase 3 clinical development, and other candidates targeting CYP11A1, into an exclusive global license for Merck.

With the exercise of the option, Merck assumed full responsibility for all past and future development and commercialization expenses associated with the candidates covered by the original agreement entered into in 2022 as discussed below.

Merck recorded net assets of $ 21 million, as well as a charge of $ 1.35 billion to Research and development expenses in 2024 for acquired IPR&D with no alternative future use.

Additionally, developmental milestones of $ 100 million were recorded as charges to Research and development expenses in each of 2025 and 2024.

Additionally in July 2024, Merck and Orion Corporation (Orion) announced the mutual exercise of an option to convert the companies’ ongoing co-development and co-commercialization agreement for opevesostat (MK-5684/ODM-208), an investigational cytochrome P450 11A1 (CYP11A1) inhibitor, and other candidates targeting CYP11A1, into an exclusive global license for Merck.

In addition, Orion became eligible to receive developmental milestone payments of up to $ 30 million, regulatory milestone payments of up to $ 625 million and sales-based milestone payments of up to $ 975 million, as well as annually tiered royalties ranging from a low double-digit rate up to a rate in the low twenties on net sales for any commercialized licensed product.

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No payment was associated with the exercise of the option, which became effective in September 2024.

Also in July 2024, Merck notified Kelun-Biotech (a holding subsidiary of Sichuan Kelun Pharmaceutical Co., Ltd.) it was terminating the license and collaboration agreement entered into in July 2022 in which Merck gained exclusive worldwide rights for the development, manufacture and commercialization of an investigational antibody drug conjugate (ADC) MK-1200 (SKB315) for the treatment of solid tumors.

As a result of this termination, which became effective in September 2024, all rights to SKB315 have reverted to Kelun-Biotech.

In March 2024, Merck acquired Harpoon Therapeutics, Inc.

(Harpoon), a clinical-stage immunotherapy company developing a novel class of T-cell engagers designed to harness the power of the body’s immune system to treat patients suffering from cancer and other diseases for $ 765 million and also incurred $ 56 million of transaction costs.

Harpoon’s lead candidate, MK-6070 (formerly HPN328), is a T-cell engager targeting delta-like ligand 3 (DLL3), an inhibitory canonical Notch ligand that is expressed at high levels in small-cell lung cancer and neuroendocrine tumors.

The transaction was accounted for as an asset acquisition since MK-6070 represented substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes).

Merck recorded net assets of $ 165 million, as well as a charge of $ 656 million to Research and development expenses in 2024 related to the transaction.

Harpoon’s lead candidate, gocatamig (MK-6070, formerly HPN328), is a T-cell engager targeting delta-like ligand 3 (DLL3), an inhibitory canonical Notch ligand that is expressed at high levels in small cell lung cancer and neuroendocrine tumors.

The transaction was accounted for as an asset acquisition since gocatamig represented substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes).

Merck recorded net assets of $ 165 million, as well as a charge of $ 656 million to Research and development expenses in 2024 for acquired IPR&D with no alternative future use.

There are no future contingent payments associated with the acquisition.

In August 2024, Merck and Daiichi Sankyo expanded their existing global co-development and co-commercialization agreement to include MK-6070.

In August 2024, Merck and Daiichi Sankyo expanded their existing global co-development and co-commercialization agreement to include gocatamig.

See Note 4 for more information on Merck’s collaboration with Daiichi Sankyo.

In February 2024, Merck and Alteogen Inc.

(Alteogen) converted their existing non-exclusive license agreement into an exclusive license for the use of Alteogen’s proprietary berahyaluronidase alfa for the formulation of subcutaneous pembrolizumab.

Pursuant to the amended agreement, Alteogen is eligible to receive regulatory approval milestone payments of up to $ 51 million, as well as annual and cumulative sales-based milestone payments of up to $ 1.0 billion in the aggregate.

After the achievement of all sales-based milestones, a low single digit royalty on net sales is payable to Alteogen.

In 2025, the U.S.

Food and Drug Administration (FDA) approved Keytruda Qlex (pembrolizumab and berahyaluronidase alfa-pmph) injection and the European Commission approved a new subcutaneous route of administration and a new pharmaceutical form (solution for injection) of Keytruda .

These approvals triggered regulatory milestone payments of $ 40 million in the aggregate from Merck to Alteogen.

Additionally, following FDA and EC approvals, the Company determined that it was probable that sales of Keytruda Qlex in the future would trigger $ 890 million of sales-based milestone payments from Merck to Alteogen.

Accordingly, Merck recorded a $ 930 million liability for these regulatory and sales-based milestone payments and a corresponding intangible asset related to Keytruda Qlex included in Other Intangibles, Net .

The intangible asset is being amortized over its estimated useful life through December 2030.

The $ 40 million of regulatory milestone payments were made in 2025;

the future sales-based milestone payments will be paid upon achievement of the corresponding milestone.

2023 Transactions

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Total consideration paid of $ 11.0 billion included $ 1.2 billion of costs to settle share-based equity awards (including $ 700 million to settle unvested equity awards).

Prometheus’ lead candidate, tulisokibart (MK-7240, formerly PRA023), is a humanized monoclonal antibody directed to tumor necrosis factor-like ligand 1A, a target associated with both intestinal inflammation and fibrosis.

Prometheus’ lead candidate, tulisokibart (MK-7240, formerly PRA023), is a humanized monoclonal antibody directed to tumor necrosis factor-like ligand 1A, a central amplifier of inflammatory pathways and fibrotic mechanisms in inflammatory bowel disease.

Tulisokibart is being developed for the treatment of immune-mediated diseases including ulcerative colitis, Crohn’s disease, and other autoimmune conditions.

Phase 3 clinical trials evaluating tulisokibart for Crohn’s disease and ulcerative colitis are underway.

The transaction was accounted for as an asset acquisition since tulisokibart accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes).

Merck recorded net assets of $ 877 million, including cash of $ 368 million, investments of $ 296 million, deferred tax assets of $ 218 million and other net liabilities of $ 5 million, as well as a charge of $ 10.2 billion to Research and development expenses in 2023 related to the transaction.

There are no future contingent payments associated with the acquisition.

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Subsequently, in April 2024, Merck notified Kelun-Biotech it was terminating one additional candidate under the agreement.

In July 2024, Merck notified Kelun-Biotech that it was

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exercising an existing license option for one of the candidates under the agreement, granting Merck a license for the development, manufacture and commercialization worldwide excluding China.

In July 2024, Merck notified Kelun-Biotech that it was exercising an existing license option for one of the candidates under the agreement, granting Merck a license for the development, manufacture and commercialization worldwide excluding China.

There are now three candidates licensed under the original agreement and one candidate for which the license option remains unexercised.

Merck paid Kelun-Biotech $ 38 million in connection with the July option exercise, following which Kelun-Biotech remains eligible to receive future contingent payments aggregating up to $ 540 million in development-related payments, $ 1.5 billion in regulatory milestones, and $ 3.1 billion in sales-based milestones, if Kelun-Biotech does not retain Chinese mainland, Hong Kong and Macau rights for the remaining option ADC and all remaining candidates achieve regulatory approval.

Merck paid Kelun-Biotech $ 38 million in connection with the July 2024 option exercise, following which Kelun-Biotech is eligible to receive contingent payments aggregating up to $ 540 million in development-related payments (of which $ 20 million was paid in 2025), $ 1.5 billion in regulatory milestones, and $ 3.1 billion in sales-based milestones, if Kelun-Biotech does not retain Chinese mainland, Hong Kong and Macau rights for the remaining option ADC and all remaining candidates achieve regulatory approval.

In addition, Kelun-Biotech is eligible to receive tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on future net sales for any commercialized ADC product.

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(Imago), a clinical-stage biopharmaceutical company developing new medicines for the treatment of myeloproliferative neoplasms and other bone marrow diseases, for $ 1.35 billion (including payments to settle share-based equity awards) and also incurred approximately $ 60 million of transaction costs.

Imago’s lead candidate, bomedemstat (MK-3543, formerly IMG-7289), which is in Phase 3 clinical development, is an investigational orally available lysine-specific demethylase 1 inhibitor currently being evaluated in multiple clinical trials for the treatment of essential thrombocythemia, myelofibrosis, and polycythemia vera, in addition to other indications.

Imago’s lead candidate, bomedemstat (MK-3543, formerly IMG-7289), is an investigational orally available lysine-specific demethylase 1 inhibitor currently being evaluated in multiple clinical trials for the treatment of essential thrombocythemia, myelofibrosis, and polycythemia vera, in addition to other indications.

The transaction was accounted for as an asset acquisition since bomedemstat represented substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes).

Merck recorded net assets of $ 219 million, as well as a charge of $ 1.2 billion to Research and development expenses in 2023 related to the transaction.

Merck recorded net assets of $ 219 million, as well as a charge of $ 1.2 billion to Research and development expenses in 2023 for acquired IPR&D with no alternative future use.

There are no future contingent payments associated with the acquisition.

2022 Transactions

In October 2022, Merck and Royalty Pharma plc (Royalty Pharma) entered into a funding arrangement under which Royalty Pharma paid Merck $ 50 million to co-fund Merck’s development costs for a Phase 2b trial of MK-8189, an investigational oral phosphodiesterase 10A (PDE10A) inhibitor, which was being evaluated for the treatment of schizophrenia.

As Royalty Pharma was sharing the risk of technical and regulatory success with Merck, the development funding was recognized by Merck as an obligation to perform contractual services.

Accordingly, the payment received was recognized by Merck as a reduction to Research and development expenses ratably over the estimated Phase 2b research period.

In 2024, it was determined the Phase 2b clinical trial for MK-8189 as a monotherapy for acute schizophrenia did not meet its primary efficacy endpoint;

therefore, further development in schizophrenia, bipolar, and dementia indications has stopped, and the funding arrangement was terminated.

In September 2022, Merck exercised its option to jointly develop and commercialize V940 (mRNA-4157), an investigational individualized neoantigen therapy, pursuant to the terms of an existing collaboration and license agreement with Moderna, Inc.

See Note 4 for additional information related to this collaboration.

In August 2022, Merck and Orna Therapeutics (Orna), a biotechnology company pioneering a new investigational class of engineered circular RNA (oRNA) therapies, entered into a collaboration agreement to discover, develop, and commercialize multiple programs, including vaccines and therapeutics in the areas of infectious disease and oncology.

Under the terms of the agreement, Merck made an upfront payment to Orna of $ 150 million, which was recorded as a charge to Research and development expenses in 2022.

In addition, Orna is eligible to receive future contingent payments aggregating up to $ 440 million in development-related payments, $ 675 million in regulatory milestones, and $ 2.4 billion in sales-based milestones associated with the progress of the multiple vaccine and therapeutic programs, as well as royalties ranging from a high-single-digit rate to a low-double-digit rate on any approved products derived from the collaboration.

Merck also invested $ 100 million in Orna’s Series B preferred shares in 2022.

In July 2022, Merck and Orion Corporation (Orion) announced a global co-development and co-commercialization agreement for Orion’s investigational candidate opevesostat (MK-5684/ODM-208) and other drugs targeting cytochrome P450 11A1 (CYP11A1), an enzyme important in steroid production.

Merck made an upfront payment to Orion of $ 290 million, which was recorded as a charge to Research and development expenses in 2022.

Orion is responsible for the manufacture of clinical and commercial supply of opevesostat.

In addition, the contract provided both parties with an option to convert the initial co-development and co-commercialization agreement into a global exclusive license to Merck, which was mutually exercised in July 2024 (as noted above).

In May 2022, in connection with an existing arrangement, Merck exercised its option to obtain an exclusive license outside of Chinese mainland, Hong Kong, Macau and Taiwan for the development, manufacture and commercialization of Kelun-Biotech’s trophoblast antigen 2 (TROP2)-targeting ADC programs, including its lead compound, sacituzumab tirumotecan (MK-2870/SKB-264), which is currently in Phase 3 clinical development.

Under the terms of the agreement, Merck and Kelun-Biotech are collaborating on certain early clinical development plans,

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including evaluating the potential of sacituzumab tirumotecan as a monotherapy and in combination with Keytruda for advanced solid tumors.

Upon option exercise, Merck made a payment of $ 30 million, which was recorded as a charge to Research and development expenses in 2022.

Additionally, Merck made an additional payment of $ 25 million upon technology transfer in 2023.

Merck has also made all contingent developmental milestone payments under the agreement, which aggregated $ 90 million, nearly all of which were paid in 2024 and were recorded to Research and development expenses.

In addition, Kelun-Biotech is eligible to receive future contingent milestone payments (which include all program compounds) aggregating up to $ 290 million in first commercial sale milestones, and $ 780 million in sales-based milestones.

The agreement also provides for Merck to pay tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on future net sales.

Spin-Off of Organon & Co.

In connection with the 2021 spin-off of Organon & Co.

(Organon), Merck and Organon entered into a series of interim operating agreements pursuant to which in various jurisdictions where Merck held licenses, permits and other rights in connection with marketing, import and/or distribution of Organon products prior to the separation, Merck continued to market, import and distribute such products on behalf of Organon until such time as the relevant licenses and permits transferred to Organon, with Organon receiving all of the economic benefits and burdens of such activities.

As of December 31, 2024, only one jurisdiction remains under an interim operating agreement.

Additionally, Merck and Organon entered into a number of manufacturing and supply agreements (MSAs) with terms ranging from four years to ten years .

The amounts included in the consolidated statement of income for the above MSAs include sales of $ 392 million, $ 394 million and $ 383 million in 2024, 2023 and 2022, respectively, and related cost of sales of $ 390 million, $ 422 million and $ 404 million in 2024, 2023 and 2022, respectively.

The amounts due from Organon under all spin-off related agreements were $ 330 million and $ 632 million at December 31, 2024 and 2023, respectively, and are reflected in Other current assets .

The amounts due to Organon under these agreements were $ 113 million and $ 598 million at December 31, 2024 and 2023, respectively, and are included in Accrued and other current liabilities .

Collaborative Arrangements

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In 2017, Merck and AstraZeneca PLC (AstraZeneca) entered into a global strategic oncology collaboration to co-develop and co-commercialize AstraZeneca’s Lynparza (olaparib) for multiple cancer types.

Independently, Merck and AstraZeneca are developing and commercializing Lynparza in combinations with their respective PD-1 and PD-L1 medicines, Keytruda and Imfinzi.

