What changed in this filing

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Item 1. Financial Statements

2025-05-02 compared with 2024-11-06 · 297 added, 477 removed, 838 unchanged (48% of the section changed)

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Sales $ 15,529 $ 15,775

5 unchanged sentences

Other (income) expense, net ( 35 ) ( 33 )

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

Income Before Taxes

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

Taxes on Income

929 870 2,377 2,332

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

Net Income Attributable to Noncontrolling Interests 6 5

12 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net Income Attributable to Merck & Co., Inc.

2 unchanged sentences

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

( 296 ) 159 ( 99 ) 171

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

8 unchanged sentences

(Unaudited, $ in millions except per share amounts)

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Current Assets

49 unchanged sentences

(Unaudited, $ in millions)

Nine Months Ended

September 30,

Three Months Ended

Cash Flows from Operating Activities

5 unchanged sentences

( 90 ) ( 143 )

Charge for the acquisition of Eyebiotech Limited

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

Charge for the acquisition of Harpoon Therapeutics, Inc.

Charge for the acquisition of Prometheus Biosciences, Inc.

Charge for the acquisition of Imago BioSciences, Inc.

Charge for research and development asset acquisition

Deferred income taxes ( 186 ) ( 51 )

Share-based compensation 195 176

Other 611 ( 81 )

Net changes in assets and liabilities ( 3,712 ) ( 3,382 )

4 unchanged sentences

Proceeds from sales of securities and other investments 456 260

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

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

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

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

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

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

Other ( 20 ) ( 14 )

1 unchanged sentence

Cash Flows from Financing Activities

Proceeds from issuance of debt

Payments on debt ( 2,500 ) ( 751 )

6 unchanged sentences

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash 156 ( 138 )

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

Net Decrease in Cash, Cash Equivalents and Restricted Cash

( 4,586 ) ( 1,238 )

2 unchanged sentences

Cash, Cash Equivalents and Restricted Cash at End of Period (includes restricted cash of $ 103

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

and $ 92 at March 31, 2025 and 2024, respectively, included in Other current assets )

$ 8,732 $ 5,671

9 unchanged sentences

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

Recently Adopted Accounting Standard

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

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.

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

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

Recently Issued Accounting Standards Not Yet Adopted

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

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

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

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.

In December 2023, the Financial Accounting Standards Board (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 beginning with 2025 annual reporting.

Early adoption is permitted.

The guidance is effective for 2025 annual reporting.

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

Acquisitions, Divestitures, Research Collaborations and Licensing Agreements

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 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, 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.

6 unchanged sentences

2025 Transactions

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

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

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

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

The transaction was accounted for as an asset acquisition.

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

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

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

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

two related aqua manufacturing facilities in Canada and Vietnam;

as well as a research facility in Chile.

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

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

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

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

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

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

($ in millions) July 9, 2024

Property, plant and equipment

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

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

Other assets and liabilities, net 24

Total identifiable net assets 796

Consideration transferred $ 1,301

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In March 2025, Merck and Jiangsu Hengrui Pharmaceuticals Co., Ltd.

(Hengrui Pharma) announced that the companies have entered into an exclusive license agreement for HRS-5346, an investigational oral small molecule Lipoprotein(a) inhibitor, which is currently being evaluated in a Phase 2 clinical trial in China.

Under the agreement, Hengrui Pharma granted Merck exclusive rights to develop, manufacture and commercialize HRS-5346 worldwide, excluding the Greater China region.

Hengrui Pharma will receive an upfront payment of $ 200 million and is eligible to receive future contingent developmental milestone payments of up to $ 92.5 million, regulatory milestone payments of up to $ 177.5 million and sales-based milestone payments of up to $ 1.5 billion, as well as tiered royalties ranging from a mid-single-digit rate to a low-double digit rate on future net sales of HRS-5346, if approved.

Closing of the proposed transaction is subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions.

Merck expects to record a pretax charge of $ 200 million to Research and development expenses upon closing, which is anticipated in the second quarter of 2025.

Also in March 2025, Merck acquired the Dundalk, Ireland facility of WuXi Vaccines (a wholly owned subsidiary of WuXi Biologics), which was accounted for as an asset acquisition.

Merck paid $ 437 million at closing which, combined with previous consideration transferred under a prior manufacturing arrangement with WuXi Vaccines related to this facility, resulted in $ 759 million being recorded as assets under construction within Property, Plant and Equipment .

There are no future contingent payments associated with the acquisition.

2024 Transactions

In March 2024, Merck acquired 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, for $ 765 million and also incurred $ 56 million of transaction costs.

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 (SCLC) and neuroendocrine tumors.

MK-6070 is currently being evaluated as monotherapy in a Phase 1/2 clinical trial in certain patients with advanced cancers associated with expression of DLL3.

The study is also evaluating MK-6070 in combination with atezolizumab in certain patients with SCLC.

