What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-05 compared with 2024-05-03 · 328 added, 191 removed, 906 unchanged (36% of the section changed)

2 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited, $ in millions except per share amounts)

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Sales $ 16,112 $ 15,035 $ 31,887 $ 29,522

6 unchanged sentences

10,106 20,370 20,212 31,207

Income Before Taxes 5,670 3,650

Taxes on Income

Net Income 4,767 2,825

Income (Loss) Before Taxes

6,006 ( 5,335 ) 11,675 ( 1,685 )

Income Tax Provision

545 637 1,447 1,462

Net Income (Loss)

5,461 ( 5,972 ) 10,228 ( 3,147 )

Net Income Attributable to Noncontrolling Interests 6 3 11 7

Net Income Attributable to Merck & Co., Inc.

Net Income (Loss) Attributable to Merck & Co., Inc.

$ 5,455 $ ( 5,975 ) $ 10,217 $ ( 3,154 )

Basic Earnings per Common Share Attributable to Merck & Co., Inc.

Basic Earnings (Loss) per Common Share Attributable to Merck & Co., Inc.

Common Shareholders

Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc.

$ 2.15 $ ( 2.35 ) $ 4.03 $ ( 1.24 )

Earnings (Loss) per Common Share Assuming Dilution Attributable to Merck & Co., Inc.

Common Shareholders

$ 2.14 $ ( 2.35 ) $ 4.02 $ ( 1.24 )

MERCK & CO., INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, $ in millions)

Three Months Ended

Net Income Attributable to Merck & Co., Inc.

June 30, Six Months Ended

2024 2023 2024 2023

Net Income (Loss) Attributable to Merck & Co., Inc.

$ 5,455 $ ( 5,975 ) $ 10,217 $ ( 3,154 )

Other Comprehensive Loss Net of Taxes:

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

Net unrealized gain on derivatives, net of reclassifications

67 145 197 12

Benefit plan net (loss) gain and prior service (cost) credit, net of amortization ( 10 ) ( 25 ) ( 15 ) ( 75 )

1 unchanged sentence

( 87 ) ( 17 ) ( 200 ) ( 132 )

Comprehensive Income Attributable to Merck & Co., Inc.

Comprehensive Income (Loss) Attributable to Merck & Co., Inc.

$ 5,368 $ ( 5,992 ) $ 10,017 $ ( 3,286 )

4 unchanged sentences

(Unaudited, $ in millions except per share amounts)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Current Assets

49 unchanged sentences

(Unaudited, $ in millions)

Three Months Ended

Six Months Ended

Cash Flows from Operating Activities

Net income (loss)

$ 10,228 $ ( 3,147 )

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Amortization 1,087 1,020

3 unchanged sentences

Charge for the acquisition of Harpoon Therapeutics, Inc.

Charge for the acquisition of Prometheus Biosciences, Inc.

Charge for the acquisition of Imago BioSciences, Inc.

1 unchanged sentence

Share-based compensation 379 314

Other 83 ( 197 )

Net changes in assets and liabilities ( 4,394 ) ( 4,526 )

5 unchanged sentences

Acquisition of Harpoon Therapeutics, Inc., net of cash acquired

Acquisition of Prometheus Biosciences, Inc., net of cash acquired

Acquisition of Imago BioSciences, Inc., net of cash acquired — ( 1,327 )

2 unchanged sentences

Cash Flows from Financing Activities

Net change in short-term borrowings

Proceeds from issuance of debt

Payments on debt ( 751 ) ( 1,751 )

3 unchanged sentences

Other ( 298 ) ( 315 )

Net Cash Used in Financing Activities

Net Cash (Used in) Provided by Financing Activities

( 1,598 ) 1,704

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash ( 220 ) ( 6 )

Net Decrease in Cash, Cash Equivalents and Restricted Cash

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash

4,464 ( 7,061 )

2 unchanged sentences

Cash, Cash Equivalents and Restricted Cash at End of Period (includes restricted cash of $ 69

and $ 79 at March 31, 2024 and 2023, respectively, included in Other current assets )

and $ 52 at June 30, 2024 and 2023, respectively, included in Other current assets )

$ 11,373 $ 5,712

9 unchanged sentences

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

Recently Issued Accounting Standards Not Yet Adopted

Recently Adopted Accounting Standard

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

1 unchanged sentence

The amended guidance is effective prospectively for all joint ventures with a formation date on or after January 1, 2025, however existing joint ventures have the option to apply the guidance retrospectively.

Early adoption is permitted for both interim and annual periods.

The Company anticipates there will be no impact to its consolidated financial statements upon adoption.

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

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

Recently Issued Accounting Standards Not Yet Adopted

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

3 unchanged sentences

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

The guidance is effective for 2025 annual reporting.

The guidance is effective beginning with 2025 annual reporting.

Early adoption is permitted.

9 unchanged sentences

2024 Transactions

In July 2024, Merck acquired the aqua business of Elanco Animal Health Incorporated (Elanco) for approximately $ 1.3 billion.

The Elanco aqua business consists of an innovative portfolio of medicines and vaccines, nutritionals and supplements for aquatic species;

two related aqua manufacturing facilities in Canada and Vietnam;

as well as a research facility in Chile.

The acquisition broadens Animal Health’s aqua portfolio with products such as Clynav, a new generation DNA-based vaccine that protects Atlantic salmon against pancreas disease, and Imvixa, an anti-parasitic sea lice treatment.

This acquisition also brings a portfolio of water treatment products for warm water production, complementing Animal Health’s warm water vaccine portfolio.

In addition to these products, the DNA-based vaccine technology that is a part of the business has the potential to accelerate the development of novel vaccines to address the unmet needs of the aqua industry.

The Company is in the process of determining the preliminary fair value of assets acquired, liabilities assumed and total consideration transferred in this transaction, which will be accounted for as a business combination.

Also in July 2024, Merck acquired Eyebiotech Limited (EyeBio), a privately held ophthalmology-focused biotechnology company for an upfront payment of $ 1.3 billion.

The acquisition agreement also provides for a further $ 1.7 billion in potential developmental, regulatory and sales-based milestone payments.

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

EyeBio’s lead candidate, Restoret /MK-3000 (formerly EYE103), is an investigational, potentially first-in-class tetravalent, tri-specific antibody that acts as an agonist of the Wingless-related integration site signaling pathway, which is in clinical development for the treatment of diabetic macular edema and neovascular age-related macular degeneration.

The transaction

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

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

Merck will record a charge of approximately $ 1.3 billion to Research and development expenses in the third quarter of 2024.

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

With the exercise of the option, Merck will assume full responsibility for all past and future development and commercialization expenses associated with the candidates covered by the original agreement.