The companies are also jointly developing and commercializing AstraZeneca’s Koselugo (selumetinib) for multiple indications.

Under the terms of the agreement, AstraZeneca and Merck share the development and commercialization costs for Lynparza and Koselugo monotherapy and non-PD-1/PD-L1 combination therapy opportunities.

Profits from Lynparza and Koselugo product sales generated through monotherapies or combination therapies are shared equally.

AstraZeneca is the principal on Lynparza and Koselugo sales transactions.

Merck records its share of Lynparza and Koselugo product sales, net of cost of sales and commercialization costs, as alliance revenue, and its share of development costs associated with the collaboration as part of Research and development expenses.

Independently, Merck and AstraZeneca are developing and commercializing Lynparza in combinations with their respective PD-1 and PD-L1 medicines, Keytruda (pembrolizumab) and Imfinzi.

Under the terms of the agreement, AstraZeneca and Merck share the development and commercialization costs for Lynparza monotherapy and non-PD-1/PD-L1 combination therapy opportunities.

Profits from Lynparza product sales generated through monotherapies or combination therapies are shared equally.

AstraZeneca is the principal on Lynparza sales transactions.

Merck records its share of Lynparza product sales, net of cost of sales and commercialization costs, as alliance revenue, and its share of development costs associated with the collaboration as part of Research and development expenses.

Reimbursements received from AstraZeneca for research and development expenses are recognized as reductions to Research and development costs.

As part of the agreement, Merck made an upfront payment to AstraZeneca and also made payments over a multi-year period for certain license options.

In addition, the agreement provides for contingent payments from Merck to AstraZeneca related to the successful achievement of sales-based and regulatory milestones.

In 2024, sales of Koselugo triggered a $ 100 million sales-based milestone payment from Merck to AstraZeneca.

Accordingly, Merck recorded a $ 100 million liability (which remained accrued at December 31, 2024 and was subsequently paid in January 2025) and a corresponding increase to the intangible asset related to Koselugo.

Merck also recognized $ 48 million of cumulative amortization catch-up expense related to the recognition of this milestone in 2024.

Merck made a sales-based milestone payment to AstraZeneca of $ 400 million in 2022 (which had been previously accrued for).

Additionally, in 2022, Merck determined it was probable that sales of Lynparza in the future would trigger a $ 600 million sales-based milestone payment from Merck to AstraZeneca.

Accordingly, Merck recorded a $ 600 million liability (which remained accrued at December 31, 2024 and was

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subsequently paid in January 2025) and a corresponding increase to the intangible asset related to Lynparza.

Merck also recognized $ 250 million of cumulative amortization catch-up expense related to the recognition of this milestone in 2022.

The initial collaboration agreement also included the joint development and commercialization of AstraZeneca’s Koselugo (selumetinib) for multiple indications, with revenues, costs and profits being accounted for similar to Lynparza.

In August 2025, Merck and AstraZeneca amended the terms of the original collaboration agreement, which resulted in the discontinuation of the revenue and cost sharing provisions of the collaboration and the simplification of the governance structure related to Koselugo.

In exchange, Merck received a $ 150 million upfront payment in 2025 (which was recorded within Sales as alliance revenue in 2025) and $ 150 million in February 2026 (which will be recorded within Sales as alliance revenue in 2026).

Merck may also receive $ 150 million in the first quarter of 2027 and $ 100 million in the first quarter of 2028, subject to an annual election by AstraZeneca in January of each year as discussed below.

Additionally, the amended agreement provided for Merck to receive contingent regulatory milestone payments of up to $ 175 million in the aggregate, all of which were triggered in 2025 and recorded within Sales as alliance revenue.

Of these milestone amounts, $ 50 million is due from AstraZeneca in 2026, $ 50 million is due in 2027 and $ 75 million is due in 2028.

The Company is also receiving mid-single-digit royalties on net sales (which are included within Sales as alliance revenue).

Merck remains eligible to receive future contingent payments for the achievement of sales-based milestones of up to $ 235 million.

AstraZeneca has the option in January of 2027 or January 2028 to revert back to the income and cost sharing terms of the original agreement (in which case any future annual, contingent milestone, and royalty payments referenced above would no longer be due) although Merck would retain any payments made by AstraZeneca prior to the exercise of that option and any amounts due from AstraZeneca would remain payable to Merck.

As part of the initial collaboration agreement, Merck made an upfront payment to AstraZeneca and also made payments over a multi-year period for certain license options.

In addition, the initial collaboration agreement provided for contingent payments from Merck to AstraZeneca related to the successful achievement of sales-based and regulatory milestones.

In 2025, Merck made sales-based milestone payments aggregating $ 700 million (related to the original collaboration agreement) to AstraZeneca of which $ 600 million related to Lynparza and $ 100 million related to Koselugo (both of which had been previously accrued for).

Merck recognized $ 48 million of cumulative amortization catch-up expense related to the recognition of the $ 100 million Koselugo milestone in 2024.

Potential future sales-based milestone payments of $ 2.0 billion have not yet been accrued as they are not deemed by the Company to be probable at this time.

Lynparza received regulatory approvals triggering capitalized milestone payments from Merck to AstraZeneca of $ 245 million, $ 105 million and $ 250 million in 2024, 2023 and 2022, respectively (each of which had been previously accrued for).

In 2024, the partners agreed that no future regulatory milestone payments from Merck to AstraZeneca are likely under the agreement.

The intangible asset balances related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) and Koselugo (which reflects the 2024 capitalized sales-based milestone payment) were $ 1.2 billion and $ 49 million, respectively, at December 31, 2024 and are included in Other Intangibles, Net .

Lynparza received regulatory approvals triggering capitalized milestone payments from Merck to AstraZeneca of $ 245 million and $ 105 million in 2024 and 2023, respectively (both of which had been previously accrued for).

The partners have agreed that no future regulatory milestone payments from Merck to AstraZeneca are likely.

The intangible asset balances related to Lynparza and Koselugo (which reflect the capitalized sales-based and regulatory milestone payments attributed to each product) were $ 844 million and $ 38 million, respectively, at December 31, 2025 and are included in Other Intangibles, Net .

The assets are being amortized over their estimated useful lives (through 2028 for Lynparza and through 2029 for Koselugo) as supported by projected future cash flows, subject to impairment testing.

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Receivables from AstraZeneca included in Other current assets (3)

Receivables from AstraZeneca included in Other assets (3)

Payables to AstraZeneca included in Accrued and other current liabilities (4)

Payables to AstraZeneca included in Other Noncurrent Liabilities (2)

(1) Amounts in 2025 include the $ 150 million upfront payment and $ 175 million regulatory milestones triggered as a result of the amendment to the collaboration agreement noted above.

(2) Represents amortization of capitalized milestone payments.

Amounts in 2024 and 2022 include $ 48 million and $ 250 million, respectively, of cumulative amortization catch-up expense as noted above.

(2) Includes accrued milestone payments.

Amount in 2024 includes $ 48 million of cumulative amortization catch-up expense as noted above.

(3) Balance at December 31, 2025 includes milestone receivables.

(4) Balance at December 31, 2024 includes accrued milestone payments.

Eisai Co., Ltd.

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Expenses incurred during co-development are shared by the two companies in accordance with the collaboration agreement and reflected in Research and development expenses.

Certain expenses incurred solely by Merck or Eisai are not shareable under the collaboration agreement, including costs incurred in excess of agreed upon caps and costs related to certain combination studies of Keytruda and Lenvima.

Under the agreement, Merck made an upfront payment to Eisai and also made payments over a multi-year period for certain option rights.

In addition, the agreement provides for contingent payments from Merck to Eisai related to the successful achievement of sales-based and regulatory milestones.

Merck made sales-based milestone payments to Eisai aggregating $ 125 million, $ 125 million and $ 600 million in 2024, 2023 and 2022, respectively.

In 2023, Merck determined it was probable that sales of Lenvima in the future would trigger $ 250 million of sales-based milestone payments from Merck to Eisai.

Accordingly, Merck recorded $ 250 million of liabilities (of which $ 125 million was subsequently paid in each of 2024 and 2023 as noted above) and corresponding increases to the intangible asset related to Lenvima.

Accordingly, Merck recorded $ 250 million of liabilities (of which $ 125 million was subsequently paid in each of 2024 and 2023) and corresponding increases to the intangible asset related to Lenvima.

Merck also recognized $ 154 million of cumulative amortization catch-up expense related to the recognition of these milestones in 2023.

Potential future sales-based milestone payments of $ 2.3 billion have not yet been accrued as they are not deemed by the Company to be probable at this time.

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In 2022, Lenvima received regulatory approvals triggering capitalized milestone payments of $ 50 million from Merck to Eisai.

There are no regulatory milestone payments remaining under the agreement.

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Receivables from Eisai included in Other current assets

Payables to Eisai included in Accrued and other current liabilities (2)

(1) Represents amortization of capitalized milestone payments.

Amount in 2023 includes $ 154 million of cumulative amortization catch-up expense as noted above.

(2) Represents an accrued milestone payment.

In 2014, the Company entered into a worldwide clinical development collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators including Bayer’s Adempas (riociguat) and Verquvo (vericiguat).

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Cost of sales includes Bayer’s share of profits from sales in Merck’s marketing territories.

In addition, the agreement provided for contingent payments from Merck to Bayer related to the successful achievement of sales-based milestones.

In 2022, Merck made the final $ 400 million sales-based milestone payment under this collaboration to Bayer.

The agreement provided for contingent payments from Merck to Bayer related to the successful achievement of sales-based milestones.

There are no such payments remaining under this collaboration.

The intangible asset balances related to Adempas (which includes the acquired intangible asset balance, as well as capitalized sales-based milestone payments attributed to Adempas) and Verquvo (which reflects the portion of the final sales-based milestone payment that was attributed to Verquvo) were $ 280 million and $ 40 million, respectively, at December 31, 2025 and are included in Other Intangibles, Net .

The assets are being amortized over their estimated useful lives (through 2027 for Adempas and through 2031 for Verquvo) as supported by projected future cash flows, subject to impairment testing.

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Summarized financial information related to this collaboration is as follows:

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Cost of sales (1)

554 852 3,038

Selling, general and administrative

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December 31 2025 2024

Receivables from Ridgeback included in Other current assets

Payables to Ridgeback included in Accrued and other current liabilities (2)

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Daiichi Sankyo

In October 2023, Merck and Daiichi Sankyo entered into a global development and commercialization agreement for three of Daiichi Sankyo’s DXd ADC candidates:

In 2023, Merck and Daiichi Sankyo entered into a global development and commercialization agreement for three of Daiichi Sankyo’s DXd ADC candidates:

patritumab deruxtecan (HER3-DXd) (MK-1022), ifinatamab deruxtecan (I-DXd) (MK-2400) and raludotatug deruxtecan (R-DXd) (MK-5909).

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Daiichi Sankyo will be solely responsible for manufacturing and supply.

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Under the terms of the agreement, Merck made payments to Daiichi Sankyo totaling $ 4.0 billion in 2023.

These payments included $ 1.0 billion ($ 500 million each for patritumab deruxtecan and ifinatamab deruxtecan), which may be refundable on a pro-rated basis in the event of early termination of development with respect to either program.

In addition, the agreement provided for a continuation payment of $ 750 million related to patritumab deruxtecan, which Merck paid in October 2024, and a continuation payment of $ 750 million related to raludotatug deruxtecan due from Merck in October 2025.

If Merck does not make the remaining continuation payment for raludotatug deruxtecan, the rights for that program will revert to Daiichi Sankyo and the non-refundable upfront payments already paid will be retained by Daiichi Sankyo.

The agreement also provides for contingent payments from Merck to Daiichi Sankyo of up to an additional $ 5.5 billion for each DXd ADC upon the successful achievement of certain sales-based milestones.

In conjunction with this transaction, Merck recorded an aggregate pretax charge of $ 5.5 billion to Research and development expenses in 2023 for the $ 4.0 billion of upfront payments and the $ 1.5 billion of continuation payments.

Merck determined it was appropriate to expense the $ 1.0 billion refundable portion of the consideration in 2023 because of the significant number of clinical studies that were underway and planned in the near future, as well as certain studies in advanced stages, making it highly likely that the programs would continue to progress and incur substantial expenses, and therefore the likelihood of the programs terminating before the end of the refundable period was deemed remote.

Merck also determined that it was appropriate to expense the continuation payments upon execution of the agreement because such payments do not result in the Company gaining any additional intellectual property rights.

In addition, the significant number of ongoing and planned clinical studies and the short-term nature of the option period makes the likelihood of Merck not making these payments remote.

Merck and Daiichi Sankyo equally share research and development costs, except for raludotatug deruxtecan, where Merck is responsible for 75 % of the first $ 2.0 billion of research and development expenses.

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Merck will record its share of product sales, net of cost of sales and commercialization costs, as alliance revenue.

In August 2024, Merck and Daiichi Sankyo expanded their agreement to include MK-6070, an investigational delta-like ligand 3 (DLL3) targeting T-cell engager, which Merck obtained through its acquisition of Harpoon (see Note 3).

The companies are planning to evaluate MK-6070 in combination with ifinatamab deruxtecan in certain patients with SCLC, as well as other potential combinations.

In August 2024, Merck and Daiichi Sankyo expanded their agreement to include gocatamig (MK-6070), an investigational DLL3 targeting T-cell engager, which Merck obtained through its acquisition of Harpoon (see Note 3).

The companies are planning to evaluate gocatamig in combination with ifinatamab deruxtecan in certain patients with small cell lung cancer, as well as other potential combinations.

Merck received an upfront cash payment of $ 170 million from Daiichi Sankyo (recorded within Other (income) expense, net ) and has also satisfied a contingent quid obligation from the original collaboration agreement.

The companies will jointly develop and commercialize MK-6070 worldwide and share research and development and commercialization expenses.

Research and development expenses related to MK-6070 in combination with ifinatamab deruxtecan will be shared in a manner consistent with the original agreement for ifinatamab deruxtecan.

Merck will be solely responsible for manufacturing and supply of MK-6070.

If approved, Merck will generally record sales for MK-6070 worldwide (Merck will be the principal on sales transactions) and the companies will equally share expenses as well as profits worldwide, except for Japan where Merck retains exclusive rights and Daiichi Sankyo will receive a 5 % sales-based royalty.

