What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-07 compared with 2026-05-04 · 301 added, 208 removed, 463 unchanged (52% of the section changed)

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Below is a summary of significant business development activity thus far in 2026.

In March 2026, Merck entered into a definitive agreement to acquire Terns Pharmaceuticals, Inc.

(Terns), a clinical-stage oncology company, for $53 per share, for a total transaction value of approximately $6.7 billion.

Through this acquisition, Merck will acquire Terns’ lead candidate, TERN-701, a novel investigational oral allosteric BCR::ABL1 tyrosine kinase inhibitor (TKI) currently being evaluated in a Phase 1/2 trial for patients with Philadelphia chromosome-positive, chronic phase chronic myeloid leukemia previously treated with at least one prior TKI and who experienced treatment failure, suboptimal response or treatment intolerance.

The transaction has been approved by both Merck’s and Terns’ Boards of Directors.

The acquisition is subject to a majority of Terns’ stockholders tendering their shares in the tender offer initiated by Merck in April 2026.

The consummation of the proposed transaction is also subject to customary closing conditions.

Merck anticipates the transaction will be accounted for as an asset acquisition since TERN-701 is expected to account for substantially all of the fair value of the gross assets to be acquired (excluding cash and deferred income taxes).

Upon closing of the transaction, which is anticipated in May 2026, Merck expects to record a charge of approximately $5.8 billion to Research and development expenses, or approximately $2.35 per share.

In July 2026, Merck acquired TARGAN, a privately held company developing and commercializing biodevice solutions to improve performance outcomes for the poultry industry, for approximately $650 million.

The acquisition is expected to broaden Merck Animal Health’s portfolio in commercial poultry operations with WingScan, an automated solution that uses vision technology for gender identification.

This acquisition also brings the capability for a high-speed precision ocular spray technology, which administers respiratory and coccidiosis vaccines, among others, to day-old chicks.

In addition, TARGAN has the potential to develop additional biodevices within poultry and other livestock species.

Merck recorded an unrealized gain of $71 million to Other (income) expense, net in the second quarter and first six months of 2026 related to an existing investment that Merck held in TARGAN.

The Company expects to account for the transaction as a business combination.

There are no future contingent payments associated with the acquisition.

In addition, taking into consideration operational investment to advance TERN-701, as well as the cost of financing the transaction, the Company also anticipates a negative impact of approximately $0.12 per share over the remainder of 2026 following the closing of the transaction.

In May 2026, Merck acquired Terns Pharmaceuticals, Inc.

(Terns), a clinical-stage oncology company, for $6.8 billion (including $606 million of payments to settle share-based equity awards of which $433 million related to unvested equity awards).

Through this acquisition, Merck acquired Terns’ lead candidate, MK-4208 (formerly TERN-701), a novel investigational oral allosteric BCR::ABL1 tyrosine kinase inhibitor (TKI) currently being evaluated in a Phase 1/2 trial for patients with Philadelphia chromosome-positive, chronic phase chronic myeloid leukemia previously treated with at least one prior TKI and who experienced treatment failure, suboptimal response or treatment intolerance.

The transaction was accounted for as an asset acquisition because MK-4208 accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes).

Merck recorded a charge of $5.7 billion to Research and development expenses (which primarily represented acquired in-process research and development [IPR&D] with no alternative future use), or $2.31 per share, in the second quarter and first six months of 2026, as well as net assets of $1.1 billion, including cash of $505 million, investments of $487 million, deferred tax assets of $190 million, and other net liabilities of $105 million.

There are no future contingent payments associated with the acquisition.

In January 2026, Merck acquired Cidara Therapeutics, Inc.

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MK-1406 is currently being evaluated in a Phase 3 trial among adult and adolescent participants who are at higher risk of developing complications from influenza.

The transaction was accounted for as an asset acquisition since MK-1406 accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes).

Merck recorded a charge of $9.0 billion to Research and development expenses, or $3.62 per share, (which primarily represented acquired in-process research and development with no alternative future use), as well as net assets of $332 million in the first quarter of 2026.

The transaction was accounted for as an asset acquisition because MK-1406 accounted for substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes).

Merck recorded a charge of $9.0 billion to Research and development expenses (which primarily represented acquired IPR&D with no alternative future use), or $3.62 per share, in the first six months of 2026, as well as net assets of $332 million.

Under a previous license agreement between Cidara and J&J Innovative Medicine (a Johnson & Johnson company, previously Janssen Pharmaceuticals, Inc.), which was assumed by Merck, J&J Innovative Medicine is eligible to receive regulatory and sales-based milestones related to MK-1406.

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In 2022, the U.S.

Congress passed the Inflation Reduction Act (IRA), which made significant changes to how drugs are covered and paid for under the Medicare program, including the creation of financial penalties for drugs whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits (which went into effect in 2025), and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028).

Congress passed the Inflation Reduction Act (IRA), which made significant changes to how drugs are covered and paid for under the Medicare program, including the creation of financial penalties for drugs whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits (which went into effect in 2025), and government price-setting for certain Medicare Part D drugs (which went into effect in 2026) and Medicare Part B drugs (starting in 2028).

Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), selected Januvia (sitagliptin) in 2023 for the first year of the IRA’s “Drug Price Negotiation Program” (Program), and selected Janumet (sitagliptin and metformin HCl) and Janumet XR (sitagliptin and metformin HCl extended release) in 2025 for the second year of the IRA’s Program.

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Furthermore, the Company expects that Keytruda (pembrolizumab) will be selected in 2027 for government price setting, which would become effective on January 1, 2029;

a pending CMS proposed rule may subject Keytruda Qlex (pembrolizumab and berahyaluronidase alfa) to price setting at the same time.

Government price setting may also impact pricing in the private market negatively affecting the Company’s performance.

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In several international markets, government-mandated pricing actions have reduced prices of generic and patented drugs.

In addition, the Company’s sales performance in the first three months of 2026 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs.

In addition, the Company’s sales performance in the first six months of 2026 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs.

In July 2026, the German parliament approved the Statutory Health Insurance Contribution Rate Stabilization Act (GKV-BStabG), a comprehensive health care reform law designed to reduce health insurance expenditures.

The legislation introduces significant cost-containment measures that directly impact the pharmaceutical industry, with the majority of the provisions taking effect on January 1, 2027.

The Company is currently evaluating the implications of the GKV-BStabG on its business;

however, the provisions of this law will exert significant downward pressure on sales in Germany.

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

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prescription drug prices to prices in selected comparably developed nations.

2025, the Company and other pharmaceutical companies received letters from the U.S.

In July 2025, the Company and other pharmaceutical companies received letters from the U.S.

presidential administration with a request to agree to the administration’s “most-favored-nation” drug pricing goals by September 29, 2025.

Further to the letter received from the administration, in December 2025, the Company announced that it had entered into a three-year agreement (MFN Agreement) with the U.S government that addressed the four policy goals of the administration’s July letter.

Included within the MFN Agreement is an obligation by the Company to provide key products through a direct-to-patient program at affordable prices for eligible patients in the U.S.

This will initially include Januvia , Janumet and Janumet XR , and will be expanded in the future to include enlicitide decanoate pending FDA approval.

The Company also agreed to offer its existing medicines at discounted prices to Medicaid, excluding certain products.

The Company is providing Januvia , Janumet and Janumet XR through a direct-to-patient program at affordable prices for eligible patients in the U.S., and will be expanding the program in the future to include Lipfendra (enlicitide).

The Company also agreed to offer its existing medicines at discounted prices to Medicaid (excluding certain products) and in June 2026 signed an agreement with CMS to participate in the GENErating cost Reductions fOr U.S.

Medicaid (GENEROUS) Model, a voluntary program through which participating state Medicaid agencies receive pricing for certain medications aligned to prices paid in select countries.

Additionally, the Company agreed that products launched during the term of the MFN Agreement (with certain exceptions) will be subject to “most-favored-nation” pricing in reference to prices for such products in a specified group of countries (MFN Countries).

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Three Months Ended

March 31, % Change

($ in millions) 2026 2025 % Change

United States $ 9,164 $ 8,522 8 % 8 %

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Exchange Six Months Ended

June 30, % Change

($ in millions) 2026 2025 % Change 2026 2025 % Change

$ 9,367 $ 8,836 6 % 6 % $ 18,532 $ 17,359 7 % 7 %

International 7,240 6,969 4 % 2 % 14,361 13,977 3 % (1) %

Total $ 16,607 $ 15,806 5 % 4 % $ 32,893 $ 31,335 5 % 3 %

Worldwide sales were $16.3 billion in the first quarter of 2026, an increase of 5% compared with the first quarter of 2025, reflecting growth in oncology, cardiometabolic and respiratory, and animal health, partially offset by declines in vaccines, diabetes, and infectious diseases.

Growth in the oncology franchise in the first quarter of 2026 was largely due to the performance of Keytruda and Welireg (belzutifan), as well as higher alliance revenue from Koselugo (selumetinib) resulting from an amendment to the collaboration agreement.

plus international may not equal due to rounding.

