Merck & Co., Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Business Development Transactions Below is a summary of significant business development activity thus far in 2025. 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 payments associated with certain developmental, regulatory and sales-based milestones, as well as tiered royalties 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, or approximately $0.06 per share, 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. Pricing and Tariffs Global efforts toward health care cost containment continue to exert pressure on product pricing and market access worldwide. Changes to the U.S. health care system as part of health care reform, as well as increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and private sector beneficiaries, have contributed to pricing pressure. In 2021, the U.S. Congress passed the American Rescue Plan Act, which included a provision that eliminated the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January 2024. As a result of this provision, the Company paid state Medicaid programs more in rebates than it received on Medicaid sales of Januvia (sitagliptin), Janumet (sitagliptin and metformin HCl) and Janumet XR (sitagliptin and metformin HCl extended release) in 2024. In 2022, the U.S. Congress passed the Inflation Reduction Act (IRA), which made significant changes to how drugs are covered and paid for under the Medicare program, including the creation of financial penalties for drugs whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits (which has taken effect in 2025), and government price-setting for certain Medicare Part D drugs (starting in 2026) and Medicare Part B drugs (starting in 2028). Government price setting may also impact pricing in the private market negatively affecting the Company’s performance. In 2023, the U.S. Department of Health and Human Services (HHS), through the Centers for Medicare & Medicaid Services (CMS), selected Januvia for the first year of the IRA’s “Drug Price Negotiation Program” (Program). Pursuant to the IRA’s Program, a government price was set for Januvia , which will become effective on January 1, 2026. In January 2025, the U.S. Department of HHS, through the CMS, announced that Janumet and Janumet XR would be in included in the second year of the IRA’s Program, with government price setting to become effective on January 1, 2027. The Company has sued the U.S. government regarding the IRA’s Program. Additionally, increased utilization of the 340B Federal Drug Discount Program and restrictions on the Company’s ability to identify inappropriate discounts are having a negative impact on Company performance. Furthermore, the Executive Branch and Congress continue to discuss legislation designed to control health care costs, including the cost of drugs. In several international markets, government-mandated pricing actions have reduced prices of generic and patented drugs. In addition, the Company’s sales performance in the first three months of 2025 was negatively affected by other cost-reduction measures taken by governments and other third parties to lower health care costs. The Company anticipates all of these actions and additional actions in the future will continue to negatively affect sales and profits. The U.S. government has implemented tariffs on certain foreign imports into the U.S. The impact of the tariffs on Merck’s business depends on a number of factors including the duration, scope and amount of the tariffs, as well as the extent of any measures that have been or will be taken by any affected countries, including tariffs imposed by foreign governments. At this time, the Company anticipates that tariffs implemented to date will result in approximately $200 million of additional expenses in 2025 (which will be primarily reflected within Cost of sales ) the vast majority of which relate to China, largely related to the importation of products into China. However, future changes to tariffs could have a further adverse effect on the Company’s business. In particular, the U.S. government has indicated that it intends to impose tariffs on pharmaceutical products, although the specific amount and timing of any such future tariffs has not been provided. Operating Results Sales Three Months Ended March 31, % Change Excluding Foreign Exchange ($ in millions) 2025 2024 % Change United States $ 8,522 $ 7,478 14 % 14 % International 7,007 8,297 (16) % (11) % Total $ 15,529 $ 15,775 (2) % 1 % - 28 - Worldwide sales were $15.5 billion in the first quarter of 2025, a decrease of 2% compared with the first quarter of 2024, reflecting declines in vaccines, virology and immunology, partially offset by growth in oncology, cardiovascular, diabetes and animal health. The decline in vaccines was primarily due to lower combined Gardasil (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine and Recombinant) /Gardasil 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) sales, partially offset by the U.S. launch of Capvaxive (Pneumococcal 