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

Orion will retain responsibility for the manufacture of clinical and commercial supply for Merck.

No payment was associated with the exercise of the option.

The exclusive global license is expected to become effective in the third quarter of 2024, but is subject to certain conditions, including approval under the Hart-Scott-Rodino Antitrust Improvements Act, and other customary conditions.

In March 2024, Merck acquired Harpoon Therapeutics, Inc.

4 unchanged sentences

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

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

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

There are no future contingent payments associated with the acquisition.

In February 2024, Merck entered into a definitive agreement to acquire the aqua business of Elanco Animal Health Incorporated (Elanco) for $ 1.3 billion in cash.

The Elanco aqua business to be acquired consists of an innovative portfolio of medicines and vaccines, nutritionals and supplements for aquatic species;

two related aqua manufacturing facilities in Canada and Vietnam;

as well as a research facility in Chile.

Upon closing, the acquisition will broaden Animal Health’s aqua portfolio with products, such as Clynav, a new generation DNA-based vaccine that protects Atlantic salmon against pancreas disease, and Imvixa, an anti-parasitic sea lice treatment.

This acquisition also brings a portfolio of water treatment products for warm water production, complementing Animal Health’s warm water vaccine portfolio.

In addition to these products, the DNA-based vaccine

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

technology that is a part of the business has the potential to accelerate the development of novel vaccines to address the unmet needs of the aqua industry.

The acquisition is expected to be completed by mid-2024, subject to approvals from regulatory authorities and other customary closing conditions.

The transaction will be accounted for as a business combination.

2023 Transactions

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.

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

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

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

A Phase 3 clinical trial evaluating tulisokibart for ulcerative colitis commenced in 2023.

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

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

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 as a charge to Research and development expenses in the first quarter of 2023.

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

In October 2023, Merck notified Kelun-Biotech it was terminating two of the seven candidates under the agreement.

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

Kelun-Biotech remains eligible to receive future contingent payments aggregating up to $ 600 million in development-related payments, $ 1.6 billion in regulatory milestones, and $ 3.1 billion in sales-based milestones if Kelun-Biotech does not retain Chinese mainland, Hong Kong and Macau rights for the option ADCs and all remaining candidates achieve regulatory approval.

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

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

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

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

3 unchanged sentences

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

A Phase 3 clinical trial evaluating bomedemstat for the treatment of certain patients with essential thrombocythemia is underway.

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

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

A Phase 3 clinical trial evaluating bomedemstat for the

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

treatment of certain patients with essential thrombocythemia is underway.

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

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

There are no future contingent payments associated with the acquisition.

2 unchanged sentences

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

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

As of June 30, 2024, only one jurisdiction remains under an interim operating agreement.

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

The amounts included in the condensed consolidated statement of income for the above MSAs include sales of $ 107 million and $ 94 million and related cost of sales of $ 110 million and $ 107 million for the first quarter of 2024 and 2023, respectively.

The amounts due from Organon for all spin-off related agreements were $ 462 million and $ 632 million at March 31, 2024 and December 31, 2023, respectively, and are reflected in Other current assets .

The amounts due to Organon under these agreements were $ 193 million and $ 598 million at March 31, 2024 and December 31, 2023, respectively, and are included in Accrued and other current liabilities .

The amounts included in the condensed consolidated statement of operations for the above MSAs include sales of $ 93 million and $ 96 million and related cost of sales of $ 92 million and $ 101 million for the second quarter of 2024 and 2023, respectively, and sales of $ 201 million and $ 191 million and related cost of sales of $ 202 million and $ 208 million for the first six months of 2024 and 2023, respectively.

The amounts due from Organon for all spin-off related agreements were $ 557 million and $ 632 million at June 30, 2024 and December 31, 2023, respectively, and are reflected in Other current assets .

The amounts due to Organon under these agreements were $ 102 million and $ 598 million at June 30, 2024 and December 31, 2023, respectively, and are included in Accrued and other current liabilities .

Collaborative Arrangements

11 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

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

1 unchanged sentence

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

Accordingly, Merck recorded a $ 600 million liability (which remained accrued at March 31, 2024) and a corresponding increase to the intangible asset related to Lynparza.

Accordingly, Merck recorded a $ 600 million liability (which remained accrued at June 30, 2024) and a corresponding increase to the intangible asset related to Lynparza.

Potential future sales-based milestone payments of $ 2.1 billion have not yet been accrued as they are not deemed by the Company to be probable at this time.

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

Potential future regulatory milestone payments of $ 650 million remain under the agreement.

The intangible asset balance related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) was $ 1.4 billion at March 31, 2024 and is included in Other Intangibles, Net .

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

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

The intangible asset balance related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) was $ 1.3 billion at June 30, 2024 and is included in Other Intangibles, Net .

The amount is being amortized over its estimated useful life through 2028 as supported by projected future cash flows, subject to impairment testing.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Summarized financial information related to this collaboration is as follows:

Three Months Ended

June 30, Six Months Ended

($ in millions) 2024 2023 2024 2023

3 unchanged sentences

Cost of sales (1)

82 78 163 148

Selling, general and administrative 43 51 82 98

Research and development 18 22 38 43

($ in millions) March 31, 2024 December 31, 2023

($ in millions) June 30, 2024 December 31, 2023

Receivables from AstraZeneca included in Other current assets

15 unchanged sentences

Similarly, in the third quarter of 2023 an additional $ 125 million sales-based milestone payment to Eisai was deemed by the Company to be probable of payment.

Accordingly, Merck recorded $ 250 million of liabilities for these payments (of which $ 125 million was subsequently paid in the second quarter of 2023 and $ 125 million remained accrued at March 31, 2024) and corresponding increases to the intangible asset related to Lenvima.

Accordingly, Merck recorded $ 250 million of liabilities for these payments (one of which was paid in the second quarter of 2023 and the other was paid in the second quarter of 2024) and corresponding increases to the intangible asset related to Lenvima.

Merck also recognized $ 72 million and $ 81 million of cumulative amortization catch-up expense related to the recognition of these milestones in the first and third quarters of 2023, respectively.

1 unchanged sentence

There are no regulatory milestone payments remaining under the agreement.

The intangible asset balance related to Lenvima (which includes capitalized sales-based and regulatory milestone payments) was $ 623 million at March 31, 2024 and is included in Other Intangibles, Net .

The intangible asset balance related to Lenvima (which includes capitalized sales-based and regulatory milestone payments) was $ 563 million at June 30, 2024 and is included in Other Intangibles, Net .