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

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

There are no future contingent payments associated with the acquisition.

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

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

There are no future contingent payments

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

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

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

2023 Transactions

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

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

In June 2023, Merck acquired Prometheus Biosciences, Inc.

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

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

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

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

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

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

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

There are no future contingent payments associated with the acquisition.

In February 2023, Merck and Kelun-Biotech closed a license and collaboration agreement expanding their relationship in which Merck gained exclusive rights for the research, development, manufacture and commercialization of up to seven investigational preclinical ADCs for the treatment of cancer.

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

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

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

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

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

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

Merck 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.

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 asset acquisition since bomedemstat represented substantially all of the fair value of the gross assets acquired (excluding cash and deferred income taxes).

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

There are no future contingent payments associated with the acquisition.

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

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

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

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

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

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

Collaborative Arrangements

6 unchanged sentences

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

Under the terms of the agreement, AstraZeneca and Merck 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.

4 unchanged sentences

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

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

In the first quarter of 2025, Merck made sales-based milestone payments aggregating $ 700 million to AstraZeneca of which $ 600 million related to Lynparza and $ 100 million related to Koselugo (both of which had been previously accrued for).

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 from Merck to AstraZeneca of $ 245 million and $ 105 million in the first nine months of 2024 and 2023, respectively (each of which had been previously accrued for).

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

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

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

Lynparza received a regulatory approval triggering a capitalized milestone payment from Merck to AstraZeneca of $ 245 million in the first quarter of 2024 (which had been previously accrued for).

The partners have agreed that no future regulatory milestone payments from Merck to AstraZeneca are likely under the agreement.

The intangible asset balances related to Lynparza and Koselugo (which reflect the capitalized sales-based and regulatory milestone payments attributed to each product) were $ 1.1 billion and $ 48 million, respectively, at March 31, 2025 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:

Three Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2025 2024

3 unchanged sentences

Cost of sales (1)

82 82 245 230

Selling, general and administrative 32 39

Research and development 12 20

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

($ in millions) March 31, 2025 December 31, 2024

Receivables from AstraZeneca included in Other current assets

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

Payables to AstraZeneca included in Other Noncurrent Liabilities (2)

(1) Represents amortization of capitalized milestone payments.

(2) Includes accrued milestone payments.

(2) Balance at December 31, 2024 includes accrued milestone payments.

Eisai Co., Ltd.

2 unchanged sentences

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.

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

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

Eisai records Lenvima product sales globally (Eisai is the principal on Lenvima sales transactions) and Merck and

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

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

Eisai share applicable profits equally.

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

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

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

1 unchanged sentence

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

In the first quarter of 2023, Merck determined it was probable that sales of Lenvima in the future would trigger a $ 125 million sales-based milestone payment from Merck to Eisai.

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

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

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

In the second quarter of 2024, Merck made a $ 125 million sales-based milestone payment to Eisai (which had been previously accrued for).

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

There are no regulatory milestone payments remaining under the agreement.

The intangible asset balance related to Lenvima (which includes capitalized sales-based and regulatory milestone payments) was $ 502 million at September 30, 2024 and is included in Other Intangibles, Net .

The intangible asset balance related to Lenvima (which includes capitalized sales-based and regulatory milestone payments) was $ 382 million at March 31, 2025 and is included in Other Intangibles, Net .

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

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2025 2024

1 unchanged sentence

Cost of sales (1)

60 137 181 320

Selling, general and administrative 31 39

Research and development 5 8

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

($ in millions) March 31, 2025 December 31, 2024

Receivables from Eisai included in Other current assets

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

(1) Represents amortization of capitalized milestone payments.

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

(2) Represents an accrued milestone payment.

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) and Verquvo (vericiguat).

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

The intangible asset balances related to Adempas (which includes the acquired intangible asset balance, as well as capitalized sales-based milestone payments attributed to Adempas) and Verquvo (which reflects the portion of the final sales-based milestone payment that was attributed to Verquvo) were $ 431 million and $ 47 million, respectively, at September 30, 2024 and are included in Other Intangibles, Net .

The intangible asset balances related to Adempas (which includes the acquired intangible asset balance, as well as capitalized sales-based milestone payments attributed to Adempas) and Verquvo (which reflects the portion of the final sales-based milestone payment that was attributed to Verquvo) were $ 353 million and $ 42 million, respectively, at March 31, 2025 and are included in Other Intangibles, Net .

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

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2025 2024

4 unchanged sentences

Cost of sales (1)

59 53 182 165

Selling, general and administrative 29 33

Research and development 24 28

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

($ in millions) March 31, 2025 December 31, 2024

Receivables from Bayer included in Other current assets

4 unchanged sentences

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.