21-valent Conjugate Vaccine). The decline in virology was primarily due to lower sales of Lagevrio (molnupiravir) and the decline in immunology resulted from the transfer of marketing rights for Remicade and Simponi back to Johnson & Johnson on October 1, 2024. Growth in the oncology franchise was largely due to the performance of Keytruda (pembrolizumab) and Welireg (belzutifan), growth in the cardiovascular franchise was largely attributable to the ongoing launch of Winrevair (sotatercept-csrk), and the increase in diabetes was due to Januvia . See Note 14 to the condensed consolidated financial statements for details on sales of the Company’s products. A discussion of performance for select products in the franchises follows. All product or service marks appearing in type form different from that of the surrounding text are trademarks or service marks owned, licensed to, promoted or distributed by Merck, its subsidiaries or affiliates, except as noted. All other trademarks or service marks are those of their respective owners. Pharmaceutical Segment Oncology Three Months Ended March 31, % Change Excluding Foreign Exchange ($ in millions) 2025 2024 % Change Keytruda $ 7,205 $ 6,947 4 % 6 % Alliance Revenue - Lynparza (1) 312 292 7 % 8 % Alliance Revenue - Lenvima (1) 258 255 1 % 2 % Welireg 137 85 62 % 63 % Alliance Revenue - Reblozyl (2) 119 71 68 % 68 % (1) Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 3 to the condensed consolidated financial statements). (2) Alliance revenue for Reblozyl represents royalties (see Note 3 to the condensed consolidated financial statements). Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been approved in over 40 indications in the U.S., including 18 tumor types and 2 tumor-agnostic indications, and has similarly been approved in markets worldwide for many of these indications. The Keytruda clinical development program includes studies across a broad range of cancer types. See “Research and Development Update” below. Global sales of Keytruda grew 4% in the first quarter of 2025. Keytruda sales growth in the U.S. reflects higher demand and pricing, partially offset by an approximate $250 million negative impact due to the timing of wholesaler purchases. Demand was driven by increased utilization across earlier-stage indications, including in certain types of high-risk early-stage triple-negative breast cancer (TNBC), renal cell carcinoma (RCC), and non-small-cell lung cancer (NSCLC), as well as higher demand across the multiple approved metastatic indications, in particular for the treatment of certain types of urothelial and endometrial cancers. Keytruda sales growth in international markets reflects higher demand predominately for the TNBC, NSCLC and RCC earlier-stage indications, as well as uptake in gastric, urothelial, and cervical cancer metastatic indications. The 2025 launch and reimbursement of new indications for Keytruda in the EU is having a negative impact on pricing in those markets. Keytruda has received the following regulatory approvals thus far in 2025. Date Approval January 2025 China’s National Medical Products Administration (NMPA) approval in combination with Padcev (enfortumab vedotin-ejfv), an antibody-drug conjugate, for the treatment of adults with locally advanced or metastatic urothelial carcinoma, based on the KEYNOTE-A39 trial that was conducted in collaboration with Seagen (now Pfizer Inc.) and Astellas. April 2025 European Commission (EC) approval in combination with pemetrexed and platinum chemotherapy for the first-line treatment of adult patients with unresectable non epithelioid malignant pleural mesothelioma, based on the IND.227/KEYNOTE-483 trial. The Company is a party to license agreements pursuant to which the Company pays royalties on net sales of Keytruda . Under the terms of the more significant of these agreements, Merck pays a royalty of 2.5% on worldwide net sales of Keytruda ; this royalty expires on December 31, 2026. The Company pays an additional 2% royalty on worldwide net sales of Keytruda to another third party, the termination date of which varies by country; this royalty expired in the U.S. in September 2024 and will expire on varying dates in major European markets in the second half of 2025. The royalty expenses are included in Cost of sales . Lynparza (olaparib) is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being developed and commercialized as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see Note 3 to the condensed consolidated financial statements). Lynparza is approved for the treatment of certain types of advanced or recurrent ovarian, early or metastatic breast, metastatic pancreatic and metastatic castration-resistant prostate cancers. Alliance revenue related to Lynparza increased 7% in the first - 29 - quarter of 2025 primarily due to higher demand in the U.S. and certain international markets. In January 2025, China’s NMPA approved Lynparza as adjuvant treatment for adult patients with germline BRCA -mutated, human epidermal growth factor receptor 2 (HER2)-negative