The amount is being amortized over its estimated useful life through 2026 as supported by projected future cash flows, subject to impairment testing.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

($ in millions) 2024 2023 2024 2023

1 unchanged sentence

Cost of sales (1)

60 57 121 183

Selling, general and administrative 41 48 80 99

Research and development 6 17 13 56

($ in millions) March 31, 2024 December 31, 2023

($ in millions) June 30, 2024 December 31, 2023

Receivables from Eisai included in Other current assets

1 unchanged sentence

(1) Represents amortization of capitalized milestone payments.

Amount in the first quarter of 2023 includes $ 72 million of cumulative amortization catch-up expense as noted above.

Amount in the first six months of 2023 includes $ 72 million of cumulative amortization catch-up expense as noted above.

(2) Represents an accrued milestone payment.

10 unchanged sentences

There are no sales-based milestone payments remaining under this collaboration.

The intangible asset balances related to Adempas (which includes the acquired intangible asset balance, as well as capitalized sales-based milestone payments attributed to Adempas) and Verquvo (which reflects the portion of the final sales-based milestone payment that was attributed to Verquvo) were $ 483 million and $ 49 million, respectively, at March 31, 2024 and are included in Other Intangibles, Net .

The intangible asset balances related to Adempas (which includes the acquired intangible asset balance, as well as capitalized sales-based milestone payments attributed to Adempas) and Verquvo (which reflects the portion of the final sales-based milestone payment that was attributed to Verquvo) were $ 445 million and $ 47 million, respectively, at June 30, 2024 and are included in Other Intangibles, Net .

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

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

($ in millions) 2024 2023 2024 2023

4 unchanged sentences

Cost of sales (1)

61 56 123 113

Selling, general and administrative 26 34 59 67

Research and development 28 25 55 50

($ in millions) March 31, 2024 December 31, 2023

($ in millions) June 30, 2024 December 31, 2023

Receivables from Bayer included in Other current assets

13 unchanged sentences

Three Months Ended

June 30, Six Months Ended

($ in millions) 2024 2023 2024 2023

Net sales of Lagevrio recorded by Merck

$ 110 $ 203 $ 460 $ 595

Cost of sales (1)

96 193 287 414

Selling, general and administrative

Research and development

($ in millions) March 31, 2024 December 31, 2023

($ in millions) June 30, 2024 December 31, 2023

Receivables from Ridgeback included in Other current assets

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

13 unchanged sentences

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

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

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

Merck includes its share of development costs associated with the collaboration as part of Research and development expenses.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

($ in millions) 2024 2023 2024 2023

1 unchanged sentence

Research and development

($ in millions) March 31, 2024 December 31, 2023

($ in millions) June 30, 2024 December 31, 2023

Payables to Daiichi Sankyo included in Accrued and other current liabilities

6 unchanged sentences

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

Merck has also capitalized certain of the shared costs, which aggregated $ 110 million at March 31, 2024 and will be amortized over the assets’ estimated useful lives.

Merck has also capitalized certain of the shared costs, which aggregated $ 135 million at June 30, 2024 and will be amortized over the assets’ estimated useful lives.

Summarized financial information related to this collaboration is as follows:

Three Months Ended

June 30, Six Months Ended

($ in millions) 2024 2023 2024 2023

1 unchanged sentence

Research and development

($ in millions) March 31, 2024 December 31, 2023

($ in millions) June 30, 2024 December 31, 2023

Payables to Moderna included in Accrued and other current liabilities

7 unchanged sentences

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

Alliance revenue related to this collaboration, consisting of royalties (recorded within Sales ) was $ 71 million and $ 43 million in the first quarter of 2024 and 2023, respectively.

Alliance revenue related to this collaboration, consisting of royalties (recorded within Sales ) was $ 90 million and $ 161 million in the second quarter and first six months of 2024, respectively, compared with $ 47 million and $ 90 million in the second quarter and first six months of 2023, respectively.

Restructuring

3 unchanged sentences

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

The Company recorded total pretax costs of $ 246 million in the first quarter of 2024 related to the 2024 Restructuring Program, bringing total cumulative pretax costs incurred through March 31, 2024 to $ 436 million.

The Company recorded total pretax costs of $ 177 million and $ 422 million in the second quarter and first six months of 2024, respectively, related to the 2024 Restructuring Program, bringing total cumulative pretax costs incurred through June 30, 2024 to $ 613 million.

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

The Company recorded total pretax costs of $ 97 million in the first quarter of 2023 related to the 2019 Restructuring Program.

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

For segment reporting, restructuring charges are unallocated expenses.

The Company recorded total pretax costs of $ 236 million and $ 333 million in the second quarter and first six months of 2023, respectively, related to the 2019 Restructuring Program.

The actions under the 2019 Restructuring Program were

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

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

For segment reporting, restructuring charges are unallocated expenses.

The following tables summarize the charges related to the restructuring programs by type of cost:

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

($ in millions) Accelerated Depreciation

1 unchanged sentence

Other Exit Costs

Total Accelerated

Separation Costs

2024 Restructuring Program

4 unchanged sentences

$ 66 $ 19 $ 92 $ 177 $ 131 $ 111 $ 180 $ 422

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

($ in millions) Accelerated Depreciation

1 unchanged sentence

Other Exit Costs

Total Accelerated

Separation Costs

2019 Restructuring Program

1 unchanged sentence

Selling, general and administrative — — 52 52 — — 53 53

Research and development — — 1 1 — — 1 1

Restructuring costs — 110 41 151 — 151 67 218

7 unchanged sentences

Additionally, other activity includes certain employee-related costs associated with pension and other postretirement benefit plans (see Note 10) and share-based compensation.

The following table summarizes the charges and spending relating to restructuring program activities for the three months ended March 31, 2024:

The following table summarizes the charges and spending relating to restructuring program activities for the six months ended June 30, 2024:

($ in millions) Accelerated Depreciation

5 unchanged sentences

Non-cash activity ( 131 ) — ( 111 ) ( 242 )

Restructuring reserves March 31, 2024

Restructuring reserves June 30, 2024

$ — $ 660 $ 27 $ 687

2 unchanged sentences

The Company manages the impact of foreign exchange rate movements and interest rate movements on its earnings, cash flows and fair values of assets and liabilities through operational means and through the use of various financial instruments, including derivative instruments.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

A significant portion of the Company’s revenues and earnings in foreign affiliates is exposed to changes in foreign exchange rates.

2 unchanged sentences

The Company has established revenue hedging, balance sheet risk management and net investment hedging programs to protect against volatility of future foreign currency cash flows and changes in fair value caused by changes in foreign exchange rates.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

The objective of the revenue hedging program is to reduce the variability caused by changes in foreign exchange rates that would affect the U.S.

26 unchanged sentences

Foreign exchange risk is also managed through the use of foreign currency debt.