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2025 2024

Net sales of Lagevrio recorded by Merck

$ 383 $ 640 $ 843 $ 1,236

Cost of sales (1)

204 348 491 762

Selling, general and administrative

Research and development

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

($ in millions) March 31, 2025 December 31, 2024

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

2 unchanged sentences

Daiichi Sankyo

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

In October 2023, Merck and Daiichi Sankyo entered into a global development and commercialization agreement for three of Daiichi Sankyo’s DXd antibody drug conjugate (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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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

If Merck does not make the remaining continuation payment for raludotatug deruxtecan, the rights for that program will revert to Daiichi

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

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

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

Sankyo and the non-refundable upfront payments already paid will be retained by Daiichi Sankyo.

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

In 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 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.

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

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

The companies are planning to evaluate MK-6070 in combination with ifinatamab deruxtecan in certain patients with small-cell-lung cancer, 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.

The companies will jointly develop and commercialize MK-6070 worldwide and share research and development, as well as 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.

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Three Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2025 2024

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Research and development

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

($ in millions) March 31, 2025 December 31, 2024

Receivables from Daiichi Sankyo included in Other current assets

Payables to Daiichi Sankyo included in Accrued and other current liabilities (1)

Payables to Daiichi Sankyo included in Other Noncurrent Liabilities

(1) Includes accrued continuation payment.

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.

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

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

Intismeran autogene 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.

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

Merck has also capitalized certain of the shared costs, which aggregated $ 172 million at September 30, 2024 and will be amortized over the assets’ estimated useful lives.

Merck has also capitalized certain of the shared costs, mainly related to facility costs, which aggregated $ 228 million at March 31, 2025 and will be amortized over the assets’ estimated useful lives.

Summarized financial information related to this collaboration is as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2025 2024

1 unchanged sentence

Research and development

93 66 255 153

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

($ in millions) March 31, 2025 December 31, 2024

Payables to Moderna included in Accrued and other current liabilities

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

Alliance revenue related to this collaboration, consisting of royalties (recorded within Sales ) was $ 100 million and $ 261 million in the third quarter and first nine months of 2024, respectively, compared with $ 52 million and $ 142 million in the third quarter and first nine months of 2023, respectively.

Alliance revenue related to this collaboration, consisting of royalties (recorded within Sales ) was $ 119 million and $ 71 million in the first quarter of 2025 and 2024, respectively.

Restructuring

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.

In January 2024, the Company approved a 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.

The actions contemplated under the 2024 Restructuring Program are expected to be substantially completed by the end of 2031, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $ 4.0 billion.

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

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

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

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

The Company recorded total pretax costs of $ 105 million and $ 246 million in the first quarter of 2025 and 2024, respectively, related to the 2024 Restructuring Program.

Since inception of the 2024 Restructuring Program through March 31, 2025, Merck has incurred total cumulative pretax costs of $ 1.2 billion.

For segment reporting, restructuring charges are unallocated expenses.

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

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

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

Three Months Ended March 31, 2025

($ in millions) Accelerated Depreciation

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Other Exit Costs

Total Accelerated

Separation Costs

2024 Restructuring Program

Cost of sales $ 41 $ — $ ( 5 ) $ 36

Selling, general and administrative — — 31 31 — — 67 67

Research and development — — — — — — 2 2

Restructuring costs — 1 68 69

$ 41 $ 1 $ 63 $ 105

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

Three Months Ended March 31, 2024

($ in millions) Accelerated Depreciation

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Other Exit Costs

Total Accelerated

Separation Costs

2019 Restructuring Program

Cost of sales $ 65 $ — $ 51 $ 116

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Other exit costs in 2025 and 2024 include asset impairment, facility shut-down and other related costs, as well as pretax gains and losses resulting from the sales of facilities and related assets.

Additionally, other activity includes certain

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

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

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

Additionally, other activity includes certain employee-related costs associated with pension and other postretirement benefit plans (see Note 9) and share-based compensation.

The following table summarizes the charges and spending relating to restructuring program activities for the three months ended March 31, 2025:

($ in millions) Accelerated Depreciation

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Non-cash activity ( 41 ) — ( 8 ) ( 49 )

Restructuring reserves September 30, 2024

Restructuring reserves March 31, 2025

$ — $ 557 $ — $ 557

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

Financial Instruments

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For derivatives that are designated as cash flow hedges, the unrealized gains or losses on these contracts are recorded in Accumulated Other Comprehensive Loss ( 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 first quarter of 2025 or 2024.

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 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

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

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

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

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

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

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 .

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

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

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

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

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

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

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

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

($ in millions) 2025 2024 2025 2024

6 unchanged sentences

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

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

September 30, 2024

At March 31, 2025, the Company was a party to seven pay-floating, receive-fixed interest rate swap contracts designated as fair value hedges of a portion of fixed-rate notes as detailed in the table below.

March 31, 2025

($ in millions)

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$ 1,500 6 $ 1,500

5.00 % notes due 2053

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.

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($ in millions)

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

March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024

Balance Sheet Caption

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$ 1,794 $ 1,509 $ 56 $ 17

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

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Fair Value of Derivative U.S.

