What changed in this filing

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Item 1. Financial Statements

2024-11-06 compared with 2024-08-05 · 300 added, 219 removed, 1015 unchanged (34% of the section changed)

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(Unaudited, $ in millions except per share amounts)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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12,567 10,342 32,778 41,550

Income (Loss) Before Taxes

Income Before Taxes

4,090 5,620 15,766 3,935

Income Tax Provision

Taxes on Income

929 870 2,377 2,332

Net Income (Loss)

3,161 4,750 13,389 1,603

Net Income Attributable to Noncontrolling Interests 4 5 15 12

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

Net Income Attributable to Merck & Co., Inc.

$ 3,157 $ 4,745 $ 13,374 $ 1,591

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

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

Common Shareholders

$ 1.25 $ 1.87 $ 5.28 $ 0.63

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

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

Common Shareholders

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited, $ in millions)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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

Net Income Attributable to Merck & Co., Inc.

$ 3,157 $ 4,745 $ 13,374 $ 1,591

Other Comprehensive Loss Net of Taxes:

Net unrealized gain on derivatives, net of reclassifications

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

( 296 ) 159 ( 99 ) 171

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( 10 ) ( 16 ) ( 210 ) ( 148 )

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

Comprehensive Income Attributable to Merck & Co., Inc.

$ 3,147 $ 4,729 $ 13,164 $ 1,443

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(Unaudited, $ in millions except per share amounts)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current Assets

49 unchanged sentences

(Unaudited, $ in millions)

Six Months Ended

Nine Months Ended

September 30,

Cash Flows from Operating Activities

Net income (loss)

$ 13,389 $ 1,603

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

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

Amortization 1,720 1,582

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( 169 ) ( 240 )

Charge for the acquisition of Eyebiotech Limited

Charge for the acquisition of MK-1045 (formerly CN201) from Curon Pharmaceutical

Charge for the acquisition of Harpoon Therapeutics, Inc.

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Share-based compensation 574 478

Other 611 ( 81 )

Net changes in assets and liabilities ( 1,812 ) ( 2,349 )

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Proceeds from sales of securities and other investments 370 1,489

Acquisition of Eyebiotech Limited, net of cash acquired ( 1,344 ) —

Acquisition of Elanco Animal Health Incorporated aqua business ( 1,301 ) —

Acquisition of Harpoon Therapeutics, Inc., net of cash acquired ( 746 ) —

Acquisition of MK-1045 (formerly CN201) from Curon Pharmaceutical ( 700 ) —

Acquisition of Prometheus Biosciences, Inc., net of cash acquired — ( 10,705 )

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Cash Flows from Financing Activities

Net change in short-term borrowings

Proceeds from issuance of debt

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Other ( 330 ) ( 325 )

Net Cash (Used in) Provided by Financing Activities

Net Cash Used in Financing Activities

( 4,023 ) ( 2,565 )

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Cash, Cash Equivalents and Restricted Cash at End of Period (includes restricted cash of $ 95

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

and $ 64 at September 30, 2024 and 2023, respectively, included in Other current assets )

$ 14,688 $ 8,669

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2024 Transactions

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

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

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

MK-1045 is currently being evaluated in Phase 1 and Phase 1b/2 clinical trials for the treatment of patients with relapsed or refractory non-Hodgkin lymphoma and relapsed or refractory B-cell acute lymphocytic leukemia, respectively.

Merck plans to evaluate MK-1045 as a treatment for B-cell malignancies as well as investigate its potential to provide a novel, scalable option for the treatment of autoimmune diseases.

The transaction was accounted for as an asset acquisition.

Merck recorded a charge of $ 750 million (reflecting the upfront payment and other related costs) to Research and development expenses in the third quarter and first nine months of 2024.

In connection with the agreement, Merck is also obligated to pay a third party future contingent developmental, regulatory and sales-based milestone payments of up to $ 128 million in the aggregate, as well as tiered royalties ranging from a mid-single-digit rate to a low-double-digit rate on future net sales of MK-1045 if approved.

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

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

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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.

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

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

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.

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

The estimated fair values of assets acquired and liabilities assumed from the Elanco aqua business (which are considered preliminary subject to the finalization of the tax treatment of the transaction) are as follows:

($ in millions) July 9, 2024

Property, plant and equipment

Product rights - Clynav (useful life 15 years) (1)

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

Other assets and liabilities, net 24

Total identifiable net assets 796

Consideration transferred $ 1,301

(1) The estimated fair values of Clynav and other product rights were determined using an income approach, specifically the multi-period excess earnings method.

The future probability-weighted net cash flows were discounted to present value utilizing a discount rate of 8.5 %.

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

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

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

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

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

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.

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

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

Additionally, a $ 100 million developmental milestone was triggered in the third quarter of 2024 upon initiation of a Phase 2/3 clinical trial evaluating Restoret for the treatment of diabetic macular edema, which was also recorded to Research and development expenses.

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

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

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

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

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

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

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

In March 2024, Merck acquired Harpoon Therapeutics, Inc.

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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 six months 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 nine months of 2024 related to the transaction.

There are no future contingent payments associated with the acquisition.

In August 2024, Merck and Daiichi Sankyo expanded their existing global

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

co-development and co-commercialization agreement to include MK-6070.

See Note 3 for more information on Merck’s collaboration with Daiichi Sankyo.

2023 Transactions

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

patritumab deruxtecan (HER3-DXd) (MK-1022), ifinatamab deruxtecan (I-DXd) (MK-2400) and raludotatug deruxtecan (R-DXd) (MK-5909) (see Note 3).

In June 2023, Merck acquired Prometheus Biosciences, Inc.

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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.

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

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

In February 2023, Merck and Kelun-Biotech 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 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 six months of 2023.

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

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

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

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

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

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Imago’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

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

treatment of certain patients with essential thrombocythemia is underway.

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 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.

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

There are no future contingent payments associated with the acquisition.

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

As of September 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 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 .

The amounts included in the condensed consolidated statement of operations for the above MSAs include sales of $ 109 million and $ 100 million and related cost of sales of $ 108 million and $ 106 million for the third quarter of 2024 and 2023, respectively, and sales of $ 309 million and $ 290 million and related cost of sales of $ 310 million and $ 314 million for the first nine months of 2024 and 2023, respectively.

The amounts due from Organon for all spin-off related agreements were $ 370 million and $ 632 million at September 30, 2024 and December 31, 2023, respectively, and are reflected in Other current assets .

The amounts due to Organon under these agreements were $ 130 million and $ 598 million at September 30, 2024 and December 31, 2023, respectively, and are included in Accrued and other current liabilities .

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

Collaborative Arrangements

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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 June 30, 2024) and a corresponding increase to the intangible asset related to Lynparza.

Accordingly, Merck recorded a $ 600 million liability (which remained accrued at September 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 six months of 2024 and 2023, respectively (each of which had been previously accrued for).

Lynparza received regulatory approvals triggering capitalized milestone payments from Merck to AstraZeneca of $ 245 million and $ 105 million in the first nine 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 intangible asset balance related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) was $ 1.3 billion at September 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

September 30, Nine Months Ended

September 30,

($ in millions) 2024 2023 2024 2023

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Research and development 19 23 57 65

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

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

Receivables from AstraZeneca included in Other current assets

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

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

Expenses incurred during co-development are shared by the two companies in

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

accordance with the collaboration agreement and reflected in Research and development expenses.

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

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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.

Merck also recognized $ 81 million and $ 154 million of cumulative amortization catch-up expense related to the recognition of these milestones in the third quarter and first nine months of 2023, respectively.

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

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 $ 563 million at June 30, 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 $ 502 million at September 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.

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

September 30, Nine Months Ended

September 30,

($ in millions) 2024 2023 2024 2023

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Research and development 4 5 18 61

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

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

Receivables from Eisai included in Other current assets

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(1) Represents amortization of capitalized milestone payments.

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

Amounts in the third quarter and first nine months of 2023 include $ 81 million and $ 154 million, respectively, of cumulative amortization catch-up expense as noted above.

(2) Represents an accrued milestone payment.

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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 $ 445 million and $ 47 million, respectively, at June 30, 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 $ 431 million and $ 47 million, respectively, at September 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.

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

September 30, Nine Months Ended

September 30,

($ in millions) 2024 2023 2024 2023

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Research and development 27 26 82 76

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

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

Receivables from Bayer included in Other current assets

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

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

Under the terms of the agreement, Ridgeback received an upfront payment and is eligible to receive future contingent payments dependent upon the achievement of certain developmental and regulatory approval milestones.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2024 2023 2024 2023

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Research and development

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

Receivables from Ridgeback included in Other current assets

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

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

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

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

If Merck does not make the continuation payments on the dates noted for either patritumab deruxtecan and/or raludotatug deruxtecan, the rights for the applicable program will revert to Daiichi Sankyo and the non-refundable upfront payments already paid will be retained by Daiichi Sankyo.

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

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

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

The agreement also provides

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

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

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

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

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

In August 2024, Merck and Daiichi Sankyo expanded their agreement to include MK-6070, an investigational delta-like ligand 3 (DLL3) targeting T-cell engager, which Merck obtained through its acquisition of Harpoon (see Note 2).

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

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

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

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

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

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

Summarized financial information related to this collaboration is as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2024 2023 2024 2023

1 unchanged sentence

Research and development

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

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

Payables to Daiichi Sankyo included in Accrued and other current liabilities

3 unchanged sentences

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

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

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

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

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 $ 135 million at June 30, 2024 and will be amortized over the assets’ estimated useful lives.

Merck has also capitalized certain of the shared costs, which aggregated $ 172 million at September 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

September 30, Nine Months Ended

September 30,

($ in millions) 2024 2023 2024 2023

1 unchanged sentence

Research and development

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

93 66 255 153

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

Payables to Moderna included in Accrued and other current liabilities

3 unchanged sentences

BMS is the principal on sales transactions for Reblozyl;

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

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

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

reimbursed by BMS.

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

1 unchanged sentence

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 $ 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.

Alliance revenue related to this collaboration, consisting of royalties (recorded within Sales ) was $ 100 million and $ 261 million in the third quarter and first nine months of 2024, respectively, compared with $ 52 million and $ 142 million in the third quarter and first nine 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 $ 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.

The Company recorded total pretax costs of $ 279 million and $ 701 million in the third quarter and first nine months of 2024, respectively, related to the 2024 Restructuring Program, bringing total cumulative pretax costs incurred through September 30, 2024 to $ 892 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 $ 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.

The Company recorded total pretax costs of $ 199 million and $ 532 million in the third quarter and first nine months of 2023, respectively, related to the 2019 Restructuring Program.

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

For segment reporting, restructuring charges are unallocated expenses.

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

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

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

($ in millions) Accelerated Depreciation

9 unchanged sentences

$ 40 $ 11 $ 228 $ 279 $ 171 $ 122 $ 408 $ 701

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

Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023

($ in millions) Accelerated Depreciation

14 unchanged sentences

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

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

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

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

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

Additionally, other activity includes certain

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

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 nine months ended September 30, 2024:

($ in millions) Accelerated Depreciation

5 unchanged sentences

Non-cash activity ( 171 ) — ( 292 ) ( 463 )

Restructuring reserves June 30, 2024

Restructuring reserves September 30, 2024

$ — $ 626 $ 25 $ 651

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.

23 unchanged sentences

The Company also uses forward exchange contracts to hedge a portion of its net investment in foreign operations against movements in foreign exchange rates.

The forward contracts are designated as hedges of the net investment in a foreign operation.

The forward contracts are designated as hedges of the net investment in a foreign

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

The unrealized gains or losses on these contracts are recorded in foreign currency translation adjustment within OCI and remain in AOCL until either the sale or complete or substantially complete liquidation of the subsidiary.

6 unchanged sentences

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:

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

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

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

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

Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30, Nine Months Ended September 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.