Worldwide sales were $16.6 billion and $32.9 billion in the second quarter and first six months of 2026, respectively, representing increases of 5% compared with the same periods of 2025, reflecting growth in oncology, cardiometabolic and respiratory, and animal health, partially offset by declines in diabetes and infectious diseases.

Lower sales in vaccines also partially offset revenue growth in the year-to-date period.

Growth in the oncology franchise in the second quarter and first six months of 2026 was largely due to the performance of Keytruda/Keytruda Qlex and Welireg (belzutifan).

Higher alliance revenue from Koselugo (selumetinib) resulting from an amendment to the collaboration agreement also contributed to oncology sales growth in the year-to-date period.

Sales growth in the cardiometabolic and respiratory franchise was largely attributable to the continued uptake of Winrevair (sotatercept-csrk), as well as the inclusion of sales of Ohtuvayre (ensifentrine) (which was obtained as part of the October 2025 acquisition of Verona Pharma plc [Verona Pharma]).

Animal health sales growth was due to the performance of both livestock and companion animal products.

The vaccines revenue decline was primarily due to lower combined Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine Recombinant) and Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) sales.

The decline in diabetes was primarily due to lower sales of Januvia , and the decline in infectious diseases was largely due to lower sales of Lagevrio (molnupiravir).

The decline in diabetes was primarily due to lower sales of Januvia and Janumet , and the decline in infectious diseases was largely due to lower sales of Lagevrio (molnupiravir) and Dificid (fidaxomicin).

The vaccines revenue decline in the year-to-date period was primarily due to lower combined sales of Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine Recombinant) and Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant).

Additionally, the overall U.S.

vaccines market has experienced a contraction negatively affecting sales.

See Note 15 to the condensed consolidated financial statements for details on sales of the Company’s products.

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Keytruda/Keytruda Qlex

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Welireg 271 162 67 % 67 % 470 300 57 % 56 %

Alliance Revenue - Koselugo (2)

Alliance Revenue - Reblozyl (2)

122 107 15 % 15 % 270 226 20 % 20 %

Alliance Revenue - Koselugo (3)

10 43 (76) % (76) % 171 87 96 % 96 %

(1) Alliance revenue for Lynparza represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 3 to the condensed consolidated financial statements).

(2) Alliance revenue for Koselugo in 2026 primarily includes a $150 million payment received in connection with an amendment to the collaboration agreement with AstraZeneca in August 2025, which revised the payment structure.

Alliance revenue in the first quarter of 2025 represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

(See Note 3 to the condensed consolidated financial statements for more information on this collaboration, including the above referenced amendment.)

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

(3) Alliance revenue for Koselugo in the first six months of 2026 primarily includes a $150 million payment received in connection with an amendment to the collaboration agreement with AstraZeneca in August 2025, which revised the payment structure.

Alliance revenue for Koselugo in the second quarter and first six months of 2025 represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

(See Note 3 to the condensed consolidated financial statements for more information on this collaboration, including the above referenced amendment.)

Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved in over 45 indications in the U.S., including 19 tumor types and 2 tumor-agnostic indications, and has similarly been approved in markets worldwide for many of these indications.

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See “Research and Development Update” below.

Combined global sales of Keytruda/Keytruda Qlex grew 12% in the first quarter of 2026.

Combined global sales of Keytruda/Keytruda Qlex grew 5% and 8% in the second quarter and first six months of 2026, respectively.

Sales growth in the U.S.

reflects an approximate $250 million favorable impact due to the timing of wholesaler purchases, higher net pricing, and increased demand.

in both periods reflects higher net pricing and increased demand.

Additionally, the year-to-date period in 2026 reflects an approximate $250 million favorable impact due to the timing of wholesaler purchases.

Demand in the U.S.

was driven by higher utilization across earlier-stage indications, including in certain types of cervical cancer, triple-negative breast cancer (TNBC), and renal cell carcinoma (RCC), as well as higher demand across multiple metastatic indications, in particular for the treatment of certain types of urothelial and cervical cancers.

Sales growth in international markets reflects higher demand in urothelial, non-small cell lung cancer (NSCLC), gastric, cervical, and endometrial cancer metastatic indications, as well as increased uptake predominately for the TNBC, NSCLC, melanoma, and RCC earlier-stage indications.

was driven by higher utilization across earlier-stage indications, including in certain types of triple-negative breast cancer (TNBC), bladder cancer, head and neck squamous cell carcinoma, and cervical cancer, as well as higher demand across multiple metastatic indications, in particular for the treatment of certain types of urothelial cancer.

Sales growth in international markets reflects higher demand in urothelial and endometrial cancer metastatic indications, as well as increased uptake in earlier-stage indications, predominately for TNBC, cervical, non-small cell lung cancer (NSCLC), and renal cell carcinoma (RCC).

The launch and reimbursement of new indications for Keytruda in the EU continues to have a negative impact on pricing in those markets.

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China’s National Medical Products Administration (NMPA) approval for the first-line treatment of certain patients with primary advanced or recurrent endometrial cancer, based on the KEYNOTE-868 (NRG-GY018) trial.

February 2026

February 2026 U.S.

Food and Drug Administration (FDA) approval in combination with paclitaxel, with or without bevacizumab, for the treatment of adult patients with platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal carcinoma whose tumors express programmed death-ligand (PD-L1) Combined Positive Score (CPS) ≥ 1 as determined by an FDA-authorized test, and who have received one or two prior systemic treatment regimens, based on the KEYNOTE-B96 trial.

February 2026

Japan’s Ministry of Health, Labor and Welfare (MHLW) approval for neoadjuvant and adjuvant treatment of locally advanced head and neck squamous cell carcinoma, based on the KEYNOTE-689 trial.

February 2026 Japan’s Ministry of Health, Labor and Welfare (MHLW) approval as part of a neoadjuvant and adjuvant treatment regimen with radiotherapy with or without chemotherapy for certain patients with resectable locally advanced head and neck squamous cell carcinoma, based on the KEYNOTE-689 trial.

EC approval in combination with paclitaxel, with or without bevacizumab, for the treatment of platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal carcinoma in adults whose tumors express PD-L1 (CPS ≥1) and who have received one or two prior systemic treatment regimens, based on the KEYNOTE-B96 trial.

June 2026 FDA approval in combination with Welireg for the adjuvant treatment of adult patients with RCC with a clear cell component at intermediate-high or high risk of recurrence following nephrectomy, or following nephrectomy and resection of metastatic lesions, based on the LITESPARK-022 trial.

June 2026 EC approval in combination with Padcev (enfortumab vedotin), an antibody-drug conjugate (ADC), as neoadjuvant treatment and then continued after radical cystectomy as adjuvant treatment, for adults with resectable muscle-invasive bladder cancer (MIBC) who are ineligible for cisplatin-containing chemotherapy, based on the KEYNOTE-905 trial.

June 2026 FDA approval in combination with Trodelvy (sacituzumab govitecan-hziy), a trophoblast cell-surface antigen 2 (TROP2)-directed ADC, for the first-line treatment of adult patients with unresectable locally advanced or TNBC whose tumors express PD-L1 (CPS ≥10), based on the KEYNOTE-D19 trial.

June 2026 China's NMPA approval in combination with paclitaxel, with or without bevacizumab, for the treatment of adult patients with platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal cancer whose tumors express PD-L1 (CPS ≥1) and who have received prior first- or second-line systemic therapy, based on the KEYNOTE-B96 trial.

July 2026 FDA approval in combination with Padcev for expanded use as neoadjuvant treatment and then continued after cystectomy as adjuvant treatment for adults with MIBC, including those eligible for cisplatin-containing chemotherapy, based on the KEYNOTE-B15 trial.

Keytruda Qlex (available in some markets as Keytruda SC ) received the following regulatory approvals thus far in 2026.

Date Approval

February 2026

FDA approval in combination with paclitaxel, with or without bevacizumab, for the treatment of adult patients with platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal carcinoma whose tumors express PD-L1 (CPS ≥ 1) as determined by an FDA-authorized test, and who have received one or two prior systemic treatment regimens, based on the KEYNOTE-B96 trial.

February 2026 FDA approval in combination with paclitaxel, with or without bevacizumab, for the treatment of adult patients with platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal carcinoma whose tumors express PD-L1 (CPS ≥ 1) as determined by an FDA-authorized test, and who have received one or two prior systemic treatment regimens, based on the KEYNOTE-B96 trial.

FDA approval of a label update based on results from the MK-3475A-F11 trial, which evaluated patient reported preference for subcutaneous administration of Keytruda Qlex over intravenous administration of Keytruda in participants with multiple tumor types.

June 2026 EC approval in combination with Padcev, an ADC, as neoadjuvant treatment and then continued after radical cystectomy as adjuvant treatment, for adults with resectable MIBC who are ineligible for cisplatin-containing chemotherapy, based on the KEYNOTE-905 trial.

June 2026 FDA approval in combination with Trodelvy (sacituzumab govitecan-hziy), a TROP2-directed ADC, for the first-line treatment of adult patients with unresectable locally advanced or TNBC whose tumors express PD-L1 (CPS ≥10), based on the KEYNOTE-D19 trial.