The companies will jointly develop and commercialize gocatamig

worldwide and share research and development costs, as well as commercialization expenses.

Research and development expenses related to gocatamig in combination with ifinatamab deruxtecan will be shared in a manner consistent with the original agreement for ifinatamab deruxtecan.

Merck will be solely responsible for manufacturing and supply of gocatamig.

If approved, Merck will generally record sales for gocatamig worldwide (Merck will be the principal on sales transactions) and the companies will equally share expenses as well as profits worldwide, except for Japan where Merck retains exclusive rights, and Daiichi Sankyo will receive a 5 % sales-based royalty.

Summarized financial information related to this collaboration is as follows:

Years Ended December 31 2025 2024 2023

Cost of sales (1)

Selling, general and administrative

Research and development (2)

524 351 5,549

December 31 2025 2024

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Payables to Daiichi Sankyo included in Accrued and other current liabilities (3)

Payables to Daiichi Sankyo included in Other Noncurrent Liabilities (2)

(1) Represents Merck’s share of certain inventory-related costs.

(2) Expenses in 2023 include the $ 5.5 billion charge for the upfront and continuing option payments noted above.

(2) Includes accrued continuation payment.

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(3) Balance at December 31, 2024 includes accrued continuation payment.

Moderna, Inc.

In 2022, Merck exercised its option to jointly develop and commercialize V940 (mRNA-4157), an investigational individualized neoantigen therapy, pursuant to the terms of an existing collaboration and license agreement with Moderna, Inc.

(Moderna), which resulted in a $ 250 million payment that was charged to Research and development expenses in 2022.

V940 (mRNA-4157) is currently being evaluated in combination with Keytruda in multiple Phase 3 clinical trials.

In 2022, Merck exercised its option to jointly develop and commercialize intismeran autogene (V940/mRNA-4157), an investigational individualized neoantigen therapy, pursuant to the terms of an existing collaboration and license agreement with Moderna, Inc.

Intismeran autogene is currently being evaluated in combination with Keytruda in multiple clinical trials.

Merck and Moderna share costs and will share any profits equally under this worldwide collaboration.

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Any reimbursements received from Moderna for research and development expenses are recognized as reductions to Research and development costs.

Merck has also capitalized certain of the shared costs, mainly related to facility costs, which aggregated $ 198 million at December 31, 2024 and will be amortized over the assets’ estimated useful lives.

Merck has also capitalized a net $ 236 million of shared facility costs at December 31, 2025, primarily reflected within Other Assets .

These costs are amortized over the assets’ estimated useful lives.

Summarized financial information related to this collaboration is as follows:

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Selling, general and administrative

$ 27 $ 16 $ 5

Research and development (1)

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Payables to Moderna included in Accrued and other current liabilities

(1) Expenses in 2022 include the $ 250 million option exercise payment noted above.

(1) Includes amortization of shared facility costs.

Bristol-Myers Squibb Company

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BMS is the principal on sales transactions for Reblozyl.

however, Merck co-promotes Reblozyl (and may co-promote any future products approved under this collaboration) in North America, which is reimbursed by BMS.

Merck receives tiered royalties ranging from 20 % to 24 % based on sales levels.

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Additionally, Merck is eligible to receive future contingent sales-based milestone payments of up to $ 80 million.

Alliance revenue related to this collaboration (recorded within Sales ) consists of royalties and, for 2022, also includes the receipt of a regulatory approval milestone payment of $ 20 million.

Merck recorded alliance revenue related to this collaboration of $ 371 million in 2024, $ 212 million in 2023 and $ 166 million in 2022.

Alliance revenue related to this collaboration, consisting of royalties (recorded within Sales ), was $ 525 million in 2025, $ 371 million in 2024 and $ 212 million in 2023.

Restructuring

In January 2024, the Company approved a new 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.

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 recorded total pretax costs of $ 2.0 billion in 2025 related to the 2025 Restructuring Program, which includes charges of $ 910 million to Cost of sales for the accelerated depreciation of manufacturing lines at two sites.

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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In 2019, Merck approved a global restructuring program (2019 Restructuring Program) as part of a worldwide initiative focused on optimizing the Company’s manufacturing and supply network, as well as reducing its global real estate footprint.

The Company recorded total pretax costs of $ 743 million in 2023 and $ 666 million in 2022 related to the 2019 Restructuring Program.

The actions under the 2019 Restructuring Program were substantially complete at the end of 2023 and, as of January 1, 2024, any remaining activities are being accounted for as part of the 2024 Restructuring Program.

For segment reporting, restructuring charges are unallocated expenses.

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The following table summarizes the charges related to the restructuring programs by type of cost:

The following table summarizes the charges related to restructuring program activities by type of cost:

Depreciation Separation

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910 548 554 2,012

Year Ended December 31, 2023

2024 Restructuring Program

Cost of sales 247 — 5 252

Selling, general and administrative — — 1 1

Restructuring costs — 61 225 286

247 61 231 539

$ 1,157 $ 609 $ 785 $ 2,551

Year Ended December 31, 2024

2024 Restructuring Program

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$ 254 $ 122 $ 512 $ 888

$ 140 $ 454 $ 339 $ 933

Year Ended December 31, 2023

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Cost of sales $ — $ — $ 62 $ 62

Restructuring costs — 115 13 128

2019 Restructuring Program

Cost of sales 131 — 18 149

Selling, general and administrative 9 — 113 122

2 unchanged sentences

140 339 264 743

Accelerated depreciation costs primarily relate to manufacturing, research and administrative facilities and equipment to be sold or closed as part of the programs.

$ 140 $ 454 $ 339 $ 933

Accelerated depreciation costs primarily relate to manufacturing, research and administrative facilities to be fully or partially closed or divested and equipment to be disposed of as part of the programs.

Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions.

2 unchanged sentences

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

Other exit costs in 2024, 2023 and 2022 include asset impairment, facility shut-down and other related costs, as well as pretax gains and losses resulting from the sales of facilities and related assets.

Other exit costs in 2025, 2024 and 2023 include asset impairment, facility shut-down, contractual termination, and other related costs, as well as pretax gains and losses resulting from the sales of facilities and related assets.

Additionally, other activity includes certain employee-related costs associated with pension and other postretirement benefit plans (see Note 13) and share-based compensation.

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The following table summarizes the charges and spending relating to restructuring program activities:

The following table summarizes the charges and spending related to restructuring program activities:

Depreciation Separation

Costs Other Exit Costs

2025 Restructuring Program

Restructuring reserves January 1, 2025 $ — $ — $ — $ —

Expenses 910 548 554 2,012

(Payments) receipts, net — ( 46 ) ( 50 ) ( 96 )

Non-cash activity ( 910 ) — ( 216 ) ( 1,126 )

Restructuring reserves December 31, 2025 $ — $ 502 $ 288 $ 790

2024 Restructuring Program

Restructuring reserves January 1, 2024

$ — $ 681 $ 31 $ 712

26 unchanged sentences

For those derivatives which are not designated as cash flow hedges, but serve as economic hedges of forecasted sales, unrealized gains or losses are recorded in Sales each period.

The cash flows from both designated and non-designated contracts are reported as operating activities in the Consolidated Statement of Cash Flows.

The cash flows from both designated and non-designated contracts are reported as operating

activities in the Consolidated Statement of Cash Flows.

The Company does not enter into derivatives for trading or speculative purposes.

2 unchanged sentences

The Company also uses a balance sheet risk management program to mitigate the exposure of such assets and liabilities from the effects of volatility in foreign exchange.

Merck principally utilizes forward exchange contracts to

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offset the effects of foreign exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the foreign exchange rate and the cost of the hedging instrument (primarily the euro, Swiss franc, Japanese yen, and Chinese renminbi).

Merck principally utilizes forward exchange contracts to offset the effects of foreign exchange on exposures when it is deemed economical to do so based on a cost-benefit analysis that considers the magnitude of the exposure, the volatility of the foreign exchange rate and the cost of the hedging instrument (primarily the euro, Swiss franc, Japanese yen, and Chinese renminbi).

The forward contracts are not designated as hedges and are marked to market through Other (income) expense, net .

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

Amount of Pretax (Gain) Loss Recognized in Other Comprehensive Income (1)

Amount of Pretax Loss (Gain) Recognized in Other Comprehensive Income (1)

Amount of Pretax (Gain) Loss Recognized in Other (income) expense, net for Amounts Excluded from Effectiveness Testing

7 unchanged sentences

The Company does not use leveraged swaps and, in general, does not leverage any of its investment activities that would put principal at risk.

At December 31, 2024, the Company was a party to six pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of the fixed-rate notes as detailed in the table below.

At December 31, 2025, the Company was a party to seven pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of a portion of fixed-rate notes as detailed in the table below.

Par Value of Debt Number of Interest Rate Swaps Held Total Swap Notional Amount

1 unchanged sentence

$ 1,500 6 $ 1,500

5.00 % notes due 2053

The interest rate swap contracts are designated hedges of the fair value changes in the notes attributable to changes in the benchmark Secured Overnight Financing Rate (SOFR) swap rate.

The fair value changes in the notes attributable to changes in the SOFR swap rate are recorded in interest expense along with the offsetting fair value changes in the swap contracts.

In January 2025, the Company entered into an additional interest rate swap contract with a notional amount of $ 250 million related to its 5.00 % notes due 2053.

In February 2026, the Company entered into an additional interest rate swap contract with a notional amount of $ 250 million related to its 5.00 % notes due 2053.

The cash flows from these contracts are reported as operating activities in the Consolidated Statement of Cash Flows.

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The table below presents the location of amounts recorded in the Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges as of December 31:

20 unchanged sentences

Foreign exchange contracts Accrued and other current liabilities — 191 13,579 — 343 13,551

Foreign exchange contracts Other Noncurrent Liabilities — 1 357 — — —

$ 107 $ 192 $ 25,579 $ 323 $ 343 $ 26,095

9 unchanged sentences

Net amounts $ 77 $ 79 $ 265 $ 46

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

3 unchanged sentences

$ 65,011 $ 64,168 $ 60,115 $ 151 $ ( 24 ) $ 466 $ 658 $ 216 $ ( 393 )

(Gain) loss on fair value hedging relationships:

Loss (gain) on fair value hedging relationships:

Interest rate swap contracts

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Foreign exchange contracts

Amount of gain recognized in OCI on derivatives

Amount of (loss) gain recognized in OCI on derivatives

— — — — — — ( 577 ) 508 114

Increase in Sales as a result of AOCL reclassifications

(Decrease) increase in Sales as a result of AOCL reclassifications

( 106 ) 167 249 — — — 106 ( 167 ) ( 249 )

2 unchanged sentences

— — — ( 1 ) ( 1 ) ( 1 ) — — —

Amount of (loss) gain recognized in OCI on derivatives

Amount of gain (loss) recognized in OCI on derivatives

— — — — — — 28 ( 1 ) 13

1 unchanged sentence

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

Amount of Derivative Pretax Loss (Gain) Recognized in Income

Amount of Derivative Pretax (Gain) Loss Recognized in Income

Years Ended December 31 2025 2024 2023

6 unchanged sentences

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

At December 31, 2024, the Company estimates $ 262 million of pretax net unrealized gains on derivatives maturing within the next 12 months that hedge foreign currency denominated sales over that same period will be reclassified from AOCL to Sales .

At December 31, 2025, the Company estimates $ 178 million of pretax net unrealized losses on derivatives maturing within the next 12 months that hedge foreign currency denominated sales over that same period will be reclassified from AOCL to Sales .

The amount ultimately reclassified to Sales may differ as foreign exchange rates change.

Realized gains and losses are ultimately determined by actual foreign exchange rates at maturity.

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Investments in Debt and Equity Securities

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Gains Losses Gains Losses

Commercial paper $ 348 $ — $ — $ 348 $ 252 $ — $ — $ 252

government and agency securities $ 100 $ — $ — $ 100 $ 188 $ — $ — $ 188

Corporate notes and bonds — — — — 13 — — 13

Foreign government bonds

1 — — 1 — — — —

Commercial paper — — — — 348 — — 348

Total debt securities $ 101 $ — $ — $ 101 $ 536 $ — $ — $ 536

1 unchanged sentence

Total debt and publicly traded equity securities $ 1,493 $ 1,456

(1) Unrealized net losses of $ 30 million were recorded in Other (income) expense, net in 2024 on equity securities still held at December 31, 2024.

(1) Unrealized net gains of $ 474 million were recorded in Other (income) expense, net in 2025 on equity securities still held at December 31, 2025.

Unrealized net losses of $ 30 million were recorded in Other (income) expense, net in 2024 on equity securities still held at December 31, 2024.

At December 31, 2025 and 2024, the Company also had $ 831 million and $ 863 million, respectively, of equity investments without readily determinable fair values included in Other Assets .

4 unchanged sentences

At December 31, 2025, 2024 and 2023, the Company also had $ 224 million, $ 267 million and $ 417 million, respectively, recorded in Other Assets for equity securities held through ownership interests in investment funds.

Losses recorded in Other (income) expense, net relating to these investment funds were $ 29 million, $ 106 million and $ 1.0 billion for the years ended December 31, 2024, 2023 and 2022, respectively.

Losses recorded in Other (income) expense, net relating to these investment funds were $ 55 million, $ 29 million and $ 106 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Fair Value Measurements

7 unchanged sentences

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

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

2 unchanged sentences

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Foreign government bonds

$ — $ 1 $ — $ 1 $ — $ — $ — $ —

Commercial paper — — — — — 348 — 348

4 unchanged sentences

government and agency securities 100 — — 100 89 — — 89

Corporate notes and bonds — — — — 13 — — 13

Publicly traded equity securities (2)

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

(2) Balance at December 31, 2024 includes securities with a fair value of $ 81 million, which are subject to a contractual sale restriction that expires in March 2025.

Balance at December 31, 2023 includes securities with a fair value of $ 177 million, which were subject to a contractual sale restriction that expired in July 2024.

(2) Balance at December 31, 2024 includes securities with an aggregate fair value of $ 81 million, which were subject to a contractual sale restriction that expired in April 2025.

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

4 unchanged sentences

Changes in estimated fair value (1)

Payments ( 151 ) ( 117 )

( 52 ) ( 10 )

( 141 ) ( 151 )

Fair value December 31

1 unchanged sentence

Includes cumulative translation adjustments.

(2) Balance at December 31, 2024 includes $ 148 million of current liabilities, of which $ 123 million relates to the termination of the Sanofi Pasteur MSD joint venture in 2016.