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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:

September 30, 2024 December 31, 2023

The following table provides information on the Company’s derivative positions subject to these master

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

netting arrangements as if they were presented on a net basis, allowing for the right of offset by counterparty and cash collateral exchanged per the master agreements and related credit support annexes:

March 31, 2025 December 31, 2024

($ in millions) Asset Liability Asset Liability

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Cash collateral received

( 23 ) — ( 165 ) —

Net amounts $ 148 $ 29 $ 265 $ 46

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

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

Three Months Ended March 31,

($ in millions) 2025 2024 2025 2024 2025 2024

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

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

Other comprehensive income (loss)

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74 44 — — ( 74 ) ( 44 )

Interest rate contracts

Amount of gain recognized in Other (income) expense, net on derivatives

— — — — — — — — ( 1 ) ( 1 ) — —

Amount of (loss) gain recognized in OCI on derivatives

— — — — — — — — — — ( 1 ) 13

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

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

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

Amount of Derivative Pretax (Gain) Loss Recognized in Income

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

Three Months Ended March 31,

($ in millions) 2025 2024

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

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

At March 31, 2025, the Company estimates $ 16 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.

2 unchanged sentences

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Cost Gross Unrealized Fair

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($ in millions) Gains Losses Gains Losses

government and agency securities $ 81 $ — $ — $ 81 $ 72 $ — $ — $ 72

Commercial paper $ 599 $ — $ — $ 599 $ 348 $ — $ — $ 348

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

government and agency securities 91 — — 91 188 — — 188

Total debt securities $ 690 $ — $ — $ 690 $ 536 $ — $ — $ 536

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Total debt and publicly traded equity securities $ 1,723 $ 1,456

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

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

At September 30, 2024 and September 30, 2023, the Company also had $ 848 million and $ 863 million, respectively, of equity investments without readily determinable fair values included in Other Assets .

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

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

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

Cumulative unrealized gains and cumulative unrealized losses based on observable price changes for investments in equity investments without readily determinable fair values still held at September 30, 2024 were $ 302 million and $ 89 million, respectively.

At September 30, 2024 and September 30, 2023, the Company also had $ 328 million and $ 467 million, respectively, recorded in Other Assets for equity securities held through ownership interests in investment funds.

(Gains) losses recorded in Other (income) expense, net relating to these investment funds were $( 21 ) million and $ 93 million for the third quarter of 2024 and 2023, respectively, and $( 26 ) million and $ 66 million for the first nine months of 2024 and 2023, respectively.

(1) Unrealized net gains of $ 115 million were recorded in Other (income) expense, net in the first quarter of 2025 on equity securities still held at March 31, 2025.

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

At March 31, 2025 and March 31, 2024, the Company also had $ 872 million and $ 851 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

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

investee and records unrealized losses based on unfavorable observable price changes, which are included in Other (income) expense, net .

During the first quarter of 2025 , the Company recorded unrealized losses of $ 11 million related to certain of these equity investments still held at March 31, 2025.

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

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 March 31, 2025 were $ 309 million and $ 118 million, respectively.

At March 31, 2025 and March 31, 2024, the Company also had $ 249 million and $ 396 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 $ 23 million and $ 2 million for the first quarter of 2025 and 2024, respectively.

Fair Value Measurements

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

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

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

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

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

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

3 unchanged sentences

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

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

($ in millions) March 31, 2025 December 31, 2024

Commercial paper $ — $ 599 $ — $ 599 $ — $ 348 $ — $ 348

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

Publicly traded equity securities 616 — — 616 463 — — 463

2 unchanged sentences

government and agency securities 91 — — 91 89 — — 89

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

Publicly traded equity securities (2)

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Forward exchange contracts — 246 — 246 — 499 — 499

Purchased currency options — 108 — 108 — 213 — 213

Interest rate swaps

— 56 — 56 — 17 — 17

Purchased currency options — 61 — 61 — 83 — 83

— 410 — 410 — 729 — 729

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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) Includes securities with an aggregate fair value of $ 49 million and $ 81 million at March 31, 2025 and December 31, 2024, respectively, which were subject to a contractual sale restriction that expired in April 2025.

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

As of September 30, 2024 and December 31, 2023, Cash and cash equivalents included $ 13.6 billion and $ 6.0 billion of cash equivalents, respectively (which would be considered Level 2 in the fair value hierarchy).

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

As of March 31, 2025 and December 31, 2024, Cash and cash equivalents included $ 7.9 billion and $ 12.3 billion of cash equivalents, respectively (which would be considered Level 2 in the fair value hierarchy).

Contingent Consideration

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Payments ( 116 ) ( 126 )

Fair value September 30 (2)

Fair value March 31 (2)

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

Includes cumulative translation adjustments.

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

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

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

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

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

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

(2) Balance at March 31, 2025 includes $ 25 million of current liabilities.