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

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

Alliance revenue related to Lynparza grew 9% in the first quarter of 2026 largely due to higher demand in the U.S.

and many international markets.

Sales of Welireg , for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors, certain adult patients with previously treated advanced RCC, and certain patients with pheochromocytoma and paraganglioma, rose 45% in the first quarter of 2026 primarily due to higher demand in the U.S.

for the RCC indication and continued launch uptake in several international markets, particularly in Japan and certain European markets.

Alliance revenue related to Lynparza grew 4% in the first six months of 2026 largely due to higher demand in the U.S.

and many international markets, partially offset by lower net pricing.

Welireg is approved for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors, certain adult patients with previously treated advanced RCC, and certain patients with pheochromocytoma and paraganglioma.

Welireg is also approved in combination with Keytruda or Keytruda Qlex for the adjuvant treatment of certain adult patients with clear cell RCC following nephrectomy.

Sales of Welireg rose 67% and 57% in the second quarter and first six months of 2026, respectively, primarily due to higher demand in the U.S.

for the advanced RCC indication and continued launch uptake in several international markets, particularly in Japan.

Favorable wholesaler purchasing patterns in the U.S.

also contributed to sales growth in the second quarter of 2026.

Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein that is being commercialized through a global collaboration with Bristol-Myers Squibb Company (BMS) (see Note 3 to the condensed consolidated financial statements).

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

revenue related to this collaboration (consisting of royalties) increased 15% and 20% in the second quarter and first six months of 2026, respectively, primarily due to strong underlying sales performance.

Koselugo is an oral, selective MEK inhibitor approved for the treatment of patients with neurofibromatosis type 1 who have symptomatic inoperable plexiform neurofibromas.

Koselugo is part of a collaboration with AstraZeneca.

The increase in alliance revenue in the first quarter of 2026 is due to a $150 million payment received in connection with an amendment to the collaboration agreement in August 2025 that (subject to an annual election by AstraZeneca) discontinued the revenue and cost sharing provisions of the collaboration, and changed the payment structure.

Alliance revenue related to Koselugo declined 76% in the second quarter of 2026 due to an amendment to the collaboration agreement with AstraZeneca in August 2025 that (subject to an annual election by AstraZeneca) discontinued the revenue and cost sharing provisions of the collaboration, and revised the payment structure.

The increase in alliance revenue in the first six months of 2026 was due to a $150 million payment received in the first quarter of 2026 in connection with the above reference amendment to the collaboration agreement, partially offset by the related discontinuation of the profit sharing.

See Note 3 to the condensed consolidated financial statements for additional information.

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

Alliance revenue related to this collaboration (consisting of royalties) increased 25% in the first quarter of 2026 primarily due to strong underlying sales performance.

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Gardasil/Gardasil 9

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and immunizations based on shared clinical decision-making.

Immunizations recommended for all children include vaccines for measles, mumps, rubella, polio, pertussis, tetanus, diphtheria, Haemophilus influenzae type B (Hib), pneumococcal disease, human papillomavirus (HPV), and varicella (chickenpox).

Immunizations recommended for certain high-risk groups or populations include respiratory syncytial virus (RSV), hepatitis A, hepatitis B, and dengue.

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HHS has stated that immunizations for all of the diseases covered by the previous immunization schedule will still be available to anyone who wants them through Affordable Care Act insurance plans and federal insurance programs, including Medicaid, the Children’s Health Insurance Program, and the Vaccines For Children (VFC) program.

Additionally, in September 2025, the trade association representing U.S.

Additionally, the trade association representing U.S.

health insurers (AHIP) announced that its member health plans would continue to cover all immunizations that had been recommended by the CDC’s Advisory Committee on Immunization Practices (ACIP) as of September 1, 2025, with no cost-sharing for patients through the end of 2027.

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Court of Appeals for the First Circuit.

Combined worldwide sales of Gardasil and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of HPV, declined 19% in the first quarter of 2026.

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

The decline also reflects lower sales in the U.S.

primarily due to unfavorable CDC purchasing patterns, partially offset by higher net pricing.

As previously disclosed, the Company suspended shipments to China beginning in February 2025 given lower demand and elevated channel inventory levels in China.

Combined worldwide sales of Gardasil and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of HPV, grew 4% in the second quarter of 2026 due to higher demand in Asia Pacific and Europe, as well as favorable timing of tenders in Europe, partially offset by lower demand in certain other international markets.

Combined worldwide sales of Gardasil and Gardasil 9 declined 9% in the first six months of 2026 primarily driven by lower demand in China (discussed below) and in Japan, reflecting in part that the last date to initiate the first dose in Japan’s national immunization program catch-up cohort was in March 2025.

The year-to-date sales decline also reflects lower sales in the U.S.

primarily due to unfavorable CDC purchasing patterns and lower demand, partially offset by higher net pricing.

The sales decline in the first six months of 2026 was partially offset by higher demand in Europe and other markets in the Asia Pacific region.

As previously disclosed, the Company suspended shipments to China in February 2025 given lower demand and elevated channel inventory levels in China.

In April 2026, the Company entered into a revised supply contract with its distributor and commercialization partner in China, Chongqing Zhifei Biological Products Co., Ltd.

Subject to agreement between the parties, the Company may make shipments to China in the latter part of 2026;

if so, any associated revenue in 2026 is expected to be immaterial.

In the second quarter of 2026, the Company began making limited shipments to China;

however, revenue associated with the revised supply contract is expected to be immaterial in 2026.

Among the changes in the CDC’s now-stayed January announcement referenced above was a reduction of the recommended doses for HPV vaccination of adolescents to a single dose.

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

Under the terms of the more significant of these agreements, Merck pays a 7% royalty on net sales of

Gardasil/Gardasil 9 in the U.S.

Under the terms of the more significant of these agreements, Merck pays a 7% royalty on net sales of Gardasil/Gardasil 9 in the U.S.

to one third party (this royalty expires in December 2028).

The royalty expenses are included in Cost of sales .

Global sales of ProQuad (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella, increased 64% in the first quarter of 2026 primarily due to higher sales in the U.S.

As a result of manufacturing delays, in January 2025, the Company borrowed doses of ProQuad from the CDC Pediatric Vaccine Stockpile, which reduced sales of ProQuad by approximately $70 million in the first quarter of 2025.

The Company replenished the borrowing later in 2025.

Higher demand in certain European markets also contributed to the growth in ProQuad sales in the first quarter of 2026.

Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella declined 38% in the first quarter of 2026 primarily due to lower sales in the U.S.

largely reflecting unfavorable private sector purchasing patterns and lower demand.

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), declined 6% in the first quarter of 2026 primarily due to lower sales in the U.S.

largely driven by lower demand, partially offset by higher net pricing.

Global sales of ProQuad (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella, decreased 14% in the second quarter of 2026 and increased 10% in the first six months of 2026.

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

The Company partially replenished the borrowing in the second quarter of 2025 resulting in a benefit to U.S.

ProQuad sales of $24 million in that period;

the net effect of the borrowing and partial replenishment resulted in a net reduction to U.S.

ProQuad sales of $49 million for the first six months of 2025.

The Company replenished the remainder of the borrowing later in 2025.

Additionally, lower demand in the U.S.

in the second quarter and first six months of 2026 was partially offset by higher demand in certain European markets.

Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella declined 24% in the first six months of 2026 primarily due to lower demand in the U.S.

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), increased 8% and 1% in the second quarter and first six months of 2026, respectively, primarily due to unfavorable CDC stockpile activity in the prior year as noted below, higher net pricing in the U.S., and higher demand in several international markets, partially offset by lower demand in the U.S.

and Latin America.

In September 2025, the ACIP voted to recommend that children under the age of four years receive protection from chickenpox (varicella) as a standalone immunization rather than in combination with measles, mumps, and rubella (MMR) vaccination, eliminating a previous shared clinical decision-making recommendation that allowed parents to choose combined MMR and varicella vaccine first-dose administration.

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The Company anticipates that any negative effect of these recommendations on sales of ProQuad will not be material.

Worldwide sales of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help protect against invasive pneumococcal disease caused by certain serotypes, declined 12% in the first quarter of 2026 primarily due to lower demand in the U.S.

and most international markets due to competition.

Worldwide sales of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help protect against invasive pneumococcal disease (IPD) caused by certain serotypes, declined 35% and 24% in the second quarter and first six months of 2026, respectively, primarily due to $60 million of favorable CDC stockpile activity in the U.S.

in the prior year.

The impact to Vaxneuvance sales from CDC stockpile activity in 2025 was offset by a drawdown of CDC stockpile inventory for Varivax (noted above) and RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), which resulted in a net neutral transaction.

Lower demand in the U.S.

and the Asia Pacific region due to competition also contributed to the sales declines in the second quarter and first six months of 2026.

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

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The royalty expenses are included in Cost of sales .

Sales of Capvaxive (Pneumococcal 21-valent Conjugate Vaccine), a vaccine for the prevention of invasive pneumococcal disease and pneumococcal pneumonia caused by certain serotypes in individuals 18 years of age and older, grew 33% in the first quarter of 2026 largely due to launch uptake in certain international markets, particularly in the EU, and continued uptake in the U.S.