The Company’s senior unsecured euro-denominated notes have been designated as, and are effective as, economic hedges of the net investment in a foreign operation.

A portion of the Company’s senior unsecured euro-denominated notes have been designated as, and are effective as, economic hedges of the net investment in a foreign operation.

Accordingly, foreign currency transaction gains or losses due to spot rate fluctuations on the euro-denominated debt instruments are included in foreign currency translation adjustment within OCI .

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

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

1 unchanged sentence

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

Three Months Ended March 31, Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30, Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2024 2023 2024 2023 2024 2023 2024 2023

6 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

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

March 31, 2024

At June 30, 2024, the Company was a party to six pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of a portion of fixed-rate notes as detailed in the table below.

June 30, 2024

($ in millions)

7 unchanged sentences

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

In April 2024, the Company entered into two additional interest rate swaps with notional amounts of $ 250 million each also related to its 4.50 % notes due 2033.

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

2 unchanged sentences

($ in millions)

March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023

Balance Sheet Caption

2 unchanged sentences

Presented in the table below is the fair value of derivatives on a gross basis segregated between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Fair Value of Derivative U.S.

17 unchanged sentences

As noted above, the Company records its derivatives on a gross basis in the Condensed Consolidated Balance Sheet.

The Company has master netting agreements with several of its financial institution counterparties (see Concentrations of Credit Risk below).

The Company has master netting agreements with several of its financial institution counterparties (see Concentrations of

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Credit Risk below).

The following table provides information on the Company’s derivative positions subject to these master netting arrangements as if they were presented on a net basis, allowing for the right of offset by counterparty and cash collateral exchanged per the master agreements and related credit support annexes:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

($ in millions) Asset Liability Asset Liability

4 unchanged sentences

Net amounts $ 254 $ 28 $ 124 $ 24

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023

Financial Statement Caption in which Effects of Fair Value or Cash Flow

Hedges are Recorded

Sales Other (income) expense, net (1)

Hedges are Recorded Sales Other (income) expense, net (1)

Other comprehensive income (loss) Sales Other (income) expense, net (1)

Other comprehensive income (loss)

6 unchanged sentences

Foreign exchange contracts

Amount of gain (loss) recognized in OCI on derivatives

Amount of gain recognized in OCI on derivatives

— — — — 139 194 — — — — 348 128

4 unchanged sentences

— — — — — — — — ( 1 ) ( 1 ) — —

Amount of loss recognized in OCI on derivatives

Amount of gain recognized in OCI on derivatives

— — — — — 13 — — — — ( 1 ) 13

2 unchanged sentences

Amount of Derivative Pretax (Gain) Loss Recognized in Income

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

($ in millions) 2024 2023 2024 2023

6 unchanged sentences

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

At March 31, 2024, the Company estimates $ 113 million of pretax net unrealized gains on derivatives maturing within the next 12 months that hedge foreign currency denominated sales over that same period will be reclassified from AOCL to Sales .

At June 30, 2024, the Company estimates $ 190 million of pretax net unrealized gains on derivatives maturing within the next 12 months that hedge foreign currency denominated sales over that same period will be reclassified from AOCL to Sales .

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

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

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Investments in Debt and Equity Securities

Information on investments in debt and equity securities is as follows:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cost Gross Unrealized Fair

2 unchanged sentences

($ in millions) Gains Losses Gains Losses

Commercial paper $ 40 $ — $ — $ 40 $ 252 $ — $ — $ 252

government and agency securities $ 77 $ — $ — $ 77 $ 72 $ — $ — $ 72

Commercial paper 50 — — 50 252 — — 252

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

2 unchanged sentences

Total debt and publicly traded equity securities $ 1,153 $ 1,101

(1) Unrealized net gains of $ 143 million were recorded in Other (income) expense, net in the first quarter of 2024 on equity securities still held at March 31, 2024.

Unrealized net gains of $ 338 million were recorded in Other (income) expense, net in the first quarter of 2023 on equity securities still held at March 31, 2023.

At March 31, 2024 and March 31, 2023, the Company also had $ 851 million and $ 942 million, respectively, of equity investments without readily determinable fair values included in Other Assets .

(1) Unrealized net losses (gains) of $ 8 million and $( 125 ) million were recorded in Other (income) expense, net in the second quarter and first six months of 2024, respectively, on equity securities still held at June 30, 2024.

Unrealized net losses (gains) of $ 71 million and $( 267 ) million were recorded in Other (income) expense, net in the second quarter and first six months of 2023, respectively, on equity securities still held at June 30, 2023.

At June 30, 2024 and June 30, 2023, the Company also had $ 936 million and $ 949 million, respectively, of equity investments without readily determinable fair values included in Other Assets .

The Company records unrealized gains on these equity investments based on favorable observable price changes from transactions involving similar investments of the same investee and records unrealized losses based on unfavorable observable price changes, which are included in Other (income) expense, net .

During the first quarter of 2024 , the Company recorded unrealized gains of $ 4 million and unrealized losses of $ 5 million related to certain of these equity investments still held at March 31, 2024.

During the first quarter of 2023 , the Company recorded unrealized gains of $ 1 million and unrealized losses of $ 21 million related to certain of these equity investments still held at March 31, 2023.

Cumulative unrealized gains and cumulative unrealized losses based on observable

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

price changes for investments in equity investments without readily determinable fair values still held at March 31, 2024 were $ 297 million and $ 69 million, respectively.

At March 31, 2024 and March 31, 2023, the Company also had $ 396 million and $ 725 million, respectively, recorded in Other Assets for equity securities held through ownership interests in investment funds.

Losses (gains) recorded in Other (income) expense, net relating to these investment funds were $ 2 million and $( 132 ) million for the first quarter of 2024 and 2023, respectively.

During the first six months of 2024 , the Company recorded unrealized gains of $ 61 million and unrealized losses of $ 5 million related to certain of these equity investments still held at June 30, 2024.

During the first six months of 2023 , the Company recorded unrealized gains of $ 3 million and unrealized losses of $ 23 million related to certain of these equity investments still held at June 30, 2023.

Cumulative unrealized gains and cumulative unrealized losses based on observable price changes for investments in equity investments without readily determinable fair values still held at June 30, 2024 were $ 355 million and $ 69 million, respectively.

At June 30, 2024 and June 30, 2023, the Company also had $ 278 million and $ 622 million, respectively, recorded in Other Assets for equity securities held through ownership interests in investment funds.

(Gains) losses recorded in Other (income) expense, net relating to these investment funds were $( 7 ) million and $ 105 million for the second quarter of 2024 and 2023, respectively, and were $( 5 ) million and $( 27 ) million for the first six months of 2024 and 2023, respectively.