The payments of contingent consideration during the first three months of 2025 and 2024 relate to the 2016 termination of the Sanofi Pasteur MSD (SPMSD) joint venture.

There are no remaining contingent consideration liabilities related to the SPMSD joint venture termination.

Other Fair Value Measurements

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

The estimated fair value of loans payable and long-term debt (including current portion) at September 30, 2024, was $ 35.2 billion compared with a carrying value of $ 38.1 billion and at December 31, 2023, was $ 32.0 billion compared with a carrying value of $ 35.1 billion.

The estimated fair value of loans payable and long-term debt (including current portion) at March 31, 2025, was $ 30.6 billion compared with a carrying value of $ 34.8 billion and at December 31, 2024, was $ 32.6 billion compared with a carrying value of $ 37.1 billion.

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

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

The Company factored $ 3.1 billion and $ 3.0 billion of accounts receivable as of September 30, 2024 and December 31, 2023, respectively, under these factoring arrangements, which reduced outstanding accounts receivable.

The Company factored $ 1.7 billion and $ 2.1 billion of accounts receivable as of March 31, 2025 and December 31, 2024, respectively, under these factoring arrangements, which reduced outstanding accounts receivable.

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

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

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

As of March 31, 2025 and December 31, 2024, the Company had collected $ 39 million and $ 55 million, respectively, on behalf of the financial institutions, which is reflected as restricted cash in Other current assets, and the related obligation to remit the cash is recorded in Accrued and other current liabilities .

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

3 unchanged sentences

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

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

Cash collateral received by the Company from various counterparties was $ 23 million and $ 165 million at March 31, 2025 and December 31, 2024, respectively.

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

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

Inventories consisted of:

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

($ in millions) March 31, 2025 December 31, 2024

Finished goods $ 2,129 $ 2,022

8 unchanged sentences

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

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

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

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

Long-Term Debt

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

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

MSD Netherlands Capital B.V.

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

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

are consolidated in the financial statements of the Company.

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

At March 31, 2025 and December 31, 2024, these amounts included $ 4.0 billion and $ 3.8 billion, respectively, of inventories not expected to be sold within one year.

In addition, these amounts included $ 544 million and $ 412 million at March 31, 2025 and December 31, 2024, respectively, of inventories produced in preparation for product launches.

Contingencies

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.

13 unchanged sentences

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

As of September 30, 2024, approximately 330 cases were pending against Merck in various state courts.

As of March 31, 2025, approximately 500 cases were pending against Merck in various state courts.

Gardasil/Gardasil 9

1 unchanged sentence

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

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

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

As of March 31, 2025, approximately 245 cases were filed and pending against Merck in either federal or state court.

In August 2022, the U.S.

1 unchanged sentence

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

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

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

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

Commercial and Other Litigation

Qui Tam Litigation

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

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

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

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

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

In February 2024, the multidistrict litigation ( Gardasil MDL) was reassigned to Judge Kenneth

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

declined to exercise that right.

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

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

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

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

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

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

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

340B Program Litigation

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

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

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

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

On March 11, 2025, the court granted Merck’s motion for summary judgment in 16 bellwether cases on implied preemption grounds;

plaintiffs have filed a Notice of Appeal to the Fourth Circuit.

The parties’ letter submissions on next steps in the Gardasil MDL proceeding in light of the court’s decision were submitted on April 8, 2025.

On March 21, 2025, plaintiff’s co-lead counsel in the Gardasil MDL filed a seven -plaintiff complaint in New Jersey state court.

On March 24, 2025, Merck removed the case to federal court and has requested that the U.S.

Judicial Panel on Multidistrict Litigation transfer the case to the Gardasil MDL.

Plaintiffs have opposed transfer to the Gardasil MDL and have moved to have the case remanded to New Jersey state court.

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 several 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.

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

Governmental Proceedings

Civil Investigative Demand

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.

Other Matters

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

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

Securities Litigation

As previously disclosed, 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

Zetia Antitrust Litigation

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 (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.

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

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

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

In 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 district court in the District of New Jersey 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.

On March 5, 2025, the Merck Defendants filed motions to dismiss the amended complaints.

On March 24, 2025, the Merck Defendants filed a third-party complaint against AmerisourceBergen Drug Corp., AmerisourceBergen Corp., and Cencora, Inc., seeking indemnification for Humana’s direct purchaser claims.

On February 25, 2025, the district court in the District of Minnesota granted in part and denied in part the motion to dismiss in the United HealthCare case.

On March 11, 2025, the Merck Defendants filed an answer and affirmative defenses in response to United HealthCare’s complaint.

On March 24, 2025, the Merck Defendants filed a third-party complaint against

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

Cardinal Health, Inc., Cardinal Health 110, LLC, and Cardinal Health 112, LLC, seeking indemnification for certain of United HealthCare’s direct and indirect purchaser claims.