As part of the termination, Merck recorded a liability for contingent future royalty payments of 11.5 % on net sales of all Merck products that were previously sold by the joint venture through December 31, 2024.

The fair value of this liability is determined utilizing the estimated amount and timing of projected cash flows using a risk-adjusted discount rate to present value the cash flows.

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The payments of contingent consideration in 2024 include $ 126 million related to the Sanofi Pasteur MSD liabilities described above and $ 25 million related to the first commercial sale of Lyfnua (gefapixant) in the European Union (EU).

The payments of contingent consideration in 2023 relate to the Sanofi Pasteur MSD liabilities.

Amount in 2025 includes the reversal of $ 45 million for a Zerbaxa (ceftolozane and tazobactam) sales-based milestone as it was determined that payment was not probable.

(2) Amount in both periods reflects payments related to the 2016 termination of the Sanofi Pasteur MSD joint venture.

Amount in 2025 also includes a $ 25 million payment related to the achievement of a sales-based milestone for Zerbaxa and amount in 2024 also includes a $ 25 million payment related to the first commercial sale of Lyfnua (gefapixant) in the European Union.

Other Fair Value Measurements

6 unchanged sentences

Cash and investments are placed in instruments that meet high credit quality standards, as specified in the Company’s investment policy guidelines.

The majority of the Company’s accounts receivable arise from product sales in the U.S., Europe and China and are primarily due from drug wholesalers, distributors and retailers, hospitals and government agencies.

The majority of the Company’s accounts receivable arise from product sales in the U.S.

and Europe and are primarily due from drug wholesalers, distributors and retailers, hospitals and government agencies.

The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in their credit profile.

3 unchanged sentences

and Cardinal Health, Inc., which represented approximately 22 %, 21 % and 13 %, respectively, of total accounts receivable at December 31, 2025.

Vaccines distributed by Chongqing Zhifei Biological Products Co., Ltd.

(Zhifei) represent a substantial portion of total sales in China;

however, nearly all of the accounts receivable for Zhifei were factored as of December 31, 2024, as part of the Company’s factoring program discussed below.

The Company monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business.

13 unchanged sentences

The obligation to return such collateral is recorded in Accrued and other current liabilities .

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Inventories at December 31 consisted of:

17 unchanged sentences

$ 17,922 $ 3,275 $ 21,197

Acquisitions (1)

( 19 ) ( 28 ) ( 47 )

1 unchanged sentence

17,903 3,765 21,668

Acquisitions (1)

— ( 106 ) ( 106 )

1 unchanged sentence

$ 17,905 $ 3,674 $ 21,579

(1) Activity is related to the 2024 acquisition of the Elanco aqua business and related measurement period adjustments in 2025.

(2) Includes cumulative translation adjustments on goodwill balances.

11 unchanged sentences

$ 55,410 $ 28,729 $ 26,681 $ 42,162 $ 25,792 $ 16,370

Some of the more significant acquired intangibles included in product rights, on a net basis, related to human health marketed products at December 31, 2024 were Winrevair , $ 5.9 billion;

Reblozyl, $ 2.8 billion;

and Zerbaxa , $ 260 million.

Some of the more significant acquired intangibles included in product rights, on a net basis, related to human health marketed products at December 31, 2025 were Ohtuvayre $ 11.8 billion;

Winrevair , $ 5.4 billion;

and Reblozyl, $ 2.5 billion.

Additionally, the Company had $ 3.7 billion of net acquired intangibles related to animal health at December 31, 2025, of which $ 1.3 billion related to product rights and $ 1.7 billion was attributable to trade names, primarily related to Allflex.

At December 31, 2024, IPR&D primarily relates to MK-1026 (nemtabrutinib), obtained through the acquisition of ArQule, Inc.

(ArQule), which had a balance of $ 418 million.

Some of the more significant net intangible assets included in licenses and other above at December 31, 2024 include Lynparza, $ 1.2 billion, related to a collaboration with AstraZeneca;

At December 31, 2025, IPR&D primarily relates to MK-1026 (nemtabrutinib), obtained through the 2020 acquisition of ArQule, Inc., which had a balance of $ 418 million.

Some of the more significant net intangible assets included in licenses and other above at December 31, 2025 include Keytruda Qlex $ 886 million, related to a license agreement with Alteogen;

Lynparza, $ 844 million, related to a collaboration with AstraZeneca;

Lenvima, $ 201 million, related to a collaboration with Eisai;

and Adempas, $ 280 million, related to a collaboration with Bayer.

See Note 4 for additional information related to the intangible assets associated with these collaborations.

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See Note 3 for additional information related to the intangible asset associated with the license agreement and Note 4 for additional information related to the intangible assets associated with the collaborations.

IPR&D that the Company acquires through business combinations represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility.

12 unchanged sentences

The revised estimated fair value of gefapixant when compared with its related carrying value resulted in the impairment charge noted above.

The remaining intangible asset balance related to Lyfnua (gefapixant) at December 31, 2024 of $ 21 million is included in product rights in the table above and is being amortized over its expected useful life as supported by projected future cash flows in the markets where it is approved including Japan and the EU.

In 2022, the Company recorded $ 1.7 billion of intangible asset impairment charges within Research and development expenses, of which $ 1.6 billion represents IPR&D impairment charges related to nemtabrutinib (MK-1026), an oral, reversible, non-covalent Bruton’s tyrosine kinase (BTK) inhibitor currently being evaluated for the treatment of hematological malignancies that was obtained through the 2020 acquisition of ArQule.

Following discussions with regulatory authorities in the third quarter of 2022, the development period for nemtabrutinib was extended, which constituted a triggering event that required the evaluation of the nemtabrutinib intangible asset for impairment.

The Company estimated the current fair value of nemtabrutinib utilizing an income approach which calculates the present value of projected future cash flows.

The market participant assumptions used to derive the forecasted cash flows were updated to reflect a delay in the anticipated launch date for nemtabrutinib, which resulted in lower cumulative revenue forecasts and a reduction in the estimated fair value.

The revised estimated fair value of nemtabrutinib when compared with its related carrying value resulted in a $ 807 million impairment charge recorded in the third quarter of 2022.

In December 2022, regulatory authorities provided additional feedback with respect to clinical study design that led to a further reassessment of the development plan for nemtabrutinib, which was expected to result in changes to the clinical study design, and corresponding delays in the anticipated approval and launch timelines, which constituted a triggering event.

Utilizing an income approach, the forecasted cash flows were updated to reflect a decline in forecasted revenue coupled with an increase in development cost forecasts, which reduced projected cash flows lowering the estimated fair value of nemtabrutinib.

The revised estimated fair value of nemtabrutinib when compared with its then-related carrying value resulted in a $ 780 million impairment charge.

The remaining IPR&D intangible asset related to nemtabrutinib is $ 418 million.

If the assumptions used to estimate the fair value of nemtabrutinib prove to be incorrect and the development of nemtabrutinib does not progress as anticipated thereby adversely affecting projected future cash flows, the Company may record an additional impairment charge in the future and such charge could be material.

The Company also recorded an $ 80 million intangible asset impairment charge in 2022 related to derazantinib resulting from the termination of the out-licensing agreement and the decision by Merck not to pursue development of derazantinib.

The IPR&D projects that remain in development are subject to the inherent risks and uncertainties in drug development and it is possible that the Company will not be able to successfully develop and complete the IPR&D programs and profitably commercialize the underlying product candidates.

The Company may recognize additional non-cash impairment charges in the future related to marketed products or pipeline programs and such charges could be material.

The Company may recognize non-cash impairment charges in the future related to marketed products or pipeline programs and such charges could be material.

Aggregate amortization expense primarily recorded within Cost of sales was $ 2.8 billion in 2025, $ 2.4 billion in 2024 and $ 2.0 billion in 2023.

5 unchanged sentences

2030, $ 2.7 billion.

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Loans Payable, Long-Term Debt and Leases

Loans Payable

Loans payable at December 31, 2024 included $ 2.5 billion of notes due in 2025 and $ 149 million of long-dated notes that are subject to repayment at the option of the holders.

Loans payable at December 31, 2025 included $ 2.3 billion of notes due in 2026, $ 215 million of long-dated notes that are subject to repayment at the option of the holders, and $ 63 million under a foreign financing facility.

Loans payable at December 31, 2024 included $ 2.5 billion of notes due in 2025 and $ 149 million of long-dated notes that are subject to repayment at the option of the holders.

16 unchanged sentences

4.00 % notes due 2049

1.875 % euro-denominated notes due 2026

1.45 % notes due 2030

3 unchanged sentences

1.90 % notes due 2028

4.55 % notes due 2032

4.45 % notes due 2032

4.15 % notes due 2031

3.25 % euro-denominated notes due 2032

3.50 % euro-denominated notes due 2037

5.15 % notes due 2063

3.90 % notes due 2039

3.70 % euro-denominated notes due 2044

2.35 % notes due 2040

3.75 % euro-denominated notes due 2054

2 unchanged sentences

3.85 % notes due 2027

3.85 % notes due 2029

4.15 % notes due 2030

5.50 % notes due 2046

4.90 % notes due 2044

6.50 % notes due 2033

1.375 % euro-denominated notes due 2036

1 unchanged sentence

4.05 % notes due 2028

Floating rate notes due 2027 (1)

Floating rate notes due 2029 (2)

3.60 % notes due 2042

4 unchanged sentences

6.40 % debentures due 2028

6.30 % debentures due 2026

1.875 % euro-denominated notes due 2026

0.75 % notes due 2026

6.30 % debentures due 2026

Other 139 209

$ 46,750 $ 34,462

(1) Floating rate is compounded SOFR plus 46 bps, which at December 31, 2025 was 4.16 %.

(2) Floating rate is compounded SOFR plus 57 bps, which at December 31, 2025 was 4.35 %.

Other (as presented in the table above) includes borrowings at variable rates that resulted in effective interest rates of 4.18 % and 5.02 % for 2025 and 2024, respectively.

With the exception of the 6.30 % debentures due 2026, the notes listed in the table above are redeemable in whole or in part, at Merck’s option at any time, at varying redemption prices.

Effective as of November 3, 2009, the Company executed a full and unconditional guarantee of the then existing debt of its subsidiary Merck Sharp & Dohme LLC.

(MSD) and MSD executed a full and unconditional guarantee of the then existing debt of the Company

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(excluding commercial paper), including for payments of principal and interest.

Effective as of November 3, 2009, the Company executed a full and unconditional guarantee of the then existing debt of its subsidiary Merck Sharp & Dohme Corp.

(MSD, now Merck Sharp & Dohme LLC) and MSD executed a full and unconditional guarantee of the then existing debt of the Company (excluding commercial paper), including for payments of principal and interest.

These guarantees do not extend to debt issued subsequent to that date.

In December 2025, the Company issued $ 8.0 billion aggregate principal amount of senior unsecured notes consisting of $ 500 million of floating rate notes due 2029, $ 750 million of 3.85 % notes due 2029, $ 1.0 billion of 4.15 % notes due 2031, $ 1.0 billion of 4.45 % notes due 2032, $ 1.5 billion of 4.75 % notes due 2035, $ 750 million of 5.50 % notes due 2046, $ 1.5 billion of 5.55 % notes due 2055, and $ 1.0 billion of 5.70 % notes due 2065.

The Company used the net proceeds from the offering for general corporate purposes, including to fund a portion of the approximately $ 9.2 billion cash consideration for the January 2026 acquisition of Cidara, including related fees and expenses (see Note 3).

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 from the offering for general corporate purposes, including to fund a portion of the $ 10.4 billion cash consideration for the October 2025 acquisition of Verona Pharma, including related fees and expenses (see Note 3).

In May 2024, MSD Netherlands Capital B.V., a wholly owned finance subsidiary of Merck, completed a registered public offering of € 3.4 billion in aggregate principal amount of euro-dominated senior notes comprised of € 850 million of 3.25 % senior notes due 2032, € 850 million of 3.50 % senior notes due 2037, € 850 million of 3.70 % senior notes due 2044, and € 850 million of 3.75 % senior notes due 2054 (collectively, the Euronotes).

26 unchanged sentences

The lease term includes options to extend or terminate the lease when it is reasonably certain that Merck will exercise that option.

Real estate leases for facilities have an average remaining lease term of approximately six years , which include options to extend the leases for up to five years where applicable.

Real estate leases for facilities have an average remaining lease term of approximately seven years , which include options to extend the lease term for periods ranging up to five years where applicable.

Vehicle leases are generally in effect for four years .

2 unchanged sentences

Operating lease assets and liabilities are recognized based on the present value of lease payments over the lease term.

Since the Company’s leases do not have a readily determinable implicit discount rate, the Company uses its incremental borrowing rate to calculate the present value of lease payments by asset class.

Since the Company’s leases do not have a readily determinable implicit discount rate, the Company uses

its incremental borrowing rate to calculate the present value of lease payments by asset class.

On a quarterly basis, an updated incremental borrowing rate is determined based on the average remaining lease term of each asset class and the Company’s pretax cost of debt for that same term.

11 unchanged sentences

Operating lease assets obtained in exchange for lease obligations were $ 162 million in 2025, $ 47 million in 2024 and $ 122 million in 2023.

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

12 unchanged sentences

Imputed interest 248

At December 31, 2024, the Company had entered into additional real estate operating leases that had not yet commenced;

the obligations associated with these leases total $ 183 million.

At December 31, 2025, the Company had entered into additional real estate leases that had not yet commenced;

the obligations associated with these leases total $ 400 million, of which $ 300 million relates to a lease that will commence in February 2026 and has a lease term of 20 years.

Contingencies and Environmental Liabilities

9 unchanged sentences

The Company has evaluated its risks and has determined that the cost of obtaining product liability insurance outweighs the likely benefits of the coverage that is available and, as such, has no insurance for most product liabilities.

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Product Liability Litigation

Dr Scholl’s Foot Powder

Scholl’s Foot Powder

As previously disclosed, Merck is a defendant in product liability lawsuits in the U.S.

6 unchanged sentences

involving Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant) and Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant).

As of December 31, 2024, approximately 225 cases were filed and pending against Merck in either federal or state court.

As of December 31, 2025, approximately 135 cases were filed and are pending against Merck in either federal or state court.