Fair Value Measurements

7 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

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

2 unchanged sentences

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

($ in millions) March 31, 2024 December 31, 2023

($ in millions) June 30, 2024 December 31, 2023

Commercial paper $ — $ 50 $ — $ 50 $ — $ 252 $ — $ 252

22 unchanged sentences

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

(2) Balance at March 31, 2024 includes securities with a fair value of $ 266 million, which are subject to a contractual sale restriction that expires in July 2024.

(2) Balance at June 30, 2024 includes securities with a fair value of $ 285 million, which were subject to a contractual sale restriction that expired in July 2024.

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

As of March 31, 2024 and December 31, 2023, Cash and cash equivalents included $ 4.6 billion and $ 6.0 billion of cash equivalents, respectively (which would be considered Level 2 in the fair value hierarchy).

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

As of June 30, 2024 and December 31, 2023, Cash and cash equivalents included $ 10.5 billion and $ 6.0 billion of cash equivalents, respectively (which would be considered Level 2 in the fair value hierarchy).

Contingent Consideration

4 unchanged sentences

Payments ( 126 ) ( 117 )

Fair value March 31 (2)

Fair value June 30 (2)

(1) Recorded in Cost of sales, Research and development expenses, and Other (income) expense, net .

Includes cumulative translation adjustments.

(2) Balance at March 31, 2024, includes $ 133 million of current liabilities, all of which relate to the termination of the Sanofi Pasteur MSD joint venture in 2016.

(2) Balance at June 30, 2024, includes $ 131 million of current liabilities, all of which relate to the termination of the Sanofi Pasteur MSD joint venture in 2016.

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

3 unchanged sentences

Some of the Company’s financial instruments, such as cash and cash equivalents, receivables and payables, are reflected in the balance sheet at carrying value, which approximates fair value due to their short-term nature.

The estimated fair value of loans payable and long-term debt (including current portion) at March 31, 2024, was $ 30.4 billion compared with a carrying value of $ 34.2 billion and at December 31, 2023, was $ 32.0 billion compared with a carrying value of $ 35.1 billion.

The estimated fair value of loans payable and long-term debt (including current portion) at June 30, 2024, was $ 33.5 billion compared with a carrying value of $ 37.8 billion and at December 31, 2023, was $ 32.0 billion compared with a carrying

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

value of $ 35.1 billion.

Fair value was estimated using recent observable market prices and would be considered Level 2 in the fair value hierarchy.

7 unchanged sentences

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

The Company factored $ 2.7 billion and $ 3.0 billion of accounts receivable as of March 31, 2024 and December 31, 2023, respectively, under these factoring arrangements, which reduced outstanding accounts receivable.

The Company factored $ 2.9 billion and $ 3.0 billion of accounts receivable as of June 30, 2024 and December 31, 2023, respectively, under these factoring arrangements, which reduced outstanding accounts receivable.

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

In certain of these factoring arrangements, for ease of administration, the Company will collect customer payments related to the factored receivables, which it then remits to the financial institutions, generally within thirty days after receipt.

As of March 31, 2024 and December 31, 2023, the Company had collected $ 43 million and $ 44 million, respectively, on behalf of the financial institutions, which is reflected as restricted cash in Other current assets and the related obligation to remit the cash within Accrued and other current liabilities .

As of June 30, 2024 and December 31, 2023, the Company had collected $ 42 million and $ 44 million, respectively, on behalf of the financial institutions, which is reflected as restricted cash in Other current assets and the related obligation to remit the cash within Accrued and other current liabilities .

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

3 unchanged sentences

These annexes contain provisions that require collateral to be exchanged depending on the value of the derivative assets and liabilities, the Company’s credit rating, and the credit rating of the counterparty.

Cash collateral received by the Company from various counterparties was $ 58 million and $ 3 million at March 31, 2024 and December 31, 2023, respectively.

Cash collateral received by the Company from various counterparties was $ 123 million and $ 3 million at June 30, 2024 and December 31, 2023, respectively.

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

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Inventories consisted of:

($ in millions) March 31, 2024 December 31, 2023

($ in millions) June 30, 2024 December 31, 2023

Finished goods $ 1,889 $ 1,954

8 unchanged sentences

Amounts recognized as Other Assets are comprised almost entirely of raw materials and work in process inventories.

At both March 31, 2024 and December 31, 2023, these amounts included $ 2.6 billion of inventories not expected to be sold within one year.

In addition, these amounts included $ 861 million and $ 790 million at March 31, 2024 and December 31, 2023, respectively, of inventories produced in preparation for product launches.

At June 30, 2024 and December 31, 2023, these amounts included $ 3.2 billion and $ 2.6 billion, respectively, of inventories not expected to be sold within one year.

In addition, these amounts included $ 250 million and $ 790 million at June 30, 2024 and December 31, 2023, respectively, of inventories produced in preparation for product launches.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Long-Term Debt

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

The Company has fully and unconditionally guaranteed all of MSD Netherlands Capital B.V.’s obligations under the Euronotes and no other subsidiary of the Company will guarantee these obligations.

MSD Netherlands Capital B.V.

is a “finance subsidiary” as defined in Rule 13-01(a)(4)(vi) of Regulation S-X of the Exchange Act, with no assets or operations other than those related to the issuance, administration and repayment of the Euronotes.

The financial condition, results of operations and cash flows of MSD Netherlands Capital B.V.

are consolidated in the financial statements of the Company.

The net cash proceeds from the offering were used for general corporate purposes.

Contingencies

11 unchanged sentences

Scholl’s Foot Powder

Merck is a defendant in product liability lawsuits in the U.S.

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

arising from consumers’ alleged exposure to talc in Dr.

1 unchanged sentence

In these actions, plaintiffs allege that they were exposed to asbestos-contaminated talc and developed mesothelioma as a result.

As of March 31, 2024, approximately 275 cases were pending against Merck in various state courts.

As of June 30, 2024, approximately 290 cases were pending against Merck in various state courts.

Gardasil/Gardasil 9

1 unchanged sentence

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

As of March 31, 2024, approximately 190 cases were filed and pending against Merck in either federal or state court.

As of June 30, 2024, approximately 210 cases were filed and pending against Merck in either federal or state court.

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

3 unchanged sentences

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

There are fewer than 15 product liability cases pending outside the U.S.

One state court action in Los Angeles County is scheduled to commence trial on October 7, 2024.

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

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Governmental Proceedings

Civil Investigative Demand

In June 2024, Merck received a Civil Investigative Demand (CID) from the U.S.

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

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

The Company is cooperating with the investigation.