On March 18, 2025, the district court in the Northern District of California granted in part and denied in part the motion to dismiss in the Kaiser case.

The court granted Kaiser leave to amend its complaint.

Patent Litigation

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.

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

Food and Drug Administration (FDA) seeking to market generic and biosimilar 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 and biosimilar companies.

Similar lawsuits defending the Company’s patent rights may exist in other countries.

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

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

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

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

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

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

In June 2023, the U.S.

District Court for the District of New Jersey ruled in Merck’s favor.

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Patent & Trademark Office correctly granted a full five-year extension.

This ruling affirms and validates Merck’s U.S.

patent protection for Bridion through at least January 2026.

Also in June 2023, the U.S.

District Court for the District of New Jersey

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

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

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

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

Court of Appeals for the Federal Circuit.

The appeal is currently pending.

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

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

Oral argument took place on February 4, 2025.

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 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.

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.

The Company does not expect this company to bring its generic version of Bridion to the market before July 27, 2026.

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.

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

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.

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

On March 13, 2025, the Federal Circuit affirmed the district court’s decision, holding that the patent term extension granted to the sugammadex patent covering Bridion was not invalid and that the patent is entitled to its full five-year patent term extension.

The FDA has now granted Bridion six months of pediatric exclusivity.

Thus, the Federal Circuit’s decision secures Bridion ’s exclusivity in the U.S.

through July 27, 2026.

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

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

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

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

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

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

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

in May 2026 or earlier under certain circumstances, and their generic versions of Janumet XR to the market in July 2026 or earlier under certain circumstances.

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(collectively, Zydus).

In that lawsuit, the Company alleged infringement of the 2027 salt/polymorph patent based on the filing of Zydus’s NDA seeking approval of a form of sitagliptin that is a different form than that used in Januvia .

In that lawsuit, the Company alleged infringement of the salt/polymorph patent based on the filing of Zydus’s NDA seeking approval of a form of sitagliptin that is a different from than that used in Januvia .

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

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

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

(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 on July 26, 2024.

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

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

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

determine the validity of the Janumet SPCs in Europe, for which an oral hearing was held in March 2023 and an Advocate General Opinion was received on June 6, 2024, with a decision expected later in 2024.

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

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 in December 2024.

The decision provides guidance on points of law and does not directly apply 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.

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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.

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patents, including a demand for damages.

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

Between November 30, 2023, and March 13, 2024, the Company filed inter partes review petitions with the United States 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.

On July 1, 2024, the district court granted Merck’s motion to stay the case in its entirety pending the outcome of the PTAB proceeding instituted on June 13, 2024.

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.

Subcutaneous Pembrolizumab — Halozyme, Inc.

has publicly alleged that certain patents in its modified hyaluronidase (MDASE) portfolio cover the Company’s subcutaneous pembrolizumab candidate, which is currently under review by the FDA.

In November 2024, the Company began filing a series of post grant review (PGR) petitions before the PTAB alleging that certain patents in the MDASE portfolio are invalid.

On April 24, 2025, Halozyme, Inc.

filed a complaint in the U.S.

District Court for the District of New Jersey alleging that the Company’s activities related to subcutaneous pembrolizumab infringe or will

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

infringe 15 patents belonging to the MDASE portfolio, 11 of which are the subject of the Company’s already filed PGR petitions.

The PTAB will likely issue a decision regarding the institution of the Company’s first filed petition in early June 2025.

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.

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

In 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.

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

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

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

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

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

In 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.

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

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

In 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 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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the actual costs incurred by the Company;

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

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

scope of its litigation;

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

the number of cases being brought against the Company;

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

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

The amount of legal defense reserves as of March 31, 2025 and December 31, 2024 of approximately $ 230 million and $ 225 million, respectively, represents the Company’s best estimate of the minimum amount of defense costs to be incurred in connection with its outstanding litigation;

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

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.

Three Months Ended September 30,

Common Stock Other

Capital Retained

Earnings Accumulated

Comprehensive

Loss Treasury Stock Non-

Interests Total

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

Balance at July 1, 2023

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

Net income attributable to Merck & Co., Inc.

— — — 4,745 — — — — 4,745

Other comprehensive loss, net of taxes — — — — ( 16 ) — — — ( 16 )

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

— — — ( 1,861 ) — — — — ( 1,861 )

Treasury stock shares purchased — — — — — 4 ( 466 ) — ( 466 )

Share-based compensation plans and other — — 139 — — — 12 — 151

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

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

Balance at July 1, 2024

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

Net income attributable to Merck & Co., Inc.

