What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-07 compared with 2023-05-05 · 250 added, 229 removed, 339 unchanged (59% of the section changed)

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

In April 2023, Merck announced an agreement to acquire Prometheus Biosciences, Inc.

In June 2023, Merck acquired Prometheus Biosciences, Inc.

(Prometheus), a clinical-stage biotechnology company pioneering a precision medicine approach for the discovery, development, and commercialization of novel therapeutic and companion diagnostic products for the treatment of immune-mediated diseases.

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

Prometheus is developing PRA023 for the treatment of immune-mediated diseases including ulcerative colitis, Crohn’s disease, and other autoimmune conditions.

Under the terms of the acquisition agreement, Merck, through a subsidiary, will acquire all of the outstanding shares of Prometheus for $200 per share in cash for a total equity value of approximately $10.8 billion.

The acquisition is subject to Prometheus shareholder approval.

The closing of the proposed transaction will be subject to certain conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions.

The transaction is expected to close in the third quarter of 2023.

If the proposed transaction closes, the Company anticipates it will be accounted for as an asset acquisition, which would result in a charge of approximately $10.3 billion in Research and development expenses or approximately $4.00 per share.

Additionally, Merck anticipates earnings per share (EPS) will be negatively affected by approximately $0.25 in the first 12 months following the closing of the transaction resulting from investments to advance the related pipeline assets, as well as the cost of financing.

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

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

MK-7240 is being developed for the treatment of immune-mediated diseases including ulcerative colitis, Crohn’s disease, and other autoimmune conditions.

The transaction was accounted for as an acquisition of an asset.

Merck recorded net assets of $877 million, including cash of $368 million, investments of $296 million, deferred tax assets of $218 million and other net liabilities of $5 million, as well as Research and development expenses of $10.2 billion in the second quarter and first six months of 2023 related to the transaction or $4.02 per share.

There are no future contingent payments associated with the acquisition.

In February 2023, Merck and Kelun-Biotech (a holding subsidiary of Sichuan Kelun Pharmaceutical Co., Ltd.) closed a license and collaboration agreement expanding their relationship in which Merck gained exclusive rights for the research, development, manufacture and commercialization of up to seven investigational preclinical antibody drug conjugates (ADCs) for the treatment of cancer.

Kelun-Biotech retained the right to research, develop, manufacture and commercialize certain licensed and option ADCs for Chinese mainland, Hong Kong and Macau.

Merck made an upfront payment of $175 million, which was recorded in Research and development expenses in the first quarter of 2023.

Merck made an upfront payment of $175 million, which was recorded in Research and development expenses in the first six months of 2023.

In addition, Kelun-Biotech is eligible to receive future contingent milestone payments and tiered royalties on future net sales for any commercialized ADC product.

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The transaction was accounted for as an acquisition of an asset.

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

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

There are no future contingent payments associated with the acquisition.

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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 2023 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 2023 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs.

In 2022, the U.S.

Congress passed the Inflation Reduction Act, which makes 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, and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028).

In the U.S., the Biden Administration and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs.

Congress passed the Inflation Reduction Act (IRA), which makes 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, and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028).

The Company has sued the U.S.

government regarding the IRA’s “Drug Price Negotiation Program” for Medicare (see Note 9 to the condensed consolidated financial statements).

Furthermore, the Biden Administration and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs.

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

As a result of global macroeconomic conditions, the Company is experiencing some minor disruption and volatility in its global supply chain network.

These disruptions could increase in the future and cause delays in shipments of raw materials and packaging, as well as related cost inflation.

Operating Results

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United States $ 7,018 $ 6,238 12 % 12 % $ 13,676 $ 13,577 1 % 1 %

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plus international may not equal total due to rounding.

Worldwide sales declined 9% to $14.5 billion in the first quarter of 2023 primarily due to lower sales in the virology franchise, largely attributable to Lagevrio (molnupiravir), which had sales of $392 million in the first quarter of 2023 compared with $3.2 billion in the first quarter of 2022.

Also contributing to the revenue decline in the first quarter of 2023 were lower sales in the diabetes franchise due to Januvia (sitagliptin) and Janumet (sitagliptin and metformin HCl), as well as lower sales of Pneumovax 23 (pneumococcal vaccine polyvalent).

The sales decline in the first quarter of 2023 was partially offset by higher sales in the oncology franchise, largely driven by strong growth of Keytruda (pembrolizumab), higher sales in the vaccines franchise, primarily attributable to growth of Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) and the ongoing launch of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine) for pediatric use, as well as higher sales of hospital acute care products, including Bridion (sugammadex) Injection.

Worldwide sales grew 3% to $15.0 billion in the second quarter of 2023 primarily due to higher sales in the oncology franchise, largely driven by strong growth of Keytruda (pembrolizumab), and higher sales in the vaccines franchise, primarily attributable to growth of Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) and the ongoing launch of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine) for pediatric use.

Also contributing to revenue growth in the second quarter were higher sales of hospital acute care products, including Bridion (sugammadex) Injection and Prevymis (letermovir).

Sales growth in the second quarter of 2023 was partially offset by lower sales in the virology franchise largely due to Lagevrio (molnupiravir) which had sales of $203 million in the second quarter of 2023 compared with $1.2 billion in the second quarter of 2022.

Lower sales in the diabetes franchise attributable to Januvia (sitagliptin) and Janumet (sitagliptin and metformin HCl), as well as lower sales of Pneumovax 23 (pneumococcal vaccine polyvalent) also partially offset revenue growth in the second quarter of 2023.

Worldwide sales declined 3% to $29.5 billion in the first six months of 2023 primarily due to lower sales in the virology franchise, largely attributable to Lagevrio , which had sales of $595 million in the first six months of 2023 compared with $4.4 billion in the first six months of 2022.

Also contributing to the revenue decline in the first six months of 2023 were lower sales in the diabetes franchise due to Januvia and Janumet , as well as lower sales of Pneumovax 23.

The sales decline in the first six months of 2023 was largely offset by higher sales in the oncology franchise, primarily driven by strong growth of Keytruda , higher sales in the vaccines franchise, primarily attributable to growth of Gardasil 9 and the ongoing launch of Vaxneuvance for pediatric use, as well as higher sales of hospital acute care products, including Bridion and Prevymis .

See Note 16 to the condensed consolidated financial statements for details on sales of the Company’s products.

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Keytruda $ 6,271 $ 5,252 19 % 21 % $ 12,065 $ 10,061 20 % 23 %

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242 231 5 % 6 % 474 459 3 % 5 %

Welireg 50 27 89 % 89 % 92 45 * *

Alliance Revenue - Reblozyl (2)

47 33 41 % 41 % 90 86 4 % 4 %

Welireg 42 18 * *

(1) Alliance revenue 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 represents royalties and, for 2022, also includes a payment received related to the achievement of a regulatory approval milestone (see Note 3 to the consolidated financial statements).

Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved as monotherapy for the treatment of certain patients with cervical cancer, classical Hodgkin lymphoma, cutaneous squamous cell carcinoma, esophageal or gastroesophageal junction (GEJ) carcinoma, head and neck squamous cell carcinoma (HNSCC), hepatocellular carcinoma (HCC), non-small-cell lung cancer (NSCLC), melanoma, Merkel cell carcinoma, microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) cancer (solid tumors) including MSI-H/dMMR colorectal cancer, MSI-H/dMMR advanced endometrial carcinoma, primary mediastinal large B-cell lymphoma (PMBCL), tumor mutational burden-high (TMB-H) cancer (solid tumors), and urothelial carcinoma including non-muscle invasive bladder cancer.

Additionally, Keytruda is approved as monotherapy for the adjuvant treatment of certain patients with renal cell carcinoma (RCC) at intermediate-high or high risk of recurrence and for certain patients with completely resected stage IIB, IIC or III melanoma, and for adjuvant treatment following resection and platinum-based chemotherapy for adult patients with stage 1B (T2a ≥4 cm), II, or IIIA NSCLC.

Keytruda is also approved for certain patients with high-risk early-stage triple-negative breast cancer (TNBC) in combination with chemotherapy as neoadjuvant treatment, and then continued as a single agent as adjuvant treatment after surgery.

In addition, Keytruda is approved for the treatment of certain patients in combination with chemotherapy for metastatic squamous and nonsquamous NSCLC, in combination with chemotherapy with or without bevacizumab for advanced cervical cancer, in combination with chemotherapy for esophageal cancer, in combination with trastuzumab, fluoropyrimidine- and platinum-containing chemotherapy for human epidermal growth factor 2 (HER2)-positive gastric or GEJ adenocarcinoma, in combination with chemotherapy for HNSCC, in combination with chemotherapy for locally recurrent unresectable or metastatic TNBC, in combination with axitinib for advanced RCC, in combination with Lenvima for certain patients with advanced endometrial carcinoma or advanced RCC, and in combination with enfortumab vedotin for certain patients with locally advanced or metastatic urothelial carcinoma who are not eligible for cisplatin-containing chemotherapy.