In these actions, plaintiffs allege, among other things, that they suffered various personal injuries after vaccination with Gardasil or Gardasil 9, with postural orthostatic tachycardia syndrome (POTS) as a predominate alleged injury.

2 unchanged sentences

Conrad in the Western District of North Carolina for coordinated pre-trial proceedings.

In February 2024, the multidistrict litigation was reassigned to Judge Kenneth D.

As previously disclosed, there are fewer than 15 product liability cases pending outside the U.S.

In February 2024, the multidistrict litigation ( Gardasil MDL) was reassigned to Judge Kenneth D.

On March 11, 2025, the court granted Merck’s motion for summary judgment in 16 bellwether cases on implied preemption grounds;

plaintiffs have appealed to the Fourth Circuit.

The parties’ letter submissions on next steps in the Gardasil MDL proceeding in light of the court’s decision were submitted on April 8, 2025.

Expert discovery on the remaining alleged conditions and summary judgment briefing are to follow.

On March 21, 2025, May 1, 2025, and July 11, 2025, plaintiff’s co-lead counsel in the Gardasil MDL filed multi-plaintiff complaints in New Jersey state court.

Merck removed the cases to federal court and requested that the U.S.

Judicial Panel on Multidistrict Litigation transfer the case to the Gardasil MDL.

Plaintiffs opposed transfer to the Gardasil MDL and moved to have the case remanded to New Jersey state court.

Judicial Panel on Multidistrict Litigation issued orders transferring the cases to the Gardasil MDL.

On January 28, 2025, a trial commenced in California state court.

Plaintiff claims that she suffers from POTS and fibromyalgia as a result of her Gardasil vaccinations.

On February 14, 2025, after four weeks of trial and an opportunity to litigate plaintiff’s claims before a jury, plaintiff’s counsel approached Merck and proposed that the jury be discharged and the case adjourned.

On February 14, 2025, after several weeks of trial and an opportunity to litigate plaintiff’s claims before a jury, plaintiff’s counsel approached Merck and proposed that the jury be discharged and the case adjourned.

Merck agreed, subject to an explicit stipulation that Merck would provide no financial or other consideration in exchange for the agreement to adjourn.

The case has thus been adjourned until a new trial date of September 15, 2025.

The case has thus been

adjourned until a new trial date of May 4, 2026.

Merck is vigorously defending this case and believes that evidence presented in court will show that Gardasil had no role in causing any of plaintiff’s conditions.

In October 2025, Merck entered into a proposed agreement with plaintiffs’ counsel to substantially resolve the Gardasil product liability litigation.

The proposed agreement sets forth various terms and conditions under which Merck would resolve the bulk of all pending Gardasil product liability claims in the U.S.

in exchange for a total payment that is considerably less than Merck’s anticipated costs of defense in the litigation and that is not material to Merck.

The proposed agreement requires that several conditions be met within specified time periods, including participation thresholds, in order for the proposed agreement to result in a final resolution of any pending litigation.

As previously disclosed, there are fewer than 15 product liability cases pending outside the U.S.

Governmental Proceedings

Civil Investigative Demands

As previously disclosed, in June 2024, Merck received a Civil Investigative Demand (CID) from the U.S.

Department of Justice, pursuant to a False Claims Act investigation, seeking documents and materials related to Steglatro , Januvia and certain related drugs.

As previously disclosed, in August 2025, the Company received a Civil Investigative Demand (CID) from the U.S.

Department of Justice (DOJ), pursuant to a False Claims Act investigation, seeking documents, information, and testimony related to the Company’s programs and practices concerning diversity, equity, and inclusion.

The CID states that the DOJ is investigating whether, in connection with the Company’s claims for payments under its federal contracts, the Company falsely certified compliance with federal antidiscrimination laws.

The Company is cooperating with the investigation.

As previously disclosed, in June 2024, Merck received a Civil Investigative Demand (CID) from the DOJ, pursuant to a False Claims Act investigation, seeking documents and materials related to Steglatro , Januvia and certain related drugs.

The CID states that it is investigating Merck’s price reporting under the Medicaid Drug Rebate Program as well as compliance with anti-kickback requirements in connection with patient assistance programs.

The Company is cooperating with the investigation.

As previously disclosed, in June 2020, Merck received a CID from the U.S.

Department of Justice.

The CID requests answers to interrogatories, as well as various documents, regarding temperature excursions at a third-party storage facility containing certain Merck products.

Merck is cooperating with the government’s investigation and intends to produce information and/or documents as necessary in response to the CID.

As previously disclosed, in June 2020, Merck received a CID from the DOJ.

The CID requested answers to interrogatories, as well as various documents, regarding temperature excursions at a third-party storage facility containing certain Merck products.

Merck cooperated with the government’s investigation.

The government has ended its investigation and the matter is now closed.

Inflation Reduction Act

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The Company’s policy is to cooperate with these authorities and to provide responses as appropriate.

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As previously disclosed, from time to time, the Company receives inquiries and is the subject of preliminary investigation activities from competition and other governmental authorities in markets outside the U.S.

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Securities Litigation

In February 2025, a putative class action was filed against Merck and certain of its officers in the U.S.

District Court for the District of New Jersey purportedly on behalf of all purchasers of Merck common stock between February 2022 and February 2025.

As previously disclosed, on February 12, 2025, a putative class action was filed against Merck and certain of its officers in the U.S.

District Court for the District of New Jersey, captioned Cronin v.

Merck & Co., Inc., et al.

purportedly on behalf of all purchasers of Merck common stock between October 26, 2023 and February 3, 2025.

Plaintiff alleges that Merck violated federal securities laws by making materially false and misleading statements and material omissions regarding demand for Gardasil/Gardasil 9 in China.

Plaintiff seeks unspecified monetary damages, pre-judgment and post-judgment interest, and fees and costs.

On December 4, 2025, the court entered an order approving appointment of a lead plaintiff group comprised of purported Merck shareholders AMF Tjänstepension AB, KBC Asset Management NV, and Wayne County Employees’ Retirement System (Lead Plaintiffs).

On December 17, 2025, the court approved the parties’ joint stipulation and scheduling order setting the deadline to file an operative amended complaint and motion-to-dismiss briefing.

Per the stipulation, Lead Plaintiffs’ amended complaint was filed on February 20, 2026;

defendants’ motion to dismiss is due May 1, 2026;

Lead Plaintiffs’ opposition to the motion to dismiss is due June 30, 2026;

and defendants’ reply brief is due August 14, 2026.

As previously disclosed, on July 18, 2025, purported Merck stockholder Terence Collins filed a derivative lawsuit in the U.S.

District Court for the District of New Jersey, captioned Collins v.

Davis, et al.

, against certain Merck officers and board members.

The complaint asserts a violation of Section 14(a) of the Securities Exchange Act of 1934 (the Exchange Act), as well as claims of breach of fiduciary duty, waste of corporate assets, and unjust enrichment based on the same allegations as in the putative securities class action.

On behalf of the Company, the complaint seeks unspecified monetary damages, corporate governance reforms, injunctive relief, restitution, and fees and costs.

As previously disclosed, on September 2, 2025, purported Merck stockholders Robert Daniel and Daniel Gershen filed a derivative lawsuit in the U.S.

District Court for the District of New Jersey, captioned Daniel, et al.

Frazier, et al.

, against certain current and former Merck officers and board members for violations of Sections 10(b), 14(a), and 20(a) of the Exchange Act, breach of fiduciary duty, waste of corporate assets, and unjust enrichment based on the same allegations as the putative securities class action and the earlier-filed Collins derivative lawsuit.

On behalf of the Company, the complaint seeks unspecified monetary damages, corporate governance reforms, injunctive relief, restitution, and fees and costs.

As previously disclosed, on September 19, 2025, the parties to the Collins and Daniel lawsuits concurrently filed joint stipulations to stay the lawsuits pending the earliest of the following:

(i) dismissal of the securities class action;

(ii) any defendant filing an answer in the securities class action;

or (iii) any party to the stipulation giving 15 days’ notice that they no longer consent to the stay.

The parties also filed joint stipulations to consolidate the Collins and Daniel derivative lawsuits.

On October 1, 2025, the district court so-ordered the stay stipulations and consolidation stipulations.

The cases are now consolidated and stayed under the caption In re Merck & Co., Inc.

Stockholder Derivative Litigation.

As previously disclosed, on September 23, 2025, purported Merck shareholders Gary Weniger, Kathie McGinty, and Pamela Young filed a derivative lawsuit in the Superior Court of New Jersey (Union County), captioned Weniger, et al.

Frazier, et al., against certain current and former Merck officers and board members.

The complaint asserts claims of breach of fiduciary duty, gross mismanagement, waste of corporate assets, unjust enrichment, insider trading, and a violation of New Jersey securities law based on the same allegations as the putative securities class action and the earlier-filed Collins and Daniel derivative lawsuits.

On behalf of the Company, the complaint seeks unspecified monetary damages, disgorgement of any illicitly gained proceeds, corporate governance reforms, injunctive relief, restitution, and fees and costs.

On November 3, 2025, purported Merck shareholder The Vladimir Gusinsky Revocable Trust filed a derivative lawsuit in the Superior Court of New Jersey (Union County), captioned The Vladimir Gusinsky Revocable Trust v.

Frazier, et al.

, against certain current and former Merck officers and board members.

The complaint asserts claims of breach of fiduciary duty and unjust enrichment based on the same allegations as the putative securities class action and the earlier-filed derivative lawsuits.

On behalf of the Company, the complaint seeks unspecified monetary damages, corporate governance reforms, restitution, disgorgement of profits, and fees and costs.

On November 17, 2025, the parties to the Weniger and Gusinsky derivative lawsuits filed a joint stipulation to stay the proceedings pending the earliest of the following:

(i) dismissal of the securities class action;

(ii) any defendant filing an answer in the securities class action;

or (iii) any party to the stipulation giving 15 days’ notice that they no longer consent to the stay.

The parties also stipulated to consolidate the Weniger and Gusinsky derivative lawsuits.

On November 18, 2025, the court approved the parties’ stipulation to consolidate the Weniger and Gusinsky lawsuits.

On December 4, 2025, the parties filed a joint status letter with a renewed request for a stay.

On December 5, 2025, purported Merck shareholder Mark Kistenmacher filed a derivative lawsuit in the Superior Court of New Jersey (Union County), captioned Kistenmacher v.

Baker, et al.

, against certain current and former Merck officers and board members.

The complaint asserts claims of breach of fiduciary duty, unjust enrichment, waste of corporate assets, gross mismanagement, and abuse of control based on the same allegations

as the putative securities class action and the earlier-filed derivative lawsuits.

On behalf of the Company, the complaint seeks unspecified monetary damages, disgorgement of profits and special benefits, punitive damages, and fees and costs.

Commercial and Other Litigation

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These cases were transferred to the Eastern District of Virginia to proceed with the Zetia MDL.

In December 2023, the U.S.

As previously disclosed, in December 2023, the U.S.

Judicial Panel on Multidistrict Litigation remanded the four Insurer Plaintiff cases to the transferor courts in the Northern District of California (Kaiser), the District of Minnesota (United HealthCare), and the District of New Jersey (Humana and Centene).

The Merck Defendants filed motions to dismiss in each of the Insurer Plaintiff cases.

On December 30, 2024, the court granted in part and denied in part the motions to dismiss in the Humana and Centene cases, and on January 29, 2025, Humana and Centene filed amended complaints.

As previously disclosed, in December 2024, the district court in the District of New Jersey granted in part and denied in part the motions to dismiss in the Humana and Centene cases and, on January 29, 2025, Humana and Centene filed amended complaints.

On February 12, 2026, the district court in the Northern District of California granted in part and denied in part the motion to dismiss in the Kaiser case.

RotaTeq Antitrust Litigation

As previously disclosed, in March 2023, the Mayor and City Council of Baltimore filed a putative class action against MSD in the Eastern District of Pennsylvania on behalf of all third-party payors in 35 states that indirectly purchased, paid, and/or provided reimbursement for some or all of the purchase price of RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), other than for resale, from March 3, 2019 to the present.

As previously disclosed, in March 2023, the Mayor and City Council of Baltimore filed a putative class action against MSD in the Eastern District of Pennsylvania on behalf of all third-party payers in states that indirectly purchased, paid, and/or provided reimbursement for some or all of the purchase price of RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), other than for resale, from March 3, 2019 to the present.

Plaintiff alleges that MSD violated federal and state antitrust laws and state consumer protection laws.

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District Court for the District of New Jersey.

Following motion practice, the plaintiffs filed a third amended complaint in August 2024, seeking to certify a nationwide class action of purchasers or users of Bravecto (fluralaner) products in the U.S.

or its territories between May 1, 2014 and July 1, 2021.

Plaintiffs contend Bravecto causes neurological events in dogs and cats and alleges violations of the New Jersey Consumer Fraud Act, Breach of Warranty, Product Liability, and related theories.

The Company moved to dismiss or, alternatively, to strike the class allegations from the third amended complaint, and that motion is pending.

Following motion practice, the plaintiffs filed a third amended complaint in August 2024, seeking to certify a nationwide class as well as five statewide classes of purchasers or users of Bravecto (fluralaner) products from its launch through the present.

Plaintiffs contend Bravecto causes neurological events in dogs and cats and alleges violations of the consumer fraud statutes of certain of their home states (Connecticut, New York, Florida and Texas), Breach of Warranty, Product Liability, and related theories.

The Company moved to dismiss or, alternatively, to strike the class allegations from the third amended complaint, and that motion was granted in part and denied in part.

The Company sought permission from the court to file a motion for summary judgment directed at the named plaintiffs’ claims and that motion is pending.

The Company anticipates that plaintiffs will file a motion for class certification in March 2026 and that it will oppose plaintiffs’ motion thereafter.

A similar case was filed in Quebec, Canada in May 2019.

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Superior Court certified a class of dog owners in Quebec who gave Bravecto Chew to their dogs between February 16, 2017 and November 2, 2018 whose dogs experienced one of the conditions in the post-marketing adverse reactions section of the labeling approved on November 2, 2018.

The Superior Court certified a class of dog owners in Quebec who gave Bravecto Chew to their dogs between February 16, 2017 and November 2, 2018 whose dogs experienced one of the conditions in the post-marketing adverse reactions section of the labeling approved on November 2, 2018.

The Company and plaintiffs each appealed the class certification decision.

The Court of Appeal of Quebec amended the class period to start July 2, 2014, allowed the second plaintiff to serve as a class representative, and modified the list of conditions in the class definition.