Other Matters

As previously disclosed, from time to time, the Company’s subsidiaries in China receive inquiries regarding their operations from various Chinese governmental agencies.

5 unchanged sentences

Should those proceedings be determined adversely to the Company, monetary fines and/or remedial undertakings may be required.

Commercial and Other Litigation

Zetia Antitrust Litigation

As previously disclosed, Merck, Merck Sharp & Dohme, LLC.

(MSD), Schering Corporation, Schering-Plough Corporation, and MSP Singapore Company LLC (collectively, the Merck Defendants) were defendants in a number of lawsuits filed in 2018 on behalf of direct and indirect purchasers of Zetia alleging violations of federal and state antitrust laws, as well as other state statutory and common law causes of action.

The cases were consolidated in a federal multidistrict litigation (the Zetia MDL) before Judge Rebecca Beach Smith in the Eastern District of Virginia.

As previously disclosed, in April 2023, the Merck Defendants reached settlements with the direct purchaser and retailer plaintiffs and a proposed settlement, subject to court approval, with the indirect purchaser class.

Under these agreements, Merck agreed to pay $ 572.5 million to resolve the direct purchaser, retailer, and indirect purchaser plaintiffs’ claims, which was recorded as an expense in the Company’s financial results in the first quarter of 2023.

In October 2023, the court granted final approval of the indirect purchaser class settlement.

In 2020 and 2021, United Healthcare Services, Inc.

(United Healthcare), Humana Inc.

(Humana), Centene Corporation and others (Centene), and Kaiser Foundation Health Plan, Inc.

(Kaiser) (collectively, the Insurer Plaintiffs), each filed a lawsuit in a jurisdiction outside of the Eastern District of Virginia against the Merck Defendants and others, making similar allegations as those made in the Zetia MDL, as well as additional allegations about Vytorin.

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

In February 2022, the Insurer Plaintiffs filed amended complaints.

In March 2022, the Merck Defendants, jointly with other defendants, moved to dismiss certain aspects of the Insurer Plaintiffs’ complaints, including any claims for Vytorin damages.

In December 2023, prior to a decision on the motion to dismiss, the U.S.

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

On March 15, 2024, the Merck Defendants filed motions to dismiss the Humana and Centene cases.

Qui Tam Litigation

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

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

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

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

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

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

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

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

Relators have appealed that decision.

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

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

The Company has appealed the antitrust decision.

Patent Litigation

5 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

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

4 unchanged sentences

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

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

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

14 unchanged sentences

On February 5, 2024, the Company received another Paragraph IV Certification Letter under the Hatch-Waxman Act notifying the Company that Hikma Pharmaceuticals USA Inc.

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

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

On March 15, 2024, the Company filed a patent infringement lawsuit in the U.S.

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

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

Expiration of the patent, and any potentially applicable pediatric

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

exclusivity, will occur earlier than expiry of the 30-month stay.

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

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

15 unchanged sentences

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

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

As a result of these settlement agreements related to the later expiring 2027 salt/polymorph patent directed to the specific sitagliptin salt form of the products, the Company expects that Januvia and Janumet will not lose market exclusivity in the U.S.

3 unchanged sentences

Prior to expiration, generic companies sought revocation of the Janumet SPCs in a number of European countries.

In February 2022, a Finnish court referred certain questions to the Court of Justice of the European Union (CJEU) that could determine the validity of the Janumet SPCs in Europe, for which an oral hearing was held in March 2023 and an Advocate General Opinion is expected in June 2024 with a decision later in 2024.

In February 2022, a Finnish court referred certain questions to the Court of Justice of the European Union (CJEU) that could determine the validity of the Janumet SPCs in Europe, for which an oral hearing was held in March 2023 and an Advocate General Opinion was received on June 6, 2024, with a decision expected later in 2024.

If the CJEU renders a decision that negatively impacts the validity of the Janumet SPCs throughout Europe, generic companies that were prevented from launching products during the SPC period in certain European countries may have an action for damages.

15 unchanged sentences

patents, including a demand for damages.

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

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

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

asserted in the case.

On June 13, 2024, the PTAB instituted a review of one of the asserted patents.

The additional IPR petitions and institution decisions are all still pending.

On July 1, 2024, the District Court granted Merck’s motion to stay the case in its entirety pending the outcome of the PTAB proceeding.

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

3 unchanged sentences

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

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

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

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

1 unchanged sentence

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

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

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

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

District Court for the District of New Jersey against Cipla.

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

Other Litigation

9 unchanged sentences

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

The amount of legal defense reserves as of March 31, 2024 and December 31, 2023 of approximately $ 220 million and $ 210 million, respectively, represents the Company’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation;

The amount of legal defense reserves as of June 30, 2024 and December 31, 2023 of approximately $ 215 million and $ 210 million, respectively, represents the Company’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation;

however, events such as additional trials and other events that could arise in the course of its litigation could affect the ultimate amount of legal defense costs to be incurred by the Company.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Three Months Ended March 31,

Three Months Ended June 30,

Common Stock Other

5 unchanged sentences

($ and shares in millions except per share amounts) Shares Par Value Shares Cost

Balance at January 1, 2023

Balance at April 1, 2023

3,577 $ 1,788 $ 44,467 $ 62,039 $ ( 4,883 ) 1,040 $ ( 56,577 ) $ 71 $ 46,905

Net loss attributable to Merck & Co., Inc.

— — — ( 5,975 ) — — — — ( 5,975 )

Other comprehensive loss, net of taxes — — — — ( 17 ) — — — ( 17 )

Cash dividends declared on common stock ($ 0.73 per share)

— — — ( 1,866 ) — — — — ( 1,866 )

Treasury stock shares purchased — — — — — 3 ( 338 ) — ( 338 )

Share-based compensation plans and other — — ( 248 ) — — ( 5 ) 303 — 55

Net income attributable to noncontrolling interests — — — — — — — 3 3

Distributions attributable to noncontrolling interests — — — — — — — ( 25 ) ( 25 )

Balance at June 30, 2023 3,577 $ 1,788 $ 44,219 $ 54,198 $ ( 4,900 ) 1,038 $ ( 56,612 ) $ 49 $ 38,742

Balance at April 1, 2024

3,577 $ 1,788 $ 44,598 $ 56,697 $ ( 5,274 ) 1,044 $ ( 57,445 ) $ 60 $ 40,424

Net income attributable to Merck & Co., Inc.