high-risk early breast cancer, based on the OlympiA trial. Lenvima (lenvatinib) is an oral receptor tyrosine kinase inhibitor being developed and commercialized as part of a collaboration with Eisai Co., Ltd. (Eisai) (see Note 3 to the condensed consolidated financial statements). Lenvima is approved for the treatment of certain types of thyroid cancer, RCC, hepatocellular carcinoma, in combination with everolimus for certain patients with advanced RCC, and in combination with Keytruda for certain patients with advanced endometrial carcinoma or advanced RCC. Alliance revenue related to Lenvima increased 1% in the first quarter of 2025 primarily reflecting higher demand in the U.S. Sales of Welireg , for the treatment of adult patients with certain von Hippel-Lindau (VHL) disease-associated tumors and certain adult patients with previously treated advanced RCC, rose 62% in the first quarter of 2025. Sales growth was primarily due to higher demand in the U.S. reflecting in part continued uptake of the RCC indication following approval by the U.S. Food and Drug Administration (FDA) in 2023. In February 2025, the EC conditionally approved Welireg as monotherapy both for the treatment of adult patients with VHL disease who require therapy for associated, localized RCC, central nervous system hemangioblastomas, or pancreatic neuroendocrine tumors, and for whom localized procedures are unsuitable, and for the treatment of adult patients with advanced clear cell RCC that progressed following two or more lines of therapy that included a PD-1 or PD-L1 inhibitor and at least two vascular endothelial growth factor targeted therapies. The EC approval of these two indications is based on results from the LITESPARK-004 and LITESPARK-005 trials. The conditional approval of Welireg will be valid for one year, subject to yearly renewal, pending certain additional clinical data. Timing for commercial availability of Welireg in individual EU countries will depend on multiple factors, including the completion of national reimbursement procedures. Reblozyl (luspatercept-aamt) is a first-in-class erythroid maturation recombinant fusion protein that is being commercialized through a global collaboration with Bristol-Myers Squibb Company (BMS) (see Note 3 to the condensed consolidated financial statements). Reblozyl is approved for the treatment of anemia in certain rare blood disorders. Alliance revenue related to this collaboration (consisting of royalties) increased 68% in the first quarter of 2025 primarily due to strong underlying sales performance, as well a favorable true-up of the previous quarter’s estimated royalty amount. Vaccines Three Months Ended March 31, % Change Excluding Foreign Exchange ($ in millions) 2025 2024 % Change Gardasil/Gardasil 9 $ 1,327 $ 2,249 (41) % (40) % ProQuad 121 204 (41) % (40) % M-M-R II 168 104 62 % 63 % Varivax 249 262 (5) % (4) % Vaxneuvance 230 219 5 % 7 % Capvaxive 107 — — — Combined worldwide sales of Gardasil and Gardasil 9, vaccines to help prevent certain cancers and other diseases caused by certain types of human papillomavirus (HPV), declined 41% in the first quarter of 2025 primarily driven by lower demand in China, partially offset by higher demand in most other international markets, particularly in Japan due to a national catch-up immunization program, and by higher pricing and demand in the U.S. Demand in Japan is expected to decline significantly in future periods given that the last date to initiate the first dose in the national immunization program catch-up cohort was March 2025. Beginning in mid-2024, the Company observed a significant decline in shipments from its distributor and commercialization partner in China, Chongqing Zhifei Biological Products Co., Ltd. (Zhifei), to disease and control prevention institutions and correspondingly into the points of vaccination compared with prior quarters of 2024, resulting in above normal inventory levels at Zhifei. Accordingly, the Company shipped less than its contracted doses to Zhifei in the latter part of 2024. Lower demand in China persisted and, at the end of 2024, overall channel inventory levels in China remained elevated at above normal levels. Therefore, the Company made a decision to temporarily pause shipments to China beginning in February 2025 through at least the middle of the year and, as a result, combined sales of Gardasil/Gardasil 9 will decline significantly in 2025 compared with 2024. In January 2025, China’s NMPA approved Gardasil for use in males 9-26 years of age to help prevent certain HPV-related cancers and diseases. In April 2025, China’s NMPA approved Gardasil 9 for use in males 16-26 years of age to help prevent certain HPV-related cancers and diseases. Gardasil 9 is currently indicated in the U.S. for a two-dose regimen in adolescents aged 9-14 and a three-dose regimen for those aged 15-45. The U.S. Centers for Disease Control and Prevention’s (CDC) Advisory Committee on Immunization Practices (ACIP) has stated that at its meeting in June 2025 it intends to discuss