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

At September 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.

September 30, 2024

($ in millions)

11 unchanged sentences

($ in millions)

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

September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023

Balance Sheet Caption

1 unchanged sentence

$ 1,589 $ 1,056 $ 98 $ 56

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

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:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Fair Value of Derivative U.S.

11 unchanged sentences

Foreign exchange contracts Other current assets 183 — 10,298 153 — 9,693

Foreign exchange contracts Other Assets 2 — 22 — — —

Foreign exchange contracts Accrued and other current liabilities — 179 11,635 — 162 8,104

Foreign exchange contracts Other Noncurrent Liabilities — 2 22 — — —

183 179 21,933 153 162 17,797

1 unchanged sentence

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

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

Credit Risk below).

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

($ in millions) Asset Liability Asset Liability

2 unchanged sentences

Cash collateral received

( 123 ) — ( 3 ) —

Net amounts $ 115 $ 73 $ 124 $ 24

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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

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

4 unchanged sentences

$ 16,657 $ 15,962 $ ( 162 ) $ 126 $ ( 10 ) $ ( 16 ) $ 48,544 $ 45,485 $ ( 151 ) $ 388 $ ( 210 ) $ ( 148 )

(Gain) loss on fair value hedging relationships:

Loss (gain) on fair value hedging relationships:

Interest rate swap contracts

3 unchanged sentences

Foreign exchange contracts

Amount of gain recognized in OCI on derivatives

Amount of (loss) gain recognized in OCI on derivatives

— — — — ( 325 ) 247 — — — — 22 375

4 unchanged sentences

— — — — — — — — ( 1 ) ( 1 ) — —

Amount of gain recognized in OCI on derivatives

Amount of (loss) gain recognized in OCI on derivatives

— — — — — — — — — — ( 1 ) 13

(1) Interest expense is a component of Other (income) expense, net.

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

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

Amount of Derivative Pretax (Gain) Loss Recognized in Income

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

Three Months Ended September 30, Nine Months Ended September 30,

($ in millions) 2024 2023 2024 2023

6 unchanged sentences

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

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 .

At September 30, 2024, the Company estimates $ 161 million of pretax net unrealized losses on derivatives maturing within the next 12 months that hedge foreign currency denominated sales over that same period will be reclassified from AOCL to Sales .

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

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

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:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cost Gross Unrealized Fair

8 unchanged sentences

Total debt and publicly traded equity securities $ 1,065 $ 1,101

(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 .

(1) Unrealized net losses (gains) of $ 42 million and $( 82 ) million were recorded in Other (income) expense, net in the third quarter and first nine months of 2024, respectively, on equity securities still held at September 30, 2024.

Unrealized net gains of $ 61 million and $ 327 million were recorded in Other (income) expense, net in the third quarter and first nine months of 2023, respectively, on equity securities still held at September 30, 2023.

At September 30, 2024 and September 30, 2023, the Company also had $ 848 million and $ 863 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 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.

During the first nine months of 2024 , the Company recorded unrealized gains of $ 12 million and unrealized losses of $ 25 million related to certain of these equity investments still held at September 30, 2024.

During the first nine months of 2023 , the Company recorded unrealized gains of $ 7 million and unrealized losses of $ 24 million related to certain of these equity investments still held at September 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 September 30, 2024 were $ 302 million and $ 89 million, respectively.

At September 30, 2024 and September 30, 2023, the Company also had $ 328 million and $ 467 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 $( 21 ) million and $ 93 million for the third quarter of 2024 and 2023, respectively, and $( 26 ) million and $ 66 million for the first nine months of 2024 and 2023, respectively.

Fair Value Measurements

5 unchanged sentences

Level 3 - Unobservable inputs that are supported by little or no market activity.

Level 3 assets or liabilities are those whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques with significant unobservable inputs, as well as assets or liabilities for which the determination of fair value requires significant judgment or estimation.

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.

Level 3 assets or liabilities are those whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques with significant

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

unobservable inputs, as well as assets or liabilities for which the determination of fair value requires significant judgment or estimation.