Sales of Capvaxive (Pneumococcal 21-valent Conjugate Vaccine), a vaccine for the prevention of IPD and pneumococcal pneumonia caused by certain serotypes in individuals 18 years of age and older, and for the prevention of IPD caused by those serotypes in certain children and adolescents 2 to 17 years of age at increased risk, grew 42% and 38% in the second quarter and first six months of 2026, respectively.

Sales growth was largely due to launch uptake in certain international markets, particularly in Europe and the Asia Pacific region, as well as continued uptake in the U.S.

Sales growth in the U.S.

was negatively impacted by a reduction in wholesaler inventory.

in the year-to-date period was negatively impacted by a reduction in wholesaler inventory.

Capvaxive was approved in the U.S.

in June 2024, in the EU in March 2025 and in Japan in August 2025.

in June 2024, in the EU in March 2025 and in Japan in August 2025 for use in adults.

In June 2026, the FDA approved an expanded IPD indication for Capvaxive to include children and adolescents aged 2 through 17 years who have completed a primary pediatric pneumococcal vaccination series and have one or more chronic medical conditions that put them at an increased risk for pneumococcal disease.

The EC approved a similar indication expansion in April 2026.

The expanded approvals were based on data from the STRIDE-13 trial.

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

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Enflonsia was approved in the U.S.

in June 2025 and in the EU in April 2026 based on results from the CLEVER and SMART clinical trials.

in June 2025, in the EU in April 2026, and in Japan and China in June 2026, based on results from the CLEVER and SMART clinical trials.

The timing for availability of Enflonsia in individual EU countries will vary by country and depend on multiple factors, including the completion of reimbursement procedures.

Sales of Enflonsia were $1 million in the first quarter of 2026 and the Company expects minimal sales of Enflonsia in the second quarter of 2026 given the seasonal nature of the product and continued high levels of RSV monoclonal antibody inventory in the market;

Sales of Enflonsia were $2 million and $3 million in the second quarter and first six months of 2026, respectively, reflecting the seasonal nature of the product and continued high levels of RSV monoclonal antibody inventory in the market;

however, the Company anticipates that shipments will increase in the second half of 2026.

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Three Months Ended

March 31, % Change

($ in millions) 2026 2025 % Change

June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2026 2025 % Change 2026 2025 % Change

$ 588 $ 336 75 % 75 % $ 1,114 $ 615 81 % 81 %

204 — — — 335 — — —

Alliance Revenue - Adempas/Verquvo (1)

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Winrevair is an activin signaling inhibitor indicated for the treatment of adults with pulmonary arterial hypertension (PAH) (World Health Organization [WHO] Group 1 pulmonary hypertension) to improve exercise capacity and WHO functional class, and reduce the risk of clinical worsening events including hospitalization for PAH, lung transplantation and death.

Sales of Winrevair rose to $525 million in the first quarter of 2026 largely due to continued uptake in the U.S.

Sales of Winrevair rose 75% and 81% in the second quarter and first six months of 2026, respectively, largely due to continued uptake in the U.S.

and early launch uptake in certain international markets, particularly in Japan and Europe.

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in October 2025 and in the EU in January 2026.

Winrevair is the subject

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

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

The royalty expenses are included in Cost of sales .

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Ohtuvayre was obtained in conjunction with Merck’s October 2025 acquisition of Verona Pharma.

Sales in the second quarter of 2026 reflect a benefit from the timing of specialty pharmacy purchases in the U.S., which is expected to unwind in the third quarter of 2026.

Adempas (riociguat) and Verquvo (vericiguat) are part of a worldwide collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators (see Note 3 to the condensed consolidated financial statements).

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Verquvo is approved to reduce the risk of cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous diuretics in adults with symptomatic chronic heart failure and reduced ejection fraction.

Alliance revenue from the collaboration grew 3% in the first quarter of 2026 primarily reflecting higher demand in Bayer’s marketing territories.

Alliance revenue from the collaboration grew 3% in the first six months of 2026 primarily reflecting higher demand in Bayer’s marketing territories.

The Company expects alliance revenue to decline for the full year of 2026 reflecting the loss of market exclusivity for Adempas in the U.S.

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

Sales of Adempas in Merck’s marketing territories increased 15% in the first quarter of 2026 largely due to higher demand.

Sales of Adempas in Merck’s marketing territories increased 6% in the first six months of 2026 largely due to higher demand.

In July 2026, the FDA approved Lipfendra tablets as an adjunct to diet and exercise to reduce low-density lipoprotein cholesterol (LDL-C) in adults with hypercholesterolemia, including heterozygous familial hypercholesterolemia (HeFH).

Lipfendra is a novel macrocyclic peptide and is the first FDA-approved oral PCSK9 inhibitor shown to lower LDL-C, also known as bad cholesterol.

The approval was based on the CORALreef Lipids and CORALreef HeFH clinical trials.

Infectious Diseases

Three Months Ended

March 31, % Change

($ in millions) 2026 2025 % Change

June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2026 2025 % Change 2026 2025 % Change

Bridion $ 497 $ 461 8 % 8 % $ 969 $ 902 7 % 7 %

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Lagevrio 5 83 (95) % (95) % 32 185 (82) % (83) %

Global sales of Bridion (sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, grew 7% in the first quarter of 2026, as higher demand in the U.S.

Global sales of Bridion (sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, grew 8% and 7% in the second quarter and first six months of 2026, respectively, as higher demand and pricing in the U.S.

was partially offset by lower demand in most international markets due to generic competition.

Bridion will lose market exclusivity in the U.S.

Bridion lost market exclusivity in the U.S.

in July 2026 .

The Company anticipates U.S.

sales of Bridion to decline thereafter, depending upon the availability of generic supply.

sales of Bridion to decline in future periods, depending upon the availability of generic supply.

The Company expects to discontinue U.S.

sales of Bridion as market supply stabilizes, potentially into 2027.

Worldwide sales of Prevymis (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in certain high risk adult and pediatric recipients of an allogenic hematopoietic stem cell transplant and for prophylaxis of CMV disease in certain high risk adult and pediatric recipients of a kidney transplant, grew 31% in the first quarter of 2026 primarily due to higher demand in the U.S.

sales of Bridion in 2027 as generic market supply stabilizes.

Worldwide sales of Prevymis (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in certain high risk adult and pediatric recipients of an allogenic hematopoietic stem cell transplant and for prophylaxis of CMV disease in certain high risk adult and pediatric recipients of a kidney transplant, grew 29% and 30% in the second quarter and first six months of 2026, respectively, primarily due to higher demand in the U.S.

and certain European markets, reflecting in part the launch of new indications.

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

difficile -associated diarrhea, declined 59% in the first quarter of 2026 due to generic competition in the U.S.

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

difficile -associated diarrhea, declined 77% and 69% in the second quarter and first six months of 2026, respectively, due to generic competition in the U.S.

Dificid lost market exclusivity in the U.S.

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

Sales of Lagevrio decreased 73% in the first quarter of 2026 largely due to lower demand in Japan and the U.S.

Sales of Lagevrio decreased 95% and 82% in the second quarter and first six months of 2026, respectively, largely due to lower demand in Japan and the U.S.

driven primarily by declining COVID-19 cases.

The Company expects the Lagevrio sales decline to continue during 2026.

In April 2026, the FDA approved Idvynso , a once-daily, two-drug single-tablet regimen of doravirine, a non-nucleoside reverse transcriptase inhibitor, and islatravir, a next-generation nucleoside analog reverse transcriptase inhibitor, for the treatment of HIV-1 infection in adults to replace the current antiretroviral regimen in those who are virologically suppressed (HIV-1 RNA less than 50 copies per mL) on a stable antiretroviral regimen with no history of virologic treatment failure and no known substitutions associated with resistance to doravarine.

In the U.S., where Lagevrio remains in Phase 3 development and is marketed under an Emergency Use Authorization (EUA), the Secretary of HHS provided advance notice on June 29, 2026 that the declaration supporting the EUAs pursuant to which Lagevrio and certain other COVID-19 drug and biologic products are marketed will terminate, effective June 29, 2027.

Based on the Secretary’s June 2026 determination and advance notice of termination, the Company is working with the FDA to develop a plan for disposition of Lagevrio in the U.S.

by June 29, 2027.

sales of Lagevrio were $18 million in the first six months of 2026.

Idvynso was also approved in Japan for these patients in March 2026.

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Three Months Ended

March 31, % Change

($ in millions) 2026 2025 % Change

June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2026 2025 % Change 2026 2025 % Change

Januvia/Janumet $ 429 $ 623 (31) % (31) % $ 1,003 $ 1,419 (29) % (30) %

Worldwide combined sales of Januvia and Janumet , medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 28% in the first quarter of 2026 primarily due to lower sales in the U.S.

reflecting lower net pricing and ongoing volume declines due to competitive pressure.

The sales decline was also attributable to lower demand in China and ongoing generic competition in most other international markets.