and, potentially, vote on a change to the dose recommendation, which could include a reduction in the number of recommended doses. The Company is a party to license agreements pursuant to which the Company pays royalties on sales of Gardasil/Gardasil 9. Under the terms of the more significant of these agreements, Merck pays a 7% royalty on net sales of Gardasil/Gardasil 9 in the U.S.; this royalty expires in December 2028. The royalty expenses are included in Cost of sales . - 30 - Global sales of ProQuad (Measles, Mumps, Rubella and Varicella Virus Vaccine Live), a pediatric combination vaccine to help protect against measles, mumps, rubella and varicella, declined 41% in the first quarter of 2025. As a result of manufacturing delays, in January 2025, the Company borrowed doses of ProQuad from the CDC Pediatric Vaccine Stockpile. The borrowing reduced sales of ProQuad in the first quarter of 2025 by approximately $70 million. These doses are being used to support routine vaccination in the U.S. Worldwide sales of M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live), a vaccine to help protect against measles, mumps and rubella, grew 62% in the first quarter of 2025 primarily due to higher sales in the U.S. largely reflecting private sector buy-in due to measles outbreaks, as well as higher pricing. Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), declined 5% in the first quarter of 2025 primarily due to lower demand in the U.S. and declines in certain international markets, partially offset by higher pricing in the U.S. The Company has experienced manufacturing delays related to ProQuad and Varivax . As a result, the Company anticipates that some international markets will experience supply constraints during 2025. Worldwide sales of Vaxneuvance (Pneumococcal 15-valent Conjugate Vaccine), a vaccine to help protect against invasive pneumococcal disease caused by certain serotypes, grew 5% in the first quarter of 2025 primarily due to continued uptake following launches in the pediatric indication in Europe and certain countries in the Asia Pacific region, partially offset by lower demand in the U.S. due to competitive pressure. Merck is a party to license agreements pursuant to which the Company pays royalties on sales of Vaxneuvance . Under the terms of the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Vaxneuvance through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales . Sales of Capvaxive were $107 million in the first quarter of 2025 due to continued uptake following launch in the U.S. in the third quarter of 2024. In June 2024, the FDA approved Capvaxive for the prevention of invasive pneumococcal disease and pneumococcal pneumonia caused by certain serotypes in individuals 18 years of age and older. In March 2025, the EC approved Capvaxive . The timing of availability of Capvaxive in individual EU countries will depend on multiple factors including the completion of reimbursement procedures. The FDA and EC approvals were supported by results from the STRIDE clinical program, which evaluated Capvaxive in both vaccine-naïve and vaccine-experienced adult patient populations. Merck is a party to certain third-party license agreements pursuant to which the Company pays royalties on sales of Capvaxive . Under the terms of the most significant of these agreements, Merck pays a royalty of 7.25% on net sales of Capvaxive through 2026; this royalty will decline to 2.5% on net sales from 2027 through 2035. The royalty expenses are included in Cost of sales . Hospital Acute Care Three Months Ended March 31, % Change Excluding Foreign Exchange ($ in millions) 2025 2024 % Change Bridion $ 441 $ 440 — % 1 % Prevymis 208 174 19 % 22 % Worldwide sales of Bridion (sugammadex), for the reversal of two types of neuromuscular blocking agents used during surgery, were nearly flat in the first quarter of 2025 as higher demand and pricing in the U.S. was offset by lower demand in several international markets due to generic competition, particularly in Japan and the EU. The patents that provided market exclusivity for Bridion in the EU and Japan expired in July 2023 and January 2024, respectively. Accordingly, the Company is experiencing sales declines of Bridion in these markets and expects the declines to continue. Worldwide sales of Prevymis (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in certain high risk adult and pediatric recipients of an allogenic hematopoietic stem cell transplant and for prophylaxis of CMV disease in certain high risk adult and pediatric recipients of a kidney transplant, grew 19% in the first quarter of 2025 largely due to higher demand in the U.S. Cardiovascular Three Months Ended March 31, % Change Excluding Foreign Exchange ($ in millions) 2025 2024 % Change Winrevair $ 280 $ — — — Alliance Revenue - Adempas/Verquvo (1) 106 98 8 % 8 % Adempas 68 70 (3) % 1 % (1) Alliance revenue for Adempas and Verquvo represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 3 to the condensed consolidated financial statements). Sales of Winrevair were $280 million in the first quarter of 2025 primarily reflecting continued uptake in the U.S. since launch in the second quarter of 2024. In March 2024, the FDA approved Winrevair for the treatment of adults with pulmonary arterial hypertension (PAH) (World Health Organization [WHO] Group 1) to increase exercise capacity, improve WHO functional class (FC), and reduce the risk of clinical worsening events. In August 2024, the EC approved Winrevair , in combination with other PAH therapies, for the treatment of PAH in adult patients with WHO FC II to III, to improve exercise capacity. The FDA and EC approvals were based on the STELLAR trial. Winrevair has since launched in certain international markets, including certain markets in the EU. Timing for commercial availability of Winrevair in the remaining EU countries will depend on multiple factors, - 31 - including the completion of national reimbursement procedures, which is expected to occur in the second half of 2025. Winrevair is the subject of a licensing agreement pursuant to which Merck pays a 22% royalty on net sales of Winrevair to BMS. The royalty expenses are included in Cost of sales . Adempas (riociguat) and Verquvo (vericiguat) are part of a worldwide collaboration with Bayer AG (Bayer) to market and develop soluble guanylate cyclase (sGC) modulators (see Note 3 to the condensed consolidated financial statements). Adempas is approved for the treatment of certain types of PAH and chronic pulmonary hypertension. Verquvo is approved to reduce the risk of cardiovascular death and heart failure hospitalization following a hospitalization for heart failure or need for outpatient intravenous diuretics in adults with symptomatic chronic heart failure and reduced ejection fraction. Alliance revenue from the collaboration grew 8% in the first quarter of 2025 primarily reflecting higher demand in Bayer’s marketing territories. Revenue also includes sales of Adempas and Verquvo in Merck’s marketing territories. Sales of Adempas in Merck’s marketing territories were nearly flat in the first quarter of 2025. Virology Three Months Ended March 31, % Change Excluding Foreign Exchange ($ in millions) 2025 2024 % Change Lagevrio $ 102 $ 350 (71) % (69) % Lagevrio is an investigational oral antiviral COVID-19 medicine being developed in a collaboration with Ridgeback Biotherapeutics LP (Ridgeback) (see Note 3 to the condensed consolidated financial statements). Sales of Lagevrio declined 71% in the first quarter of 2025 primarily due to lower demand in several markets in the Asia Pacific region, particularly in Japan. Immunology Three Months Ended March 31, % Change Excluding Foreign Exchange ($ in millions) 2025 2024 % Change Simponi $ — $ 184 (100) % (100) % Remicade — 39 (100) % (100) % Simponi (golimumab) and Remicade (infliximab) are treatments for certain inflammatory diseases that the Company marketed in Europe, Russia and Türkiye. The Company’s marketing rights with respect to these products reverted to Johnson & Johnson on October 1, 2024, subsequent to which the Company is no longer recognizing sales of these products. Diabetes Three Months Ended March 31, % Change Excluding Foreign Exchange ($ in millions) 2025 2024 % Change Januvia/Janumet $ 796 $ 670 19 % 21 % Worldwide combined sales of Januvia and Janumet , medicines that help lower blood sugar levels in adults with type 2 diabetes, increased 19% in the first quarter of 2025 primarily due to higher net pricing in the U.S., including a favorable true-up to customer discounts, partially offset by the ongoing impact of the loss of exclusivity in most international markets, as well as continuing volume declines in the U.S. due to competitive pressure. The American Rescue Plan Act enacted in the U.S. in 2021 included a provision that eliminated the statutory c ap on rebates drug manufacturers pay to Medicaid beginning in January 2024. As a result of this provision, the Company paid state Medicaid programs more in rebates than it received on Medicaid sales of Januvia , Janumet and Janumet XR in 2024. In early 2025, Merck lowered the list price of the Januvia family of products to more closely align them with net prices. The lower list price has reduced the rebate amount Merck pays to Medicaid, resulting in higher realized net pricing. The Company expects higher U.S. net sales of these products for full year 2025 compared with full year 2024. While the key U.S. patent for Januvia , Janumet and Janumet XR claiming the sitagliptin compound expired in January 2023, as a result of favorable court rulings and settlement agreements related to a later expiring patent directed to the specific sitagliptin salt form of the products (see Note 7 to the condensed consolidated financial statements), the Company expects that Januvia and Janumet will not lose market exclusivity in the U.S. until May 2026 and Janumet XR will not lose market exclusivity in the U.S. until July 2026, although a non-automatically substitutable form of sitagliptin that differs from the form in the Company’s sitagliptin