— — — 3,157 — — — — 3,157

Other comprehensive loss, net of taxes

— — — — ( 10 ) — — — ( 10 )

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

— — — ( 1,960 ) — — — — ( 1,960 )

Treasury stock shares purchased — — — — — 4 ( 444 ) — ( 444 )

Share-based compensation plans and other — — 168 — — — 9 — 177

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

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

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

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

Nine Months Ended September 30,

Three Months Ended March 31,

Common Stock Other

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

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

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

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

Balance at January 1, 2025

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Other comprehensive loss, net of taxes

— — — — ( 20 ) — — — ( 20 )

Cash dividends declared on common stock ($ 0.81 per share)

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

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

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

Balance at March 31, 2025 3,577 $ 1,788 $ 44,816 $ 66,097 $ ( 4,965 ) 1,061 $ ( 59,401 ) $ 65 $ 48,400

Pension and Other Postretirement Benefit Plans

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Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

($ in millions) U.S.

International U.S.

International

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Expected return on plan assets ( 210 ) ( 143 ) ( 207 ) ( 139 )

Amortization of unrecognized prior service (credit) cost

— ( 3 ) — ( 6 ) — ( 10 ) ( 1 ) 5

Net loss (gain) amortization

Amortization of unrecognized prior service credit

— ( 4 ) — ( 3 )

Net loss amortization

Termination benefits — — 3 —

Curtailments — — — — — — 5 —

Settlements — — — — — — 26 —

$ 33 $ ( 19 ) $ 26 $ ( 6 )

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

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

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Three Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2025 2024

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Net gain amortization ( 10 ) ( 12 )

Curtailments — — — ( 1 )

$ ( 8 ) $ ( 21 )

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

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

In addition, lump sum payments to U.S.

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

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

pension plans.

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

Remeasurements during the first nine months of 2023 resulted in a net increase of $ 13 million to net pension liabilities and also resulted in a related adjustment to AOCL .

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

The components of net periodic benefit cost (credit) other than the service cost component are included in Other (income) expense, net (see Note 10), with the exception of certain amounts for termination benefits which are recorded in Restructuring costs if the event giving rise to the termination benefits related to restructuring actions.

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

Other (Income) Expense, Net

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Three Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2025 2024

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Exchange losses 90 83

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

Income from investments in equity securities, net (1)

( 90 ) ( 143 )

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

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

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

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

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

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

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

The effective income tax rate of 59.3 % for the first nine months of 2023 includes a 44.0 percentage point combined unfavorable impact of charges for the acquisitions of Prometheus and Imago for which no tax benefits were recognized, as well as higher

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

foreign taxes, the impact of the R&D capitalization provision of the Tax Cuts and Jobs Act of 2017 (TCJA) on the Company’s U.S.

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

tax rate, partially offset by higher foreign tax credits.

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

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

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

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

Interest paid for the three months ended March 31, 2025 and 2024 was $ 233 million and $ 217 million, respectively.

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

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

While many jurisdictions in which Merck operates have adopted the global minimum tax provision of the Organization for Economic Cooperation and Development (OECD) Pillar 2, effective for tax years beginning in January 2024, it resulted in a minimal impact to the Company’s 2024 effective income tax rate due to the accounting for the tax effects of intercompany transactions.

The Company expects the impact of the global minimum tax to be approximately 2 % for full year 2025.

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

On April 21, 2025, Merck received Notices of Proposed Adjustment (NOPAs) that would increase the amount of the one-time transition tax on certain undistributed earnings of foreign subsidiaries by approximately $ 1.3 billion.

In addition, the NOPAs included penalties of approximately $ 260 million.

These amounts are exclusive of any interest that may be due.

The Company disagrees with the proposed adjustments and will vigorously contest the NOPAs through all available administrative and, if necessary, judicial proceedings.

It is expected to take a number of years to reach resolution of this matter.

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

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

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 examinations are in progress.

Earnings Per Share

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

($ and shares in millions except per share amounts) 2025 2024

11 unchanged sentences

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

For the third quarter of 2024 and 2023, 7 million and 6 million, respectively, and for the first nine months of 2024 and 2023, 6 million and 5 million, respectively, of common shares issuable under share-based compensation plans were excluded from the computations of earnings per common share assuming dilution because the effect would have been antidilutive.

For the first quarter of 2025 and 2024, 10 million and 3 million, respectively, of common shares issuable under share-based compensation plans were excluded from the computations of earnings per common share assuming dilution because the effect would have been antidilutive.

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

Other Comprehensive Income (Loss)

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

Three Months Ended September 30,

($ in millions) Derivatives Employee

Plans Foreign Currency

Adjustment Accumulated Other

Comprehensive

Balance July 1, 2023, net of taxes

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

Other comprehensive income (loss) before reclassification adjustments, pretax 247 29 ( 252 ) 24

Tax ( 52 ) ( 7 ) 77 18

Other comprehensive income (loss) before reclassification adjustments, net of taxes 195 22 ( 175 ) 42

Reclassification adjustments, pretax ( 45 ) (1)

Reclassification adjustments, net of taxes ( 36 )

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

Balance September 30, 2023, net of taxes

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

Balance July 1, 2024, net of taxes

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

Other comprehensive income (loss) before reclassification adjustments, pretax ( 325 ) — 279 ( 46 )