While the key U.S.

patent for Januvia , Janumet and Janumet XR claiming the sitagliptin compound expired in January 2023, as a result of favorable court rulings and settlement agreements related to a later expiring patent directed to the specific

sitagliptin salt form of the products, Januvia and Janumet will lose market exclusivity in the U.S.

in May 2026 and Janumet XR will lose market exclusivity in the U.S.

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

See Note 8 to the condensed consolidated financial statements for additional information related to the above-referenced patent litigation.

Additionally, HHS, through the CMS, selected Januvia in 2023 for the first year of the IRA’s Program, and selected Janumet and Janumet XR in 2025 for the second year of the IRA’s Program.

Pursuant to the IRA’s program, the government set a price for Januvia , which became effective on January 1 2026, and set a price for Janumet and Janumet XR, which will become effective on January 1, 2027.

The Company has sued the U.S.

government regarding the IRA’s Program.

The Company expects a significant decline in sales of Januvia in the first half of 2026 and subsequently, following loss of market exclusivity in May 2026, the Company anticipates it will lose nearly all U.S.

sales of Januvia and Janumet .

Worldwide combined sales of Januvia and Janumet , medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 31% and 29% in the second quarter and first six months of 2026, respectively, primarily due to lower sales in the U.S.

reflecting ongoing volume declines due to competitive pressure and lower net pricing.

The sales declines were also attributable to lower demand in China and ongoing generic competition in most other international markets.

Januvia and Janumet lost market exclusivity in the U.S.

in May 2026 and Janumet XR lost market exclusivity in the U.S.

in July 2026.

The Company expects that it will lose a substantial portion of U.S.

sales of Januvia , Janumet and Janumet XR sales in future periods due to generic competition.

Animal Health Segment

Three Months Ended

March 31, % Change

($ in millions) 2026 2025 % Change

June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2026 2025 % Change 2026 2025 % Change

Livestock $ 1,041 $ 961 8 % 6 % $ 2,105 $ 1,885 12 % 7 %

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$ 1,775 $ 1,646 8 % 5 % $ 3,566 $ 3,234 10 % 6 %

Sales of livestock products grew 15% in the first quarter of 2026 primarily due to higher demand for ruminant and poultry products, as well as higher pricing.

Sales of companion animal products grew 9% in the first quarter of 2026 primarily due to new product launches and higher pricing, partially offset by lower demand for other products in the portfolio, reflecting a reduction in veterinary visits.

Sales of the Bravecto (fluralaner) line of products were $379 million in the first quarter of 2026, representing growth of 16%, or 9% excluding the effect of foreign exchange, compared with the first quarter of 2025.

Sales of livestock products grew 8% and 12% in the second quarter and first six months of 2026, respectively, primarily due to higher demand for ruminant and poultry products.

Sales of companion animal products grew 7% and 8% in the second quarter and first six months of 2026, respectively, primarily due to new product launches, partially offset by lower demand for other products in the portfolio.

Sales of the Bravecto (fluralaner) line of products were $359 million in the second quarter of 2026, representing growth of 7%, or 4% excluding the effect of foreign exchange, compared with the second quarter of 2025.

Sales of the Bravecto line of products were $738 million in the first six months of 2026, representing growth of 11%, or 7% excluding the effect of foreign exchange, compared with the same period of 2025.

In July 2026, Merck acquired TARGAN, a privately held company developing and commercializing biodevice solutions to improve performance outcomes for the poultry industry.

See Note 2 to the condensed consolidated financial statements for more information.

In February 2026, the FDA approved Numelvi (atinvicitinib tablets), the first and only second-generation Janus kinase (JAK) inhibitor indicated for the control of pruritus associated with allergic dermatitis in dogs six months of age and older.

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Three Months Ended

($ in millions) 2026 2025 % Change

June 30, Six Months Ended

($ in millions) 2026 2025 % Change 2026 2025 % Change

Cost of sales $ 4,395 $ 3,557 24 % $ 8,590 $ 6,976 23 %

5 unchanged sentences

Cost of Sales

Cost of sales increased 23% in the first quarter of 2026.

Cost of sales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $931 million and $587 million in the first quarter of 2026 and 2025, respectively.

Additionally, cost of sales in the first quarter of 2026 includes an $83 million impact for the recognition of fair value step-up of inventories related to the October 2025 acquisition of Verona Pharma.

Also included in cost of sales are expenses associated with restructuring activities, which amounted to $237 million and $36 million in the first quarter of 2026 and 2025, respectively, primarily reflecting accelerated depreciation and asset impairment charges related to manufacturing facilities to be fully or partially closed or divested, as well as contractual termination costs.

Cost of sales increased 24% and 23% in the second quarter and first six months of 2026, respectively.

Cost of sales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $984 million and $599 million in the second quarter of 2026 and 2025, respectively, and $1.9 billion and $1.2 billion in the first six months of 2026 and 2025, respectively.

Additionally, cost of sales in the second quarter and first six months of 2026 include an $83 million and $166 million impact, respectively, for the recognition of fair value step-up of inventories related to the October 2025 acquisition of Verona Pharma.

Also included in cost of sales are expenses associated with restructuring activities, which amounted to $184 million and $165 million in the second quarter of 2026 and 2025, respectively, and $421 million and $201 million in the first six months of 2026 and 2025, respectively, primarily reflecting accelerated depreciation and asset impairment charges related to manufacturing facilities to be fully or partially closed or divested, as well as contractual termination costs.

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

Gross margin was 74.2% in the first quarter of 2026 compared with 78.0% in the first quarter of 2025.

The gross margin decline was primarily due to higher amortization of intangible assets, higher restructuring costs, the recognition of fair value step-up of inventories related to the October 2025 acquisition of Verona Pharma, and the unfavorable effect of foreign exchange, partially offset by the favorable effect of product mix.

Gross margin was 73.5% in the second quarter of 2026 compared with 77.5% in the second quarter of 2025.

Gross margin was 73.9% in the first six months of 2026 compared with 77.7% in the first six months of 2025.

The gross margin decline in both periods was primarily due to higher amortization of intangible assets, higher inventory write-downs (primarily vaccines), increased restructuring costs, and the recognition of fair value step-up of inventories related to the October 2025 acquisition of Verona Pharma, partially offset by the favorable effect of product mix.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses increased 6% in the first quarter of 2026 primarily due to higher administrative costs and the unfavorable impact of foreign exchange.

Selling, general and administrative (SG&A) expenses increased 10% and 8% in the second quarter and first six months of 2026, respectively, primarily due to higher administrative costs (including investments in IT), higher promotional and selling costs in support of product launches, and the unfavorable impact of foreign exchange.

Research and Development

Research and development (R&D) expenses increased to $12.6 billion in the first quarter of 2026 from $3.6 billion in the first quarter of 2025 primarily due to a $9.0 billion charge for the acquisition of Cidara, increased clinical development spending, the unfavorable effect of foreign exchange, and restructuring costs, partially offset by a $200 million reduction in R&D expenses as part of the funding agreement with Blackstone Life Sciences (Blackstone) and a $100 million charge in the first quarter of 2025 for the achievement of a developmental milestone related to the 2024 EyeBiotech Limited (EyeBio) acquisition.

See Note 2 to the condensed consolidated financial statements for more information on the acquisition of Cidara and the Blackstone funding agreement.

R&D expenses consist of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $2.5 billion the first quarter of 2026 (inclusive of a $200 million benefit from the Blackstone funding agreement noted above) and $2.5 billion for the first quarter of 2025.

Also included in R&D expenses are Animal Health research costs, upfront and milestone payments for collaboration and licensing agreements (including the charge for the EyeBio developmental milestone noted above), charges for transactions accounted for as asset acquisitions (including the charge for the acquisition of Cidara noted above), and costs incurred by other divisions in support of R&D activities, including depreciation, production, and general and administrative, which in the aggregate were $10.0 billion and $1.1 billion for the first quarter of 2026 and 2025, respectively.

R&D expenses also include restructuring costs of $34 million in the first quarter of 2026 primarily associated with contractual termination costs.

Research and development (R&D) expenses increased to $9.7 billion and $22.3 billion in the second quarter and first six months of 2026, respectively, compared with $4.0 billion and $7.7 billion in the second quarter and first six months of 2025, respectively.

The increase in both periods was primarily due to higher charges for business development activity.

Significant charges for business development activity in 2026 include:

• $5.7 billion for the acquisition of Terns (second quarter and first six months of 2026)

• $9.0 billion for the acquisition of Cidara (first six months of 2026)

Significant charges for business development activity in 2025 include:

• $200 million for a license agreement with Jiangsu Hengrui Pharmaceuticals Co., Ltd.

(Hengrui Pharma) (second quarter and first six months of 2025)

• $100 million for the achievement of a developmental milestone related to the 2024 EyeBiotech Limited (EyeBio) acquisition (first six months of 2025)

The increase in R&D expenses in both the second quarter and first six months of 2026 was also attributable to higher clinical development spending and the unfavorable effect of foreign exchange.