The Court of Appeal of Quebec amended the class period to start July 2,

2014, allowed the second plaintiff to serve as a class representative, and modified the list of conditions in the class definition.

The Company sought leave to appeal to the Supreme Court of Canada, which was denied.

The case is proceeding in the Superior Court.

340B Program Litigation

As previously disclosed, Merck filed a complaint in the U.S.

District Court for the District of Columbia to challenge the letter Merck received from the U.S.

Health Resources and Services Administration (HRSA) in May 2022 regarding Merck’s 340B Program integrity initiative.

On September 17, 2024, the court entered a consent judgment granting Merck the relief it had sought in the litigation, including declarations that HRSA’s May 2022 letter was unlawful and that the version of Merck’s 340B Program integrity initiative at issue in the litigation did not violate Section 340B on its face.

Qui Tam Litigation

As previously disclosed, in June 2012, the U.S.

District Court for the Eastern District of Pennsylvania unsealed a complaint that had been filed against the Company under the federal False Claims Act by two former employees alleging, among other things, that the Company defrauded the U.S.

government by falsifying data in connection with a clinical study conducted on the mumps component of the Company’s M-M-R II vaccine.

The complaint alleges the fraud took place between 1999 and 2001.

government had the right to participate in and take over the prosecution of this lawsuit but notified the court that it declined to exercise that right.

The two former employees pursued the lawsuit without the involvement of the U.S.

In July 2023, the court denied relators’ motion for summary judgment, granted two of the Company’s motions for summary judgment, and denied the Company’s remaining motions for summary judgment as moot.

The court entered judgment in favor of the Company and dismissed relators’ amended complaint in full with prejudice.

Relators appealed that decision, and in August 2024, the Third Circuit affirmed the district court’s decision.

In addition, as previously disclosed, two putative class action lawsuits on behalf of direct purchasers of the M‑M‑R II vaccine, which charge that the Company misrepresented the efficacy of the M-M-R II vaccine in violation of federal antitrust laws and various state consumer protection laws, are pending in the Eastern District of Pennsylvania.

The court granted the Company’s motion for summary judgment as to plaintiffs’ state law claims and denied the motion as to plaintiffs’ antitrust claim.

The Company appealed, and on October 7, 2024, the Third Circuit reversed-in-part the district court’s order and remanded the case with instructions to enter summary judgment for the Company.

On November 20, 2024, plaintiffs-appellees filed a petition for rehearing and rehearing en banc, and on February 10, 2025, the court denied the petition.

Merck KGaA Litigation

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Patent Litigation

From time to time, generic manufacturers of pharmaceutical products file abbreviated New Drug Applications (ANDAs) with the U.S.

Food and Drug Administration (FDA) seeking to market generic forms of the Company’s products prior to the expiration of relevant patents owned by the Company.

To protect its patent rights, the Company may file patent infringement lawsuits against such generic companies.

From time to time, generic and biosimilar manufacturers of pharmaceutical products file abbreviated New Drug Applications (ANDAs) and Biologics License Applications, respectively, with the FDA seeking to market generic and biosimilar forms of the Company’s products prior to the expiration of relevant patents owned by the Company.

To protect its patent rights, the Company may file patent infringement lawsuits against such generic and biosimilar companies.

Similar lawsuits defending the Company’s patent rights may exist in other countries.

The Company intends to vigorously defend its patents, which it believes are valid, against infringement by companies attempting to market products prior to the expiration of such patents.

As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products and, with respect to products acquired through acquisitions accounted for as business combinations, potentially significant intangible asset impairment charges.

Bridion — As previously disclosed, between January and November 2020, the Company received multiple Paragraph IV Certification Letters under the Hatch-Waxman Act notifying the Company that generic drug companies had filed applications to the FDA seeking pre-patent expiry approval to sell generic versions of Bridion (sugammadex)

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In March, April and December 2020, the Company filed patent infringement lawsuits in the U.S.

District Courts for the District of New Jersey and the Northern District of West Virginia against those generic companies.

All actions in the District of New Jersey were consolidated.

The West Virginia case was jointly dismissed with prejudice in August 2022 in favor of proceeding in New Jersey.

The remaining defendants in the New Jersey action have stipulated to infringement of the asserted claims and withdrew all remaining claims and defenses other than a defense seeking to shorten the patent term extension (PTE) of the sugammadex patent to December 2022.

As with any litigation, there can be no assurance of the outcomes, which, if adverse, could result in significantly shortened periods of exclusivity for these products and, with respect to products acquired through acquisitions, potentially significant intangible asset impairment charges.

In addition to these matters, the Company may be involved in other litigation involving its intellectual property and intellectual property owned or licensed by other companies.

In March, April and December 2020, the Company filed patent infringement lawsuits against those generic companies.

The defendants in the New Jersey action referred to below stipulated to infringement of the asserted claims and withdrew all remaining claims and defenses other than a defense seeking to shorten the patent term extension (PTE) of the sugammadex patent to December 2022.

District Court for the District of New Jersey held a one-day trial in December 2022 on this remaining PTE calculation defense.

The court ordered a post-trial briefing on this defense and held closing arguments in February 2023.

As previously disclosed, in June 2023, the U.S.

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Patent & Trademark Office correctly granted a full five-year extension.

This ruling affirms and validates Merck’s U.S.

patent protection for Bridion through at least January 2026.

Also in June 2023, the U.S.

District Court for the District of New Jersey issued a final judgment prohibiting the FDA from approving any of the pending or tentatively approved generic applications until January 27, 2026, except for any subsequent agreements between defendants and Merck or further order by the court.

In July 2023, defendants filed a notice of appeal with the U.S.

Court of Appeals for the Federal Circuit.

The appeal is currently pending.

Oral argument took place on February 4, 2025.

While the New Jersey action was pending, the Company settled with five generic companies providing that these generic companies can bring their generic versions of Bridion to the market in January 2026 (which may be delayed by any applicable pediatric exclusivity) or earlier under certain circumstances.

The Company agreed to stay the lawsuit filed against two generic companies, which in exchange agreed to be bound by a judgment on the merits of the consolidated action in the District of New Jersey.

One of the generic companies in the consolidated action requested dismissal of the action against it and the Company did not oppose this request, which was subsequently granted by the court.

The Company does not expect this company to bring its generic version of Bridion to the market before January 2026 or later, depending on any applicable pediatric exclusivity.

In February 2024, the Company received another Paragraph IV Certification Letter under the Hatch-Waxman Act notifying the Company that Hikma Pharmaceuticals USA Inc.

(Hikma) had filed an application to the FDA seeking pre-patent expiry approval to sell a generic version of Bridion Injection.

In March 2024, the Company filed a patent infringement lawsuit in the U.S.

District Court for the District of New Jersey against Hikma, postponing FDA approval of the Hikma generic drug for 30 months or until expiration of the sugammadex patent (January 27, 2026) and any potentially applicable pediatric exclusivity or an adverse court decision, if any, whichever may occur earlier.

Expiration of the patent, and any potentially applicable pediatric exclusivity, will occur earlier than expiry of the 30-month stay.

On April 16, 2024, the district court stayed the case during the pendency of the Federal Circuit appeal noted above.

In March 2025, the Federal Circuit affirmed the district court’s decision, holding that the patent term extension granted to the sugammadex patent covering Bridion was not invalid and that the patent is entitled to its full five-year patent term extension.

In addition, the FDA has now granted Bridion six months of pediatric exclusivity.

While the New Jersey action was pending, the Company settled with five generic companies providing that these generic companies can bring their generic versions of Bridion to the market in January 2026 (which were subject to delay by any applicable pediatric exclusivity) or earlier under certain circumstances.

Thus, the Federal Circuit’s decision and these settlements secure Bridion ’s exclusivity in the U.S.

through July 27, 2026.

Januvia, Janumet, Janumet XR — As previously disclosed, the FDA granted pediatric exclusivity with respect to Januvia (sitagliptin), Janumet (sitagliptin/metformin HCl), and Janumet XR (sitagliptin and metformin HCl extended-release), which provides a further six months of exclusivity in the U.S.

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As previously disclosed, beginning in 2019, a number of generic drug companies filed ANDAs seeking approval of generic forms of Januvia and Janumet along with Paragraph IV certifications challenging the validity of the salt/polymorph patent.

The Company responded by filing infringement suits which have all been settled.

The Company has settled with a total 26 generic companies providing that these generic companies can bring their generic versions of Januvia and Janumet to the market in the U.S.

in May 2026 or earlier under certain circumstances, and their generic versions of Janumet XR to the market in July 2026 or earlier under certain circumstances.

In March 2021, the Company filed a patent infringement lawsuit in the U.S.

District Court for the District of Delaware against Zydus Worldwide DMCC, Zydus Pharmaceuticals (USA) Inc., and Cadila Healthcare Ltd.

(collectively, Zydus).

In that lawsuit, the Company alleged infringement of the salt/polymorph patent based on the filing of Zydus’s NDA seeking approval of a form of sitagliptin that is a different from than that used in Januvia .

In December 2022, the parties reached settlement that included dismissal of the case without prejudice enabling Zydus to seek final approval of a non-automatically substitutable product.

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In January 2023, the Company received a Paragraph IV Certification Letter under the Hatch-Waxman Act notifying the Company that Zydus filed an ANDA seeking approval of sitagliptin/metformin HCl tablets and certifying that no valid or enforceable claim of any of the patents listed in FDA’s Orange Book for Janumet will be infringed by the proposed Zydus product.

In March 2023, the parties reached settlement enabling Zydus to seek final approval of a non-automatically substitutable product containing a different form of sitagliptin than that used in Janumet .

In November 2023, the Company received a Paragraph IV Certification Letter under the Hatch-Waxman Act notifying the Company that Zydus filed an ANDA seeking approval of sitagliptin/metformin HCl Extended Release tablets.

In January 2024, the parties reached settlement enabling Zydus to seek final approval of a non-automatically substitutable version containing a different form of sitagliptin than that used in Janumet XR .

The Company has settled with over two dozen generic companies providing that these generic companies can bring their generic versions of Januvia and Janumet to the market in the U.S.

in May 2026 or

earlier under certain circumstances, and their generic versions of Janumet XR to the market in July 2026 or earlier under certain circumstances.

As a result of these settlement agreements related to the later expiring 2027 salt/polymorph patent directed to the specific sitagliptin salt form of the products, 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 Zydus has received FDA approval for a non-automatically substitutable form of sitagliptin that differs from the form in the Company’s sitagliptin products.

until July 2026, although the FDA has approved a non-automatically substitutable form of sitagliptin that differs from the form in the Company’s sitagliptin products.

In March 2024, the Company received another Paragraph IV Certification Letter under the Hatch-Waxman Act from Azurity Pharmaceuticals, Inc.

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In February 2022, a Finnish court referred certain questions to the Court of Justice of the European Union that could impact the validity of the Janumet SPCs in Europe.

A decision was rendered on December 19, 2024.

The decision provides guidance on points of law and does not directly apply these to the Janumet SPCs.

A decision rendered in December 2024 provides guidance on points of law and does not directly apply to the Janumet SPCs.

Thus, additional proceedings in certain countries where generic companies were prevented from launching products during the SPC period may be necessary to determine whether the SPCs are valid and if not, whether damages are appropriate.

Those countries include Belgium, Czech Republic, Ireland, Finland, France, Slovakia and Switzerland.

Those countries include Belgium, Czech Republic, Finland, and France.

If the Janumet SPCs are ultimately upheld, the Company has reserved its rights related to the pursuit of damages for those countries where a generic launched prior to expiry of the Janumet SPC.

In October 2023, the Company filed a patent infringement lawsuit against Sawai Pharmaceuticals Co., Ltd.

and Medisa Shinyaku Co., Ltd (collectively, Defendants) in the Tokyo District Court seeking an injunction to stop the manufacture, sale and offer for sale of the Defendants’ sitagliptin dihydrogen phosphate product, while the Company’s patents and patent term extensions are in force.

The lawsuit is in response to the Defendants’ application for marketing authorization to sell a generic sitagliptin dihydrogen phosphate product, in the anhydrate form, which was approved in August 2023.

(Sawai) and Medisa Shinyaku Co., Ltd (collectively, Defendants) in the Tokyo District Court seeking an injunction to stop the manufacture, sale and offer for sale of the Defendants’ sitagliptin dihydrogen phosphate product, while the Company’s patents and patent term extensions are in force.

The lawsuit is in response to the Defendants’ application for marketing authorization to sell a generic sitagliptin dihydrogen phosphate product, in the anhydride form, which was approved in August 2023.

Merck asserts that the Defendants’ activity infringes a patent term extension associated with Merck’s patent directed to the sitagliptin compound patent.

In January 2026, the Tokyo District Court orally indicated its view that the extended patent covers Sawai’s tablets.

Following this, Sawai conceded to all of the Company’s claims;

thus, the case was concluded without a written decision.

The relevant PTE for Januvia in Japan remains in effect until it expires on March 30, 2026.

Keytruda — As previously disclosed, in November 2022, the Company filed a complaint against The Johns Hopkins University (JHU) in the U.S.

District Court of Maryland.

This action concerns patents emerging from a joint research collaboration between Merck and JHU regarding the use of pembrolizumab, which Merck sells under the trade name Keytruda .

Merck and JHU partnered to design and conduct a clinical study administering Keytruda to cancer patients having tumors that had the genetic biomarker known as microsatellite instability-high (MSI-H).

After the conclusion of the study, JHU secured U.S.

patents citing the joint research study.

Merck alleges that JHU has breached the collaboration agreement by filing and obtaining these patents without informing or involving Merck and then licensing the patents to others.

Merck therefore brought this action for breach of contract, declaratory judgment of noninfringement, and promissory estoppel.

This action concerns a joint research collaboration between Merck and JHU regarding the use of Keytruda in certain indications.

Merck and JHU partnered to design and conduct a clinical study administering Keytruda to cancer patients having tumors that had the genetic biomarker known as microsatellite instability-high (MSI-H) (the Joint Clinical Study).

Subsequently JHU obtained a number of U.S.

patents specifically relying on the Joint Clinical Study.

Merck alleges that JHU breached the collaboration agreement by obtaining issuance of these patents without informing or involving Merck, which were licensed to others, and then trying to enforce these patents against Merck.

Merck therefore brought an action for breach of contract, declaratory judgment of noninfringement, and promissory estoppel.