1 unchanged sentence

Other comprehensive loss, net of taxes

— — — — ( 87 ) — — — ( 87 )

Cash dividends declared on common stock ($ 0.77 per share)

3 unchanged sentences

Net income attributable to noncontrolling interests — — — — — — — 6 6

Balance at March 31, 2023 3,577 $ 1,788 $ 44,467 $ 62,039 $ ( 4,883 ) 1,040 $ ( 56,577 ) $ 71 $ 46,905

Balance at June 30, 2024 3,577 $ 1,788 $ 44,362 $ 60,187 $ ( 5,361 ) 1,041 $ ( 57,394 ) $ 66 $ 43,648

Six Months Ended June 30,

Common Stock Other

Capital Retained

Earnings Accumulated

Comprehensive

Loss Treasury Stock Non-

Interests Total

($ and shares in millions except per share amounts) Shares Par Value Shares Cost

Balance at January 1, 2023

3,577 $ 1,788 $ 44,379 $ 61,081 $ ( 4,768 ) 1,039 $ ( 56,489 ) $ 67 $ 46,058

Net income attributable to Merck & Co., Inc.

Net loss attributable to Merck & Co., Inc.

— — — ( 3,154 ) — — — — ( 3,154 )

Other comprehensive loss, net of taxes — — — — ( 132 ) — — — ( 132 )

Cash dividends declared on common stock ($ 1.46 per share)

— — — ( 3,729 ) — — — — ( 3,729 )

Treasury stock shares purchased — — — — — 4 ( 487 ) — ( 487 )

Share-based compensation plans and other — — ( 160 ) — — ( 5 ) 364 — 204

Net income attributable to noncontrolling interests — — — — — — — 7 7

Distributions attributable to noncontrolling interests — — — — — — — ( 25 ) ( 25 )

Balance at June 30, 2023 3,577 $ 1,788 $ 44,219 $ 54,198 $ ( 4,900 ) 1,038 $ ( 56,612 ) $ 49 $ 38,742

Balance at January 1, 2024

3,577 $ 1,788 $ 44,509 $ 53,895 $ ( 5,161 ) 1,045 $ ( 57,450 ) $ 54 $ 37,635

Net income attributable to Merck & Co., Inc.

— — — 10,217 — — — — 10,217

Other comprehensive loss, net of taxes — — — — ( 200 ) — — — ( 200 )

Cash dividends declared on common stock ($ 1.54 per share)

3 unchanged sentences

Net income attributable to noncontrolling interests — — — — — — — 11 11

Balance at March 31, 2024 3,577 $ 1,788 $ 44,598 $ 56,697 $ ( 5,274 ) 1,044 $ ( 57,445 ) $ 60 $ 40,424

Balance at June 30, 2024 3,577 $ 1,788 $ 44,362 $ 60,187 $ ( 5,361 ) 1,041 $ ( 57,394 ) $ 66 $ 43,648

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Pension and Other Postretirement Benefit Plans

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

($ in millions) U.S.

International U.S.

International

2 unchanged sentences

Expected return on plan assets ( 207 ) ( 137 ) ( 185 ) ( 130 ) ( 417 ) ( 278 ) ( 372 ) ( 257 )

Amortization of unrecognized prior service credit

Amortization of unrecognized prior service (credit) cost

— ( 3 ) — 16 — ( 6 ) ( 1 ) 12

Net loss (gain) amortization

10 1 — ( 1 ) 20 3 — ( 2 )

Termination benefits — — 1 — 4 — 1 —

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

($ in millions) 2024 2023 2024 2023

5 unchanged sentences

$ ( 21 ) $ ( 15 ) $ ( 42 ) $ ( 30 )

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

In connection with restructuring actions (see Note 4), termination charges were recorded on pension plans related to expanded eligibility for certain employees e x iting Merck.

In connection with restructuring actions (see Note 4), termination charges were recorded on pension plans related to expanded eligibility for certain employees exiting Merck.

Also, in connection with these restructuring activities, curtailments were recorded on certain pension plans.

In addition, lump sum payments to U.S.

pension plan participants triggered a partial settlement resulting in a charge of $ 21 million in the first quarter of 2023.

This partial settlement triggered a remeasurement of some of the Company’s U.S.

pension plan participants triggered partial settlement charges in the second quarter and first six months of 2023.

These partial settlements triggered remeasurements of some of the Company’s U.S.

pension plans.

The remeasurement, which was calculated using discount rates and asset values as of March 31, 2023, resulted in a net increase of $ 44 million to net pension liabilities and also resulted in a related adjustment to AOCL .

Remeasurements during the first six months of 2023 resulted in a net increase of $ 47 million to net pension liabilities and also resulted in a related adjustment to AOCL .

The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 11), with the exception of certain amounts for termination benefits, curtailments and settlements, which are recorded in Restructuring costs if the event giving rise to the termination benefits, curtailment or settlement related to restructuring actions.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

($ in millions) 2024 2023 2024 2023

2 unchanged sentences

Exchange losses 60 62 144 122

Income from investments in equity securities, net (1)

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

( 56 ) 175 ( 200 ) ( 274 )

4 unchanged sentences

Unrealized gains and losses from investments that are directly owned are determined at the end of the reporting period, while gains and losses from ownership interests in investment funds are accounted for on a one quarter lag.

Other, net (as reflected in the table above) in the first three months of 2023 includes a $ 572.5 million charge related to settlements with certain plaintiffs in the Zetia antitrust litigation (see Note 7).

Interest paid for the three months ended March 31, 2024 and 2023 was $ 217 million and $ 208 million, respectively.

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

The effective income tax rate of 22.6 % for the first quarter of 2023 reflects a 5.5 percentage point unfavorable discrete impact of a charge for the acquisition of Imago for which no tax benefit was recognized.

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.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Other, net (as reflected in the table above) in the first six months of 2023 includes a $ 572.5 million charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.

Interest paid for the six months ended June 30, 2024 and 2023 was $ 581 million and $ 449 million, respectively.

The effective income tax rates were 9.1 % and 12.4 % for the second quarter and first six months of 2024, respectively.

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

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

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

If the IRS disagrees with the Company’s transition tax position, it may result in a significant tax liability.

The statute of limitations for assessments with respect to the 2019 and 2020 federal return years will expire in June and October of 2024, respectively, unless extended.

The statute of limitations for assessments with respect to the 2019 federal tax return year expired in June 2024 as noted above.

The statute of limitations for assessments with respect to the 2020 federal tax return year will expire in October of 2024, unless extended.

Earnings Per Share

The calculations of earnings per share are as follows:

The calculations of earnings (loss) per share are as follows:

Three Months Ended

June 30, Six Months Ended

($ and shares in millions except per share amounts) 2024 2023 2024 2023

Net Income Attributable to Merck & Co., Inc.

Net Income (Loss) Attributable to Merck & Co., Inc.