The increases were partially offset by a $200 million and $400 million reduction in R&D expenses in the second quarter and first six months of 2026, respectively, as part of the funding agreement with Blackstone Life Sciences (Blackstone).

See Note 2 to the condensed consolidated financial statements for more information on the acquisitions of Terns and Cidara, the license agreement with Hengrui Pharma, as well as the Blackstone funding agreement.

R&D expenses consist of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $2.8 billion and $5.3 billion in the second quarter and first six months of 2026, respectively, (inclusive of a $200 million and $400 million benefit, respectively, from the Blackstone funding agreement noted above) and $2.8 billion and $5.3 billion for the second quarter and first six months of 2025, respectively.

Also included in R&D expenses are Animal Health research costs, upfront and milestone payments for collaboration and licensing agreements (including the charges related to Hengrui Pharma and EyeBio noted above), charges for transactions

accounted for as asset acquisitions (including the charges for the acquisitions of Terns and Cidara noted above), and costs incurred by other divisions in support of R&D activities, including depreciation, production, and general and administrative, which in the aggregate were $7.0 billion and $1.2 billion for the second quarter of 2026 and 2025, respectively, and $17.0 billion and $2.3 billion for the first six months of 2026 and 2025, respectively.

Restructuring Costs

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

Restructuring costs of $195 million and $69 million for the first quarter of 2026 and 2025, respectively, primarily include separation and other costs associated with these restructuring activities.

Restructuring costs of $151 million and $560 million for the second quarter of 2026 and 2025, respectively, and $346 million and $629 million in the first six months of 2026 and 2025, respectively, primarily include separation and other costs associated with these restructuring activities.

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

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Additional costs associated with the Company’s restructuring activities are included in Cost of sales , Selling, general and administrative expenses and Research and development costs.

The Company recorded aggregate pretax costs of $466 million and $105 million in the first quarter of 2026 and 2025, respectively, related to restructuring program activities.

The Company recorded aggregate pretax costs of $334 million and $779 million in the second quarter of 2026 and 2025, respectively, and $800 million and $884 million in the first six months of 2026 and 2025, respectively, related to restructuring program activities.

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

Other (Income) Expense, Net

Other (income) expense, net, was $138 million of expense in the first quarter of 2026 compared with $35 million of income in the first quarter of 2025.

The unfavorable quarter-over-quarter change was primarily due to higher net interest expense, partially offset by higher net income from investments in equity securities (primarily due to the Company’s investment in Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd.).

Other (income) expense, net, was $99 million of expense in the second quarter of 2026 compared with $7 million of income in the second quarter of 2025.

Other (income) expense, net, was $237 million of expense in the first six months of 2026 compared with $43 million of income in the first six months of 2025.

The unfavorable period-over-period changes were primarily due to higher net interest expense, partially offset by higher net income from investments in equity securities.

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

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Three Months Ended

June 30, Six Months Ended

($ in millions) 2026 2025 2026 2025

14 unchanged sentences

Taxes on Income

The income tax provision of $709 million for the first quarter of 2026 on a pretax loss of $3.5 billion, resulted in an effective income tax rate of (20.1)%.

The first quarter 2026 effective income tax rate reflects a 33.1 percentage point unfavorable impact of the charge for the acquisition of Cidara, which had no tax benefit, partially offset by the favorable impacts of jurisdictional mix of income and expense.

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

The income tax provision of $654 million for the second quarter of 2026 on a pretax loss of $683 million, resulted in an effective income tax rate of (95.9)%.

The second quarter 2026 effective income tax rate reflects a 108.9 percentage point unfavorable impact of the charge for the acquisition of Terns, which had no tax benefit, partially offset by the favorable impacts of jurisdictional mix of income and expense.

The income tax provision of $1.4 billion for the first six months of 2026 on a pretax loss of $4.2 billion, resulted in an effective income tax rate of (32.3)%.

The effective income tax rate for the first six months of 2026 reflects a 45.3 percentage point combined unfavorable impact of the charges for the acquisitions of Cidara and Terns, which had no tax benefits, partially offset by the favorable impacts of jurisdictional mix of income and expense.

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

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

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

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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.

The Company disagrees with the proposed adjustments and is vigorously contesting the NOPAs through available administrative proceedings.

However, it remains uncertain whether a resolution can be reached during this phase of the audit, and judicial proceedings may be necessary.

If the Company is ultimately unsuccessful in resolving or defending its position, the impact could be material to its financial statements.

The statute of limitations for assessments with respect to the 2019 and 2020 federal tax return years expired in June 2024 and October 2024, respectively.

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Three Months Ended

June 30, Six Months Ended

($ in millions except per share amounts) 2026 2025 2026 2025

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Income from investments in equity securities, net

Non-GAAP (loss) income before taxes

(191) (61) (371) (168)

Non-GAAP income (loss) before taxes 550 6,311 (1,652) 12,859

Income tax provision as reported under GAAP 654 571 1,363 1,388

Estimated tax benefit on excluded items (1)

228 227 476 340

Tax benefits resulting primarily from favorable audit reserve adjustments — 146 — 146

Non-GAAP income tax provision 882 944 1,839 1,874

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

(2) GAAP and non-GAAP EPS were negatively affected in the first quarter of 2026 by a charge of $3.62 per share for a transaction accounted for as an asset acquisition.

(2) GAAP and non-GAAP EPS were negatively affected in the second quarter and first six months of 2026 by charges of $2.31 and $5.93 per share, respectively, for transactions accounted for as asset acquisitions.

GAAP and non-GAAP EPS were negatively affected in both the second quarter and first six months of 2025 by a charge of $0.07 per share for an upfront payment related to a license agreement.

See “Business Development Transactions” above for additional information.

(3) The Company recorded a net loss on both a GAAP and non-GAAP basis for the first quarter of 2026;

(3) The Company recorded a net loss on both a GAAP and non-GAAP basis for both the second quarter and first six months of 2026;

therefore, no potential dilutive common shares were used in the computations of loss per common share assuming dilution because the effects would have been antidilutive.

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

There were no such items in either the first quarter of 2026 or 2025.

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

Research and Development Update

1 unchanged sentence

and internationally.

MK-1654, Enflonsia , a prophylactic long-acting monoclonal antibody designed to protect infants from RSV disease during their first RSV season, is under review in Japan.

The application is based on results from the Phase 2b/3 CLEVER trial and the Phase 3 SMART trial.

MK-2400, ifinatamab deruxtecan (I-DXd), an investigational, potential first-in-class B7-H3 directed DXd antibody drug conjugate (ADC), is under priority review in the U.S.

for the treatment of adult patients with previously treated extensive-stage

small cell lung cancer who experienced disease progression on or after platinum-based chemotherapy.

Idvynso , MK-8591A, a once-daily, oral two-drug regimen of doravirine, a non-nucleoside reverse transcriptase inhibitor, and islatravir, a next-generation nucleoside analog reverse transcriptase inhibitor, for the treatment of certain adults with HIV-1 infection is under review in the EU.

The application is based on findings from the Phase 3 MK-8591A-051 and

MK-8591A-052 clinical trials in adults whose HIV-1 infection is virologically suppressed on antiretroviral therapy, as well as on the MK-8591A-053 clinical trial in previously untreated adults.

MK-2400, ifinatamab deruxtecan (I-DXd), an investigational, potential first-in-class B7-H3 directed DXd ADC, is under priority review in the U.S.

for the treatment of adult patients with previously treated extensive-stage small cell lung cancer who experienced disease progression on or after platinum-based chemotherapy.

The FDA set a Prescription Drug User Fee Act (PDUFA) target action date of October 10, 2026.

The biologics license application (BLA) is based on results from the Phase 2 IDeate-Lung01 trial.

The Biologics License Application is based on results from the Phase 2 IDeate-Lung01 trial.

I-DXd is being developed as part of a collaboration with Daiichi Sankyo.

MK-0616, enlicitide decanoate, an investigational once-daily oral proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitor, is under review in the EU for the treatment of adults with primary hypercholesterolemia or mixed dyslipidemia.

MK-0616, Lipfendra , a once-daily oral PCSK9 inhibitor, is under review in the EU for the treatment of adults with primary hypercholesterolemia or mixed dyslipidemia.

The application is based on the Phase 3 CORALreef Lipids, CORALreef HeFH, and CORALreef AddOn studies.

Enlicitide decanoate is in Phase 3 development in the U.S.

In December 2025, the FDA selected enlicitide decanoate for the Commissioner’s National Priority Voucher (CNPV) pilot program, which offers the ability to seek expedited approval for a drug or biologic application or efficacy supplement.

Pilot program eligibility requires alignment with one or more critical national health priorities, which include addressing a health crisis in the U.S., bringing innovative therapies to the American people, addressing a large unmet medical need, promoting domestic manufacturing, and increasing affordability.

The pilot program is intended to enable enhanced communications with the FDA and action on an application within one to two months.

The CNPV process for enlicitide decanoate is progressing.

Lipfendra also is under review in China.

MK-3475, Keytruda , is an anti-PD-1 therapy available for intravenous administration.