Tax 68 ( 3 ) 20 85

Other comprehensive income (loss) before reclassification adjustments, net of taxes ( 257 ) ( 3 ) 299 39

Reclassification adjustments, pretax ( 49 ) (1)

Tax 10 4 — 14

Reclassification adjustments, net of taxes ( 39 )

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

Balance September 30, 2024, net of taxes

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

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

Nine Months Ended September 30,

Three Months Ended March 31,

($ in millions) Derivatives Employee

8 unchanged sentences

Reclassification adjustments, pretax ( 44 ) (1)

Tax 33 10 — 43

Reclassification adjustments, net of taxes ( 35 )

Other comprehensive income (loss), net of taxes 130 ( 5 ) ( 238 ) ( 113 )

Balance September 30, 2023, net of taxes

Balance March 31, 2024, net of taxes

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

8 unchanged sentences

Other comprehensive income (loss), net of taxes ( 217 ) ( 18 ) 215 ( 20 )

Balance September 30, 2024, net of taxes

Balance March 31, 2025, net of taxes

$ 25 $ ( 2,345 ) $ ( 2,645 ) $ ( 4,965 )

16 unchanged sentences

Sales of the Company’s products were as follows:

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

2024 2023 2024 2023

Three Months Ended March 31,

($ in millions) U.S.

Int’l Total U.S.

Pharmaceutical:

14 unchanged sentences

106 1 107 — — —

( 2 ) 42 41 6 55 61

Hospital Acute Care

3 unchanged sentences

Zerbaxa 42 28 70 33 23 56

Noxafil 1 40 41 4 47 51 9 132 141 29 138 167

Cardiovascular

268 12 280 — — —

Alliance revenue-Adempas/Verquvo (3)

1 unchanged sentence

Adempas — 68 68 — 70 70

147 3 149 — — — 216 3 219 — — —

Lagevrio 35 67 102 45 305 350

23 unchanged sentences

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

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

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

(5) Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which increased sales by $ 58 million and $ 54 million for the three months ended March 31, 2025 and 2024, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon & Co.).

Other for the three months ended March 31, 2025 and 2024 also includes $ 95 million and $ 61 million, respectively, related to upfront and milestone payments received by Merck for out-licensing arrangements.

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

1 unchanged sentence

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

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

sales by $ 2.1 billion and $ 3.2 billion for the three months ended March 31, 2025 and 2024, respectively.

Consolidated sales by geographic area where derived are as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

($ in millions) 2025 2024

1 unchanged sentence

Europe, Middle East and Africa 3,454 3,563

China 1,017 1,694 4,606 5,322

Latin America 792 796

Japan 938 1,081 2,445 2,514

China 702 1,772

Asia Pacific (other than China and Japan) 689 724

Japan 669 821

Other 701 621

1 unchanged sentence

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

Three Months Ended

September 30, Nine Months Ended

September 30,

Three Months Ended March 31,

($ in millions)

Segment profits:

Pharmaceutical segment $ 11,547 $ 10,407 $ 33,651 $ 29,400

Animal Health segment 510 421 1,574 1,453

Pharmaceutical

Animal Health Total Pharmaceutical

Animal Health Total

Segment sales $ 13,638 $ 1,588 $ 15,226 $ 14,006 $ 1,511 $ 15,517

Less segment costs:

Cost of sales 1,573 600 1,706 613

Selling, general and administrative 1,402 260 1,429 252

Research and development (2)

Other segment items (3)

( 49 ) ( 1 ) ( 33 ) 1

Total segment profits 10,712 634 11,346 10,904 555 11,459

6 unchanged sentences

Restructuring costs ( 69 ) ( 123 )

Charge for Zetia antitrust litigation settlements — — — ( 573 )

Other unallocated, net ( 857 ) ( 806 )

$ 5,903 $ 5,670

(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.

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.

2 unchanged sentences

Other profits are primarily comprised of miscellaneous corporate profits, as well as operating profits (losses) related to third-party manufacturing arrangements.

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

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.

Equity income from affiliates and depreciation included in segment profits is as follows:

Three Months Ended March 31,

($ in millions) Pharmaceutical Animal Health Total Pharmaceutical Animal Health Total

Equity income from affiliates

$ 58 $ — $ 58 $ 48 $ — $ 48

1 60 61 1 58 59

Property, plant and equipment, net, by geographic area where located is as follows:

($ in millions)

March 31, 2025 December 31, 2024

United States $ 14,891 $ 14,724

Europe, Middle East and Africa 8,402 7,548

Asia Pacific (other than China and Japan)

China 198 202

Japan 145 143

Latin America 135 133

$ 24,793 $ 23,779

The Company does not disaggregate assets on a products and services basis for internal management reporting and, therefore, such information is not presented.

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

What changed 10-Q

Item 1. Financial Statements