(2) Alliance revenue represents royalties and, for the first six months 2022, also includes a payment received related to the achievement of a regulatory approval milestone (see Note 3 to the condensed consolidated financial statements).

Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved as monotherapy for the treatment of certain patients with cervical cancer, classical Hodgkin lymphoma, cutaneous squamous cell carcinoma, esophageal or gastroesophageal junction (GEJ) carcinoma, head and neck squamous cell carcinoma (HNSCC), hepatocellular carcinoma (HCC), melanoma, Merkel cell carcinoma, microsatellite instability-high (MSI-H) or mismatch repair deficient (dMMR) solid tumors (including MSI-H/dMMR colorectal cancer and endometrial carcinoma), non-small-cell lung cancer (NSCLC), primary mediastinal large B-cell lymphoma (PMBCL), tumor mutational burden-high (TMB-H) solid tumors, and urothelial carcinoma including non-muscle invasive bladder cancer.

Additionally, Keytruda is approved as monotherapy for the adjuvant treatment of certain patients with melanoma, and for certain patients with renal cell carcinoma (RCC) post-surgery.

Keytruda is approved for adjuvant treatment following resection and platinum-based chemotherapy for certain patients with NSCLC.

Keytruda is also approved for patients with high-risk early-stage triple-negative breast cancer (TNBC) in combination with chemotherapy as neoadjuvant treatment, and then continued as a single agent as adjuvant treatment after surgery.

In addition, Keytruda is approved in combination with chemotherapy for the treatment of certain patients with advanced NSCLC, in combination with chemotherapy with or without bevacizumab for advanced cervical cancer, in combination with chemotherapy for advanced esophageal cancer, in combination with trastuzumab and chemotherapy for certain patients with advanced gastric or GEJ adenocarcinoma, in combination with chemotherapy for HNSCC, in combination with chemotherapy for advanced TNBC, in combination with axitinib for advanced RCC, in combination with Lenvima for patients with advanced RCC or certain types of

advanced endometrial carcinoma, and in combination with enfortumab vedotin for certain cisplatin-ineligible patients with locally advanced or metastatic urothelial carcinoma.

The Keytruda clinical development program includes studies across a broad range of cancer types.

See “Research and Development Update” below.

Global sales of Keytruda grew 20% in the first quarter of 2023.

Sales growth was primarily driven by higher demand as the Company continues to launch Keytruda with multiple new indications globally.

Global sales of Keytruda grew 19% and 20% in the second quarter and first six months of 2023, respectively.

Sales growth in both periods was primarily driven by higher demand as the Company continues to launch Keytruda with multiple new indications globally.

Sales growth in the U.S.

reflects increased

uptake across earlier-stage indications including in high-risk early stage TNBC, as well as certain types of RCC and melanoma, and higher demand across the multiple approved metastatic indications, in particular for the treatment of certain types of RCC, NSCLC, TNBC, and HNSCC cancers.

Keytruda sales growth in international markets reflects higher demand for the HNSCC and RCC metastatic indications, as well as uptake in earlier-stage indications, particularly in Europe and Latin America.

reflects increased uptake across earlier-stage indications including in high-risk early stage TNBC, as well as certain types of RCC and melanoma, and higher demand across the multiple approved metastatic indications, in particular for the treatment of certain types of RCC, NSCLC, TNBC, and HNSCC cancers.

Keytruda received the following regulatory approvals thus far in 2023.

Date Approval

January 2023 FDA approval as a single agent for adjuvant treatment following surgical resection and platinum-based chemotherapy for adult patients with stage IB (T2a ≥4 cm), II, or IIIA NSCLC, based on the KEYNOTE-091 trial.

January 2023 U.S.

Food and Drug Administration (FDA) approval as a single agent for adjuvant treatment following surgical resection and platinum-based chemotherapy for adult patients with stage IB (T2a ≥4 cm), II, or IIIA NSCLC, based on the KEYNOTE-091 trial.

March 2023 FDA full approval for the treatment of adult and pediatric patients with unresectable or metastatic MSI-H or dMMR solid tumors that have progressed following prior treatment and who have no satisfactory alternative treatment options.

The conversion from an accelerated to a full (regular) approval is based on results from the Phase 2 KEYNOTE-158, KEYNOTE-164 and KEYNOTE-051 trials.

April 2023 FDA accelerated approval in combination with enfortumab vedotin-ejfv for the treatment of adult patients with locally advanced or metastatic urothelial carcinoma who are not eligible for cisplatin-containing chemotherapy, based on data from the KEYNOTE-869 trial dose escalation cohort, Cohort A and Cohort K, which was conducted in collaboration with Seagen and Astellas.

The conversion from an accelerated to a full (regular) approval is based on the KEYNOTE-158, KEYNOTE-164 and KEYNOTE-051 trials.

April 2023 FDA accelerated approval in combination with enfortumab vedotin-ejfv for the treatment of adult patients with locally advanced or metastatic urothelial carcinoma who are not eligible for cisplatin-containing chemotherapy, based on the KEYNOTE-869 trial dose escalation cohort, Cohort A and Cohort K, which was conducted in collaboration with Seagen and Astellas.

June 2023 Japan’s Ministry of Health, Labor and Welfare (MHLW) approval for the treatment of patients with relapsed or refractory PMBCL, based on the KEYNOTE-170 and the KEYNOTE-A33 studies.

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

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

Alliance revenue related to Lynparza increased 3% in the first quarter of 2023 largely driven by higher demand, particularly in Europe in certain patients with ovarian cancer.

Lenvima is an oral receptor tyrosine kinase inhibitor being developed as part of a collaboration with Eisai Co., Ltd.

Alliance revenue related to Lynparza increased 13% and 8% in the second quarter and first six months of 2023, respectively, primarily driven by higher demand in certain international markets, particularly in Europe for certain patients with ovarian, early breast and prostate cancers, and in Japan in certain patients with ovarian and early breast cancers.

In May 2023, the FDA approved Lynparza in combination with abiraterone and prednisone or prednisolone for the treatment of certain adult patients with deleterious or suspected deleterious BRCA -mutated ( BRCA m) metastatic castration-resistant prostate cancer (mCRPC), based on the PROpel trial.

Lenvima (lenvatinib) is an oral receptor tyrosine kinase inhibitor being developed as part of a collaboration with Eisai Co., Ltd.

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

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

Alliance revenue related to Lenvima grew 2% in the first quarter of 2023 reflecting uptake in the advanced RCC indication in Europe, partially offset by lower volumes in China.

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

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

Merck recorded alliance revenue related to this collaboration of $43 million in the first quarter of 2023 (consisting of royalties) compared with $52 million in the first quarter of 2022 (consisting of royalties of $32 million and the receipt of a regulatory approval milestone payment of $20 million).

Sales of Welireg (belzutifan), for the treatment of adult patients with certain von Hippel-Lindau disease-associated tumors, were $42 million in the first quarter of 2023 compared with $18 million in the first quarter of 2022 due to continued uptake in the U.S.

Alliance revenue related to Lenvima grew 5% and 3% in the second quarter and first six months of 2023, respectively, largely reflecting uptake in the advanced RCC and endometrial indications in the U.S., partially offset by lower demand in China.

Sales of Welireg (belzutifan), for the treatment of adult patients with certain von Hippel-Lindau disease-associated tumors, were $50 million and $27 million in the second quarter of 2023 and 2022, respectively, and were $92 million and $45 million in the first six months of 2023 and 2022, respectively.

The sales increase in both periods is due to continued uptake in the U.S.

following launch in 2021.

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

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

Alliance revenue related to this collaboration consists of royalties and, for the first six months of 2022, also includes the receipt of a regulatory approval milestone payment of $20 million.

Alliance revenue increased 41% and 4% in the second quarter and first six months of 2023, respectively, due to strong underlying sales performance.

The increase in alliance revenue in the first six months of 2023 was partially offset by the receipt of the regulatory approval milestone in 2022 as noted above.

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Gardasil/Gardasil 9

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Pneumovax 23 92 153 (40) % (38) % 188 325 (42) % (39) %

Combined worldwide sales of Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant) and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of human papillomavirus (HPV), grew 35% in the first quarter of 2023 driven primarily by strong demand outside of the U.S., particularly in China, which also benefited from the timing of shipments and increased supply.