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Keytruda and Keytruda Qlex each are approved for the treatment of many cancers and continue to be studied in additional Phase 3 trials.

Keytruda is under review in Japan in combination with chemotherapy with or without bevacizumab for the treatment of certain patients with platinum-resistant recurrent ovarian cancer.

In the EU and certain other international markets, Keytruda Qlex is approved as a subcutaneous route of administration and pharmaceutical form of Keytruda .

Keytruda is under review:

• In Japan, in combination with chemotherapy with or without bevacizumab for the treatment of certain patients with platinum-resistant recurrent ovarian cancer.

The application is based on data from the Phase 3 KEYNOTE-B96 trial.

Keytruda also is under review in the EU and Japan in combination with Padcev (enfortumab vedotin) as neoadjuvant treatment, then continued after radical cystectomy as adjuvant treatment, for patients with muscle invasive bladder cancer (MIBC) who are ineligible for cisplatin-based chemotherapy.

• In Japan, in combination with Padcev as neoadjuvant treatment, then continued after radical cystectomy as adjuvant treatment, for patients with MIBC who are ineligible for cisplatin-based chemotherapy.

The application is based on data from the Phase 3 KEYNOTE-905 trial conducted in collaboration with Pfizer Inc.

(Pfizer) and Astellas.

Keytruda and Keytruda Qlex are under priority review by the FDA in combination with Padcev as neoadjuvant treatment, then continued after radical cystectomy as adjuvant treatment, for patients with MIBC who are eligible for cisplatin-based chemotherapy.

The FDA set a PDUFA date of August 17, 2026.

The supplemental BLAs are based on data from the Phase 3 KEYNOTE-B15 trial conducted in collaboration with Pfizer and Astellas.

Keytruda and Keytruda Qlex also are under review by the FDA in combination with Gilead Sciences Inc.’s (Gilead) Trodelvy (sacituzumab govitecan) for the first-line treatment of certain patients with unresectable locally advanced or metastatic TNBC whose tumors express PD‑L1.

The FDA set PDUFA dates in the second half of 2026 for these applications.

The supplemental BLAs are based on data from the Phase 3 KEYNOTE-D19 trial conducted in collaboration with Gilead.

MK-6482, Welireg , Merck’s first-in-class oral hypoxia-inducible factor-2 alpha (HIF-2α) inhibitor, in combination with Keytruda or Keytruda Qlex is under priority review by the FDA for the adjuvant treatment of certain patients with clear cell RCC following nephrectomy.

The FDA set a PDUFA date of June 19, 2026.

The supplemental applications for Welireg , Keytruda and Keytruda Qlex are based on data from the Phase 3 LITESPARK-022 trial.

Welireg , in combination with MK-7902, Lenvima, an orally available multiple receptor TKI, is under review in the U.S.

and Japan for the treatment of certain previously treated patients with advanced RCC.

• In the EU and Japan, in combination with Padcev as neoadjuvant treatment, then continued after radical cystectomy as adjuvant treatment, for patients with MIBC who are eligible for cisplatin-based chemotherapy.

The applications are based on data from the Phase 3 KEYNOTE-B15 trial conducted in collaboration with Pfizer and Astellas.

• In the EU, in combination with chemotherapy with or without radiation, for the adjuvant treatment of newly diagnosed, mismatch repair deficient endometrial cancer in adults who are at high risk of recurrence.

The application is based on data from the Phase 3 KEYNOTE-B21 trial.

MK-6482, Welireg , Merck’s first-in-class oral hypoxia-inducible factor-2 alpha (HIF-2α) inhibitor, is under review:

• In the EU, in combination with Keytruda for the adjuvant treatment of certain patients with clear cell RCC following nephrectomy.

The application is based on data from the Phase 3 LITESPARK-022 trial.

• In the U.S.

and EU, in combination with MK-7902, Lenvima, an orally available multiple receptor TKI, for the treatment of certain previously treated patients with advanced RCC.

In the U.S., the FDA set a PDUFA date of October 4, 2026.

The supplemental applications for Welireg and Lenvima are based on data from the Phase 3 LITESPARK-011 trial.

In Japan, the combination is under review for Lenvima.

Lenvima is being developed as part of a collaboration with Eisai Co., Ltd.

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Additionally, in March 2026, the Company announced the presentation of positive data from the Phase 2, proof-of-concept CADENCE trial of Winrevair ;

the Company intends to proceed with Phase 3 development of Winrevair for the treatment of combined post- and precapillary pulmonary hypertension due to heart failure with preserved ejection fraction.

A pre-specified interim analysis of the Phase 3 LITESPARK-012 study found that, compared to Keytruda plus Lenvima, the triplet combination regimen of Keytruda plus Lenvima plus Welireg , as well as the combination regimen of MK-1308A (an investigational fixed dose coformulation of Keytruda and the anti-CTLA-4 antibody quanvonlimab) plus Lenvima, did not show a statistically significant improvement in the dual primary endpoints of progression-free survival and overall survival in patients with advanced clear cell RCC.

Separately, the Company has decided to end the MK-1308A clinical development program and will prioritize the development of other candidates in its comprehensive and diversified oncology pipeline.

This decision is not based on any concerns about the safety of that fixed-dose coformulation.

In the Phase 3 KEYNOTE-975 study, compared to placebo plus definitive chemoradiotherapy (dCRT), Keytruda plus dCRT did not show a statistically significant improvement in the primary endpoint of event-free survival (EFS) in certain patients with locally advanced unresectable esophageal carcinoma.

Also, a pre-specified interim analysis of the Phase 3 KEYNOTE-866 study found that, compared to perioperative placebo plus neoadjuvant chemotherapy, perioperative Keytruda plus neoadjuvant chemotherapy did not show a statistically significant improvement in the primary endpoint of EFS in patients with cisplatin-eligible MIBC who underwent radical cystectomy and pelvic lymph node dissection.

The chart below reflects the Company’s research pipeline as of April 30, 2026.

the Company intends to proceed with Phase 3 development of Winrevair for the treatment of adults with the syndrome of combined post- and precapillary pulmonary hypertension and heart failure with preserved ejection fraction.

The Company announced topline results from three studies evaluating MK-7240, tulisokibart, an investigational humanized monoclonal antibody targeting tumor necrosis factor-like cytokine 1A (TL1A).

The Phase 3 ATLAS-UC induction-only study (MK-7240-001, Study 2) in patients with moderately to severely active ulcerative colitis met its primary endpoint of clinical remission according to the Modified Mayo Score at week 12, as well as key secondary endpoints;

a Phase 3 ATLAS-UC study evaluating induction and maintenance treatment in this population (MK-7240-001, Study 1) is ongoing and results from both studies will be presented at an upcoming scientific congress.

Additionally, a Phase 2 study in hidradenitis suppurativa met its primary and key secondary endpoints.

A Phase 2 study in systemic sclerosis-associated interstitial lung disease did not meet its primary endpoint, with no new safety concerns identified;

the study will be discontinued and, following detailed review of these Phase 2 data, the Company will determine next steps with respect to this indication.

Additional Phase 3 and Phase 2 studies of tulisokibart in immune-mediated inflammatory diseases are ongoing.

The Company is collaborating with the National Cancer Institute (NCI) of the U.S.

National Institutes of Health and with Agencia Costarricense de Investigaciones Biomédicas to extend the Costa Rica ESCUDDO clinical trial evaluating efficacy of a single dose of HPV vaccine against cervical persistent infection with HPV types 16 and 18 in females ages 12-16 years at vaccination.

The Company’s funding and scientific contribution to this five-year extension of the study is expected to help address data gaps on longer term durability of protection and effectiveness of a single dose of HPV vaccine against cervical

persistent infection and disease endpoints in females.

As the FDA and European Medicines Agency (EMA) have identified, additional data gaps remain concerning single-dose efficacy in males and effectiveness of a single-dose HPV vaccine regimen compared with the approved three-dose regimen.

The ESCUDDO extension is expected to initiate in the third quarter of 2026.

Additionally, based on evaluation of feedback from the FDA and EMA on the Company’s proposed single-dose prospective clinical trial designs for V503, Gardasil 9, the Company will not proceed with those trials due to the operational infeasibility of designing studies that meet rigorous evidentiary standards required to support a change to the labeled dosing regimen.

The Company, in collaboration with Gilead Sciences, Inc., is discontinuing the Phase 3 KEYNOTE-D46/EVOKE-03 study investigating Trodelvy in combination with Keytruda compared to Keytruda monotherapy in certain patients with previously untreated metastatic NSCLC whose tumors expressed PD-L1 (tumor proportion score ≥50%).

The decision is based on the recommendation from the external Data Monitoring Committee following its review of the data from the pre-specified final analysis of progression-free survival and interim analysis of overall survival.

The safety profile of the combination was consistent with the known safety of each agent, with no new safety signals identified, and there are no changes to ongoing Company studies.

MK-4482, Lagevrio , the Company’s investigational oral antiviral medicine for the treatment of mild to moderate COVID-19 in certain adults who are at risk for progressing to severe disease, is available in the U.S.

under an EUA initially granted by the FDA in December 2021 in response to the COVID-19 pandemic.