JHU answered the complaint in April and May 2023, denying Merck’s claims, and counterclaiming for willful infringement of nine issued U.S.

patents, including a demand for damages.

Between November 30, 2023 and March 13, 2024, the Company filed inter partes review petitions with the United States Patent & Trademark Office Patent Trial and Appeal Board (PTAB), challenging the validity of all nine patents asserted in the case.

Between June 2024 and October 2024, the PTAB instituted a review of all nine asserted patents.

In July 2024, the district court granted Merck’s motion to stay the case in its entirety pending the outcome of the PTAB proceeding instituted in June 2024.

Lynparza — As previously disclosed, in December 2022, AstraZeneca Pharmaceuticals LP received a Paragraph IV Certification Letter under the Hatch-Waxman Act notifying AstraZeneca that Natco Pharma Limited (Natco) has filed an application to the FDA seeking pre-patent expiry approval to sell generic versions of Lynparza (olaparib) tablet.

In February 2023, AstraZeneca and the Company filed a patent infringement lawsuit in the U.S.

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District Court for the District of New Jersey against Natco.

This lawsuit, which asserts one or more patents covering olaparib, automatically stays FDA approval of the generic application until June 2025 or until an adverse court decision, if any, whichever may occur earlier.

In May, June, July, and November 2024, AstraZeneca and the Company filed additional patent infringement lawsuits in the U.S.

District Court for the District of New Jersey against Natco asserting additional patents covering olaparib.

In December 2023, AstraZeneca Pharmaceuticals LP received a second Paragraph IV Certification Letter under the Hatch-Waxman Act notifying AstraZeneca that Sandoz Inc.

has filed an application to the FDA seeking pre-patent expiry approval to sell generic versions of Lynparza (olaparib) tablet.

In February 2024, AstraZeneca and the Company filed a patent infringement lawsuit in the U.S.

District Court for the District of New Jersey against Sandoz.

This lawsuit, which asserts one or more patents covering olaparib, automatically stays FDA approval of the generic application until June 2026 or until an adverse court decision, if any, whichever may occur earlier.

In May, July, and November 2024, AstraZeneca and the Company filed additional patent infringement lawsuits in the U.S.

District Court for the District of New Jersey against Sandoz asserting additional patents covering olaparib.

In May 2024, AstraZeneca Pharmaceuticals LP received a third Paragraph IV Certification Letter under the Hatch-Waxman Act notifying AstraZeneca that Cipla USA, Inc.

and Cipla Limited (collectively, Cipla) filed an application to the FDA seeking pre-patent expiry approval to sell generic versions of Lynparza (olaparib) tablet.

In June 2024, AstraZeneca and the Company filed a patent infringement lawsuit in the U.S.

District Court for the District of New Jersey against Cipla.

This lawsuit, which asserts one or more patents covering olaparib, automatically stays FDA approval of the generic application until November 2026 or until an adverse court decision, if any, whichever may occur earlier.

In June, July, and November 2024, AstraZeneca and the Company filed additional patent infringement lawsuits in the U.S.

District Court for the District of New Jersey against Cipla asserting additional patents covering olaparib.

In November 2024, AstraZeneca Pharmaceuticals LP received another Paragraph IV Certification Letter under the Hatch-Waxman Act notifying AstraZeneca that Zydus Pharmaceuticals (USA) Inc.

filed an application to the FDA seeking pre-patent expiry approval to sell generic versions of Lynparza (olaparib) tablet.

In November 2024, AstraZeneca and the Company filed a patent infringement lawsuit in the U.S.

District Court for the District of New Jersey against Zydus.

This lawsuit, which asserts one or more patents covering olaparib, automatically stays FDA approval of the generic application until May 2027 or until an adverse court decision, if any, whichever may occur earlier.

In November 2024, AstraZeneca and the Company filed an additional patent infringement lawsuit in the U.S.

District Court for the District of New Jersey against Zydus asserting an additional patent covering olaparib.

Between November 30, 2023 and March 13, 2024, the Company filed inter partes review petitions with the U.S.

Patent Office’s Patent Trial and Appeal Board (PTAB), challenging the patentability of all nine patents asserted in the district court.

Between June 2024 and October 2024, the PTAB instituted a review of all nine challenged patents.

In June 2024, the district court granted Merck’s motion to stay the case in its entirety pending the outcome of the PTAB proceeding instituted in June 2024.

Between June and November of 2025, the PTAB issued Final Written Decisions finding all challenged claims of the nine patents unpatentable.

JHU has filed notices of appeal to the Federal Circuit Court of Appeals.

The district court’s stay is expected to continue until at least the issuance of the Federal Circuit decision.

Lenvima — Between 2019 and 2024, Eisai Inc (Eisai) received Paragraph IV Certification Letters under the Hatch-Waxman Act, providing notice that Sun Pharmaceuticals (Sun), Shilpa Medicare Ltd.

(Shilpa), Dr.

Reddy’s Laboratories (DRL), and Torrent Pharmaceuticals (Torrent) filed separate applications to the FDA seeking pre-patent expiry approval to sell generic versions of Lenvima (lenvatinib) tablets.

Between 2019 and 2024, Eisai and the Company filed a series of patent infringement lawsuits in the U.S.

District Court for the District of New Jersey against

each generic company asserting several Orange-Book listed patents.

The Lenvima compound patent expires in April 2026 (including pediatric exclusivity) and was not challenged.

Eisai and the Company settled with Sun, DRL, and Torrent regarding the remaining asserted patents covering Lenvima.

Eisai has announced publicly, these generic companies can bring their generic versions of Lenvima to the market in the U.S.

in July 2030 or earlier under certain circumstances.

In May 2025, Eisai and the Company received a favorable trial decision against Shilpa from the U.S.

District Court for the District of New Jersey.

As a result of the decision, Shilpa is unable to receive approval from the FDA to sell its generic version of Lenvima until February 2036.

Shilpa has appealed the district court’s decision to the U.S.

Court of Appeals for the Federal Circuit, and the appeal is currently pending.

Subcutaneous Pembrolizumab — As previously disclosed, Halozyme, Inc.

(Halozyme) has publicly alleged that certain patents in its modified hyaluronidase (MDASE) portfolio cover an ingredient in the Company’s subcutaneous pembrolizumab product.

In November 2024, the Company began filing a series of post grant review (PGR) petitions before the PTAB alleging that certain patents in the MDASE portfolio are invalid.

In June 2025, the PTAB instituted the first petition filed by the Company.

Since then, the PTAB also instituted 13 additional petitions.

An institution decision on one additional patent in the MDASE portfolio is still pending.

In April 2025, Halozyme filed a complaint in the U.S.

District Court for the District of New Jersey alleging that the Company’s activities related to subcutaneous pembrolizumab infringe or will infringe 15 patents belonging to the MDASE portfolio, 12 of which are the subject of the Company’s already filed PGR petitions.

Although there are three patents that were not and cannot be challenged using the PGR process, the Company believes those patents are invalid and suffer from the same defects as the patents currently being challenged and those patents can be challenged in court proceedings if required.

Between August and September 2025, the Company filed revocation actions against EP Patent No.

2 797 622 (the ‘622 patent) owned by Halozyme in the UK, France, Germany and The Netherlands.

Halozyme counterclaimed for an injunction in the UK under the ‘622 patent as well as an additional patent but have undertaken not to enforce any injunction there until the validity of both patents, which is in dispute, is finally determined.

In October 2025, the Company accepted service of a preliminary injunction filed by Halozyme under the ‘622 patent in Germany.

Following a one day hearing in December 2025, a preliminary injunction was awarded against the Company prohibiting sales in Germany.

The Company has appealed the preliminary injunction decision and expects a decision on the appeal in the second quarter of 2026.

Lynparza — As previously disclosed, between December 2022 and November 2024, AstraZeneca Pharmaceuticals LP received Paragraph IV Certification Letters under the Hatch-Waxman Act notifying AstraZeneca that Natco Pharma Limited, Sandoz Inc., Cipla USA, Inc and Cipla Limited (collectively, Cipla), and Zydus Pharmaceuticals (USA) Inc.

have filed separate applications to the FDA seeking pre-patent expiry approval to sell generic versions of Lynparza (olaparib) tablet.

Between February 2023 and January 2025, AstraZeneca and the Company filed a series of patent infringement lawsuits in the U.S.

District Court for the District of New Jersey against each generic company asserting a number of Orange-Book listed patents.

The filing of the initial infringement suit generally stays FDA approval for 30 months from the date of the Paragraph IV notice or until an adverse court decision, if any, whichever may occur earlier.

In these cases, however, none of the generic companies are challenging the patent specifically claiming the olaparib compound which expires in September 2027.

Thus, the earliest date the FDA can approve any of the currently pending generic applications is September 2027.

All cases have been consolidated and a trial is expected in 2026.

Capvaxive — As previously disclosed, in September 2025, Pogona, LLC filed a complaint in the U.S.

District Court for the District of New Jersey alleging that the Company’s activities related to Capvaxive infringe U.S.

Pogona, LLC is asserting the Company’s infringement is willful and is seeking monetary damages.

The Company believes the asserted patent is invalid and not infringed.

Other Litigation

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the number of cases being brought against the Company;

the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated litigation.

the costs and outcomes of completed trials;

and the most current information regarding anticipated timing, progression, and related costs of pre-trial activities and trials in the associated litigation.

The amount of legal defense reserves as of December 31, 2025 and 2024 of approximately $ 245 million and $ 225 million, respectively, represents the Company’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation;

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The Company and its subsidiaries are parties to a number of proceedings brought under the Comprehensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, and other federal and state equivalents.

These proceedings seek to require the operators of hazardous waste disposal facilities, transporters of waste to the sites and generators of hazardous waste disposed of at the sites to clean up the sites or

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to reimburse the government for cleanup costs.

The Company has been made a party to these proceedings as an alleged generator of waste disposed of at the sites.

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The Company has share-based compensation plans under which the Company grants restricted stock units (RSUs) and performance share units (PSUs) to certain management level employees.

In addition, employees and non-employee directors may be granted options to purchase shares of Company common stock at the fair market value at the time of grant.

In addition, employees

and non-employee directors may be granted options to purchase shares of Company common stock at the fair market value at the time of grant.

These plans were approved by the Company’s shareholders.

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Over the PSU performance period, the number of shares of stock that are expected to be issued will be adjusted based on the probability of achievement of a performance target and final compensation expense will be recognized based on the ultimate number of shares issued.

RSU and PSU distributions will be in shares of Company stock after the end of the vesting or performance

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period, subject to the terms applicable to such awards.

RSU and PSU distributions will be in shares of Company stock after the end of the vesting or performance period, subject to the terms applicable to such awards.

PSU awards generally vest after three years .

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Cash received from the exercise of stock options 92 177 125

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A summary of nonvested RSU and PSU activity (shares in thousands) is as follows:

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Lump sum payments to U.S.

pension plan participants also contributed to the settlements recorded during 2023 and 2022.

The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 14), with the exception of certain amounts for termination benefits, curtailments and settlements, which are recorded in Restructuring costs if the event giving rise to the termination benefits, curtailment or settlement is related to restructuring actions.

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pension plan participants also contributed to the settlements recorded during 2023.

curtailments and settlements, which are recorded in Restructuring costs if the event giving rise to the termination benefits, curtailment or settlement is related to restructuring actions.

Obligations and Funded Status

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Interest cost 569 537 303 294 61 56

Actuarial (gains) losses (1)

Actuarial losses (gains) (1)

178 ( 595 ) ( 962 ) ( 549 ) 34 32

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Other Noncurrent Liabilities ( 412 ) ( 405 ) ( 296 ) ( 394 ) ( 131 ) ( 140 )

(1) Actuarial (gains) losses primarily reflect changes in discount rates.

(1) Actuarial losses (gains) primarily reflect changes in discount rates.

At December 31, 2025 and 2024, the accumulated benefit obligation was $ 18.7 billion and $ 18.1 billion, respectively, for all pension plans, of which $ 10.4 billion and $ 10.0 billion, respectively, related to U.S.

pension plans.

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Information related to the funded status of selected pension plans at December 31 is as follows:

Information related to the funded status of select pension plans at December 31 is as follows:

International

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The Level 3 assets are those whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques with significant unobservable inputs, as well as instruments for which the determination of fair value requires significant judgment or estimation.

At December 31, 2024 and 2023, $ 700 million and $ 788 million, respectively, or approximately 4 % of the Company’s pension investments were categorized as Level 3 assets.

At December 31, 2025 and 2024, $ 737 million and $ 700 million, respectively, or 3 % and 4 %, respectively, of the Company’s pension investments were categorized as Level 3 assets.

If the inputs used to measure the financial assets fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

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The fair values of the Company’s pension plan assets at December 31 by asset category are as follows:

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— — 735 — 735 — 1 698 2 701

Other — — — — — 4 — — — 4

Plan assets at fair value $ 1,640 $ 7,961 $ 735 $ 570 $ 10,906 $ 1,345 $ 7,090 $ 698 $ 514 $ 9,647

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(2) The plans’ Level 3 investments in insurance contracts are generally valued using a crediting rate that approximates market returns and invest in underlying securities whose market values are unobservable and determined using pricing models, discounted cash flow methodologies, or similar techniques.

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The table below provides a summary of the changes in fair value, including transfers in and/or out, of all financial assets measured at fair value using significant unobservable inputs (Level 3) for the Company’s pension plan assets:

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Purchases and sales, net ( 85 ) — ( 85 ) ( 61 ) — ( 61 )

Transfers into Level 3

Balance December 31 $ 735 $ — $ 735 $ 698 $ — $ 698

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Mortgage and asset-backed securities — 63 — — 63 — 54 — — 54

Other Investments (liabilities)

Derivatives — — — — — 12 — — — 12

Plan assets at fair value $ 55 $ 969 $ — $ 83 $ 1,107 $ 44 $ 918 $ — $ 78 $ 1,040

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For international pension plans, the targeted investment portfolio varies based on the duration of pension liabilities and local government rules and regulations.

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Although a significant percentage of plan assets are invested in U.S.

equities, concentration risk is mitigated through the use of strategies that are diversified within management guidelines.

Concentration risk is mitigated by utilizing diversified investment strategies within portfolios.