Sales of Gardasil 9 in the U.S.

were essentially flat in the first quarter of 2023 as lower sales due to public sector buying patterns were offset by higher 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, increased 17% in the first quarter of 2023 primarily reflecting higher demand and pricing in the U.S.

and higher demand in Europe.

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 1% in the first quarter of 2023 primarily due to lower tenders in Latin America, largely offset by higher pricing and demand in the U.S.

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), grew 15% in the first quarter of 2023 primarily attributable to higher demand and pricing in the U.S.

Global sales of RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children, grew 38% in the first quarter of 2023 primarily due to inventory stocking in China.

Worldwide sales of Vaxneuvance , a vaccine to help prevent invasive pneumococcal disease, increased to $106 million in the first quarter of 2023 primarily due to continued uptake in the pediatric indication in the U.S.

Combined worldwide sales of Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant) and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of human papillomavirus (HPV), grew 47% and 41% in the second quarter and first six months of 2023, respectively, driven primarily by higher global demand, particularly in China due in part to continued uptake of the expanded indication of Gardasil 9 for girls and women 9 to 45 years of age.

The Company anticipates the growth rate of combined Gardasil/Gardasil 9 sales will moderate in the second half of 2023 due in part to the timing of shipments in China.

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 4% and 10% in the second quarter and first six months of 2023, respectively, primarily reflecting higher pricing in the U.S.

and the timing of shipments in certain ex-U.S.

Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella, were nearly flat in both the second quarter and first six months of 2023 compared with the corresponding prior year periods.

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), declined 2% in the second quarter of 2023 primarily attributable to lower sales in Latin America reflecting both lower demand and the timing of shipments, partially offset by higher pricing in the U.S.

Global sales of Varivax grew 5% in the first six months of 2023 largely due to higher pricing and demand in the U.S., partially offset by lower sales in Latin America reflecting both lower demand and the timing of shipments.

Global sales of RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine to help protect against rotavirus gastroenteritis in infants and children, declined 25% in the second quarter of 2023 and increased 10% in first six months of 2023 primarily due to first quarter 2023 inventory stocking in China that was partially bought out in the second quarter of 2023.

Worldwide sales of Vaxneuvance , a vaccine to help prevent invasive pneumococcal disease, increased to $168 million and $274 million in the second quarter and first six months of 2023, respectively, primarily due to continued uptake in the pediatric indication in the U.S.

following launch in 2022.

Worldwide sales of Pneumovax 23, a vaccine to help prevent pneumococcal disease, declined 44% in the first quarter of 2023 primarily reflecting lower demand in the U.S.

Worldwide sales of Pneumovax 23, a vaccine to help prevent pneumococcal disease, declined 40% and 42% in the second quarter and first six months of 2023, respectively, primarily reflecting lower demand in the U.S.

as the market continues to shift toward newer adult pneumococcal conjugate vaccines following changes in the recommendations of the U.S.

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Bridion $ 502 $ 426 18 % 19 % $ 989 $ 821 21 % 23 %

Prevymis 143 103 39 % 42 % 273 197 39 % 43 %

Worldwide sales of Bridion , for the reversal of two types of neuromuscular blocking agents used during surgery, grew 23% in the first quarter of 2023 primarily due to higher demand, particularly in the U.S., reflecting Bridion ’s growing share among neuromuscular blockade reversal agents.

The patent that provides market exclusivity for Bridion in the European Union (EU) will expire in July 2023;

the Company anticipates sales of Bridion in these markets will decline thereafter.

Worldwide sales of Prevymis (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogenic hematopoietic stem cell transplant, grew 38% in the first quarter of 2023 due to higher demand in the U.S.

and Europe, as well as uptake from the 2022 launch in China.

In February 2023, the FDA granted priority review for a supplemental New Drug Application (NDA) for Prevymis for prophylaxis of CMV disease in adult kidney transplant recipients at high risk (D+/R-);

the Prescription Drug User Fee Act (PDUFA), or target action, date is June 5, 2023.

Worldwide sales of Bridion , for the reversal of two types of neuromuscular blocking agents used during surgery, grew 18% and 21% in the second quarter and first six months of 2023, respectively, primarily due to higher demand, particularly in the U.S., reflecting Bridion ’s growing market share among neuromuscular blockade reversal agents.

The patent that provided market exclusivity for Bridion in the European Union (EU) expired in July 2023;

the Company anticipates sales of Bridion in these markets will decline in future periods.

Worldwide sales of Prevymis , a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogenic hematopoietic stem cell transplant, grew 39% in both the second quarter and first six months of 2023 largely due to higher demand in the U.S.

and Europe, as well as continued uptake from the 2022 launch

In June 2023, the FDA approved a new indication for Prevymis for prophylaxis of CMV disease in adult kidney transplant recipients at high risk (Donor CMV-seropositive/Recipient CMV-seronegative [D+/R-]) following a priority review.

Cardiovascular

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Alliance Revenue - Adempas/Verquvo (1)

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Alliance Revenue - Adempas/

$ 68 $ 98 (31) % (31) % $ 167 $ 170 (2) % (2) %

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Verquvo was approved in the U.S., the EU and Japan in 2021 and has since been approved in several other markets.

Alliance revenue from the collaboration grew 38% in the first quarter of 2023 primarily due to higher profit sharing reflecting increased demand in Bayer’s marketing territories.

Alliance revenue from the collaboration declined 31% and 2% in the second quarter and first six months of 2023, respectively, primarily due to lower profit sharing, which reflects decreased demand in Bayer’s marketing territories.

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

Sales of Adempas in Merck’s marketing territories were nearly flat in the first quarter of 2023 compared with the prior year.

Sales of Adempas in Merck’s marketing territories were nearly flat in both the second quarter and first six months of 2023 compared with the same prior year periods.

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Lagevrio $ 203 $ 1,177 (83) % (82) % $ 595 $ 4,424 (87) % (85) %

Isentress/Isentress HD 136 147 (7) % (4) % 259 305 (15) % (12) %

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

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

Following initial authorizations in certain markets in the fourth quarter of 2021, Lagevrio has since received multiple additional authorizations worldwide.

Sales of Lagevrio declined 88% in the first quarter of 2023 largely attributable to sales in the U.S.

and UK markets in the first quarter of 2022 that did not recur in the first quarter of 2023.

The Lagevrio sales decline was also attributable to lower sales in Japan and Australia.

Sales of Lagevrio declined 83% and 87% in the second quarter and first six months of 2023, respectively, primarily due to lower demand in Japan and the Asia Pacific region.

Additionally, the Company had sales of Lagevrio in the UK in the second quarter and first six months of 2022 and in the U.S.

in the first six months of 2022 that did not recur in the corresponding periods of 2023, which also contributed to the sales declines.

The Company expects full-year 2023 Lagevrio sales to be approximately $1.0 billion.

In April 2023, Japan’s Ministry of Health, Labor and Welfare granted full approval for Lagevrio .

In April 2023, Japan’s MHLW granted full approval for Lagevrio .

Lagevrio was previously granted Special Approval for Emergency in Japan in December 2021.

Global combined sales of Isentress/Isentress HD (raltegravir), an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, declined 23% in the first quarter of 2023 primarily due to lower global demand, reflecting in part competitive pressure particularly in Europe and the U.S.

Global combined sales of Isentress/Isentress HD (raltegravir), an HIV integrase inhibitor for use in combination with other antiretroviral agents for the treatment of HIV-1 infection, declined 7% and 15% in the second quarter and first six months of 2023, respectively, primarily due to competitive pressure in Europe and the U.S.

The Company expects competitive pressure for Isentress/Isentress HD to continue.

The patent that provides market exclusivity for Isentress/Isentress HD in the EU will expire in July 2023;

the Company anticipates sales declines of Isentress/Isentress HD in these markets will accelerate thereafter.

The patent that provided market exclusivity for Isentress/Isentress HD in the EU expired in July 2023;

the Company anticipates sales declines of Isentress/Isentress HD in these markets will accelerate in future periods.

Three Months Ended

March 31, % Change

($ in millions) 2023 2022 % Change

June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2023 2022 % Change 2023 2022 % Change

Januvia/Janumet $ 864 $ 1,233 (30) % (28) % $ 1,744 $ 2,466 (29) % (26) %

Worldwide combined sales of Januvia and Janumet , medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 29% in the first quarter of 2023 primarily reflecting the loss of exclusivity in several markets in Europe and the Asia Pacific region, as well as in Canada, coupled with lower demand and pricing in the U.S.

Worldwide combined sales of Januvia and Janumet , medicines that help lower blood sugar levels in adults with type 2 diabetes, declined 30% and 29% in the second quarter and first six months of 2023, respectively, primarily reflecting the ongoing impact of the loss of exclusivity in most markets in Europe and the Asia Pacific region, as well as in Canada, coupled with lower demand and pricing in the U.S.

due to competitive pressures.

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until May 2026 and Janumet XR will not lose market exclusivity in the U.S.

until July 2026, although another non-automatically substitutable form of sitagliptin is likely to be available prior to 2026 .

until July 2026, although another non-automatically substitutable form of sitagliptin could be available prior to 2026 .

As a result of competitive pressures, the Company anticipates pricing and volume declines for Januvia and Janumet in the U.S.

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Exclusivity for Janumet was lost in other European countries in April 2023.

While the Company lost market exclusivity for Januvia in China in 2022 with the launch of a generic equivalent product, the impact on sales in 2023 is expected to be modest.

While the Company lost market exclusivity for Januvia in China in 2022 with the launch of a generic equivalent product and an additional generic equivalent product was launched in the second quarter of 2023, the impact on sales for full-year 2023 is expected to be modest.

Although several generic equivalents of Janumet have been approved in China, none have launched, and the Company expects it is unlikely that any will launch prior to December 2023.

Combined sales of Januvia and Janumet in Europe, China and the U.S.

represented 11%, 13% and 37%, respectively, of total combined Januvia and Janumet sales for the first quarter of 2023.

In response to a request from a regulatory authority, Merck evaluated its sitagliptin-containing products for the presence of nitrosamines.

represented 11%, 14% and 37%, respectively, of total combined Januvia and Janumet sales for the first six months of 2023.

In response to a request from a regulatory authority in 2022, Merck evaluated its sitagliptin-containing products for the presence of nitrosamines.

Nitrosamines are organic compounds found at trace levels in water and food.

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The Company has engaged with major health authorities around the world and has implemented additional quality controls to ensure its portfolio of sitagliptin-containing products meet health authorities’ interim acceptable NTTP limits for continuing distribution of product to the market.

The Company is making progress in its efforts to reduce the level of nitrosamines in its sitagliptin-containing medicines.

However, difficulties in reducing those levels, or achieving timely regulatory approvals for required changes, could result in product shortages.

The Company has made significant progress in reducing the level of nitrosamines in its sitagliptin-containing medicines and does not anticipate product shortages at this time, subject to regulatory approvals for submitted changes.

Animal Health Segment

Three Months Ended

March 31, % Change

($ in millions) 2023 2022 % Change

June 30, % Change

Exchange Six Months Ended

June 30, % Change

($ in millions) 2023 2022 % Change 2023 2022 % Change

Livestock $ 807 $ 826 (2) % 2 % $ 1,656 $ 1,658 — % 5 %

Companion Animal 649 641 1 % 2 % 1,291 1,291 — % 2 %

Sales of livestock products grew 2% in the first quarter of 2023 primarily reflecting strong demand in the ruminant and poultry product portfolio, which includes technology solution products, as well as higher pricing.

Sales of companion animal products declined 1% in the first quarter of 2023.

Excluding the unfavorable effect of foreign exchange, companion animal sales performance primarily reflects higher pricing.

Sales of the Bravecto (fluralaner) parasiticide line of products were $314 million in both the first quarter of 2023 and the first quarter of 2022.

Sales of livestock products declined 2% in the second quarter of 2023 and were essentially flat in the first six months of 2023 compared with the corresponding period of 2022.

Excluding the unfavorable effect of foreign exchange, livestock sales performance in both periods primarily reflects higher pricing, as well as higher demand for poultry and swine products, partially offset by lower demand for ruminant products, due in part to reduced herd sizes.

Sales of companion animal products grew 1% in the second quarter of 2023 and were flat in the first six months of 2023 compared with the corresponding periods of 2022.

Excluding the unfavorable effect of foreign exchange, companion animal sales performance in both periods primarily reflects higher pricing, including for the Bravecto (fluralaner) parasiticide line of products, partially offset by supply challenges for certain companion animal vaccines.

Sales of Bravecto products were $326 million and $640 million for the second quarter and first six months of 2023, respectively, representing growth of 5% and 3%, respectively, compared with the corresponding prior year periods, or 7% and 5%, respectively, excluding the unfavorable effect of foreign exchange.

Costs, Expenses and Other

Three Months Ended

($ in millions) 2023 2022 % Change

June 30, Six Months Ended

($ in millions) 2023 2022 % Change 2023 2022 % Change

Cost of sales $ 4,024 $ 4,216 (5) % $ 7,951 $ 9,596 (17) %

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Cost of Sales

Cost of sales decreased 27% in the first quarter of 2023.

Cost of sales includes $221 million and $1.7 billion in the first quarter of 2023 and 2022, respectively, related to sales of Lagevrio , which is being developed in a collaboration with Ridgeback (see Note 3 to the condensed consolidated financial statements).

Cost of sales also includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $532 million and $683 million in the first quarter of 2023 and 2022, respectively.

Amortization expense in the first quarter of 2023 and 2022 includes $72 million and $250 million, respectively, of cumulative catch-up amortization related to Merck’s collaborations with Eisai and AstraZeneca, respectively, (see Note 3 to the condensed consolidated financial statements).

Also included in cost of sales are expenses associated with restructuring activities, which amounted to $29 million and $46 million in the first quarter of 2023 and 2022, respectively, including accelerated depreciation and asset write-offs related to the planned sale or closure of manufacturing facilities.

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

Gross margin was 72.9% in the first quarter of 2023 compared with 66.2% in the first quarter of 2022.

The gross margin improvement primarily reflects the favorable impacts of lower Lagevrio sales (which have a low gross margin), product mix and lower amortization of intangible assets (noted above).

Cost of sales decreased 5% and 17% in the second quarter and first six months of 2023, respectively.

Cost of sales includes $193 million and $615 million in the second quarter of 2023 and 2022, respectively, and $414 million and $2.3 billion in the first six months of 2023 and 2022, respectively, related to sales of Lagevrio , which is being developed in a collaboration with Ridgeback (see Note 3 to the condensed consolidated financial statements).

Cost of sales also includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $468 million and $447 million in the second quarter of 2023 and 2022, respectively, and $1.0 billion and $1.1 billion in the first six months of 2023 and 2022, respectively.

Amortization expense in the first six months of 2023 and 2022 includes $72 million and $250 million, respectively, of cumulative catch-up amortization related to Merck’s collaborations with Eisai and AstraZeneca, respectively (see Note 3 to the condensed consolidated financial statements).

Also included in cost of sales are expenses associated with restructuring activities, which amounted to $32 million and $67 million in the second quarter of 2023 and 2022, respectively, and $61 million and $113 million in the first six months of 2023 and 2022, respectively, including accelerated depreciation and asset write-offs related to the planned sale or closure of manufacturing facilities.

Separation costs associated

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

Gross margin was 73.2% in the second quarter of 2023 compared with 71.1% in the second quarter of 2022.

Gross margin was 73.1% in the first six months of 2023 compared with 68.5% in the first six months of 2022.

The gross margin improvement in both periods primarily reflects the favorable impacts of lower Lagevrio sales (which have a low gross margin) and product mix, partially offset by the unfavorable impact of foreign exchange and increased restructuring costs.

Higher amortization of intangible assets also partially offset the gross margin improvement in the first six months of 2023.

Selling, General and Administrative

Selling, general and administrative (SG&A) expenses increased 7% in the first quarter of 2023 primarily due to higher administrative costs and increased promotional spending, partially offset by the favorable effect of foreign exchange.

Selling, general and administrative (SG&A) expenses increased 8% in the second quarter of 2023 and rose 7% in the first six months of 2023 primarily due to higher administrative costs, including higher compensation and benefit costs, as well as increased promotional spending and higher selling costs, partially offset by the favorable effect of foreign exchange and lower acquisition-related costs.

Research and Development

Research and development (R&D) expenses increased 66% to $4.3 billion in the first quarter of 2023 primarily due to a $1.2 billion charge for the acquisition of Imago, as well as higher upfront charges related to collaborations and licensing arrangements.

Also contributing to the increase in R&D expenses were higher compensation and benefit costs, reflecting in part increased headcount to support clinical development activity, higher investments in discovery research and early drug development, as well as increased clinical development spending.

The increase in R&D expenses was partially offset by the favorable effect of foreign exchange.

R&D expenses are comprised of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $2.1 billion and $1.8 billion for the first quarter of 2023 and 2022, respectively.

Also included in R&D expenses are Animal Health research costs, licensing costs and costs incurred by other divisions in support of R&D activities, including depreciation, production and general and administrative, which in the aggregate were approximately $2.2 billion and $750 million for the first quarter of 2023 and 2022, respectively.