On June 29, 2026, the Secretary of HHS determined that circumstances no longer exist justifying the authorization of emergency use of drugs and biological products during the COVID-19 pandemic and provided advance notice that the declaration supporting the EUA for Lagevrio will terminate, effective June 29, 2027.

Lagevrio remains in Phase 3 development, and the Company does not anticipate FDA approval of a New Drug Application for Lagevrio prior to the June 29, 2027 termination date.

Based on the Secretary’s June 2026 determination and advance notice of termination, the Company is working with the FDA to develop a plan for disposition of Lagevrio in the U.S.

by June 29, 2027.

In June 2026, the Company, along with other pharmaceutical companies, received a letter from the Chairman of the U.S.

House of Representatives Select Committee on China inquiring about the Company’s conduct of clinical trials and related activities in China.

The Company is working with the Committee to respond to its questions.

The chart below reflects the Company’s research pipeline as of August 5, 2026.

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

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Non-Small Cell Lung

Hematological Malignancies

MK-1084 (calderasib) (1)

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Pulmonary Hypertension-Chronic Obstructive Pulmonary Disease

MK-5475 (frespaciguat)

Pulmonary Hypertension Due To Left Heart Disease

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Diabetic Macular Edema

MK-3000 (remigromig) (3)

HIV-1 Infection

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

MK-8591D (islatravir+lenacapavir) (October 2024) (1)(4)

HIV-1 Pre-Exposure Prophylaxis

MK-8527 (July 2025)

Hypercholesterolemia

MK-0616 (enlicitide decanoate) (U.S.) (August 2023)

MK-8527 (alimatravir) (July 2025)

MK-7240 (tulisokibart)

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New Molecular Entities

HIV-1 Infection

MK-8591A Idvynso (EU)

Previously Treated Extensive-Stage Small Cell Lung Cancer

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Primary Hypercholesterolemia or Mixed Dyslipidemia

MK-0616 (enlicitide decanoate) (EU)

Respiratory Syncytial Virus

MK-1654 Enflonsia (JPN)

MK-0616 Lipfendra (EU)

Certain Supplemental Filings

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• Cisplatin-Ineligible Muscle Invasive Bladder Cancer

(KEYNOTE-905) (EU) (JPN)

• Cisplatin-Eligible Muscle Invasive Bladder Cancer

(KEYNOTE-B15) (U.S.)

• First-Line Unresectable Locally Advanced or Metastatic Triple Negative Breast Cancer

(KEYNOTE-D19) (U.S.)

MK-3475A Keytruda Qlex

(KEYNOTE-905) (JPN)

• Cisplatin-Eligible Muscle Invasive Bladder Cancer

(KEYNOTE-B15) (U.S.)

• First-Line Unresectable Locally Advanced o r Metastatic Triple Negative Breast Cancer

(KEYNOTE-D19) (U.S.)

(KEYNOTE-B15) (EU) (JPN)

• Newly Diagnosed High-Risk Endometrial Cancer

(KEYNOTE-B21) (EU)

MK-6482 Welireg

• Clear Cell Renal Cell Carcinoma Following Nephrectomy

(LITESPARK-022) (U.S.) (6)

(LITESPARK-022) (EU) (6)

• Previously Treated Advanced Renal Cell Carcinoma

(LITESPARK-011) (U.S.) (JPN) (1)

(LITESPARK-011) (U.S.) (EU) (JPN) (1)(7)

Pulmonary Arterial Hypertension

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(2) Available in the U.S.

under Emergency Use Authorization.

under Emergency Use Authorization, which will terminate effective June 29, 2027.

(3) Program is in Phase 2/3 studies, the first of which commenced in August 2024.

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(5) Program is in Phase 2/3 studies, the first of which commenced in March 2026.

(6) Under review for combination use with Keytruda or Keytruda Qlex.

(6) Under review for combination use with Keytruda.

(7) Under review in Japan for Lenvima, used in combination with Welireg .

Analysis of Liquidity and Capital Resources

($ in millions) March 31, 2026 December 31, 2025

($ in millions) June 30, 2026 December 31, 2025

Cash and investments $ 8,363 $ 15,521

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Total debt to total liabilities and equity 41.5 % 36.0 %

Cash provided by operating activities was $3.9 billion in the first three months of 2026 compared with $2.5 billion in the first three months of 2025.

Cash provided by operating activities was $9.3 billion in the first six months of 2026 compared with $5.8 billion in the first six months of 2025.

Cash provided by operating activities continues to be the Company’s primary source of funds to finance operating needs, with excess cash serving as the primary source of funds to finance business development transactions, capital expenditures, dividends paid to shareholders and treasury stock purchases.

Larger business development transactions may be funded with a combination of cash from operating activities and debt.

Cash used in investing activities was $10.2 billion in the first three months of 2026 compared with $1.5 billion in the first three months of 2025.

The higher use of cash in investing activities was primarily due to the acquisition of Cidara and no proceeds from sales of securities and other investments, partially offset by lower capital expenditures (driven in part by the acquisition of a facility from WuXi Vaccines in 2025) and lower purchases of securities and other investments.

Cash used in financing activities was $3.0 billion in the first three months of 2026 compared with $5.8 billion in the first three months of 2025.

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

Cash used in investing activities was $15.8 billion in the first six months of 2026 compared with $2.3 billion in the first six months of 2025.

The higher use of cash in investing activities was primarily due to the acquisitions of Cidara and Terns, partially offset by lower purchases of securities and other investments, higher proceeds from sales of securities and other investments, and lower capital expenditures (driven in part by the acquisition of a facility from WuXi Vaccines in 2025).

Cash used in financing activities was $1.2 billion in the first six months of 2026 compared with $9.3 billion in the first six months of 2025.

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

In April 2026, Merck entered into a delayed draw term loan credit agreement (Credit Agreement) pursuant to which the lenders committed (subject to satisfaction of certain conditions set forth in the Credit Agreement) to provide Merck with financing under a 364-day term loan facility in an aggregate amount not to exceed $6.0 billion.

The Company drew down the full

$6.0 billion of funds under the facility to fund a portion of the approximately $6.8 billion cash consideration for the acquisition of Terns.

The Company has since repaid borrowings under the Credit Agreement.

In May 2026, the Company issued $6.0 billion aggregate principal amount of senior unsecured notes consisting of $500 million of floating rate notes due 2028, $1.0 billion of 4.30% notes due 2028, $500 million of 4.65% notes due 2031, $1.0 billion of 4.95% notes due 2033, $1.5 billion of 5.20% notes due 2036, $500 million of 5.75% notes due 2046, and $1.0 billion of 5.85% notes due 2056.

The Company used the net proceeds from the offering to repay borrowings under the Credit Agreement as noted above.

In January 2026 and February 2026, the Company’s $135 million, 6.30% debentures, and its $1.0 billion, 0.75% notes, respectively, matured in accordance with their terms and were repaid.

In February 2025, the Company’s $2.5 billion, 2.75% notes matured in accordance with their terms and were repaid.

In April 2026, Merck entered into a delayed draw term loan credit agreement (Credit Agreement) pursuant to which the lenders have committed (subject to satisfaction of certain conditions set forth in the Credit Agreement) to provide Merck with financing under a 364-day term loan facility in an aggregate amount not to exceed $6.0 billion.

Borrowings under the Credit Agreement will bear interest at an annual rate of the SOFR rate plus 0.50% from the date loans are borrowed (Funding Date) to the date that is 180 days from the Funding Date, and then the SOFR rate plus 0.75% thereafter.

The Company has given required notice to the lenders of its intention to draw down the $6.0 billion of funds under the facility, which will be used to fund a portion of the approximately $6.7 billion cash consideration for the acquisition of Terns.

The Company intends to use the proceeds from a long-term debt financing to repay borrowings under the Credit Agreement.

Dividends paid to stockholders were $2.1 billion in both the first three months of 2026 and 2025.

In November 2025, Merck’s Board of Directors declared a quarterly dividend of $0.85 per share on the Company’s outstanding common stock for the first quarter of 2026 that was paid in January 2026.

Dividends paid to stockholders were $4.2 billion and $4.1 billion in the first six months of 2026 and 2025, respectively.

In January 2026, Merck’s Board of Directors declared a quarterly dividend of $0.85 per share on the Company’s outstanding common stock for the second quarter of 2026 that was paid in April 2026.

In May 2026, Merck’s Board of Directors declared a quarterly dividend of $0.85 per share on the Company’s outstanding common stock for the third quarter of 2026 that was paid in July 2026.

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

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

During the first three months of 2026, the Company purchased $874 million (8 million shares) of its common stock for its treasury under this program.

During the first six months of 2026, the Company purchased $1.6 billion (14 million shares) of its common stock for its treasury under this program.

The Company expects to repurchase approximately $3.0 billion of treasury shares under this program during 2026.

As of March 31, 2026, the Company’s remaining share repurchase authorization was $6.4 billion.

As of June 30, 2026, the Company’s remaining share repurchase authorization was $5.7 billion.

The Company has a $6.0 billion credit facility that matures in May 2031.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis