What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-25 compared with 2024-02-26 · 560 added, 577 removed, 1664 unchanged (41% of the section changed)

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The consolidated balance sheet of Merck & Co., Inc.

and subsidiaries as of December 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive (loss) income, of equity and of cash flows for each of the three years in the period ended December 31, 2023, the notes to consolidated financial statements, and the report dated February 26, 2024 of PricewaterhouseCoopers LLP, independent registered public accounting firm, are as follows:

and subsidiaries as of December 31, 2024 and 2023, and the related consolidated statements of income, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2024, the notes to consolidated financial statements, and the report dated February 25, 2025 of PricewaterhouseCoopers LLP, independent registered public accounting firm, are as follows:

Consolidated Statement of Income

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44,232 58,226 42,839

Income from Continuing Operations Before Taxes 1,889 16,444 13,879

Taxes on Income from Continuing Operations 1,512 1,918 1,521

Net Income from Continuing Operations 377 14,526 12,358

Net Income Attributable to Noncontrolling Interests 12 7 13

Net Income from Continuing Operations Attributable to Merck & Co., Inc.

Income Before Taxes

19,936 1,889 16,444

Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests — — 704

Taxes on Income

2,803 1,512 1,918

17,133 377 14,526

Net Income Attributable to Noncontrolling Interests 16 12 7

Net Income Attributable to Merck & Co., Inc.

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Common Shareholders

Income from Continuing Operations $ 0.14 $ 5.73 $ 4.88

Income from Discontinued Operations — — 0.28

Net Income $ 0.14 $ 5.73 $ 5.16

$ 6.76 $ 0.14 $ 5.73

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

Common Shareholders $ 6.74 $ 0.14 $ 5.71

Income from Continuing Operations $ 0.14 $ 5.71 $ 4.86

Income from Discontinued Operations — — 0.28

Net Income $ 0.14 $ 5.71 $ 5.14

Consolidated Statement of Comprehensive (Loss) Income

Consolidated Statement of Comprehensive Income (Loss)

Merck & Co., Inc.

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$ 17,117 $ 365 $ 14,519

Other Comprehensive (Loss) Income Net of Taxes:

Net unrealized (loss) gain on derivatives, net of reclassifications ( 97 ) ( 71 ) 410

Benefit plan net (loss) gain and prior service (cost) credit, net of amortization

Other Comprehensive Income (Loss) Net of Taxes:

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

266 ( 97 ) ( 71 )

Benefit plan net gain (loss) and prior service credit (cost), net of amortization

466 ( 385 ) 335

Cumulative translation adjustment ( 516 ) 89 ( 603 )

216 ( 393 ) ( 339 )

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

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

$ 17,333 $ ( 28 ) $ 14,180

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

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Consolidated Balance Sheet

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and $ 88 in 2023)

10,278 10,349

Inventories (excludes inventories of $ 4,193 in 2024 and $ 3,348 in 2023

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

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Consolidated Statement of Equity

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— — 14,519 — — — 14,519

Other comprehensive income, net of taxes — — — 1,756 — — 1,756

Cash dividends declared on common stock ($ 2.64 per share)

Other comprehensive loss, net of taxes

— — — ( 339 ) — — ( 339 )

Treasury stock shares purchased — — — — ( 840 ) — ( 840 )

Spin-off of Organon & Co.

Cash dividends declared on common stock ($ 2.80 per share)

— — ( 7,134 ) — — — ( 7,134 )

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— — ( 7,551 ) — — — ( 7,551 )

Treasury stock shares purchased

— — — — ( 1,346 ) — ( 1,346 )

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

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— — 17,117 — — — 17,117

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

Other comprehensive income, net of taxes

— — — 216 — — 216

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

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

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Consolidated Statement of Cash Flows

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2024 2023 2022

Cash Flows from Operating Activities of Continuing Operations

Net income from continuing operations $ 377 $ 14,526 $ 12,358

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities of continuing operations:

Cash Flows from Operating Activities

$ 17,133 $ 377 $ 14,526

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

Amortization 2,395 2,044 2,085

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

Charges for certain research and development asset acquisitions

3,456 11,409 —

Charge for the acquisition of Prometheus Biosciences, Inc.

Charge for the acquisition of Imago BioSciences, Inc.

Charge for the acquisition of Pandion Therapeutics, Inc.

Deferred income taxes ( 1,249 ) ( 1,899 ) ( 1,568 )

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Other ( 1,416 ) ( 2,314 ) ( 1,473 )

Net Cash Provided by Operating Activities of Continuing Operations 13,006 19,095 13,122

Cash Flows from Investing Activities of Continuing Operations

Net Cash Provided by Operating Activities

21,468 13,006 19,095

Cash Flows from Investing Activities

Capital expenditures ( 3,372 ) ( 3,863 ) ( 4,388 )

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

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

Acquisition of Eyebiotech Limited, net of cash acquired

( 1,344 ) — —

Acquisition of Imago BioSciences Inc., net of cash acquired

Acquisition of Elanco Animal Health Incorporated aqua business

( 1,303 ) — —

Acquisition of Acceleron Pharma Inc., net of cash acquired — — ( 11,174 )

Acquisition of Pandion Therapeutics, Inc., net of cash acquired — — ( 1,554 )

Other acquisitions, net of cash acquired — ( 121 ) ( 179 )

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

Acquisition of MK-1045 from Curon Pharmaceutical

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

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

Other ( 127 ) ( 36 ) ( 89 )

Net Cash Used in Investing Activities of Continuing Operations ( 14,083 ) ( 4,960 ) ( 16,421 )

Cash Flows from Financing Activities of Continuing Operations

Net change in short-term borrowings — — ( 3,986 )

Net Cash Used in Investing Activities

( 7,734 ) ( 14,083 ) ( 4,960 )

Cash Flows from Financing Activities

Payments on debt ( 1,290 ) ( 1,755 ) ( 2,251 )

Proceeds from issuance of debt 3,599 5,939 —

Distribution from Organon & Co.

Purchases of treasury stock ( 1,306 ) ( 1,346 ) —

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Other ( 372 ) ( 328 ) ( 240 )

Net Cash (Used in) Provided by Financing Activities of Continuing Operations ( 4,810 ) ( 9,119 ) 3,097

Cash Flows from Discontinued Operations

Net cash provided by operating activities — — 987

Net cash used in investing activities — — ( 134 )

Net Cash Used in Financing Activities

Net Cash Flows Provided by Discontinued Operations — — 349

( 7,032 ) ( 4,810 ) ( 9,119 )

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash ( 293 ) 23 ( 410 )

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

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

6,409 ( 5,864 ) 4,606

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

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Notes to Consolidated Financial Statements

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The Company sells its products to veterinarians, distributors, animal producers, farmers and pet owners.

Spin-Off of Organon & Co.

On June 2, 2021, Merck completed the spin-off of products from its women’s health, biosimilars and established brands businesses into a new, independent, publicly traded company named Organon & Co.

(Organon) through a distribution of Organon’s publicly traded stock to Company shareholders.

The established brands included in the transaction consisted of dermatology, non-opioid pain management, respiratory, select cardiovascular products, as well as the rest of Merck’s diversified brands franchise.

The historical results of the businesses that were contributed to Organon in the spin-off have been reflected as discontinued operations in the Company’s consolidated financial statements through the date of the spin-off (see Note 5).

Summary of Accounting Policies

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

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

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For those subsidiaries that operate in highly inflationary economies and for those subsidiaries where the U.S.

dollar has been determined to be the functional currency, non-monetary foreign currency assets and liabilities are translated using historical rates, while monetary assets and liabilities are translated at current rates, with the U.S.

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

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

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

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Realized gains and losses for debt securities are included in Other (income) expense, net .

Investments in publicly traded equity securities are reported at fair value determined using quoted market prices in active markets for identical assets or quoted prices for similar assets or other inputs that are observable or can be corroborated by observable market data.

Investments in publicly traded equity securities are reported at fair value as determined using quoted market prices in active markets for identical assets or quoted prices for similar assets or other inputs that are observable or can be corroborated by observable market data.

Changes in fair value are included in Other (income) expense, net .

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The vast majority of revenues from sales of products are recognized at a point in time when control of the goods is transferred to the customer, which the Company has determined is when title and risks and rewards of ownership transfer to the customer and the Company is entitled to payment.

The Company recognizes revenue from the sales of vaccines to the Federal government for placement into vaccine stockpiles in accordance with Securities and Exchange Commission (SEC) Interpretation, Commission Guidance Regarding Accounting for Sales of Vaccines and BioTerror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile .

The Company recognizes revenue from the sales of vaccines to the U.S.

federal government for placement into vaccine stockpiles in accordance with Securities and Exchange Commission (SEC) Interpretation, Commission Guidance Regarding Accounting for Sales of Vaccines and BioTerror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile .

This interpretation allows companies to recognize revenue for sales of vaccines into U.S.

government stockpiles even though these sales might not meet the criteria for revenue recognition under other

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accounting guidance.

government stockpiles even though these sales might not meet the criteria for revenue recognition under other accounting guidance.

For certain services in the Animal Health segment, revenue is recognized over time, generally ratably over the contract term as services are provided.

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

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

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

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

Payment terms for vaccines sales in the U.S.

typically range from 30 to 60 days.

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

Payment terms for vaccine sales in the U.S.

typically range from 30 days to 60 days.

Outside of the U.S., payment terms are typically 30 days to 90 days, although certain markets have longer payment terms.

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Depreciation expense was $ 2.1 billion in 2024, $ 1.8 billion in 2023 and $ 1.8 billion in 2022.

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Advertising and Promotion Costs — Advertising and promotion costs are expensed as incurred.

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These costs are included in Property, plant and equipment .

In addition, the Company capitalizes certain costs incurred to implement a cloud computing arrangement that is considered a service agreement, which are included in Other Assets .

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

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

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

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

Goodwill — Goodwill represents the excess of the consideration transferred over the fair value of net assets of businesses acquired.

Goodwill — Goodwill represents the excess of the consideration transferred over the fair value of net assets acquired in a business combination.