The increase in these expenses in the first quarter of 2023 was largely attributable to a $1.2 billion charge for the acquisition of Imago (as noted above) and a $175 million charge for a license and collaboration agreement with Kelun-Biotech.

See Note 2 for additional information related to business development activity.

Research and development (R&D) expenses were $13.3 billion in the second quarter of 2023 compared with $2.8 billion in the second quarter of 2022 and were $17.6 billion in the first six months of 2023 compared with $5.4 billion in the first six months of 2022.

The increase in both periods was primarily due to a $10.2 billion charge for the acquisition of Prometheus.

Also contributing to the increase in R&D expenses in both periods were higher compensation and benefit costs, reflecting in part increased headcount, higher investments in discovery research and early drug development, as well as increased clinical development spending.

The increase in R&D expenses in the first six months of 2023 was also attributable to a $1.2 billion charge for the acquisition of Imago and higher upfront charges related to collaborations and licensing arrangements.

The increase in R&D expenses in both periods was partially offset by the favorable effect of foreign exchange.

R&D expenses are comprised of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $2.3 billion and $1.9 billion for the second quarter of 2023 and 2022, respectively, and $4.3 billion and $3.7 billion for the first six months of 2023 and 2022, respectively.

Also included in R&D expenses are Animal Health research costs, licensing costs, charges for transactions accounted for as asset acquisitions, and costs incurred by other divisions in support of R&D activities, including depreciation, production and general and administrative, which in the aggregate were approximately $11.1 billion and $880 million for the second quarter of 2023 and 2022, respectively, and $13.3 billion and $1.6 billion for the first six months of 2023 and 2022, respectively.

The increase in these expenses in the second quarter and first six months of 2023 was largely attributable to the $10.2 billion charge for the acquisition of Prometheus (as noted above).

The increase in these expenses for the first six months of 2023 was also due in part to a $1.2 billion charge for the acquisition of Imago (as noted above) and a $175 million charge for a license and collaboration agreement with Kelun-Biotech.

See Note 2 to the condensed consolidated financial statements for additional information related to business development activity.

Restructuring Costs

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The Company anticipates the actions under the Restructuring Program will result in cumulative annual net cost savings of approximately $900 million by the end of 2023.

Restructuring costs, primarily representing separation and other related costs associated with these restructuring activities, were $67 million and $53 million for the first quarter of 2023 and 2022, respectively.

Restructuring costs, primarily representing separation and other related costs associated with these restructuring activities, were $151 million and $142 million for the second quarter of 2023 and 2022, respectively, and $218 million and $194 million for the first six months of 2023 and 2022, respectively.

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

Also included in restructuring costs are asset abandonment, facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement and

termination charges associated with pension and other postretirement benefit plans and share-based compensation plan costs.

Also included in restructuring costs are asset abandonment, facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement and termination charges associated with pension and other postretirement benefit plans and share-based compensation plan costs.

For segment reporting, restructuring costs are unallocated expenses.

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

The Company recorded aggregate pretax costs of $97 million and $127 million in the first quarter of 2023 and 2022, respectively, related to restructuring program activities (see Note 5 to the condensed consolidated financial statements).

The Company recorded aggregate pretax costs of $236 million and $258 million in the second quarter of 2023 and 2022, respectively, and $333 million and $384 million for the first six months of 2023 and 2022, respectively, related to restructuring program activities (see Note 5 to the condensed consolidated financial statements).

Other (Income) Expense, Net

Other (income) expense, net, was $89 million of expense in the first quarter of 2023 compared with $708 million of expense in the first quarter of 2022.

The change was primarily due to net unrealized gains from investments in equity securities recorded in the first quarter of 2023 compared with net unrealized losses recorded in the first quarter of 2022, as well as higher interest income in the first quarter of 2023.

The favorability was partially offset by a $572.5 million charge in the first quarter of 2023 related to settlements with certain plaintiffs in the Zetia antitrust litigation (see Note 8 to the consolidated financial statements).

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

Other (income) expense, net, was $259 million of expense for the first six months of 2023 compared with $1.1 billion of expense for the first six months of 2022 primarily due to net unrealized gains from investments in equity securities recorded in 2023 compared with net unrealized losses recorded in 2022, and lower pension settlement costs, partially offset by a $572.5 million charge in 2023 related to settlements with certain plaintiffs in the Zetia antitrust litigation (see Note 9 to the condensed consolidated financial statements).

For details on the components of Other (income) expense, net, see Note 12 to the condensed consolidated financial statements.

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Three Months Ended

June 30, Six Months Ended

($ in millions) 2023 2022 2023 2022

2 unchanged sentences

Other (15,656) (5,257) (21,710) (10,481)

Income Before Taxes $ 3,650 $ 4,861

(Loss) Income Before Taxes $ (5,335) $ 4,487 $ (1,685) $ 9,348

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as SG&A expenses directly incurred by the segment.

6 unchanged sentences

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

Pharmaceutical segment profits declined 4% in the first quarter of 2023 reflecting lower sales, largely attributable to Lagevrio , as well as higher administrative and promotional costs, and the unfavorable effect of foreign exchange.

Animal Health segment profits declined 3% in the first quarter of 2023 reflecting higher administrative and promotional costs, as well as increased research and development expenses.

Taxes on Income

The effective income tax rates were 22.6% and 11.4% for the first quarter of 2023 and 2022, respectively.

The effective income tax rate for the first quarter of 2023 reflects the unfavorable discrete impact of a charge for the acquisition of Imago for which no tax benefit was recognized, as well as higher foreign taxes, the impact of the R&D capitalization provision of the Tax Cuts and Jobs Act of 2017 on the Company’s U.S.

Pharmaceutical segment profits grew 7% and 2% in the second quarter and first six months of 2023, respectively, reflecting higher sales, partially offset by higher administrative and promotional costs, as well as the unfavorable effect of foreign exchange.

Animal Health segment profits declined 18% and 11% in the second quarter and first six months of 2023, respectively, reflecting higher administrative and promotional costs, increased research and development expenses, as well as the unfavorable effect of foreign exchange.

The income tax provision of $637 million and $1.5 billion for the second quarter and first six months of 2023, respectively, on pretax losses of $5.3 billion and $1.7 billion, respectively, resulted in effective income tax rates of (11.9)% and (86.8)%, respectively.

The second quarter 2023 effective tax rate includes the impact of a charge for the acquisition of Prometheus for which no tax benefit was recognized, which unfavorably affected the tax rate by 25.1 percentage points, as well as the favorable impact of net unrealized losses from investments in equity securities, which were taxed at the U.S.

The effective income tax rate for the first six months of 2023 includes a 101.9 percentage point combined unfavorable impact of charges for the acquisitions of Prometheus and Imago for which no tax benefits were recognized, as well as higher foreign taxes, the impact of the R&D capitalization provision of the Tax Cuts and Jobs Act of 2017 on the Company’s U.S.

global intangible low-taxed income inclusion, and net unrealized gains from investments in equity securities, which were taxed at the U.S.

tax rate, partially offset by higher foreign tax credits.

The effective income tax rate in the first quarter of 2022 includes the favorable impact of net unrealized losses from investments in equity securities, which were taxed at the U.S.

Non-GAAP Income and Non-GAAP EPS

Non-GAAP income and non-GAAP EPS are alternative views of the Company’s performance that Merck is providing because management believes this information enhances investors’ understanding of the Company’s results since management uses non-GAAP measures to assess performance.

Non-GAAP income and non-GAAP EPS exclude certain items because of the nature of these items and the impact that they have on the analysis of underlying business performance and trends.

The effective income tax rates of 12.0% for the second quarter of 2022 and 11.7% for the first six months of 2022 reflect the favorable impact of net unrealized losses from investments in equity securities, which were taxed at the U.S.

Non-GAAP (Loss) Income and Non-GAAP EPS

Non-GAAP (loss) income and non-GAAP (loss) earnings per share (EPS) are alternative views of the Company’s performance that Merck is providing because management believes this information enhances investors’ understanding of the Company’s results since management uses non-GAAP measures to assess performance.

Non-GAAP (loss) income and non-GAAP EPS exclude certain items because of the nature of these items and the impact that they have on the analysis of underlying business performance and trends.

The excluded items (which should not be considered non-recurring) consist of acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities, and certain other items.

These excluded items are significant components in understanding and assessing financial performance.

Non-GAAP income and non-GAAP EPS are important internal measures for the Company.

Non-GAAP (loss) income and non-GAAP EPS are important internal measures for the Company.