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) June 30, 2024 December 31, 2023

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

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

9 unchanged sentences

Forward exchange contracts — 180 — 180 — 202 — 202

Purchased currency options — 183 — 183 — 83 — 83

Interest rate swaps

— 99 — 99 — 57 — 57

Purchased currency options — 61 — 61 — 83 — 83

— 340 — 340 — 342 — 342

8 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 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.

(2) 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 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).

As of September 30, 2024 and December 31, 2023, Cash and cash equivalents included $ 13.6 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 ( 148 ) ( 117 )

Fair value June 30 (2)

Fair value September 30 (2)

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

Includes cumulative translation adjustments.

(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.

(2) Balance at September 30, 2024, includes $ 163 million of current liabilities, of which $ 136 million relates to the termination of the Sanofi Pasteur MSD joint venture in 2016.

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

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

The payments of contingent consideration in both periods relate to the Sanofi Pasteur MSD liabilities described above.

The payments of contingent consideration during the first nine months of 2024 include $ 126 million related to the Sanofi Pasteur MSD liabilities described above and $ 22 million related to the first commercial sale of Lyfnua (gefapixant) in the European Union.

The payments of contingent consideration during the first nine months of 2023 relate to the Sanofi Pasteur MSD liabilities described above.

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

Other Fair Value Measurements

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 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.

The estimated fair value of loans payable and long-term debt (including current portion) at September 30, 2024, was $ 35.2 billion compared with a carrying value of $ 38.1 billion and at December 31, 2023, was $ 32.0 billion compared with a carrying 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 $ 2.9 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 Company factored $ 3.1 billion and $ 3.0 billion of accounts receivable as of September 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 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 .

As of September 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 is recorded in 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 $ 123 million and $ 3 million at June 30, 2024 and December 31, 2023, respectively.

Cash collateral received by the Company from various counterparties was $ 3 million at December 31, 2023.

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

Inventories consisted of:

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

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

Finished goods $ 1,939 $ 1,954

8 unchanged sentences

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

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.

At September 30, 2024 and December 31, 2023, these amounts included $ 3.7 billion and $ 2.6 billion, respectively, of inventories not expected to be sold within one year.

In addition, these amounts included $ 334 million and $ 790 million at September 30, 2024 and December 31, 2023, respectively, of inventories produced in preparation for product launches.

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

24 unchanged sentences

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

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

As of September 30, 2024, approximately 330 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 June 30, 2024, approximately 210 cases were filed and pending against Merck in either federal or state court.

As of September 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.

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

One state court action in Los Angeles County is now scheduled to commence trial on January 21, 2025.

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

Commercial and Other Litigation

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

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

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 appealed that decision, and on August 6, 2024, the Third Circuit affirmed the district court’s decision.

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

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

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

340B Program Litigation

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

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

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

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

Governmental Proceedings

Civil Investigative Demand

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

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

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

29 unchanged sentences

Also in June 2023, the U.S.

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

District Court for the District of New Jersey

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

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

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

1 unchanged sentence

The appeal is currently pending.

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

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

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

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

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

1 unchanged sentence

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.

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

(Hikma) had 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

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.

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

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

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.

3 unchanged sentences

As previously disclosed, beginning in 2019, a number of generic drug companies filed ANDAs seeking approval of generic forms of Januvia and Janumet along with paragraph IV certifications challenging the validity of the 2027 salt/polymorph patent.

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

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

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

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

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

(Azurity) asserting that a different sitagliptin product subject to its ANDA does not infringe the salt patent.

On May 3, 2024, Merck filed a civil action in the U.S.

District Court of Delaware alleging infringement.

The case was dismissed without prejudice on July 26, 2024.

Following the dismissal, the Company granted Azurity a covenant not to assert the salt patent against the Azurity product that is the subject of such ANDA.

Supplementary Protection Certificates (SPCs) for Janumet expired in April 2023 for the majority of European countries.

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 was received on June 6, 2024, with a decision expected later in 2024.