Goodwill is assigned to reporting units and evaluated for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

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If the asset is determined to be impaired, the loss is measured based on the difference between the carrying value of the intangible asset and its fair value, which is determined based on the net present value of estimated future cash flows.

Acquired In-Process Research and Development — IPR&D that the Company acquires in conjunction with the acquisition of a business represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility.

Acquired In-Process Research and Development — IPR&D that the Company acquires in conjunction with a business combination represents the fair value assigned to incomplete research projects which, at the time of acquisition, have not reached technological feasibility.

The amounts are capitalized and are accounted for as indefinite-lived intangible assets, subject to impairment testing until completion or abandonment of the projects.

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If the fair value is less than the carrying amount, an impairment loss is recognized in operating results.

Contingent Consideration — Certain of the Company’s acquisitions involve the potential for future payment of consideration that is contingent upon the achievement of performance milestones, including product development milestones and royalty payments on future product sales.

Contingent Consideration for Business Combinations — Certain of the Company’s acquisitions involve the potential for future payment of consideration that is contingent upon the achievement of performance milestones, including product development milestones and royalty payments on future product sales.

If the transaction is accounted for as a business combination, the fair value of contingent consideration liabilities is determined at the acquisition date using unobservable inputs.

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In addition, research and development expenses include expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration associated with IPR&D assets.

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development expenses also include upfront and milestone payments related to asset acquisitions and licensing transactions involving clinical development programs that have not yet received regulatory approval.

Research and development expenses also include upfront and milestone payments related to asset acquisitions and licensing transactions involving clinical development programs that have not yet received regulatory approval.

Collaborative Arrangements — Merck has entered into collaborative arrangements that provide the Company with varying rights to develop, produce and market products together with its collaborative partners.

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

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

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

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(within Sales ).

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

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Payments due to collaborative partners upon or subsequent to regulatory approval are capitalized and amortized to Cost of sales over the estimated useful life of the corresponding intangible asset, provided that future cash flows support the amounts capitalized.

Sales-based milestones payable by Merck to collaborative partners are accrued and capitalized, subject to cumulative amortization catch-up, when determined to be probable of being achieved by the Company.

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

Sales-based milestones payable by Merck to collaborative partners are accrued and capitalized, subject to cumulative amortization catch-up, when determined by the Company to be probable of being achieved based on future sales forecasts.

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

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

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For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit in the financial statements.

The Company recognizes interest and penalties associated with uncertain tax positions as a component of Taxes on Income from Continuing Operations .

The Company recognizes interest and penalties associated with uncertain tax positions as a component of Taxes on Income .

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

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

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Use of Estimates — The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the U.S.

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

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

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

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

Recently Adopted Accounting Standards — In October 2021, the Financial Accounting Standards Board (FASB) issued amended guidance that requires acquiring entities to recognize and measure contract assets and liabilities in a business combination in accordance with existing revenue recognition guidance.

The Company adopted the guidance effective January 1, 2023.

The adoption of this guidance did not have an impact on the Company’s consolidated financial statements for prior acquisitions;

however, the impact in future periods will be dependent upon the contract assets and contract liabilities acquired in future business combinations.

In June 2022, the FASB issued guidance related to the fair value measurement of an equity security subject to contractual restrictions that prohibit the sale of the equity security.

The new guidance also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value.

The Company adopted the guidance effective July 1, 2023.

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

Recently Issued Accounting Standards Not Yet Adopted — In August 2023, the FASB issued amended guidance that requires a newly formed joint venture to recognize and initially measure its assets and liabilities at fair value upon formation.

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

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

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

Early adoption is permitted for both interim and annual periods.

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

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

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

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

The guidance is effective for annual periods beginning in 2024, and interim periods beginning in 2025.

Early adoption is permitted.

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

In December 2023, the FASB issued guidance intended to improve the transparency of income tax disclosures by requiring consistent categories and disaggregation of information in the effective income tax rate reconciliation and income taxes paid disclosures by jurisdiction.

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

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

See Note 18 for further details.

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

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

The guidance is effective for 2025 annual reporting.

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

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

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

Early adoption is permitted.

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

Acquisitions, Research Collaborations and Licensing Agreements

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

Acquisitions, Divestitures, Research Collaborations and Licensing Agreements

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

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Recent Transactions

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

The Elanco aqua business to be acquired consists of an

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innovative portfolio of medicines and vaccines, nutritionals and supplements for aquatic species;

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

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

There are no future contingent payments associated with the acquisition.

2024 Transactions

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

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

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

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

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

Hansoh is also eligible to receive future contingent

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

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

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

In 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.

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 2024 related to the execution of the transaction.

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;

two related aqua manufacturing facilities in Canada and Vietnam;

as well as a research facility in Chile.

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

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

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

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

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

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

The transaction will be accounted for as an acquisition of a business.

In January 2024, Merck entered into an agreement to acquire Harpoon Therapeutics, Inc.

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

Under the terms of the agreement, Merck will acquire all outstanding shares of Harpoon for $ 23 per share in cash, for an approximate total equity value of $ 680 million.

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

HPN328 is currently being evaluated in a Phase 1/2 clinical trial as a monotherapy in patients with advanced cancers associated with expression of DLL3 and also in combination with atezolizumab in patients with certain types of small-cell lung cancer.

Closing of the acquisition is expected in the first half of 2024, but is subject to certain conditions, including approval of the merger by Harpoon’s stockholders, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, and other customary conditions.

If the proposed transaction closes, the Company anticipates it will be accounted for as an acquisition of an asset since HPN328 accounts for substantially all of the fair value of the gross assets to be acquired (excluding cash and deferred income taxes).

The Company expects to record a charge of approximately $ 650 million to Research and development expenses upon closing.

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

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

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 23

Total identifiable net assets 785

Consideration transferred $ 1,303

(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.

The goodwill is expected to be deductible for tax purposes.

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

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

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

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

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

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

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

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

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 2024.

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

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

In March 2024, Merck acquired Harpoon Therapeutics, Inc.

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

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

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

There are no future contingent payments associated with the acquisition.

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

See Note 4 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) antibody drug conjugate (ADC) candidates:

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).

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

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

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

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

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

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

There are no future contingent payments associated with the acquisition.

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 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 in Research and development expenses in 2023.

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

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

Kelun-Biotech remains eligible to receive future contingent payments aggregating up to $ 725 million in development-related payments, $ 1.95 billion in regulatory milestones, and $ 3.9 billion in sales-based milestones if Kelun-Biotech does not retain Chinese mainland, Hong Kong and Macau rights for the option ADCs and all remaining candidates achieve regulatory approval.

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

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

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

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

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

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.

Also, in connection with the agreement, Merck invested $ 100 million in Kelun-Biotech shares in January 2023.

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In January 2023, Merck acquired Imago BioSciences, Inc.

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

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

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

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

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

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

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

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2022 Transactions

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

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

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

Under the agreement, Royalty Pharma has no rights to MK-8189 and has no decision-making authority over the program.

If Merck elects to advance MK-8189 into a Phase 3 study, Royalty Pharma has the option to provide additional funding of 50 % of the development costs up to $ 375 million.

Royalty Pharma is eligible to receive royalties on future sales.

If Royalty Pharma elects to provide the additional funding noted above, Royalty Pharma becomes eligible to receive future regulatory milestone payments contingent upon certain marketing approvals, as well as a higher royalty rate.

Merck will record the milestone payments as an expense within Other (income) expense, net upon receipt of the related approvals.

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

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

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

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

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

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

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

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

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

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

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

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

MK-5684 is an oral, non-steroidal inhibitor of CYP11A1 currently being evaluated in a Phase 3 clinical trial for the treatment of patients with metastatic castration-resistant prostate cancer.

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

Orion is responsible for the manufacture of clinical and commercial supply of MK-5684.

In addition, the contract provides both parties with an option to convert the initial co-development and co-commercialization agreement into a global exclusive license to Merck.

If the option is exercised, Merck would assume full responsibility for all past development and commercialization expenses associated with the program since inception of the agreement, as well as all future development and commercialization expenses.

In addition, Orion would be eligible to receive milestone payments associated with progress in the development and commercialization of MK-5684, as well as tiered double-digit royalties on sales if the product is approved.

Also in July 2022, Merck and Kelun-Biotech closed a license and collaboration agreement in which Merck gained exclusive worldwide rights for the development, manufacture and commercialization of an investigational ADC (MK-1200) for the treatment of solid tumors.

Under the terms of the agreement, Merck and Kelun-Biotech will collaborate on the early clinical development of the investigational ADC.

Merck made an upfront payment of $ 35 million, which was recorded in Research and development expenses in 2022.

Kelun-Biotech is also eligible to receive future contingent milestone payments aggregating up to $ 82 million in developmental milestones, $ 334 million

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in regulatory milestones, and $ 485 million in sales-based milestones.

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

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

Under the terms of the agreement, Merck and Kelun-Biotech will collaborate on certain early clinical development plans, including evaluating the potential of MK-2870 as a monotherapy and in combination with Keytruda for advanced solid tumors.

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

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

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

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

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

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

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

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

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

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

Merck also agreed to make quarterly payments in 2022 and 2023 aggregating up to $ 111 million to fund Kelun-Biotech’s ongoing research and development activities, of which $ 95 million has been paid through December 31, 2023.

In addition, Kelun-Biotech is eligible to receive future contingent milestone payments (which include all program compounds) aggregating up to $ 90 million in developmental milestones, $ 290 million in first commercial sale milestones, and $ 780 million in sales-based milestones.

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

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

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

2021 Transactions

In November 2021, Merck acquired Acceleron Pharma Inc.

(Acceleron), a publicly traded biopharmaceutical company, for total consideration of $ 11.5 billion.

Acceleron’s development work focused on evaluating the transforming growth factor (TGF)-beta superfamily of proteins that is known to play a central role in the regulation of cell growth, differentiation and repair.

Acceleron’s lead therapeutic candidate, sotatercept (MK-7962), has a novel mechanism of action with the potential to improve short-term and/or long-term clinical outcomes in patients with pulmonary arterial hypertension (PAH).

Sotatercept is under priority review in the U.S.

and is also under review in the European Union (EU) for the treatment of certain adult patients with PAH.

Under a previous agreement assumed by Merck, Bristol-Myers Squibb Company (BMS) was granted an exclusive license to develop and commercialize sotatercept outside of the pulmonary hypertension (PH) field (for which Merck would be eligible to receive contingent milestones and royalty payments), however, Merck retains the worldwide exclusive rights to develop and commercialize sotatercept in the PH field.

The agreement provides for Merck to pay 22 % royalties on future sales of sotatercept in the PH field to BMS.

In addition to sotatercept, Acceleron’s portfolio included Reblozyl (luspatercept), which is being developed and commercialized through a global collaboration with BMS.

See Note 4 for additional information related to this collaboration.

The transaction was accounted for as a business combination.

The Company incurred $ 280 million of costs directly related to the acquisition of Acceleron, consisting primarily of share-based compensation payments to settle non-vested equity awards attributable to postcombination service, severance, as well as investment banking and legal fees.

These costs were included in Selling, general and administrative expenses and Research and development costs in 2021.

The estimated fair value of assets acquired and liabilities assumed from Acceleron (inclusive of measurement period adjustments) is as follows:

November 19, 2021

Cash and cash equivalents $ 340

Investments 285

Identifiable intangible assets:

IPR&D - sotatercept 6,380

Product rights - Reblozyl ( 12 year useful life)

Deferred income tax liabilities, net ( 1,814 )

Other assets and liabilities, net 82

Total identifiable net assets 9,103

Consideration transferred $ 11,514

(1) The estimated fair value of the identifiable intangible assets related to sotatercept and Reblozyl 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 7.5 % for sotatercept and 6.0 % for Reblozyl.

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 Pharmaceutical segment.

The goodwill is not deductible for tax purposes.

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In April 2021, Merck acquired Pandion Therapeutics, Inc.

(Pandion), a clinical-stage biotechnology company developing novel therapeutics designed to address the unmet needs of patients living with autoimmune diseases.

Pandion’s development work focused on advancing a pipeline of precision immune modulators targeting critical immune control nodes.

Total consideration paid of $ 1.9 billion included $ 147 million of costs primarily comprised of share-based compensation payments to settle equity awards.

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

Merck recorded net assets of $ 156 million (primarily cash) and a charge of $ 1.7 billion to Research and development expenses in 2021 related to the transaction.

There are no future contingent payments associated with the acquisition.

In March 2021, Merck and Gilead Sciences, Inc.

(Gilead) entered into an agreement to jointly develop and commercialize long-acting treatments in HIV that combine Merck’s investigational nucleoside reverse transcriptase translocation inhibitor, islatravir, and Gilead’s investigational capsid inhibitor, lenacapavir.

There was no upfront payment made by either party upon entering into the agreement.

The initial focus of the collaboration has been on long-acting oral formulations and long-acting injectable formulations of these combination products, with other formulations potentially added to the collaboration as mutually agreed.

The parties continue to study a long-acting oral formulation of these combination products but have terminated the studies of long-acting injectable formulations of these combination products.

Furthermore, Merck and Gilead subsequently amended the agreement to include the joint development and commercialization of a long-acting injectable formulation of lenacapavir with GS-1614, a development candidate resulting from a collaboration between Scripps Research and Gilead that is a novel prodrug of islatravir.

Under the terms of the agreement, Merck and Gilead will share operational responsibilities, as well as development, commercialization and marketing costs, and any future revenues.

Global development and commercialization costs will be shared 60 % Gilead and 40 % Merck across the oral and injectable formulation programs.

For long-acting oral products, Gilead will lead commercialization in the U.S.

and Merck will lead commercialization in the EU and the rest of the world.

For long-acting injectable products, Merck will lead commercialization in the U.S.

and Gilead will lead commercialization in the EU and the rest of the world.

Gilead and Merck will co-promote in the U.S.

and certain other major markets.

Merck and Gilead will share global product revenues equally until product revenues surpass certain pre-agreed per formulation revenue tiers.

Upon passing $ 2.0 billion a year in net product sales for the oral combination, the revenue split will adjust to 65 % Gilead and 35 % Merck for any revenues above the threshold.

Upon passing $ 3.5 billion a year in net product sales for the injectable combination, the revenue split will adjust to 65 % Gilead and 35 % Merck for any revenues above the threshold.

Beyond the potential combinations of investigational lenacapavir and investigational islatravir, Gilead will have the option to license certain of Merck’s investigational oral integrase inhibitors to develop in combination with lenacapavir.

Reciprocally, Merck will have the option to license certain of Gilead’s investigational oral integrase inhibitors to develop in combination with islatravir.

Each company may exercise its option for an investigational oral integrase inhibitor of the other company following completion of the first Phase 1 clinical trial of that integrase inhibitor.

Upon exercise of an option, the companies will split development costs and revenues, unless the non-exercising company decides to opt-out.

In December 2021, the U.S.

Food and Drug Administration (FDA) placed full or partial clinical holds on investigational new drug applications for certain oral, implant and injectable formulations of islatravir based on observations of decreases in total lymphocyte and CD4+ T-cell counts in some participants receiving islatravir in clinical studies.

In 2023, the Phase 2 clinical trial evaluating an oral once-weekly combination of a lower dose of islatravir and lenacapavir in virologically suppressed adults completed enrollment.

The investigational new drug application for the islatravir + lenacapavir once-weekly treatment regimen remains under a partial clinical hold for any studies that would use islatravir doses higher than the doses considered for the revised clinical program.

The Company remains committed to developing compounds for long-acting HIV prevention and believes in the potential of the nucleoside reverse transcriptase translocation inhibitor (NRTTI) mechanism.

Spin-Off of Organon & Co.

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

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

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

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

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

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

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

Collaborative Arrangements

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Merck’s more significant collaborative arrangements are discussed below.

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AstraZeneca PLC

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

Independently, Merck and AstraZeneca will develop and commercialize Lynparza in combinations with their respective PD-1 and PD-L1 medicines, Keytruda and Imfinzi.

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

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

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

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

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

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

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

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

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

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

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

Accordingly, Merck recorded a $ 600 million liability (which remained accrued at December 31, 2023) and a corresponding increase to the intangible asset related to Lynparza.

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

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

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

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

Lynparza received regulatory approvals triggering capitalized milestone payments of $ 105 million and $ 250 million in 2023 and 2022, respectively, from Merck to AstraZeneca.

In January 2024, Merck made an additional $ 245 million regulatory milestone payment to AstraZeneca.

Potential future regulatory milestone payments of $ 850 million remain under the agreement.

The intangible asset balance related to Lynparza (which includes capitalized sales-based and regulatory milestone payments) was $ 1.5 billion at December 31, 2023 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.

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

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

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

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

Summarized financial information related to this collaboration is as follows:

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(1) Represents amortization of capitalized milestone payments.

Amount in 2022 includes $ 250 million of cumulative amortization catch-up expense as noted above.

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

(2) Includes accrued milestone payments.

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In 2018, Merck and Eisai Co., Ltd.

(Eisai) announced a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima (lenvatinib), an orally available tyrosine kinase inhibitor

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discovered by Eisai.

Under the agreement, Merck and Eisai will develop and commercialize Lenvima jointly, both as monotherapy and in combination with Keytruda .

(Eisai) announced a strategic collaboration for the worldwide co-development and co-commercialization of Lenvima (lenvatinib), an orally available tyrosine kinase inhibitor discovered by Eisai.

Under the agreement, Merck and Eisai are developing and commercializing Lenvima jointly, both as monotherapy and in combination with Keytruda .

Eisai records Lenvima product sales globally (Eisai is the principal on Lenvima sales transactions) and Merck and Eisai share applicable profits equally.

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

Accordingly, Merck recorded $ 250 million of liabilities (of which $ 125 million was subsequently paid in 2023 as noted above and $ 125 million remained accrued at December 31, 2023) and corresponding increases to the intangible asset related to Lenvima.

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

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

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

In 2022 and 2021, Lenvima received regulatory approvals triggering capitalized milestone payments of $ 50 million and $ 75 million, respectively, from Merck to Eisai.

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

There are no regulatory milestone payments remaining under the agreement.

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(2) Represents an accrued milestone payment.

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

The two companies have implemented a joint development and commercialization strategy.

The collaboration also includes development of Bayer’s Verquvo (vericiguat), which was approved in the U.S., the EU and Japan in 2021 and has since been approved in several other markets.

Under the agreement, Bayer commercializes Adempas in the Americas, while Merck commercializes in the rest of the world.

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

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

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

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Summarized financial information related to this collaboration is as follows:

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Payables to Bayer included in Accrued and other current liabilities

(1) Includes amortization of intangible assets.

Amount in 2021 includes $ 153 million of cumulative amortization catch-up expense.

(1) Includes amortization of intangible assets, cost of products sold by Merck, as well as Bayer’s share of profits from sales in Merck’s marketing territories.

Ridgeback Biotherapeutics LP

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Merck gained exclusive worldwide rights to develop and commercialize Lagevrio and related molecules.

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

Following initial authorizations in certain markets in 2021, Lagevrio has since received multiple additional authorizations.

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

(1) Includes royalty expense, amortization of capitalized milestone payments and inventory reserves.

(1) Includes cost of products sold by Merck, Ridgeback’s share of profits, royalty expense, amortization of capitalized milestone payments and inventory reserves.

(2) Includes accrued royalties.

Amount at December 31, 2022 also includes an accrued milestone payment .

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Bristol-Myers Squibb Company

Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein obtained as part of Merck’s November 2021 acquisition of Acceleron that is being commercialized through a global collaboration with BMS.

Reblozyl is approved in the U.S., Europe, and certain other markets for the treatment of anemia in certain rare blood disorders and is also being evaluated for additional indications for hematology therapies.

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.

Merck receives a 20 % sales royalty from BMS which could increase to a maximum of 24 % based on sales levels.

This royalty will be reduced by 50 % upon the earlier of patent expiry or generic entry on an indication-by-indication basis in each market.

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

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

Merck recorded alliance revenue related to this collaboration of $ 212 million in 2023, $ 166 million in 2022 and $ 17 million in 2021.

Moderna, Inc.

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 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 will be recognized as reductions to Research and development costs.

Summarized financial information related to this collaboration is as follows:

Years Ended December 31 2023 2022

Selling, general and administrative

Research and development (1)

December 31 2023 2022

Payables to Moderna included in Accrued and other current liabilities

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

Daiichi Sankyo

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Daiichi Sankyo will be solely responsible for manufacturing and supply.

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

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

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

In addition, the agreement 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 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.

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

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

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

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

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

For raludotatug deruxtecan, Merck will be responsible for 75 % of the first $ 2.0 billion of research and development expenses and 50 % of excess allowable research and development expenses;

the companies will share equally all

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other expenses as well as profits worldwide.

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

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

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

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

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

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

Spin-Off of Organon & Co.

On June 2, 2021, Merck completed the spin-off of Organon through a distribution of Organon’s publicly traded stock to Company shareholders.

In connection with the spin-off, each Merck shareholder received one-tenth of a share of Organon’s common stock for each share of Merck common stock held by such shareholder.

The distribution has been treated as tax free to Merck and its shareholders for U.S.

federal income tax purposes.

Indebtedness of $ 9.5 billion principal amount, consisting of term loans and senior notes, was issued in 2021 in connection with the spin-off and assumed by Organon.

Merck is no longer the obligor of any Organon debt or financing arrangements.

Cash proceeds of $ 9.0 billion were distributed by Organon to Merck in connection with the spin-off.

Also in connection with the spin-off, Merck and Organon entered into a separation and distribution agreement and also entered into various other agreements to effect the spin-off and provide a framework for the relationship between Merck and Organon after the spin-off, including a transition services agreement (TSA), manufacturing and supply agreements (MSAs), trademark license agreements, intellectual property license agreements, an employee matters agreement, a tax matters agreement and certain other commercial agreements.

Under the TSA, Merck is providing Organon various services and, similarly, Organon is providing Merck various services.

A majority of the services provided under the TSA terminated within 25 months following the spin-off;

a majority of the remaining services will terminate within 35 months following the spin-off.

Merck and Organon also 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 until such time as the relevant licenses and permits transferred to Organon.

Under such interim operating agreements and in accordance with the separation and distribution agreement, Merck continued operations in the affected markets on behalf of Organon, with Organon receiving all of the economic benefits and burdens of such activities.

As of December 31, 2023, only one jurisdiction remains under an interim operating agreement.

Additionally, Merck and Organon entered into a number of MSAs pursuant to which Merck is (a) manufacturing and supplying certain active pharmaceutical ingredients for Organon, (b) manufacturing and supplying certain formulated pharmaceutical products for Organon, and (c) packaging and labeling certain finished pharmaceutical products for Organon.

Similarly, Organon and Merck entered into a number of MSAs pursuant to which Organon is (a) manufacturing and supplying certain formulated pharmaceutical products for Merck, and (b) packaging and labeling certain finished pharmaceutical products for Merck.

The terms of the MSAs range in initial duration from four years to ten years .

The amounts included in the consolidated statement of income for the above MSAs include sales of $ 394 million, $ 383 million and $ 219 million in 2023, 2022 and 2021, respectively, and related cost of sales of $ 422 million, $ 404 million and $ 195 million in 2023, 2022 and 2021, respectively.

Amounts included in the consolidated statement of income for the TSAs were immaterial in 2023, 2022 and 2021.

The amounts due from Organon under all of the above agreements were $ 632 million and $ 511 million at December 31, 2023 and 2022, respectively, and are reflected in Other current assets .

The amounts due to Organon under these agreements were $ 598 million and $ 345 million at December 31, 2023 and 2022, respectively, and are included in Accrued and other current liabilities .

The results of the women’s health, biosimilars and established brands businesses (previously included in the Pharmaceutical segment) that were contributed to Organon in the spin-off, as well as interest expense related to the debt issuance in 2021, have been reflected as discontinued operations in the Company’s consolidated statement of income as Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests for periods prior to the spin-off on June 2, 2021.

Merck incurred separation costs of $ 556 million in 2021 related to the spin-off of Organon, which are also included in Income from Discontinued Operations, Net of Taxes and

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Amounts Attributable to Noncontrolling Interests .

These costs primarily relate to professional fees for separation activities within finance, tax, legal and information technology functions, as well as investment banking fees.

Details of Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests are as follows:

Year Ended December 31

Sales $ 2,512

Costs, Expenses and Other

Cost of sales 789

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

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

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

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

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

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:

Years Ended December 31 2024 2023

Selling, general and administrative

Research and development (1)

Restructuring costs 1

Other (income) expense, net ( 15 )

Income from discontinued operations before taxes 757

Tax provision 50

Income from discontinued operations, net of taxes 707

Income of discontinued operations attributable to noncontrolling interests 3

(1) Reflects amounts through the June 2, 2021 spin-off date.

December 31 2024 2023

Receivables from Daiichi Sankyo included in Other current assets

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

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

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

(2) Includes accrued continuation payment.

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Moderna, Inc.

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

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

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

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, mainly related to facility costs, which aggregated $ 198 million at December 31, 2024 and will be amortized over the assets’ estimated useful lives.

Summarized financial information related to this collaboration is as follows:

Years Ended December 31 2024 2023 2022

Selling, general and administrative

Research and development (1)

December 31 2024 2023

Payables to Moderna included in Accrued and other current liabilities

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

Bristol-Myers Squibb Company

Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein that is being commercialized through a global collaboration with Bristol-Myers Squibb Company (BMS).

BMS is the principal on sales transactions for Reblozyl;

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

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

This royalty will be reduced by 50 % upon the earlier of patent expiry or generic entry on an indication-by-indication basis in each market.

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

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

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

Restructuring

2024 Restructuring Program

In January 2024, the Company approved a new restructuring program (2024 Restructuring Program) intended to continue the optimization of the Company’s Human Health global manufacturing network as the future pipeline shifts to new modalities and also optimize the Animal Health global manufacturing network to improve supply reliability and increase efficiency.

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

The Company recorded total pretax costs of $ 190 million in 2023 related to the 2024 Restructuring Program.

2019 Restructuring Program

The Company recorded total pretax costs of $ 888 million and $ 190 million in 2024 and 2023, respectively, related to the 2024 Restructuring Program, bringing total cumulative pretax costs incurred through December 31, 2024 to $ 1.1 billion.

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

The Company recorded total pretax costs of $ 743 million in 2023, $ 666 million in 2022 and $ 868 million in 2021 related to the 2019 Restructuring Program.

Since inception of the 2019 Restructuring Program through December 31, 2023, Merck recorded total pretax accumulated costs of approximately $ 4.1 billion.

Approximately 70 % of the cumulative pretax costs were cash outlays, primarily related to employee separation expense and facility shut-down costs.

Approximately 30 % of the cumulative pretax costs were non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested.

The actions under the 2019 Restructuring Program are substantially complete.

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

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

For segment reporting, restructuring charges are unallocated expenses.

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

Costs Accelerated

Depreciation Other Exit Costs

Depreciation Separation

Costs Other Exit Costs

Year Ended December 31, 2024

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Cost of sales $ 254 $ — $ 241 $ 495

Restructuring costs 115 — 13 128

2019 Restructuring Program

Cost of sales — 131 18 149

Selling, general and administrative — — 83 83

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$ 254 $ 122 $ 512 $ 888

$ 454 $ 140 $ 339 $ 933

Year Ended December 31, 2023

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Cost of sales $ — $ — $ 62 $ 62

Restructuring costs — 115 13 128

2019 Restructuring Program

Cost of sales 131 — 18 149

Selling, general and administrative 9 — 113 122

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140 339 264 743

$ 140 $ 454 $ 339 $ 933

Year Ended December 31, 2022

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$ 120 $ 212 $ 334 $ 666

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

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

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

All the sites have and will continue to operate up through the respective closure dates and, since future undiscounted cash flows are sufficient to recover the respective book values, Merck is recording accelerated depreciation over the revised useful life of the site assets.

All the sites will continue to operate up through the respective closure dates and, since future undiscounted cash flows are sufficient to recover the respective book values, Merck is recording accelerated depreciation over the revised useful life of the site assets.

Anticipated site closure dates, particularly related to manufacturing locations, have been and may continue to be adjusted to reflect changes resulting from regulatory or other factors.

Other exit costs in 2023, 2022 and 2021 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.

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

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

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

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

Costs Accelerated

Depreciation Other Exit Costs

2024 Restructuring Program

Restructuring reserves January 1, 2023

$ — $ — $ — $ —

Expenses 115 — 75 190

(Payments) receipts, net — — ( 13 ) ( 13 )

Non-cash activity — — ( 62 ) ( 62 )

Restructuring reserves December 31, 2023

$ 115 $ — $ — $ 115

2019 Restructuring Program

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

Depreciation Separation

Costs Other Exit Costs

Restructuring reserves January 1, 2023

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The Company will layer in hedges over time, increasing the portion of forecasted sales hedged as it gets closer to the expected date of the forecasted sales.

The portion of forecasted sales hedged is based on assessments of cost-benefit profiles that consider natural offsetting exposures, revenue and exchange rate volatilities and correlations, and the cost of hedging instruments.

The portion of forecasted sales hedged is based on assessments of cost-benefit profiles that consider natural offsetting exposures, revenue and foreign exchange rate volatilities and correlations, and the cost of hedging instruments.

The Company manages its anticipated transaction exposure principally with purchased local currency put options, forward contracts, and purchased collar options.

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For derivatives that are designated as cash flow hedges, the unrealized gains or losses on these contracts are recorded in AOCL and reclassified into Sales when the hedged anticipated revenue is recognized.

The amount reclassified into earnings as a result of the discontinuation of cash flow hedges because it was no longer deemed probable the forecasted hedged transactions would occur was not material for the years ended December 31, 2024, 2023 or 2022.

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

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

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The Company manages operating activities and net asset positions at each local subsidiary in order to mitigate the effects of exchange on monetary assets and liabilities.

The Company manages operating activities and net asset positions at each local subsidiary in order to mitigate the effects of foreign exchange on monetary assets and liabilities.

Monetary assets and liabilities denominated in a currency other than the functional currency of a given subsidiary are remeasured at spot rates in effect on the balance sheet date with the effects of changes in spot rates reported in Other (income) expense, net .

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

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

Merck principally utilizes forward exchange contracts to

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

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

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

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

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.

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

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

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

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

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

At December 31, 2023, the Company was a party to four pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of a portion of fixed-rate notes as detailed in the table below.

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

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

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

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

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value changes in the swap contracts.

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

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

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

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

Carrying Amount of Hedged Liabilities Cumulative Amount of Fair Value Hedging Adjustment Increase (Decrease) Included in the Carrying Amount

Carrying Amount of Hedged Liabilities Cumulative Amount of Fair Value Hedging Adjustment Increase Included in the Carrying Amount

2024 2023 2024 2023

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Derivatives Designated as Hedging Instruments Balance Sheet Caption

Interest rate swap contracts Other Noncurrent Assets

Interest rate swap contracts Other Assets

$ 17 $ — $ 1,500 $ 57 $ — $ 1,000

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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 at December 31:

Asset Liability Asset Liability

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Gross amounts subject to offset in master netting arrangements not offset in the consolidated balance sheet ( 299 ) ( 299 ) ( 215 ) ( 215 )

Cash collateral received/posted ( 3 ) — ( 66 ) ( 19 )

Cash collateral received

( 165 ) — ( 3 ) —

Net amounts $ 265 $ 46 $ 124 $ 24

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

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$ 64,168 $ 60,115 $ 59,283 $ ( 24 ) $ 466 $ 1,501 $ 216 $ ( 393 ) $ ( 339 )

Loss (gain) on fair value hedging relationships:

(Gain) loss on fair value hedging relationships:

Interest rate swap contracts

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— — — — — — 508 114 684

Increase (decrease) in Sales as a result of AOCL reclassifications

Increase in Sales as a result of AOCL reclassifications

167 249 773 — — — ( 167 ) ( 249 ) ( 773 )

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— — — ( 1 ) ( 1 ) ( 2 ) — — —

Amount of gain (loss) recognized in OCI on derivatives

Amount of (loss) gain recognized in OCI on derivatives

— — — — — — ( 1 ) 13 ( 2 )

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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

Amount of Derivative Pretax Loss (Gain) Recognized in Income

Years Ended December 31 2024 2023 2022

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(1) These derivative contracts primarily mitigate changes in the value of remeasured foreign currency denominated monetary assets and liabilities attributable to changes in foreign currency exchange rates.

Amount in 2021 includes a loss on forward exchange contracts entered into in conjunction with the spin-off of Organon.

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

At December 31, 2023, the Company estimates $ 40 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 .

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

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

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

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

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Investments in Debt and Equity Securities

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Total debt and publicly traded equity securities $ 1,456 $ 1,101

(1) Unrealized net gains of $ 411 million were recorded in Other (income) expense, net in 2023 on equity securities still held at December 31, 2023.

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

At both December 31, 2023 and 2022, the Company also had $ 832 million of equity investments without readily determinable fair values included in Other Assets .

Unrealized net gains of $ 411 million were recorded in Other (income) expense, net in 2023 on equity securities still held at December 31, 2023.

At December 31, 2024 and 2023, the Company also had $ 863 million and $ 832 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 .

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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 December 31, 2024 were $ 309 million and $ 107 million, respectively.

At December 31, 2023, 2022 and 2021, the Company also had $ 417 million, $ 598 million and $ 1.7 billion, respectively, recorded in Other Assets for equity securities held through ownership interests in investment funds.

Losses (gains) recorded in Other (income) expense, net relating to these investment funds were $ 106 million, $ 1.0 billion and $( 1.4 ) billion for the years ended December 31, 2023, 2022 and 2021, respectively.

At December 31, 2024, 2023 and 2022, the Company also had $ 267 million, $ 417 million and $ 598 million, respectively, recorded in Other Assets for equity securities held through ownership interests in investment funds.

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

Fair Value Measurements

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

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

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

government and agency securities — 99 — 99 — — — —

Publicly traded equity securities 463 — — 463 252 — — 252

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

(2) Balance at December 31, 2023 includes securities with a total fair value of $ 177 million, which are subject to a contractual sale restriction that expires in July 2024.

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

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

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

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Payments ( 151 ) ( 117 )

Other — ( 56 )

Fair value December 31 (2)

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Includes cumulative translation adjustments.

(2) At December 31, 2023 and 2022, $ 263 million and $ 368 million, respectively, of the liabilities relate to the termination of the Sanofi Pasteur MSD joint venture in 2016.

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

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

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

Balance at December 31, 2023 includes $ 128 million recorded as a current liability for amounts expected to be paid within the next 12 months.

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

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

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

Other Fair Value Measurements

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and Cardinal Health, Inc., which represented approximately 21 %, 21 % and 13 %, respectively, of total accounts receivable at December 31, 2024.

The accounts receivable balance at December 31, 2023 for Chongqing Zhifei Biological Products Co., Ltd.

(Zhifei), the sole distributor for the Company’s vaccines products in China, is not significant as China is part of the Company’s factoring program discussed below;

however, vaccine sales distributed by Zhifei represent a substantial portion of total sales in China.

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

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

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

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

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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.

At December 31, 2023 and 2022, the Company had collected $ 44 million and $ 67 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 .

At December 31, 2024 and 2023, the Company had collected $ 55 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 Consolidated Statement of Cash Flows.

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

Cash collateral advanced by the Company to various counterparties was $ 19 million at December 31, 2022.

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Inventories at December 31 consisted of:

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Supplies 289 277

11,142 10,268

Decrease to LIFO cost ( 840 ) ( 562 )

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Other Assets 4,193 3,348

Inventories valued under the LIFO method comprised approximately $ 3.1 billion at both December 31, 2023 and 2022, after reflecting the decrease to LIFO cost.

Inventories valued under the LIFO method comprised approximately $ 3.4 billion and $ 3.1 billion at December 31, 2024 and 2023, respectively, after reflecting the decrease to LIFO cost.

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

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$ 42,162 $ 25,792 $ 16,370 $ 41,603 $ 23,592 $ 18,011

Some of the more significant acquired intangibles included in product rights, on a net basis, related to human health marketed products at December 31, 2023 were Reblozyl, $ 3.2 billion;

Zerbaxa , $ 333 million;

and Sivextro , $ 106 million.

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

Reblozyl, $ 2.8 billion;

and Zerbaxa , $ 260 million.

Additionally, the Company had $ 4.3 billion of net acquired intangibles related to animal health at December 31, 2024, of which $ 1.7 billion related to product rights and $ 1.9 billion was attributable to trade names, primarily related to Allflex.

At December 31, 2023, IPR&D primarily relates to MK-7962 (sotatercept), $ 6.4 billion, obtained through the acquisition of Acceleron in 2021 (see Note 3) and MK-1026 (nemtabrutinib), $ 418 million, obtained through the acquisition of ArQule, Inc.

(ArQule) in 2020 (see below).

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

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

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

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

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

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Upon successful completion of each IPR&D project, the Company will make a separate determination as to the then-useful life of the asset and begin amortization.

In 2023, the Company recorded a $ 779 million IPR&D impairment charge within Research and development expenses related to MK-7264, gefapixant, a non-narcotic, oral selective P2X3 receptor antagonist, in development for the treatment of refractory chronic cough or unexplained chronic cough in adults.

In 2023, the Company recorded a $ 779 million IPR&D impairment charge within Research and development expenses related to MK-7264, gefapixant, a non-narcotic, oral selective P2X3 receptor antagonist, that was in development for the treatment of refractory or unexplained chronic cough in adults.

In December 2023, the FDA issued a Complete Response Letter (CRL) regarding the resubmission of Merck’s New Drug Application (NDA) for gefapixant.

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

The remaining intangible asset balance related to Lyfnua (gefapixant) of $ 53 million is now included in product rights in the table above as of December 31, 2023 and will be amortized over its expected useful life as supported by projected future cash flows in the markets where it is approved including Japan and the EU.

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

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

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

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

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

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

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

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

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

In 2021, the Company recorded a $ 275 million IPR&D impairment charge within Research and development expenses related to nemtabrutinib.

As part of Merck’s annual impairment assessment of IPR&D intangible assets, the Company estimated the current fair value of nemtabrutinib utilizing projected future cash flows.

The market participant assumptions used to derive the forecasted cash flows were updated to reflect the current competitive landscape for nemtabrutinib, including increased expected development costs for additional clinical trial data needed to develop nemtabrutinib, as well as a delay in the anticipated launch date for nemtabrutinib, which collectively reduced the projected future cash flows and estimated fair value.

Additionally, the discount rate utilized to determine the current fair value of the asset was reduced to 8.5 % to reflect the current risk profile of the asset.

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

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

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2029, $ 1.5 billion.

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Loans Payable, Long-Term Debt and Leases

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The weighted-average interest rate of commercial paper borrowings was 5.18 % and 5.14 % for the years ended December 31, 2024 and 2023, respectively.

There were no commercial paper borrowings outstanding at December 31, 2024 or 2023.

Long-Term Debt

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2.45 % notes due 2050

1.875 % euro-denominated notes due 2026

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2.35 % notes due 2040

3.25 % euro-denominated notes due 2032

3.50 % euro-denominated notes due 2037

3.70 % euro-denominated notes due 2044

3.75 % euro-denominated notes due 2054

4.30 % notes due 2030

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2.75 % notes due 2025

0.50 % euro-denominated notes due 2024

Other 209 289

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Other (as presented in the table above) includes borrowings at variable rates that resulted in effective interest rates of 5.02 % and 4.82 % for 2024 and 2023, respectively.

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

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

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

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

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

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

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

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

The Company used a portion of the $ 5.9 billion net proceeds from this offering to fund a portion of the cash consideration paid for the acquisition of Prometheus (see Note 3), including related fees and expenses, and used the remaining net proceeds for general corporate purposes including to repay commercial paper borrowings and other indebtedness with upcoming maturities.

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

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

MSD Netherlands Capital B.V.

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

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

are consolidated in the financial statements of the Company.

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

Certain of the Company’s borrowings require that Merck comply with covenants and, at December 31, 2024, the Company was in compliance with these covenants.

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

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

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

Vehicle leases are generally in effect for four years .

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however, these amounts are immaterial.

Sublease income and activity related to sale and leaseback transactions are immaterial.

Sublease income was immaterial and there were no sale and leaseback transactions in 2024.

Merck’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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Operating lease assets obtained in exchange for lease obligations were $ 47 million in 2024, $ 122 million in 2023 and $ 57 million in 2022.

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

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Contingencies and Environmental Liabilities

The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, and commercial litigation, as well as certain additional matters including governmental and environmental matters.

The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, commercial litigation, and securities litigation, as well as certain additional matters including governmental and environmental matters.

In the opinion of the Company, it is unlikely that the resolution of these matters will be material to the Company’s financial condition, results of operations or cash flows.

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These accruals are adjusted periodically as assessments change or additional information becomes available.

For product liability claims, a portion of the overall accrual is actuarially determined and considers such factors as past experience, number of claims reported and estimates of claims incurred but not yet reported.

Generally, for product liability claims, a portion of the overall accrual is actuarially determined and considers such factors as past experience, number of claims reported and estimates of claims incurred but not yet reported.

Individually significant contingent losses are accrued when probable and reasonably estimable.

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

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Product Liability Litigation

Dr Scholl’s Foot Powder

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

arising from consumers’ alleged exposure to talc in Dr.

Scholl’s foot powder, which Merck acquired through its merger with Schering-Plough Corporation and sold as part of the divestiture of Merck’s consumer care business to Bayer in 2014.

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

As of December 31, 2024, approximately 415 cases were pending against Merck in various state courts.

Gardasil/Gardasil 9

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As of December 31, 2024, approximately 225 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.

In August 2022, the Judicial Panel on Multidistrict Litigation ordered that Gardasil/Gardasil 9 product liability cases pending in federal courts nationwide be transferred to Judge Robert J.

In August 2022, the U.S.

Judicial Panel on Multidistrict Litigation ordered that Gardasil/Gardasil 9 product liability cases pending in federal courts nationwide be transferred to Judge Robert J.

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

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

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

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

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

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

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

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

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

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

Governmental Proceedings

Civil Investigative Demands

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

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

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

The Company is cooperating with the investigation.

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

Department of Justice.

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

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

Inflation Reduction Act

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Merck is cooperating with the California Attorney General’s investigation.

As previously disclosed, in June 2020, Merck received a Civil Investigative Demand (CID) from the U.S.

Department of Justice.

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

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

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

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

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

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

Securities Litigation

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

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

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

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

Commercial and Other Litigation

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

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

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

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

On October 18, 2023, the court granted final approval of the indirect purchaser class settlement.

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In 2020 and 2021, United Healthcare Services, Inc.

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

In April 2023, the Merck Defendants reached settlements with the direct purchaser and retailer plaintiffs and a settlement with the indirect purchaser class that the court approved in October 2023.

As previously disclosed, in 2020 and 2021, United Healthcare Services, Inc.

(United Healthcare), Humana Inc.

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

In February 2022, the Insurer Plaintiffs filed amended complaints.

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

On December 4, 2023, prior to a decision on the motion to dismiss, the U.S.

In December 2023, the U.S.

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

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

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

RotaTeq Antitrust Litigation

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In May 2023, MSD moved to dismiss the complaint.

On November 20, 2023, the court granted in part and denied in part the motion to dismiss, dismissing plaintiff’s Idaho and Utah consumer law claims and allowing all other claims to proceed.

In November 2023, the court granted in part and denied in part the motion to dismiss, dismissing plaintiff’s Idaho and Utah consumer law claims and allowing all other claims to proceed.

Bravecto Litigation

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District Court for the District of New Jersey.

Following motion practice, the plaintiffs filed a second amended complaint on July 1, 2021, seeking to certify a nationwide class action of purchasers or users of Bravecto (fluralaner) products in the U.S.

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

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

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

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

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

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

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

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

The Company and plaintiffs each appealed the class certification decision.

The Court of Appeal of Quebec heard the appeal in February 2022 and issued a decision in April 2022 allowing both parties’ appeals in part.

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

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

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

1 unchanged sentence

340B Program Litigation

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

District Court for the District of Columbia to challenge the letter Merck received from the Health Resources and Services Administration (HRSA) in May 2022 regarding Merck’s 340B Program integrity initiative.

HRSA’s letter to Merck asserts that Merck is in violation of the 340B statute.

HRSA further claims that continued failure to provide the 340B price to covered entities using contract pharmacies may result in civil monetary penalties for each instance of alleged overcharging, in addition to repayment for any instance of overcharging.

The letter is very similar to letters HRSA has sent to other manufacturers, which letters have been held to be unlawful by multiple federal courts.

Merck disagrees with HRSA’s assertion.

Merck remains committed to the 340B Program and to providing 340B discounts to eligible covered entities.

Merck’s 340B Program integrity initiative is consistent with the requirements of the 340B statute and is intended to ensure the integrity and sustainability of the 340B statute by reducing prohibited duplicate discounts and diversion and putting patients back at the center of the program.

Merck continues to offer all of the Company’s covered outpatient drugs to all 340B covered entities for purchase at or below the 340B ceiling price.

In September 2022, the court stayed the case pending the D.C.

Circuit’s ruling in Novartis Pharmaceuticals Corp.

Johnson and United Therapeutics Corp.

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

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

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

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

Qui Tam Litigation

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

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

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

In September 2014, the court denied Merck’s motion to dismiss the False Claims Act suit and granted in part and denied in part its motion to dismiss the then-pending antitrust suit.

As a result, both the False Claims Act suit and the antitrust suits proceeded into discovery, which is now complete, and the parties have filed and briefed cross-motions for summary judgment.

On July 27, 2023, in the False Claims Act case, 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 two former employees pursued the lawsuit without the involvement of the U.S.

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

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

Relators have appealed that decision.

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

On November 17, 2023, the Third Circuit granted the Company’s petition for permission to appeal the antitrust decision.

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

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

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

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

Merck KGaA Litigation

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Patent Litigation

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

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

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

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

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

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

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

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

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

All actions in the District of New Jersey have been consolidated.

All actions in the District of New Jersey were consolidated.

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

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

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

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

One of the generic companies in the consolidated action

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

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

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

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patent protection for Bridion through at least January 2026.

On June 29, 2023, the U.S.

Also in June 2023, the U.S.

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

In July 2023, defendants filed a notice of appeal with the United States Court of Appeals for the Federal Circuit.

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

Court of Appeals for the Federal Circuit.

The appeal is currently pending.

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

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

The Company is currently considering its options.

Oral argument took place on February 4, 2025.

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

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

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

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

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

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

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

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

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

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

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

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

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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/polymorph patent.

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

District Court of Delaware alleging infringement.

The case was dismissed without prejudice in July 2024.

Following the dismissal, the Company granted Azurity a covenant not to assert the salt/polymorph 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 on March 8, 2023, and an Advocate General Opinion is expected on April 15, 2024 with a decision later in

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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.

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

A decision was rendered on December 19, 2024.

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

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

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

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

On October 6, 2023, the Company filed a patent infringement lawsuit against Sawai Pharmaceuticals Co., Ltd.

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

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

The lawsuit is in response to the Defendants’ application for marketing authorization to sell a generic sitagliptin dihydrogen phosphate product, in the anhydrate form, which was approved on August 15, 2023.

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

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

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

District Court of Maryland.

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patents, including a demand for damages.

On November 30, 2023, the Company filed an inter partes review with the United States Patent & Trademark Office Patent Trial and Appeal Board, challenging the validity of the patent claims of one of the asserted patents in the case.

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

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

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

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

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

District Court for the District of New Jersey/Delaware against Natco.

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District Court for the District of New Jersey against Natco.

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

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

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

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

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

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

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

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

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

District Court for the District of New Jersey against Cipla.

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

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

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

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

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

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

District Court for the District of New Jersey against Zydus.

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

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

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

Other Litigation

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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

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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.

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.

Environmental Matters

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

These proceedings seek to require the operators of hazardous waste disposal facilities, transporters of waste to the sites and generators of hazardous waste disposed of at the sites to clean up the sites or to reimburse the government for cleanup costs.

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to reimburse the government for cleanup costs.

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

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These awards generally vest one-third each year over a three-year period, with a contractual term of 7 - 10 years.

RSUs are stock awards that are granted to employees and entitle the holder to shares of common stock

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as the awards vest.

RSUs are stock awards that are granted to employees and entitle the holder to shares of common stock as the awards vest.

The fair value of the stock option and RSU awards is determined and fixed on the grant date based on the Company’s stock price.

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

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

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

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period, subject to the terms applicable to such awards.

PSU awards generally vest after three years .

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Total pretax share-based compensation cost recorded in 2024, 2023 and 2022 was $ 761 million, $ 645 million and $ 541 million, respectively.

The amount in 2021 includes $ 479 million related to continuing operations.

Income tax benefits for share-based compensation expense recognized in 2024, 2023 and 2022 were $ 117 million, $ 96 million and $ 78 million, respectively.

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Cash received from the exercise of stock options 177 125 384

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

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Expected to vest December 31, 2024 10,976 $ 117.25 1,669 $ 116.26

At December 31, 2023, there was $ 990 million of total pretax unrecognized compensation expense related to nonvested stock options, RSU and PSU awards which will be recognized over a weighted average period of 1.9 years.

At December 31, 2024, there was $ 1.1 billion of total pretax unrecognized compensation expense related to nonvested stock options, RSU and PSU awards which will be recognized over a weighted average period of 1.9 years.

For segment reporting, share-based compensation costs are unallocated expenses.

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Net Periodic Benefit Cost

The net periodic benefit cost (credit) for pension and other postretirement benefit plans (including certain costs reported as part of discontinued operations) consisted of the following components:

The net periodic benefit cost (credit) for pension and other postretirement benefit plans consisted of the following components:

Pension Benefits

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Net periodic benefit cost (credit) $ 132 $ 155 $ 425 $ ( 25 ) $ ( 29 ) $ 129 $ ( 84 ) $ ( 61 ) $ ( 93 )

Net periodic benefit cost (credit) for pension and other postretirement benefit plans in 2021 includes expenses for curtailments, settlements and termination benefits provided to certain employees in connection with the spin-off of Organon.

In connection with restructuring actions (see Note 5), termination charges were recorded in 2024, 2023 and 2022 on pension and other postretirement benefit plans related to expanded eligibility for certain employees exiting Merck.

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

The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 15), with the exception of certain amounts for termination benefits, curtailments and settlements, which are recorded in Restructuring costs if the event giving rise to the termination benefits, curtailment or settlement is related to restructuring actions or in Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests if related to the spin-off of Organon (each as noted above).

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The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 14), with the exception of certain amounts for termination benefits, curtailments and settlements, which are recorded in Restructuring costs if the event giving rise to the termination benefits, curtailment or settlement is related to restructuring actions.

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Obligations and Funded Status

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Interest cost 537 526 294 299 56 63

Actuarial losses (gains) (1)

Actuarial (gains) losses (1)

( 595 ) 403 ( 549 ) 766 32 ( 58 )

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Other Noncurrent Liabilities ( 405 ) ( 593 ) ( 394 ) ( 480 ) ( 140 ) ( 158 )

(1) Actuarial losses (gains) primarily reflect changes in discount rates.

(1) Actuarial (gains) losses primarily reflect changes in discount rates.

At December 31, 2024 and 2023, the accumulated benefit obligation was $ 18.1 billion and $ 19.1 billion, respectively, for all pension plans, of which $ 10.0 billion and $ 10.3 billion, respectively, related to U.S.

pension plans.

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Information related to the funded status of selected pension plans at December 31 is as follows:

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

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The fair values of the Company’s pension plan assets at December 31 by asset category are as follows:

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(2) The plans’ Level 3 investments in insurance contracts are generally valued using a crediting rate that approximates market returns and invest in underlying securities whose market values are unobservable and determined using pricing models, discounted cash flow methodologies, or similar techniques.

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The table below provides a summary of the changes in fair value, including transfers in and/or out, of all financial assets measured at fair value using significant unobservable inputs (Level 3) for the Company’s pension plan assets:

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Purchases and sales, net ( 61 ) — ( 61 ) ( 53 ) — ( 53 )

Transfers into Level 3 — — — 10 — 10

Balance December 31 $ 698 $ — $ 698 $ 785 $ — $ 785

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Fixed income securities

Government and agency obligations — 245 — — 245 — 226 — — 226

Corporate obligations — 598 — 598 — 157 — — 157

Government and agency obligations — 266 — 266 — 245 — — 245

Mortgage and asset-backed securities — 54 — — 54 — 2 — — 2

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For international pension plans, the targeted investment portfolio varies based on the duration of pension liabilities and local government rules and regulations.

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Although a significant percentage of plan assets are invested in U.S.

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Years Ended December 31 2024 2023 2022 2024 2023 2022 2024 2023 2022

Net (loss) gain arising during the period $ ( 69 ) $ ( 42 ) $ 813 $ ( 438 ) $ 116 $ 772 $ 110 $ — $ 156

Prior service cost arising during the period

Net gain (loss) arising during the period

$ 35 $ ( 69 ) $ ( 42 ) $ 634 $ ( 438 ) $ 116 $ ( 78 ) $ 110 $ —

Prior service credit (cost) arising during the period

— — — 56 ( 16 ) ( 4 ) — — —

$ 35 $ ( 69 ) $ ( 42 ) $ 690 $ ( 454 ) $ 112 $ ( 78 ) $ 110 $ —

Net loss (gain) amortization included in benefit cost $ 43 $ — $ 128 $ 5 $ ( 3 ) $ 96 $ ( 51 ) $ ( 42 ) $ ( 43 )

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$ 43 $ 35 $ 347 $ ( 9 ) $ ( 7 ) $ 83 $ ( 94 ) $ ( 92 ) $ ( 101 )

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Actuarial Assumptions

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Total employer contributions to these plans in 2024, 2023 and 2022 were $ 215 million, $ 199 million and $ 175 million, respectively.

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Other (Income) Expense, Net

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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 2023 includes a $ 572.5 million charge related to settlements with certain plaintiffs in the Zetia antitrust litigation (see Note 11).

Interest paid was $ 1.1 billion in 2023, $ 937 million in 2022 and $ 779 million in 2021.

Other, net (as reflected in the table above) in 2024 includes $ 170 million of income related to the expansion of a collaboration agreement with Daiichi Sankyo (see Note 4).

Other, net, in 2023 includes a $ 572.5 million charge related to settlements with certain plaintiffs in the Zetia antitrust litigation (see Note 10).

Interest paid was $ 1.3 billion in 2024, $ 1.1 billion in 2023 and $ 937 million in 2022.

Taxes on Income

A reconciliation between the effective tax rate for income from continuing operations and the U.S.

A reconciliation between the effective tax rate and the U.S.

statutory rate is as follows:

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Amount Tax Rate Amount Tax Rate Amount Tax Rate

statutory rate applied to income from continuing operations before taxes $ 397 21.0 % $ 3,453 21.0 % $ 2,915 21.0 %

statutory rate applied to income before taxes

$ 4,186 21.0 % $ 397 21.0 % $ 3,453 21.0 %

Differential arising from:

Acquisition of Prometheus

Foreign earnings ( 1,301 ) ( 6.5 ) ( 941 ) ( 49.8 ) ( 1,821 ) ( 11.1 )

Tax settlements and statute lapses

( 557 ) ( 2.8 ) — — ( 10 ) ( 0.1 )

Acquisition of Imago

R&D tax credit ( 202 ) ( 1.0 ) ( 214 ) ( 11.3 ) ( 117 ) ( 0.7 )

Inventory donations

( 71 ) ( 0.4 ) ( 65 ) ( 3.5 ) ( 52 ) ( 0.3 )

Valuation allowances 70 3.7 108 0.7 102 0.7

Acquisition-related costs, including amortization

State taxes ( 39 ) ( 0.2 ) ( 117 ) ( 6.2 ) ( 110 ) ( 0.7 )

Charges for certain research and development asset acquisitions

554 2.8 253 13.4 — —

Valuation allowances 54 0.3 70 3.7 108 0.7

Restructuring 52 0.3 41 2.2 11 0.1

Foreign earnings ( 941 ) ( 49.8 ) ( 1,821 ) ( 11.1 ) ( 1,456 ) ( 10.5 )

GILTI and the foreign-derived intangible income deduction 29 0.1 ( 80 ) ( 4.3 ) 462 2.8

R&D tax credit ( 214 ) ( 11.3 ) ( 117 ) ( 0.7 ) ( 113 ) ( 0.8 )

State taxes ( 117 ) ( 6.2 ) ( 110 ) ( 0.7 ) 2 —

Inventory donations

Acquisition-related costs, including amortization

18 0.1 42 2.2 ( 3 ) —

Tax settlements

Acquisition of Prometheus

— — 2,139 113.3 — —

Acquisition of Pandion — — — — 356 2.6

Other 80 0.4 ( 13 ) ( 0.7 ) ( 3 ) —

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Where applicable, the impact of changes in uncertain tax positions is reflected in the reconciling items above.

The Company’s remaining transition tax liability under the Tax Cuts and Jobs Act (TCJA) of 2017, which has been reduced by payments and the expected utilization of foreign tax credits, was $ 1.5 billion at December 31, 2023, of which $ 976 million is included in Income taxes payable and the remainder of $ 518 million is included in Other Noncurrent Liabilities .

The Company’s remaining transition tax liability under the Tax Cuts and Jobs Act (TCJA) of 2017, which has been reduced by payments and the expected utilization of foreign tax credits, was a net liability of $ 518 million at December 31, 2024, which is comprised of a $ 1.2 billion tax liability included in Income taxes payable, offset by $ 702 million of foreign tax credits included in Other Assets that Merck expects to be applied upon the completion of the IRS’s examination of the Company’s tax returns for the 2017 and 2018 federal tax years.

As a result of the transition tax under the TCJA, the Company is no longer indefinitely reinvested with respect to its undistributed earnings from foreign subsidiaries and has provided a deferred tax liability for foreign withholding taxes that would apply.

The Company remains indefinitely reinvested with respect to its

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financial statement basis in excess of tax basis of its foreign subsidiaries.

A determination of the deferred tax liability with respect to this basis difference is not practicable.

The foreign earnings tax rate differentials in the tax rate reconciliation above primarily reflect the impacts of operations in jurisdictions with different tax rates than the U.S., particularly Ireland and Switzerland, as well as Singapore and Puerto Rico which operate under tax incentive grants (which begin to expire in 2025), thereby yielding a favorable impact on the effective tax rate compared with the U.S.

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Company remains indefinitely reinvested with respect to its financial statement basis in excess of tax basis of its foreign subsidiaries.

A determination of the net deferred tax liability with respect to this basis difference is not practicable.

The foreign earnings tax rate differentials in the tax rate reconciliation above primarily reflect the impacts of operations in jurisdictions with different effective tax rates than the U.S., particularly Ireland, the Netherlands and Switzerland, as well as Singapore and Puerto Rico which operate under tax incentive grants (which begin to expire in 2025), thereby yielding a favorable impact on the effective tax rate compared with the U.S.

statutory rate of 21%.

The Company has an additional Cantonal tax holiday in Switzerland that provides for a tax rate reduction and is effective through 2032.

Income from continuing operations before taxes consisted of:

The Company’s income that is subject to tax incentive grants and the Cantonal tax holiday in Switzerland is subject to the global minimum tax provision of the Organization for Economic Cooperation and Development ( OECD) Pillar 2, effective in 2024.

Income before taxes consisted of:

Years Ended December 31 2024 2023 2022

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$ 19,936 $ 1,889 $ 16,444

Taxes on income from continuing operations consisted of:

Taxes on income consisted of:

Years Ended December 31 2024 2023 2022

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$ 2,803 $ 1,512 $ 1,918

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Deferred income taxes at December 31 consisted of:

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Accelerated depreciation — 645 — 626

Undistributed foreign earnings

275 371 76 118

Equity investments — 90 — 73

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tax credit carryforwards and NOL carryforwards.

Income taxes paid in 2023, 2022 and 2021 (including amounts attributable to discontinued operations in 2021) consisted of:

Income taxes paid in 2024, 2023 and 2022 consisted of:

Years Ended December 31 2024 2023 2022

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( 33 ) ( 20 ) ( 40 )

Settlements (1)

( 18 ) ( 23 ) ( 6 )

Lapse of statute of limitations (1)

Spin-off of Organon — — ( 43 )

( 528 ) ( 52 ) ( 40 )

Balance December 31 $ 2,261 $ 2,384 $ 1,835

(1) Amount in 2021 reflects a settlement with the IRS discussed below.

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(1) Amount in 2024 reflects a reduction of $ 451 million resulting from the expiration of the statute of limitations related to the 2019 and 2020 federal tax return years.

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If the Company were to recognize the unrecognized tax benefits of $ 2.3 billion at December 31, 2024, the income tax provision would reflect a favorable net impact of $ 2.2 billion.

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The Company believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures.

Interest and penalties associated with uncertain tax positions amounted to an expense (benefit) of $ 131 million in 2023, $ 54 million in 2022 and $( 37 ) million in 2021.

These amounts reflect the beneficial impacts of various tax settlements, including the settlement discussed below.

Interest and penalties associated with uncertain tax positions amounted to an expense of $ 51 million in 2024, $ 131 million in 2023 and $ 54 million in 2022.

These amounts reflect the beneficial impacts of various tax settlements.

Liabilities for accrued interest and penalties were $ 437 million and $ 388 million as of December 31, 2024 and 2023, respectively.

In 2021, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2015-2016 U.S.

federal income tax returns.

As a result, the Company was required to make a payment of $ 190 million (of which $ 172 million related to continuing operations and $ 18 million related to discontinued operations).

The Company’s reserves for unrecognized tax benefits for the years under examination exceeded the adjustments relating to this examination period and therefore the Company recorded a $ 236 million net tax benefit in 2021 (of which $ 207 million related to continuing operations and $ 29 million related to discontinued operations).

This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination.

The IRS is currently conducting examinations of the Company’s tax returns for the years 2017 and 2018, including the one-time transition tax enacted under the TCJA.

In 2024, the Company recorded a benefit of $ 519 million due to a reduction in reserves for unrecognized income tax benefits resulting from the expiration in 2024 of the statute of limitations for assessments related to the 2019 and 2020 federal tax return years.

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

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

The IRS is also currently conducting examinations of the Company’s tax returns for the years 2021 and 2022.

In addition, various state and foreign tax examinations are in progress and for these jurisdictions, the Company’s income tax returns are open for examination for the period 2009 through 2024.

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Years Ended December 31 2024 2023 2022

Net Income from Continuing Operations Attributable to Merck & Co., Inc.

$ 365 $ 14,519 $ 12,345

Income from Discontinued Operations, Net of Taxes and Amounts Attributable to Noncontrolling Interests — — 704

Net Income Attributable to Merck & Co., Inc.

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Common Shareholders

Income from Continuing Operations $ 0.14 $ 5.73 $ 4.88

Income from Discontinued Operations — — 0.28

Net Income $ 0.14 $ 5.73 $ 5.16

$ 6.76 $ 0.14 $ 5.73

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

Common Shareholders

Income from Continuing Operations $ 0.14 $ 5.71 $ 4.86

Income from Discontinued Operations — — 0.28

Net Income $ 0.14 $ 5.71 $ 5.14

$ 6.74 $ 0.14 $ 5.71

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

In 2024, 2023 and 2022, 6 million, 5 million and 2 million, respectively, of common shares issuable under share-based compensation plans were excluded from the computation of earnings per common share assuming dilution because the effect would have been antidilutive.

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Other Comprehensive Income (Loss)

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Comprehensive Loss

Balance January 1, 2021, net of taxes

Balance at January 1, 2022, net of taxes

$ 144 $ ( 2,743 ) $ ( 1,830 ) $ ( 4,429 )

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Other comprehensive income (loss), net of taxes ( 71 ) 335 ( 603 ) ( 339 )

Spin-off of Organon (see Note 5)

Balance at December 31, 2022, net of taxes 73 ( 2,408 ) ( 2,433 ) ( 4,768 )

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(3) Includes pension plan net loss of $ 3.0 billion and $ 3.5 billion at December 31, 2024 and 2023, respectively, and other postretirement benefit plan net gain of $ 400 million and $ 500 million at December 31, 2024 and 2023, respectively, as well as pension plan prior service credit of $ 174 million and $ 141 million at December 31, 2024 and 2023, respectively, and other postretirement benefit plan prior service credit of $ 61 million and $ 95 million at December 31, 2024 and 2023, respectively.

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Segment Reporting

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The Company sells its products to veterinarians, distributors, animal producers, farmers and pet owners.

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Sales of the Company’s products were as follows:

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ProQuad/M-M-R II/Varivax 1,919 566 2,485 1,837 531 2,368 1,724 518 2,241

RotaTeq 493 276 769 508 275 783 473 334 807

Vaxneuvance 461 347 808 561 103 665 163 7 170

RotaTeq 472 239 711 493 276 769 508 275 783

56 207 263 127 285 412 346 256 602

Vaqta 119 61 180 95 78 173 100 79 179

Hospital Acute Care

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Noxafil 7 170 177 32 181 213 51 187 238

Primaxin 1 211 213 1 238 239 2 258 259

Cardiovascular

408 11 419 — — — — — —

Alliance revenue - Adempas/Verquvo (3)

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Isentress/Isentress HD 185 209 394 215 268 483 274 359 633

56 193 249 49 152 201 39 111 151

113 50 163 101 41 142 87 30 118

Belsomra 72 150 222 81 150 231 79 179 258

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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 (decreased) sales by $ 244 million, $ 810 million and $( 203 ) million in 2023, 2022 and 2021, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon).

(5) Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which increased sales by $ 195 million, $ 244 million and $ 810 million in 2024, 2023 and 2022, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon).

Other for 2024, 2023 and 2022 also includes $ 106 million, $ 118 million and $ 165 million, respectively, related to upfront and milestone payments received by Merck for out-licensing arrangements.

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Consolidated sales by geographic area where derived are as follows:

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China 5,494 6,802 5,191

Latin America 3,459 3,086 2,582

Japan 3,280 3,164 3,629

Asia Pacific (other than China and Japan) 3,058 3,225 3,614

Latin America 3,086 2,582 2,206

Other 2,559 2,104 2,568

$ 64,168 $ 60,115 $ 59,283

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

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

Years Ended December 31 2024 2023 2022

Segment profits:

Pharmaceutical segment $ 38,880 $ 36,852 $ 30,977

Animal Health segment 1,737 1,963 1,950

Pharma-ceutical

Animal Health

Pharma-ceutical

Animal Health

Pharma-ceutical

Animal Health

Segment sales

$ 57,400 $ 5,877 $ 63,277 $ 53,583 $ 5,625 $ 59,208 $ 52,005 $ 5,550 $ 57,555

Less segment costs:

Cost of sales

6,828 2,469 8,849 2,498 9,678 2,259

Selling, general and administrative

6,128 1,084 5,903 1,038 5,474 999

Research and development (2)

— 385 — 353 — 329

Other segment items (3)

( 89 ) 1 ( 49 ) ( 1 ) 1 —

Total segment profits 44,533 1,938 46,471 38,880 1,737 40,617 36,852 1,963 38,815

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$ 19,936 $ 1,889 $ 16,444

(1) The significant expense categories and amounts align with the segment level information that is regularly provided to the chief operating decision maker.

(2) Human health-related research and development expenses incurred by Merck Research Laboratories are not allocated to segment profits as noted below.

(3) Includes equity (income) loss from affiliates and other miscellaneous non-operating expenses.

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as selling, general and administrative expenses directly incurred by the segment.

Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment.

For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, research and development expenses incurred in Merck Research Laboratories, the Company’s research and development division that focuses on human health-related activities, or general and administrative expenses not directly incurred by the segments, nor the cost of financing these activities.

The chief operating decision maker (Merck’s Chief Executive Officer) uses segment profit to allocate resources predominately during the planning and forecasting process.

For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, research and development expenses incurred by Merck Research Laboratories, the Company’s research and development division that focuses on human health-related activities, or general and administrative expenses not directly incurred by the segments, nor the cost of financing these activities.

Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits.

In addition, costs related to restructuring activities, as well as the amortization of intangible assets and amortization of purchase accounting adjustments are not allocated to segments.

Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits related to third-party manufacturing arrangements.

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Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits (losses) related to third-party manufacturing arrangements.

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

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Equity income from affiliates and depreciation included in segment profits is as follows:

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Year Ended December 31, 2024

Included in segment profits:

Equity income from affiliates $ 144 $ — $ 144

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Year Ended December 31, 2023

Included in segment profits:

Equity income from affiliates $ 111 $ — $ 111

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Year Ended December 31, 2022

Included in segment profits:

Equity income from affiliates

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Asia Pacific (other than China and Japan) 982 1,022 966

Latin America 222 225 199

China 202 193 207

Japan 143 133 135

Latin America 133 222 225

$ 23,779 $ 23,051 $ 21,422

The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is not presented.

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Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheet of Merck & Co., Inc.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income, of comprehensive (loss) income, of equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of income, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matters

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We have served as the Company’s auditor since 2002.

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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data