Senior management receives a monthly analysis of operating results that includes a non-GAAP EPS metric.

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In addition, senior management’s annual compensation is derived in part using a non-GAAP pretax income metric.

Since non-GAAP income and non-GAAP EPS are not measures determined in accordance with GAAP, they have no standardized meaning prescribed by GAAP and, therefore, may not be comparable to the calculation of similar measures of other companies.

The information on non-GAAP income and non-GAAP EPS should be considered in addition to, but not as a substitute for or superior to, net income and EPS prepared in accordance with generally accepted accounting principles in the U.S.

Since non-GAAP (loss) income and non-GAAP EPS are not measures determined in accordance with GAAP, they have no standardized meaning prescribed by GAAP and, therefore, may not be comparable to the calculation of similar measures of other companies.

The information on non-GAAP income and non-GAAP EPS should be considered in addition to, but not as a substitute for or superior to, net (loss) income and EPS prepared in accordance with generally accepted accounting principles in the U.S.

A reconciliation between GAAP financial measures and non-GAAP financial measures is as follows:

Three Months Ended

June 30, Six Months Ended

($ in millions except per share amounts) 2023 2022 2023 2022

Income before taxes as reported under GAAP $ 3,650 $ 4,861

(Loss) income before taxes as reported under GAAP $ (5,335) $ 4,487 $ (1,685) $ 9,348

Increase (decrease) for excluded items:

1 unchanged sentence

Restructuring costs 236 258 333 384

(Income) loss from investments in equity securities, net (429) 684

Loss (income) from investments in equity securities, net 194 234 (235) 918

Charge for Zetia antitrust litigation settlements — — 573 —

Non-GAAP income before taxes 4,481 6,309

Taxes on income as reported under GAAP 825 554

Non-GAAP (loss) income before taxes (4,407) 5,509 74 11,818

Income tax provision as reported under GAAP 637 538 1,462 1,092

Estimated tax benefit on excluded items (1)

Non-GAAP taxes on income 913 883

Non-GAAP net income 3,568 5,426

Net income (loss) attributable to noncontrolling interests as reported under GAAP 4 (3)

Non-GAAP net income attributable to Merck & Co., Inc.

173 223 261 552

Non-GAAP income tax provision 810 761 1,723 1,644

Non-GAAP net (loss) income (5,217) 4,748 (1,649) 10,174

Net income attributable to noncontrolling interests as reported under GAAP 3 5 7 2

Non-GAAP net (loss) income attributable to Merck & Co., Inc.

$ (5,220) $ 4,743 $ (1,656) $ 10,172

EPS assuming dilution as reported under GAAP (2)

$ (2.35) $ 1.55 $ (1.24) $ 3.25

EPS difference 0.29 0.32 0.59 0.76

Non-GAAP EPS assuming dilution (2)

$ (2.06) $ 1.87 $ (0.65) $ 4.01

(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) The Company recorded a net loss on both a GAAP and non-GAAP basis for the three and six months ended June 30, 2023;

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.

Acquisition- and Divestiture-Related Costs

Non-GAAP income and non-GAAP EPS exclude the impact of certain amounts recorded in connection with acquisitions and divestitures of businesses.

Non-GAAP (loss) income and non-GAAP EPS exclude the impact of certain amounts recorded in connection with acquisitions and divestitures of businesses.

These amounts include the amortization of intangible assets and amortization of purchase accounting adjustments to inventories, as well as intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration.

Also excluded are integration, transaction, and certain other costs associated with acquisitions and divestitures of businesses.

Non-GAAP income and non-GAAP EPS also exclude amortization of intangible assets related to collaborations and licensing arrangements.

Also excluded are integration, transaction, and certain other costs associated with acquisitions and divestitures.

Non-GAAP (loss) income and non-GAAP EPS also exclude amortization of intangible assets related to collaborations and licensing arrangements.

Restructuring Costs

Non-GAAP income and non-GAAP EPS exclude costs related to restructuring actions (see Note 5 to the condensed consolidated financial statements).

Non-GAAP (loss) income and non-GAAP EPS exclude costs related to restructuring actions (see Note 5 to the condensed consolidated financial statements).

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

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Income and Losses from Investments in Equity Securities

Non-GAAP income and non-GAAP EPS exclude realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds.

Non-GAAP (loss) income and non-GAAP EPS exclude realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds.

Certain Other Items

Non-GAAP income and non-GAAP EPS exclude certain other items.

Non-GAAP (loss) income and non-GAAP EPS exclude certain other items.

These items are adjusted for after evaluating them on an individual basis, considering their quantitative and qualitative aspects.

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

Excluded from non-GAAP income and non-GAAP EPS in 2023 is a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation (see Note 8 to the condensed consolidated financial statements).

Excluded from non-GAAP (loss) income and non-GAAP EPS in 2023 is a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation (see Note 9 to the condensed consolidated financial statements).

Research and Development Update

The Company currently has several candidates under regulatory review in the U.S.

The Company currently has candidates under regulatory review in the U.S.

and internationally.

MK-4482, Lagevrio , is an investigational oral antiviral medicine for the treatment of mild to moderate COVID-19 in adults who are at risk for progressing to severe disease.

Merck is developing Lagevrio in collaboration with Ridgeback.

The FDA granted Emergency Use Authorization for Lagevrio in December 2021;

last issued in February 2023, to authorize Lagevrio for the treatment of adults with a current diagnosis of mild to moderate COVID-19, and who are at high risk for progression to severe COVID-19, including hospitalization or death, and for whom alternative COVID-19 treatment options approved or authorized by the FDA are not accessible or clinically appropriate.

The authorization is based on the Phase 3 MOVe-OUT trial.

Lagevrio is not approved for any use in the U.S.

and is authorized only for the duration of the declaration that circumstances exist justifying the authorization of its emergency use under the Food, Drug and Cosmetic Act, unless the authorization is terminated or revoked sooner.

In November 2021, the European Medicines Agency (EMA) issued a positive scientific opinion for Lagevrio , which is intended to support national decision-making on the possible use of Lagevrio prior to marketing authorization.

In October 2021, the EMA initiated a rolling review for Lagevrio for the treatment of COVID-19 in adults.

In February 2023, Merck and Ridgeback announced that the Committee for Medicinal Products for Human Use (CHMP) of the EMA has recommended the refusal of the marketing authorization application (MAA) for Lagevrio .

Merck and Ridgeback have appealed the decision and requested a re-examination of the MAA.

Applications to other regulatory bodies are underway.

MK-7264, gefapixant, is an investigational, orally administered, selective P2X3 receptor antagonist, for the treatment of refractory chronic cough or unexplained chronic cough in adults under review by the FDA and the EMA.

MK-7264, gefapixant, is an investigational, non-narcotic, orally selective P2X3 receptor antagonist, for the treatment of adults with refractory or unexplained chronic cough under review by the FDA and the European Medicines Agency (EMA).

The marketing applications for gefapixant are based on results from the COUGH-1 and COUGH-2 clinical trials.

In January 2022, the FDA issued a Complete Response Letter (CRL) regarding Merck’s NDA for gefapixant.

In July 2023, the FDA accepted Merck’s resubmission of the New Drug Application (NDA) for gefapixant and assigned a Prescription Drug User Fee Act (PDUFA), or target action, date of December 27, 2023.

Merck submitted additional analyses to the FDA in June 2023 in response to the Complete Response Letter (CRL) that was received in January 2022 regarding Merck’s NDA for gefapixant.

In the CRL, the FDA requested additional information related to the cough counting system that was used to assess efficacy.

The CRL was not related to the safety of gefapixant.

The Company is performing additional analyses and anticipates submitting this information to the FDA in the second quarter of 2023 in response to the CRL.

The review period in the EU was extended pending the receipt of additional information, which Merck submitted to the EMA in the first quarter of 2023.

In July 2023, the Committee for Medicinal Products for Human Use (CHMP) of the EMA recommended the approval of gefapixant.

The CHMP’s recommendation will now be reviewed by the European Commission (EC) for marketing authorization in the EU and a final decision is expected later in 2023.

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

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This submission is to convert the accelerated approval to full (regular) approval.

Additionally, Keytruda is under review by the FDA for the treatment of adult and pediatric patients with recurrent locally advanced or metastatic Merkel cell carcinoma.

Keytruda is also under review by the FDA for the treatment of adult and pediatric patients with recurrent locally advanced or metastatic Merkel cell carcinoma.

This submission is based on data from the Phase 3 KEYNOTE-913 trial.

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This submission is to convert the accelerated approval to full (regular) approval.