In February 2022, a Finnish court referred certain questions to the Court of Justice of the European Union (CJEU) that could

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

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.

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patents, including a demand for damages.

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.

Between June 13, 2024 and October 3, 2024, the PTAB instituted a review of all nine asserted patents.

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 instituted on June 13, 2024.

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

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

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

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

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

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

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

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

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

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

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

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

Other Litigation

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the actual costs incurred by the Company;

the development of the Company’s legal defense strategy and structure in light of the scope of its litigation;

the development of the Company’s legal defense strategy and structure in light of the

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

scope of its litigation;

the number of cases being brought against the Company;

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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 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;

The amount of legal defense reserves as of September 30, 2024 and December 31, 2023 of approximately $ 210 million 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.

The Company will continue to monitor its legal defense costs and review the adequacy of the associated reserves and may determine to increase the reserves at any time in the future if, based upon the factors set forth, it believes it would be appropriate to do so.

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

Three Months Ended June 30,

Three Months Ended September 30,

Common Stock Other

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

Balance at April 1, 2023

Balance at July 1, 2023

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

Net loss attributable to Merck & Co., Inc.

Net income attributable to Merck & Co., Inc.

— — — 4,745 — — — — 4,745

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Net income attributable to noncontrolling interests — — — — — — — 5 5

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

Balance at September 30, 2023 3,577 $ 1,788 $ 44,358 $ 57,082 $ ( 4,916 ) 1,042 $ ( 57,066 ) $ 54 $ 41,300

Balance at July 1, 2024

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

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Net income attributable to noncontrolling interests — — — — — — — 4 4

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,

Distributions attributable to noncontrolling interests — — — — — — — ( 12 ) ( 12 )

Balance at September 30, 2024 3,577 $ 1,788 $ 44,530 $ 61,384 $ ( 5,371 ) 1,045 $ ( 57,829 ) $ 58 $ 44,560

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

Nine Months Ended September 30,

Common Stock Other

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

Net loss attributable to Merck & Co., Inc.

Net income attributable to Merck & Co., Inc.

— — — 1,591 — — — — 1,591

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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 September 30, 2023 3,577 $ 1,788 $ 44,358 $ 57,082 $ ( 4,916 ) 1,042 $ ( 57,066 ) $ 54 $ 41,300

Balance at January 1, 2024

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Net income attributable to noncontrolling interests — — — — — — — 15 15

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)

Distributions attributable to noncontrolling interests — — — — — — — ( 12 ) ( 12 )

Balance at September 30, 2024 3,577 $ 1,788 $ 44,530 $ 61,384 $ ( 5,371 ) 1,045 $ ( 57,829 ) $ 58 $ 44,560

Pension and Other Postretirement Benefit Plans

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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$ 41 $ ( 7 ) $ 37 $ ( 14 ) $ 90 $ ( 20 ) $ 114 $ ( 14 )

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

The Company provides medical benefits, principally to its eligible U.S.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2024 2023 2024 2023

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Net gain amortization ( 14 ) ( 11 ) ( 38 ) ( 31 )

Curtailments — — — ( 1 )

$ ( 24 ) $ ( 15 ) $ ( 65 ) $ ( 46 )

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In addition, lump sum payments to U.S.

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

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

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

pension plans.

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 third quarter 2023 remeasurement, which was calculated using discount rates and asset values as of September 30, 2023, resulted in a net decrease of $ 34 million to net pension liabilities and a related adjustment to AOCL .

Remeasurements during the first nine months of 2023 resulted in a net increase of $ 13 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.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2024 2023 2024 2023

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Exchange losses 33 85 177 208

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

Loss (income) from investments in equity securities, net (1)

31 33 ( 169 ) ( 240 )

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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 nine months of 2023 includes a $ 572.5 million charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.

Interest paid for the nine months ended September 30, 2024 and 2023 was $ 822 million and $ 678 million, respectively.

The effective income tax rate of 22.7 % for the third quarter of 2024 reflects a 7.2 percentage point combined unfavorable impact of charges related to the acquisitions of EyeBio and MK-1045, which had minimal tax benefits.