$ 5,455 $ ( 5,975 ) $ 10,217 $ ( 3,154 )

2 unchanged sentences

Average common shares outstanding assuming dilution 2,544 2,539 2,544 2,539

Basic Earnings per Common Share Attributable to Merck & Co., Inc.

Basic Earnings (Loss) per Common Share Attributable to Merck & Co., Inc.

Common Shareholders

Earnings per Common Share Assuming Dilution Attributable to Merck & Co., Inc.

$ 2.15 $ ( 2.35 ) $ 4.03 $ ( 1.24 )

Earnings (Loss) per Common Share Assuming Dilution Attributable to Merck & Co., Inc.

Common Shareholders

$ 2.14 $ ( 2.35 ) $ 4.02 $ ( 1.24 )

(1) Issuable primarily under share-based compensation plans.

For the second quarter and first six months of 2024, 7 million and 5 million, respectively, of common shares issuable under share-based compensation plans were excluded from the computations of earnings per common share assuming dilution because the effect would have been antidilutive.

The Company recorded a net loss 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.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

For the first quarter of 2024 and 2023, 3 million and 1 million, respectively, of common shares issuable under share-based compensation plans were excluded from the computations of earnings per common share assuming dilution because the effect would have been antidilutive.

Other Comprehensive Income (Loss)

Changes in each component of other comprehensive income (loss) are as follows:

Three Months Ended March 31,

Three Months Ended June 30,

($ in millions) Derivatives Employee

2 unchanged sentences

Comprehensive

Balance April 1, 2023, net of taxes

$ ( 60 ) $ ( 2,458 ) $ ( 2,365 ) $ ( 4,883 )

Other comprehensive income (loss) before reclassification adjustments, pretax 194 ( 6 ) ( 115 ) 73

Tax ( 41 ) 1 ( 22 ) ( 62 )

Other comprehensive income (loss) before reclassification adjustments, net of taxes 153 ( 5 ) ( 137 ) 11

Reclassification adjustments, pretax ( 11 ) (1)

Reclassification adjustments, net of taxes ( 8 )

Other comprehensive income (loss), net of taxes 145 ( 25 ) ( 137 ) ( 17 )

Balance June 30, 2023, net of taxes

$ 85 $ ( 2,483 ) $ ( 2,502 ) $ ( 4,900 )

Balance April 1, 2024, net of taxes

$ 106 $ ( 2,798 ) $ ( 2,582 ) $ ( 5,274 )

Other comprehensive income (loss) before reclassification adjustments, pretax 139 1 ( 157 ) ( 17 )

Tax ( 29 ) 2 ( 7 ) ( 34 )

Other comprehensive income (loss) before reclassification adjustments, net of taxes 110 3 ( 164 ) ( 51 )

Reclassification adjustments, pretax ( 55 ) (1)

Tax 12 2 — 14

Reclassification adjustments, net of taxes ( 43 )

Other comprehensive income (loss), net of taxes 67 ( 10 ) ( 144 ) ( 87 )

Balance June 30, 2024, net of taxes

$ 173 $ ( 2,808 ) $ ( 2,726 ) $ ( 5,361 )

Six Months Ended June 30,

($ in millions) Derivatives Employee

Plans Foreign Currency

Adjustment Accumulated Other

Comprehensive

Balance January 1, 2023, net of taxes

7 unchanged sentences

Other comprehensive income (loss), net of taxes 12 ( 75 ) ( 69 ) ( 132 )

Balance March 31, 2023, net of taxes

Balance June 30, 2023, net of taxes

$ 85 $ ( 2,483 ) $ ( 2,502 ) $ ( 4,900 )

5 unchanged sentences

Reclassification adjustments, pretax ( 99 ) (1)

Tax 21 11 — 32

Reclassification adjustments, net of taxes ( 78 ) ( 19 ) 20 ( 77 )

Other comprehensive income (loss), net of taxes 197 ( 15 ) ( 382 ) ( 200 )

Balance March 31, 2024, net of taxes

Balance June 30, 2024, net of taxes

$ 173 $ ( 2,808 ) $ ( 2,726 ) $ ( 5,361 )

1 unchanged sentence

(2) Includes net amortization of prior service cost, actuarial gains and losses, settlements and curtailments included in net periodic benefit cost (see Note 10).

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

Segment Reporting

13 unchanged sentences

Sales of the Company’s products were as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

($ in millions) U.S.

Int’l Total U.S.

Pharmaceutical:

24 unchanged sentences

Adempas — 72 72 — 65 65 — 142 142 — 125 125

70 — 70 — — — 70 — 70 — — —

Lagevrio 15 95 110 2 201 203 60 400 460 — 595 595

23 unchanged sentences

(4) Other pharmaceutical primarily reflects sales of other human health pharmaceutical products, including products within the franchises not listed separately.

(5) Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which increased sales by $ 54 million and $ 99 million for the three months ended March 31, 2024 and 2023, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon).

Other for the three months ended March 31, 2024 and 2023 also includes $ 61 million and $ 51 million, respectively, related to upfront and milestone payments received by Merck for out-licensing arrangements.

(5) Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which increased sales by $ 118 million and $ 128 million for the six months ended June 30, 2024 and 2023, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon).

Other for the six months ended June 30, 2024 and 2023 also includes $ 76 million and $ 54 million, respectively, related to upfront and milestone payments received by Merck for out-licensing arrangements.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

1 unchanged sentence

These discounts, in the aggregate, reduced U.S.

sales by $ 3.2 billion and $ 3.1 billion for the three months ended March 31, 2024 and 2023, respectively.

sales by $ 3.3 billion and $ 3.2 billion for the three months ended June 30, 2024 and 2023, respectively, and $ 6.6 billion and $ 6.3 billion for the six months ended June 30, 2024 and June 30, 2023, respectively.

Consolidated sales by geographic area where derived are as follows:

Three Months Ended

June 30, Six Months Ended

($ in millions) 2024 2023 2024 2023

2 unchanged sentences

China 1,817 1,913 3,589 3,628

Japan 821 758

Latin America 858 742 1,655 1,403

Japan 686 675 1,507 1,434

Asia Pacific (other than China and Japan) 748 848 1,472 1,694

1 unchanged sentence

$ 16,112 $ 15,035 $ 31,887 $ 29,522

A reconciliation of segment profits to Income Before Taxes is as follows:

A reconciliation of segment profits to Income (Loss) Before Taxes is as follows:

Three Months Ended

June 30, Six Months Ended

($ in millions) 2024 2023 2024 2023

20 unchanged sentences

Other unallocated, net, includes expenses from corporate and manufacturing cost centers, intangible asset impairment charges, gains or losses on sales of businesses, expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration, and other miscellaneous income or expense items.

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

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 1. Financial Statements