products has been approved by the FDA . Additionally, in 2023, the U.S. Department of HHS, through the CMS, announced that Januvia would be included in the first year of the IRA’s Program. Pursuant to the IRA’s Program, a government price was set for Januvia , which will become effective on January 1, 2026. Also, in January 2025, the U.S. Department of HHS, through the CMS, announced that Janumet and Janumet XR would be in included in the second year of the IRA’s Program, with government price setting to become effective on January 1, 2027. The Company has sued the U.S. government regarding the IRA’s Program. As a result of the anticipated patent expiries in 2026, the government price setting in 2026 and 2027 noted above, as well as ongoing competitive pressure, the Company anticipates significant sales declines for Januvia , Janumet and Janumet XR in the U.S. in 2026 and thereafter. - 32 - Animal Health Segment Three Months Ended March 31, % Change Excluding Foreign Exchange ($ in millions) 2025 2024 % Change Livestock $ 924 $ 850 9 % 16 % Companion Animal 664 661 — % 3 % $ 1,588 $ 1,511 5 % 10 % Sales of livestock products grew 9% in the first quarter of 2025 primarily due to higher demand across all species, a benefit from the timing of ruminant product sales, as well as the inclusion of sales from the July 2024 acquisition of the aqua business of Elanco Animal Health Incorporated. Sales of companion animal products were essentially flat in the first quarter of 2025. Sales of the Bravecto (fluralaner) line of products were $327 million for the first quarter of 2025, representing a decline of 1% compared with the corresponding prior year period, or growth of 2% excluding the unfavorable effect of foreign exchange. Costs, Expenses and Other Three Months Ended March 31, ($ in millions) 2025 2024 % Change Cost of sales $ 3,419 $ 3,540 (3) % Selling, general and administrative 2,552 2,483 3 % Research and development 3,621 3,992 (9) % Restructuring costs 69 123 (44) % Other (income) expense, net (35) (33) 6 % $ 9,626 $ 10,105 (5) % Cost of Sales Cost of s ales declined 3% in the first quarter of 2025. Cost of s ales includes the amortization of intangible assets recorded in connection with acquisitions, collaborations, and licensing arrangements, which totaled $620 million and $462 million in the first quarter of 2025 and 2024, respectively. Also included in Cost of s ales are expenses associated with restructuring activities, which amounted to $36 million and $116 million in the first quarter of 2025 and 2024, respectively, primarily reflecting accelerated depreciation and asset impairment charges related to the planned sale or closure of manufacturing facilities. Separation costs associated with manufacturing-related headcount reductions have been incurred and are reflected in Restructuring costs as discussed below. Gross margin was 78.0% in the first quarter of 2025 compared with 77.6% in the first quarter of 2024. The gross margin improvement was primarily due to the favorable effects of product mix and lower restructuring costs, partially offset by higher amortization of intangible assets and the unfavorable effect of foreign exchange. Selling, General and Administrative Selling, general and administrative (SG&A) expenses increased 3% in the first quarter of 2025 primarily due to higher administrative and promotional costs, partially offset by the favorable effect of foreign exchange. Research and Development Research and development (R&D) expenses declined 9% in the first quarter of 2025 primarily due to a $656 million charge in the first quarter of 2024 for the acquisition of Harpoon Therapeutics, Inc. (Harpoon) and the favorable effect of foreign exchange. The decline in R&D expenses was partially offset by a $100 million charge in the first quarter of 2025 associated with the achievement of a developmental milestone related to the 2024 acquisition of Eyebiotech Limited, higher compensation and benefit costs (reflecting in part increased headcount), as well as higher clinical development spending, and increased investment in discovery research and early drug development. R&D expenses are comprised of the costs directly incurred by Merck Research Laboratories (MRL), the Company’s research and development division that focuses on human health-related activities, which were $2.5 billion and $2.4 billion for the first quarter of 2025 and 2024, respectively. Also included in R&D expenses are Animal Health research costs, upfront and milestone payments for collaboration and licensing agreements, charges for transactions accounted for as asset acquisitions (including the charge for the acquisition of Harpoon noted above), and costs incurred by other divisions in support of R&D activities, including depreciation, production and general and administrative, which in the aggregate were $1.1 billion and $1.6 billion for the first quarter of 2025 and 2024, respectively. Restructuring Costs 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 - 33 - 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. Approximately 60% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. The remainder of the costs will result in cash outlays, relating primarily to facility shut-down costs. The Company expects to record charges of approximately $550 million in 2025 related to the 2024 Restructuring Program and anticipates the actions under the 2024 Restructuring Program will result in cumulative annual net cost savings of approximately $750 million by the end of 2031. As Merck continues to assess its business, it is likely to take further actions in 2025 to drive productivity across the Company while continuing to make disciplined investments in its expansive pipeline to drive growth. Restructuring costs , primarily representing separation and other costs associated with these restructuring activities, were $69 million and $123 million for the first quarter of 2025 and 2024, respectively. Separation costs incurred were associated with actual headcount reductions, as well as estimated expenses under existing severance programs for involuntary headcount reductions that were probable and could be reasonably estimated. Other expenses in Restructuring costs include facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement and termination charges associated with pension and other postretirement benefit plans and share-based compensation plan costs. For segment reporting, restructuring costs are unallocated expenses. Additional costs associated with the Company’s restructuring activities are included in Cost of sales , Selling, general and administrative expenses and Research and development costs. The Company recorded aggregate pretax costs of $105 million and $246 million in the first quarter of 2025 and 2024, respectively, related to restructuring program activities. See Note 4 to the condensed consolidated financial statements for additional details. Other (Income) Expense, Net Other (income) expense, net was $35 million of income in the first quarter of 2025, comparable with $33 million of income in the first quarter of 2024. For details on the components of Other (income) expense, net see Note 10 to the condensed consolidated financial statements. Segment Profits Three Months Ended March 31, ($ in millions) 2025 2024 Pharmaceutical segment profits $ 10,712 $ 10,904 Animal Health segment profits 634 555 Non-segment activity (5,443) (5,789) Income Before Taxes $ 5,903 $ 5,670 Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as SG&A expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as SG&A and R&D expenses directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, R&D expenses incurred by MRL, or general and administrative expenses not directly incurred by the segments, nor the cost of financing these activities. Separate divisions maintain responsibility for monitoring and managing these costs, including depreciation related to fixed assets utilized by these divisions and, therefore, they are not included in segment profits. Also excluded from the determination of segment profits are costs related to restructuring activities and acquisition- and divestiture-related costs, including the amortization of intangible assets and amortization of purchase accounting adjustments, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Additionally, segment profits do not reflect other expenses from corporate and manufacturing cost centers and other miscellaneous income or expense. These unallocated items are reflected in “Non-segment activity” in the above table. Also included in “Non-segment activity” are miscellaneous corporate profits (losses), as well as operating profits (losses) related to third-party manufacturing arrangements. Pharmaceutical segment profits declined 2% in the first quarter of 2025 primarily due to lower sales, higher promotional costs and the unfavorable effect of foreign exchange, partially offset by lower administrative and selling costs. Animal Health segment profits rose 14% in the first quarter of 2025 primarily due to higher sales, partially offset by the unfavorable effect of foreign exchange. Taxes on Income 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. - 34 - 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. In addition, beginning in 2026, the tax rates on foreign earnings and export income are scheduled to increase under existing provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) and may result in an increase to the Company’s effective income tax rate. 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. 