The effective income tax rate of 15.1 % for the first nine months of 2024 reflects a 2.1 percentage point combined unfavorable impact of charges related to the acquisitions of Harpoon, EyeBio and MK-1045, which had minimal tax benefits.

The effective income tax rate for the first nine months of 2024 also reflects a 1.6 percentage point favorable impact due to a $ 259 million reduction in reserves for unrecognized income tax benefits resulting from the expiration in June 2024 of the statute of limitations for assessments related to the 2019 federal tax return year.

The effective income tax rate of 15.5 % for the third quarter of 2023 reflects the favorable mix of income and expense.

The effective income tax rate of 59.3 % for the first nine months of 2023 includes a 44.0 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

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.

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.

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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 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.

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

Merck expects to record a benefit of approximately $ 270 million in the fourth quarter of 2024 due to a reduction in reserves for unrecognized tax benefits resulting from the expiration of the statute of limitations related to the 2020 federal tax return year.

Earnings Per Share

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

The calculations of earnings per share are as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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

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

Net Income Attributable to Merck & Co., Inc.

$ 3,157 $ 4,745 $ 13,374 $ 1,591

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Average common shares outstanding assuming dilution 2,541 2,546 2,543 2,549

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

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

Common Shareholders

$ 1.25 $ 1.87 $ 5.28 $ 0.63

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

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

Common Shareholders

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(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 third quarter of 2024 and 2023, 7 million and 6 million, respectively, and for the first nine months of 2024 and 2023, 6 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.

Other Comprehensive Income (Loss)

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

Three Months Ended June 30,

Three Months Ended September 30,

($ in millions) Derivatives Employee

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Comprehensive

Balance April 1, 2023, net of taxes

Balance July 1, 2023, net of taxes

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

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Other comprehensive income (loss), net of taxes 159 — ( 175 ) ( 16 )

Balance June 30, 2023, net of taxes

Balance September 30, 2023, net of taxes

$ 244 $ ( 2,483 ) $ ( 2,677 ) $ ( 4,916 )

Balance April 1, 2024, net of taxes

Balance July 1, 2024, net of taxes

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

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Other comprehensive income (loss), net of taxes ( 296 ) ( 13 ) 299 ( 10 )

Balance June 30, 2024, net of taxes

Balance September 30, 2024, net of taxes

$ ( 123 ) $ ( 2,821 ) $ ( 2,427 ) $ ( 5,371 )

Six Months Ended June 30,

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

Nine Months Ended September 30,

($ in millions) Derivatives Employee

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Other comprehensive income (loss), net of taxes 171 ( 75 ) ( 244 ) ( 148 )

Balance June 30, 2023, net of taxes

Balance September 30, 2023, net of taxes

$ 244 $ ( 2,483 ) $ ( 2,677 ) $ ( 4,916 )

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Other comprehensive income (loss), net of taxes ( 99 ) ( 28 ) ( 83 ) ( 210 )

Balance June 30, 2024, net of taxes

Balance September 30, 2024, net of taxes

$ ( 123 ) $ ( 2,821 ) $ ( 2,427 ) $ ( 5,371 )

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

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Sales of the Company’s products were as follows:

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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(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 $ 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.

(5) Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which increased sales by $ 156 million and $ 173 million for the nine months ended September 30, 2024 and 2023, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon as discussed in Note 2).

Other for the nine months ended September 30, 2024 and 2023 also includes $ 91 million and $ 118 million, respectively, related to upfront and milestone payments received by Merck for out-licensing arrangements.

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

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

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.

sales by $ 3.6 billion and $ 3.1 billion for the three months ended September 30, 2024 and 2023, respectively, and $ 10.1 billion and $ 9.4 billion for the nine months ended September 30, 2024 and September 30, 2023, respectively.

Consolidated sales by geographic area where derived are as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2024 2023 2024 2023

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$ 16,657 $ 15,962 $ 48,544 $ 45,485

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

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2024 2023 2024 2023

21 unchanged sentences

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