Additionally, Keytruda is under review by the FDA in combination with standard of care chemotherapy (gemcitabine and cisplatin) for the treatment of patients with locally advanced unresectable or metastatic biliary tract cancer.

The submission is based on data from the KEYNOTE-966 trial.

The FDA set a PDUFA date of February 7, 2024.

KEYNOTE-966 is also under review in the EU and Japan.

Keytruda is also under review by the FDA in combination with fluoropyrimidine- and platinum-containing chemotherapy for the first-line treatment of patients with locally advanced unresectable or metastatic gastric or GEJ adenocarcinoma.

The submission is based on data from the KEYNOTE-859 trial, in which Keytruda plus chemotherapy demonstrated a statistically significant improvement in overall survival versus chemotherapy alone, regardless of PD-L1 expression, in patients who were HER2 negative.

The submission is based on data from the KEYNOTE-859 trial.

The FDA set a PDUFA date of December 16, 2023.

KEYNOTE-859 is also under review in the EU.

KEYNOTE-859 is also under review in the EU and Japan.

In addition, Keytruda is under review by the FDA as a perioperative treatment regimen for patients with resectable stage II, IIIA or IIIB NSCLC based on the KEYNOTE-671 study.

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The submission is based on data from the pivotal Phase 3 KEYNOTE-091 trial, also known as EORTC-1416-LCG/ETOP-8-15 – PEARLS.

Keytruda is under review in Japan for the treatment of patients with relapsed or refractory PMBCL.

This submission is based on data from the Phase 2 KEYNOTE-170 study and the Phase 1 KEYNOTE-A33 study.

In February 2023, Merck announced it was discontinuing the Phase 3 KEYNOTE-641 trial evaluating Keytruda in combination with enzalutamide and androgen deprivation therapy (ADT) for the treatment of patients with metastatic castration-resistant prostate cancer (mCRPC) based on the recommendation of an independent Data Monitoring Committee.

At an interim analysis, Keytruda in combination with enzalutamide and ADT did not demonstrate an improvement in radiographic progression-

free survival or overall survival, the trial’s dual primary endpoints, compared to placebo plus enzalutamide and ADT, and crossed a pre-specified futility boundary for overall survival.

In March 2023, Merck provided an update on the open-label arm of the non-registrational Phase 2 KeyVibe-002 trial.

KeyVibe-002 is evaluating MK-7684A, a coformulation of vibostolimab, an anti-TIGIT therapy, and Keytruda , with or without docetaxel for the treatment of patients with metastatic NSCLC with progressive disease after treatment with immunotherapy and platinum-doublet chemotherapy.

KeyVibe-002, a partially blinded study, was designed with two primary objectives:

1) to evaluate the efficacy of MK-7684A alone compared with docetaxel, a standard of care;

and 2) in a blinded assessment, evaluate the efficacy of adding MK-7684A to docetaxel compared with docetaxel alone.

Results from the open-label arm of the study evaluating MK-7684A alone showed that the coformulation did not reach statistical significance for the primary endpoint of progression-free survival and was numerically less effective compared with docetaxel.

The blinded arms of the study will continue to further evaluate MK-7684A with docetaxel versus docetaxel alone.

Results will be presented at an upcoming medical meeting once further data from the blinded study arms are available.

Keytruda is also under review in the EU in combination with trastuzumab, fluoropyrimidine- and platinum-containing chemotherapy, for the first-line treatment of locally advanced unresectable or metastatic human epidermal growth factor 2 (HER2)-positive gastric or GEJ adenocarcinoma in adults whose tumors express PD-L1.

In July 2023, the CHMP adopted a positive opinion recommending approval of Keytruda for this indication based on interim results from the Phase 3 KEYNOTE-811 trial.

The CHMP’s recommendation will now be reviewed by the EC for marketing authorization in the EU, and a final decision is expected in the third quarter of 2023.

This indication was approved by the FDA under accelerated approval based on objective response rate data from KEYNOTE-811, and continued approval for this indication may be contingent upon verification and description of clinical benefit in the confirmatory trials.

Merck is working with the FDA to update this indication to patients whose tumors are PD-L1 positive.

MK-7339, Lynparza, is an oral PARP inhibitor currently approved for the treatment of several cancers being co-developed for additional cancer types as part of a collaboration with AstraZeneca (see Note 3 to the condensed consolidated financial statements).

In April 2023, the FDA convened its Oncologic Drugs Advisory Committee (ODAC) to discuss the supplemental NDA for use of Lynparza in combination with abiraterone and prednisone or prednisolone (abi/pred) for the treatment of adult patients with mCRPC, based on the results of the Phase 3 PROpel trial.

By a vote of 11 to 1 with one abstention, the OADC supported FDA approval of Lynparza plus abi/pred for the first-line treatment of adult patients with BRCA -mutated ( BRCA m) mCRPC.

The committee voted that the FDA should restrict use of Lynparza plus abi/pred to these BRCA m mCRPC patients, recommending against approval beyond this patient population.

The ODAC provides the FDA with independent, expert advice and recommendations on marketed and investigational medicines for use in the treatment of cancer.

The FDA is not bound by the committee’s guidance but takes its advice into consideration.

AstraZeneca and Merck will continue to work with the FDA as the agency completes its review of the application.

Lynparza is also under review in Japan for the treatment of certain patients with mCRPC based on the PROpel trial.

MK-7902, Lenvima, is an oral receptor tyrosine kinase inhibitor currently approved for the treatment of several cancers being developed as part of a collaboration with Eisai.

Merck and Eisai are studying the Keytruda plus Lenvima combination through the LEAP (LEnvatinib And Pembrolizumab) clinical program.

In April 2023, Merck and Eisai announced the discontinuation of the Phase 3 LEAP-003 trial evaluating Keytruda plus Lenvima for the first-line treatment of adults with unresectable or metastatic melanoma based on the recommendation of an independent Data Monitoring Committee, which reviewed data from a planned interim analysis and determined Keytruda plus Lenvima did not demonstrate an improvement in overall survival, one of the study’s dual primary endpoints, versus Keytruda alone.

Merck and Eisai also provided an update on the Phase 3 LEAP-017 trial evaluating Keytruda plus Lenvima for the treatment of patients with unresectable and metastatic colorectal cancer that is mismatch repair proficient or not MSI-H who experienced disease progression on, or became intolerant to, prior therapy.

The trial did not meet statistical significance for its primary endpoint of overall survival in the final pre-specified analysis.

The charts below reflect the Company’s research pipeline as of May 3, 2023.

Lynparza is under review in Japan for the treatment of certain patients with mCRPC based on the PROpel trial.

In July 2023, Merck submitted a Biologics License Application to the FDA for sotatercept (MK-7962), Merck’s novel investigational activin signaling inhibitor for the treatment of adults with pulmonary arterial hypertension (World Health Organization Group 1).

Also in July 2023, Merck and Moderna, Inc.

announced the initiation of the pivotal Phase 3 randomized V940-001 clinical trial evaluating V940 (mRNA-4157), an investigational individualized neoantigen therapy, in combination with Keytruda , as an adjuvant treatment in patients with resected high-risk (Stage IIB-IV) melanoma.

The FDA and EMA granted Breakthrough Therapy Designation and the Priority Medicines (PRIME) scheme, respectively, for V940 (mRNA-4157) in combination with Keytruda for the adjuvant treatment of patients with high-risk melanoma based on data from the Phase 2b KEYNOTE-942/mRNA-4157-P201 study.

KEYNOTE-A86, a study evaluating pembrolizumab subcutaneous versus pembrolizumab intravenous administered with platinum doublet chemotherapy in patients with metastatic squamous or nonsquamous NSCLC, met its dual primary endpoints and Merck anticipates disclosing details in the future.

MK-4482, Lagevrio , is an investigational oral antiviral medicine for the treatment of mild to moderate COVID-19 in adults who are at risk for progressing to severe disease.

Merck is developing Lagevrio in collaboration with Ridgeback.

The FDA granted Emergency Use Authorization for Lagevrio in December 2021, which was last reissued in February 2023.

Lagevrio is authorized for the treatment of adults with a current diagnosis of mild to moderate COVID-19, and who are at high risk for progression to severe COVID-19, including hospitalization or death, and for whom alternative COVID-19 treatment options approved or authorized by the FDA are not accessible or clinically appropriate.

The authorization is based on the Phase 3 MOVe-OUT trial.

Lagevrio is not approved for any use in the U.S.

In November 2021, the EMA issued a positive scientific opinion for Lagevrio , which was intended to support national decision-making on the possible use of Lagevrio prior to marketing authorization.

In October 2021, the EMA initiated a rolling review for Lagevrio for the treatment of COVID-19 in adults.