Expected Contributions

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Net gain (loss) arising during the period $ 408 $ 35 $ ( 69 ) $ 686 $ 634 $ ( 438 ) $ 2 $ ( 78 ) $ 110

$ 35 $ ( 69 ) $ ( 42 ) $ 634 $ ( 438 ) $ 116 $ ( 78 ) $ 110 $ —

Prior service credit (cost) arising during the period — — — 5 56 ( 16 ) — — —

$ 408 $ 35 $ ( 69 ) $ 691 $ 690 $ ( 454 ) $ 2 $ ( 78 ) $ 110

$ 35 $ ( 69 ) $ ( 42 ) $ 690 $ ( 454 ) $ 112 $ ( 78 ) $ 110 $ —

Net loss (gain) amortization included in benefit cost $ 58 $ 43 $ — $ 11 $ 5 $ ( 3 ) $ ( 45 ) $ ( 51 ) $ ( 42 )

Prior service (credit) cost amortization included in benefit cost — — ( 1 ) ( 28 ) ( 13 ) 2 ( 40 ) ( 43 ) ( 49 )

— ( 1 ) ( 32 ) ( 13 ) 2 ( 14 ) ( 43 ) ( 49 ) ( 57 )

Settlements and curtailments 9 — 36 ( 15 ) ( 1 ) ( 6 ) ( 3 ) — ( 1 )

$ 67 $ 43 $ 35 $ ( 32 ) $ ( 9 ) $ ( 7 ) $ ( 88 ) $ ( 94 ) $ ( 92 )

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Actuarial Assumptions

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For 2026, the expected rate of return for the Company’s U.S.

pension and other postretirement benefit plans will be 7.70 %, as compared to 7.75 % in 2024.

pension and other postretirement benefit plans will be 7.70 %, which is the same as 2025.

The health care cost trend rate assumptions for other postretirement benefit plans are as follows:

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Total employer contributions to these plans in 2025, 2024 and 2023 were $ 223 million, $ 215 million and $ 199 million, respectively.

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Other (Income) Expense, Net

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Exchange losses 323 227 370

(Income) loss from investments in equity securities, net (1)

Income from investments in equity securities, net (1)

( 368 ) ( 14 ) ( 340 )

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

Unrealized gains and losses from investments that are directly owned are determined at the end of the reporting period, while gains and losses from ownership interests in investment funds are accounted for on a one quarter lag.

Unrealized gains and losses from investments that are owned directly are determined at the end of the reporting period, while gains and losses from ownership interests in investment funds are accounted for on a one quarter lag.

Other, net (as reflected in the table above) in 2024 includes $ 170 million of income related to the expansion of a collaboration agreement with Daiichi Sankyo (see Note 4).

Other, net, in 2023 includes a $ 572.5 million charge related to settlements with certain plaintiffs in the Zetia antitrust litigation (see Note 10).

Interest paid was $ 1.3 billion in 2024, $ 1.1 billion in 2023 and $ 937 million in 2022.

Interest paid was $ 1.3 billion in 2025, $ 1.3 billion in 2024 and $ 1.1 billion in 2023.

Taxes on Income

A reconciliation between the effective tax rate and the U.S.

statutory rate is as follows:

As discussed in Note 2, the Company prospectively adopted a new accounting standard effective for 2025 reporting that requires disaggregation of information in the effective income tax rate reconciliation and income taxes paid disclosures.

A reconciliation between the effective income tax rate and the U.S.

statutory rate (in accordance with the new guidance) for 2025 is as follows:

Amount Tax Rate

statutory rate applied to income before taxes $ 4,424 21.0 %

Differential arising from:

State and local income taxes, net of federal benefit (1)

Foreign tax effects:

Tax rate differential between Switzerland and the U.S.

( 1,428 ) ( 6.8 )

Amount Tax Rate Amount Tax Rate Amount Tax Rate

Withholding taxes 284 1.3

Tax rate differential between Netherlands and the U.S.

Innovation box ( 1,042 ) ( 4.9 )

Other ( 66 ) ( 0.3 )

Other foreign jurisdictions 308 1.5

Effect of cross-border tax laws:

Net controlled foreign corporation tested income 3,759 17.8

Foreign-derived deduction-eligible income ( 31 ) ( 0.1 )

Subpart F 227 1.1

Foreign tax credits ( 4,190 ) ( 19.9 )

Research and development tax credits ( 260 ) ( 1.2 )

Valuation allowances 76 0.4

Nontaxable or nondeductible items ( 78 ) ( 0.4 )

Changes in unrecognized tax benefits 341 1.5

$ 2,804 13.3 %

(1) State and local tax expense was not material in 2025.

(2) Includes the impact of Cantonal tax holiday and OECD Pillar 2.

A reconciliation between the effective income tax rate and the U.S.

statutory rate (as previously reported in accordance with guidance prior to the adoption of the new accounting standard) for 2024 and 2023 is as follows:

Amount Tax Rate Amount Tax Rate

statutory rate applied to income before taxes

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Where applicable, the impact of changes in uncertain tax positions is reflected in the reconciling items above.

The Company’s remaining transition tax liability under the Tax Cuts and Jobs Act (TCJA) of 2017, which has been reduced by payments and the expected utilization of foreign tax credits, was a net liability of $ 518 million at December 31, 2024, which is comprised of a $ 1.2 billion tax liability included in Income taxes payable, offset by $ 702 million of foreign tax credits included in Other Assets that Merck expects to be applied upon the completion of the IRS’s examination of the Company’s tax returns for the 2017 and 2018 federal tax years.

In 2025, the Company made the final installment payment due related to the transition tax liability under the Tax Cuts and Jobs Act (TCJA) of 2017 of $ 1.2 billion.

As of December 31, 2025, the Company has $ 702 million of foreign tax credits included in Other Assets that Merck expects to be applied upon the completion of the Internal Revenue Service’s (IRS) examination of the Company’s tax returns for the 2017 and 2018 federal tax years.

As a result of the transition tax under the TCJA, the Company is no longer indefinitely reinvested with respect to its undistributed earnings from foreign subsidiaries and has provided a deferred tax liability for foreign withholding taxes that would apply.

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Company remains indefinitely reinvested with respect to its financial statement basis in excess of tax basis of its foreign subsidiaries.

The Company remains indefinitely reinvested with respect to its financial statement basis in excess of tax basis of its foreign subsidiaries.

A determination of the net deferred tax liability with respect to this basis difference is not practicable.

The foreign earnings tax rate differentials in the tax rate reconciliation above primarily reflect the impacts of operations in jurisdictions with different effective tax rates than the U.S., particularly Ireland, the Netherlands and Switzerland, as well as Singapore and Puerto Rico which operate under tax incentive grants (which begin to expire in 2025), thereby yielding a favorable impact on the effective tax rate compared with the U.S.

The foreign earnings tax rate differentials in the tax rate reconciliations above primarily reflect the impacts of operations in jurisdictions with different effective tax rates than the U.S., particularly Switzerland, the Netherlands and Ireland, as well as Singapore and Puerto Rico which operate under tax incentive grants (which begin to expire in 2025), thereby yielding a favorable impact on the effective tax rate compared with the U.S.

statutory rate of 21%.

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$ 2,804 $ 2,803 $ 1,512

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Deferred income taxes at December 31 consisted of:

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tax credit carryforwards and NOL carryforwards.

Income taxes paid in 2025 (presented in accordance with the new guidance) consisted of:

Year Ended December 31

Domestic - federal (1)

Domestic - state and local

Other foreign

(1) Includes TCJA transition tax payments.

Income taxes paid in 2024 and 2023 consisted of:

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(1) Includes TCJA transition tax payments.

Prepaid income taxes included in Other current assets were $ 5.7 billion and $ 3.9 billion at December 31, 2025 and 2024, respectively.

Tax benefits relating to stock option exercises were $ 7 million in 2025, $ 26 million in 2024 and $ 12 million in 2023.

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(1) Amount in 2024 reflects a reduction of $ 451 million resulting from the expiration of the statute of limitations related to the 2019 and 2020 federal tax return years.

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If the Company were to recognize the unrecognized tax benefits of $ 2.5 billion at December 31, 2025, the income tax provision would reflect a favorable net impact of $ 2.5 billion.

The Company is under examination by numerous tax authorities in various jurisdictions globally.

The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits as of December 31, 2024 could decrease by up to approximately $ 22 million in the next 12 months as a result of various audit closures, settlements or the expiration of the statute of limitations.

The ultimate finalization of the Company’s examinations with relevant taxing authorities can include formal administrative and legal proceedings, which could have a significant impact on the timing of the reversal of unrecognized tax benefits.

The Company believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures.

Interest and penalties associated with uncertain tax positions amounted to an expense of $ 51 million in 2024, $ 131 million in 2023 and $ 54 million in 2022.

Interest and penalties associated with uncertain tax positions amounted to $ 106 million in 2025, $ 51 million in 2024 and $ 131 million in 2023.

These amounts reflect the beneficial impacts of various tax settlements.

Liabilities for accrued interest and penalties were $ 546 million and $ 437 million as of December 31, 2025 and 2024, respectively.

The 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 may 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.

In 2024, the Company recorded a benefit of $ 519 million due to a reduction in reserves for unrecognized income tax benefits resulting from the expiration in 2024 of the statute of limitations for assessments related to the 2019 and 2020 federal tax return years.

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.

If the IRS disagrees with the Company’s transition tax position, it may result in a significant tax liability.

The IRS is also currently conducting examinations of the Company’s tax returns for the years 2021 and 2022.

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Common Shareholders $ 7.30 $ 6.76 $ 0.14

$ 6.76 $ 0.14 $ 5.73

Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc.

Common Shareholders $ 7.28 $ 6.74 $ 0.14

$ 6.74 $ 0.14 $ 5.71

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

In 2025, 2024 and 2023, 11 million, 6 million and 5 million, respectively, of common shares issuable under share-based compensation plans were excluded from the computation of earnings per common share assuming dilution because the effect would have been antidilutive.

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Other Comprehensive Income (Loss)

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(3) Includes pension plan net loss of $ 2.0 billion and $ 3.0 billion at December 31, 2025 and 2024, respectively, and other postretirement benefit plan net gain of $ 365 million and $ 400 million at December 31, 2025 and 2024, respectively, as well as pension plan prior service credit of $ 146 million and $ 174 million at December 31, 2025 and 2024, respectively, and other postretirement benefit plan prior service credit of $ 29 million and $ 61 million at December 31, 2025 and 2024, respectively.

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Segment Reporting

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The Company sells its products to veterinarians, distributors, animal producers, farmers and pet owners.

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Sales of the Company’s products were as follows:

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Keytruda $ 18,829 $ 12,812 $ 31,641 $ 17,872 $ 11,610 $ 29,482 $ 15,114 $ 9,897 $ 25,011

Keytruda Qlex

38 2 40 — — — — — —

Alliance revenue - Lynparza (1)

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Vaxneuvance 459 366 825 461 347 808 561 103 665

730 29 759 96 1 97 — — —

RotaTeq 426 246 673 472 239 711 493 276 769

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Prevymis 475 503 978 371 414 785 264 341 605

Dificid 303 37 340 274 28 302 241 22 263

Zerbaxa 186 126 312 146 106 252 119 100 218

Noxafil 7 170 177 32 181 213 51 187 238

Cardiovascular

Dificid 202 45 247 303 37 340 274 28 302

Cardiometabolic and Respiratory

1,358 85 1,443 408 11 419 — — —

2 unchanged sentences

Adempas — 312 312 — 287 287 — 255 255

178 — 178 — — — — — —

Lagevrio 101 278 380 176 787 964 10 1,418 1,428

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

(2) Alliance revenue for Reblozyl represents royalties and, for 2022, also includes a payment received related to the achievement of a regulatory approval milestone (see Note 4).

(2) Alliance revenue for Reblozyl represents royalties (see Note 4).

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

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

(5) Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which increased sales by $ 195 million, $ 244 million and $ 810 million in 2024, 2023 and 2022, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon).

Also reflects total alliance revenue for Koselugo of $ 436 million, $ 170 million, and $ 97 million in 2025, 2024 and 2023, respectively (see Note 4).

(5) Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which (decreased) increased sales by $( 127 ) million, $ 195 million and $ 244 million in 2025, 2024 and 2023, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon & Co.).

Other for 2025, 2024 and 2023 also includes $ 138 million, $ 106 million and $ 118 million, respectively, related to upfront and milestone payments received by Merck for out-licensing arrangements.

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Consolidated sales by geographic area where derived are as follows:

2 unchanged sentences

Europe, Middle East and Africa 14,580 14,041 13,254

China 5,494 6,802 5,191

Latin America 3,410 3,459 3,086

Asia Pacific (other than Japan and China)

2,983 3,058 3,225

Japan 2,711 3,280 3,164

Asia Pacific (other than China and Japan) 3,058 3,225 3,614

China 1,939 5,494 6,802

Other 2,878 2,559 2,104

33 unchanged sentences

(3) Includes equity (income) loss from affiliates and other miscellaneous non-operating expenses.

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as selling, general and administrative expenses directly incurred by the segment.

Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment.

The chief operating decision maker (Merck’s Chief Executive Officer) uses segment profit to allocate resources predominately during the planning and forecasting process.

Pharmaceutical segment profits consist of segment sales less standard costs, as well as selling, general and administrative expenses directly incurred by the segment.

Animal Health segment profits consist of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment.

The chief operating decision maker (Merck’s Chief Executive Officer) uses segment profit for the purpose of evaluating performance, allocating resources, informing incentive compensation targets and setting strategic Company goals during the planning and forecasting process.

On a quarterly basis, the CEO considers forecast-to-actual variances in segment profit when assessing performance of the segments and making decisions about allocating resources to the segments.

For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, research and development expenses incurred by Merck Research Laboratories, the Company’s research and development division that focuses on human health-related activities, 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.

In addition, costs related to restructuring activities, as well as the amortization of intangible assets and amortization of purchase accounting adjustments are not allocated to segments.

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In addition, costs related to restructuring activities, as well as the amortization of intangible assets and the recognition of fair value step-up of inventories are not allocated to segments.

Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits (losses) related to third-party manufacturing arrangements.

20 unchanged sentences

Latin America 128 133 222

Other 51 47 4

$ 25,316 $ 23,779 $ 23,051

The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is not presented.

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Report of Independent Registered Public Accounting Firm

26 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matters

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We have served as the Company’s auditor since 2002.

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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

1 unchanged sentence

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-K

Item 8. Financial Statements and Supplementary Data