In February 2023, Merck and Ridgeback announced that the CHMP of the EMA recommended the refusal of the marketing authorization application (MAA) for Lagevrio .

Merck and Ridgeback appealed the decision and requested a re-examination of the MAA.

In June 2023, Merck and Ridgeback announced that they have withdrawn the EU application for marketing authorization of Lagevrio based on the CHMP’s view that the data submitted are not sufficient to satisfy EU regulatory requirements for marketing authorization of Lagevrio .

Applications to other regulatory bodies are underway.

The Company is in the process of discontinuing development of ladiratuzumab vedotin, an ADC targeting LIV-1, which was being developed in collaboration with Seagen Inc.

The charts below reflect the Company’s research pipeline as of August 2, 2023.

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

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Small-Cell Lung

MK-6440 (ladiratuzumab vedotin) (1)(3)

Head and Neck

Non-Small-Cell Lung

Small-Cell Lung

MK-6482 Welireg (3)

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Treatment Resistant Depression

Ulcerative Colitis

Phase 3 (Phase 3 entry date) Under Review

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MK-3475 Keytruda

Biliary (September 2019)

Cutaneous Squamous Cell (August 2019) (EU)

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Small-Cell Lung (May 2017)

MK-3475 (pembrolizumab subcutaneous)

Non-Small-Cell Lung (August 2021)

MK-3475A (pembrolizumab+hyaluronidase subcutaneous)

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Non-Small-Cell Lung (March 2019)

Melanoma (July 2023)

HIV-1 Infection

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New Molecular Entities

Antiviral COVID-19

MK-4482 Lagevrio (EU) (1)(8)

MK-7264 (gefapixant) (U.S.) (8) (EU)

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(KEYNOTE-913) (U.S.)

• First-Line Advanced or Unresectable Biliary Tract Cancer

(KEYNOTE-966) (U.S.) (EU) (JPN)

• First-Line HER2 Negative Locally Advanced Unresectable or Metastatic Gastric Cancer

(KEYNOTE-859) (U.S.) (EU)

(KEYNOTE-859) (U.S.) (EU) (JPN)

• Resectable Stage II, IIIA or IIIB NSCLC

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(KEYNOTE-091) (EU)

• Relapsed or Refractory Primary Mediastinal B-Cell Lymphoma

(KEYNOTE-170/KEYNOTE-A33) (JPN)

• Metastatic HER2+ Gastric Cancer

(KEYNOTE-811) (EU)

MK-7339 Lynparza (1)

• First-Line Metastatic Prostate Cancer

(PROpel) (U.S.) (JPN)

(PROpel) (JPN)

(1) Being developed in a collaboration.

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under Emergency Use Authorization.

(8) Requested re-examination of EU MAA following CHMP recommendation for the refusal of the marketing authorization.

(9) In response to the CRL received from the FDA for this application in January 2022, Merck is performing additional analyses and anticipates submitting this information to the FDA in the second quarter of 2023.

(8) In July 2023, the FDA accepted Merck’s resubmission of the NDA for gefapixant following the Company’s response to the CRL received in January 2022.

Analysis of Liquidity and Capital Resources

($ in millions) March 31, 2023 December 31, 2022

($ in millions) June 30, 2023 December 31, 2022

Cash and investments $ 7,592 $ 14,207

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Total debt to total liabilities and equity 35.3 % 28.1 %

Cash provided by operating activities was $1.3 billion in the first three months of 2023 compared with $4.8 billion in the first three months of 2022 primarily reflecting the impact of lower Lagevrio sales.

Cash provided by operating activities was reduced by milestone payments related to certain collaborations of $115 million and $1.2 billion in the first three months of 2023 and 2022, respectively.

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

Cash used in investing activities was $2.4 billion in the first three months of 2023 compared with $1.2 billion in the first three months of 2022.

The higher use of cash in investing activities was primarily due to the acquisition of Imago and higher purchases of securities and other investments, partially offset by higher proceeds from sales of securities and other investments.

Cash used in financing activities was $2.1 billion in the first three months of 2023 compared with $3.1 billion in the first three months of 2022.

The decrease in cash used in financing activities was primarily due to lower payments on long-term debt, partially offset by treasury stock purchases and higher dividends paid to shareholders.

Capital expenditures totaled $1.0 billion in the first three months of 2023 compared with $984 million in the first three months of 2022.

Cash provided by operating activities was $5.0 billion in the first six months of 2023 compared with $9.1 billion in the first six months of 2022 primarily reflecting the impact of lower Lagevrio sales.

Cash provided by operating activities was reduced by milestone payments related to certain collaborations of $240 million and $1.7 billion in the first six months of 2023 and 2022, respectively.

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

Cash used in investing activities was $13.8 billion in the first six months of 2023 compared with $2.3 billion in the first six months of 2022.

The higher use of cash in investing activities was primarily due to the acquisitions of Prometheus and Imago, partially offset by higher proceeds from sales of securities and other investments, lower purchases of securities and other investments, and lower capital expenditures.

Cash provided by financing activities was $1.7 billion in the first six months of 2023 compared with a use of cash in financing activities of $4.9 billion in the first six months of 2022.

The change was primarily due to proceeds from the issuance of debt (see below) and an increase in short-term borrowings, partially offset by higher payments on long-term debt (see below), treasury stock purchases and higher dividends paid to shareholders.

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

The Company factored $2.4 billion and $2.5 billion of accounts receivable at March 31, 2023 and December 31, 2022, respectively, under these factoring arrangements, which reduced outstanding accounts receivable.

The Company factored $2.9 billion and $2.5 billion of accounts receivable at June 30, 2023 and December 31, 2022, respectively, under these factoring arrangements, which reduced outstanding accounts receivable.

The cash received from the financial institutions is reported within operating activities in the Condensed Consolidated Statement of Cash Flows.

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The net cash flows relating to these collections are reported as financing activities in the Condensed Consolidated Statement of Cash Flows.

Dividends paid to stockholders were $1.9 billion and $1.7 billion for the first three months of 2023 and 2022, respectively.

In January 2023, the Board of Directors declared a quarterly dividend of $0.73 per share on the Company’s outstanding common stock for the first quarter that was paid in April 2023.

As discussed above, in April 2023, Merck announced an agreement to acquire Prometheus for $200 per share in cash for a total equity value of approximately $10.8 billion.

The acquisition is subject to Prometheus shareholder approval.

The transaction is expected to close in the third quarter of 2023.

In May 2023, the Company issued $6.0 billion principal amount of senior unsecured notes consisting of $500 million of 4.05% notes due 2028, $750 million of 4.30% notes due 2030, $1.5 billion of 4.50% notes due 2033, $750 million of 4.90% notes due 2044, $1.5 billion of 5.00% notes due 2053, and $1.0 billion of 5.15% notes due 2063.

The Company used a portion of the $5.9 billion net proceeds from this offering to fund a portion of the cash consideration paid for the acquisition of Prometheus and related fees and expenses, and used the remaining net proceeds for general corporate purposes including to repay commercial paper borrowings and other indebtedness with upcoming maturities.

In May 2023, the Company’s $1.75 billion, 2.80% notes matured in accordance with their terms and were repaid.

In February 2022, the Company’s $1.25 billion, 2.35% notes matured in accordance with their terms and were repaid.

In September 2022, the Company’s $1.0 billion, 2.40% notes matured in accordance with their terms and were repaid.

Dividends paid to stockholders were $3.7 billion and $3.5 billion for the first six months of 2023 and 2022, respectively.

In May 2023, the Board of Directors declared a quarterly dividend of $0.73 per share on the Company’s outstanding common stock for the second quarter that was paid in July 2023.

In July 2023, the Board of Directors declared a quarterly dividend of $0.73 per share on the Company’s outstanding common stock for the third quarter that will be paid in October 2023.

In 2018, Merck’s Board of Directors authorized purchases of up to $10 billion of Merck’s common stock for its treasury.

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

The Company anticipates making modest share repurchases under this program in 2023.

During the first three months of 2023, the Company purchased $149 million (1 million shares) of its common stock for its treasury under this program.

As of March 31, 2023, the Company’s remaining share repurchase authorization was $4.9 billion.

The Company has a $6.0 billion credit facility that matures in June 2026.

The Company has made and anticipates continuing to make modest share repurchases under this program in 2023.

During the first six months of 2023, the Company purchased $487 million (4 million shares) of its common stock for its treasury under this program.

As of June 30, 2023, the Company’s remaining share repurchase authorization was $4.6 billion.

The Company has a $6.0 billion credit facility that matures in May 2028.

The facility provides backup liquidity for the Company’s commercial paper borrowing facility and is to be used for general corporate purposes.

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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