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. Non-GAAP Income and Non-GAAP EPS Non-GAAP income and non-GAAP earnings per share (EPS) are alternative views of the Company’s performance that Merck is providing because management believes this information enhances investors’ understanding of the Company’s results since management uses non-GAAP measures to assess performance. Non-GAAP income and non-GAAP EPS exclude certain items because of the nature of these items and the impact that they have on the analysis of underlying business performance and trends. The excluded items (which should not be considered non-recurring) consist of acquisition- and divestiture-related costs, restructuring costs, income and losses from investments in equity securities, and certain other items. These excluded items are significant components in understanding and assessing financial performance. Non-GAAP income and non-GAAP EPS are important internal measures for the Company. Senior management receives a monthly analysis of operating results that includes a non-GAAP EPS metric. Management uses non-GAAP measures internally for planning and forecasting purposes and to measure the performance of the Company along with other metrics. In addition, annual employee compensation, including senior management’s compensation, is derived in part using a non-GAAP pretax income metric. Since non-GAAP income and non-GAAP EPS are not measures determined in accordance with GAAP, they have no standardized meaning prescribed by GAAP and, therefore, may not be comparable to the calculation of similar measures of other companies. The information on non-GAAP income and non-GAAP EPS should be considered in addition to, but not as a substitute for or superior to, net income and EPS prepared in accordance with generally accepted accounting principles in the U.S. (GAAP). A reconciliation between GAAP financial measures and non-GAAP financial measures is as follows: Three Months Ended March 31, ($ in millions except per share amounts) 2025 2024 Income before taxes as reported under GAAP $ 5,903 $ 5,670 Increase (decrease) for excluded items: Acquisition- and divestiture-related costs 647 496 Restructuring costs 105 246 Income from investments in equity securities, net (107) (116) Non-GAAP income before taxes 6,548 6,296 Income tax provision as reported under GAAP 818 903 Estimated tax benefit on excluded items (1) 113 109 Non-GAAP income tax provision 931 1,012 Non-GAAP net income 5,617 5,284 Less: Net income attributable to noncontrolling interests as reported under GAAP 6 5 Non-GAAP net income attributable to Merck & Co., Inc. $ 5,611 $ 5,279 EPS assuming dilution as reported under GAAP (2) $ 2.01 $ 1.87 EPS difference 0.21 0.20 Non-GAAP EPS assuming dilution (2) $ 2.22 $ 2.07 (1) The estimated tax impact on the excluded items is determined by applying the statutory rate of the originating territory of the non-GAAP adjustments. (2) GAAP and non-GAAP EPS were negatively affected in the first quarter of 2024 by $0.26 per share for a charge related to pre-approval assets obtained in a transaction accounted for as an asset acquisition. - 35 - Acquisition- and Divestiture-Related Costs Non-GAAP income and non-GAAP EPS exclude the impact of certain amounts recorded in connection with acquisitions and divestitures of businesses. These amounts include the amortization of intangible assets, as well as intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also excluded are integration, transaction, and certain other costs associated with acquisitions and divestitures. Non-GAAP income and non-GAAP EPS also exclude amortization of intangible assets related to collaborations and licensing arrangements. Restructuring Costs Non-GAAP income and non-GAAP EPS exclude costs related to restructuring actions (see Note 4 to the condensed consolidated financial statements). These amounts include employee separation costs and accelerated depreciation associated with facilities to be closed or divested. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. Restructuring costs also include asset impairment, facility shut-down and other related costs, as well as employee-related costs such as curtailment, settlement and termination charges associated with pension and other postretirement benefit plans and share-based compensation costs. Income and Losses from Investments in Equity Securities Non-GAAP income and non-GAAP EPS exclude realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds. Certain Other Items Non-GAAP income and non-GAAP EPS exclude certain other items. These items are adjusted for after evaluating them on an individual basis, considering their quantitative and qualitative aspects. Typically, these items are unusual in nature, significant to the results of a particular period or not indicative of future operating results. There were no such items in either the first quarter of 2025 or 2024. Research and Development Update The Company currently has several candidates under regulatory review in the U.S. and internationally. MK-1022, patritumab deruxtecan, is a potential first-in-class HER3 directed DXd antibody drug conjugate (ADC), under review by the FDA for the treatment of adult patients with locally advanced or metastatic EGFR-mutated NSCLC previously treated with two or more systemic therapies. The Biologics License Application (BLA) is based on the primary results from the HERTHENA-Lung01 pivotal Phase 2 trial and data results presented at the IASLC 2023 World Conference on Lung Cancer, which were simultaneously published in the Journal of Clinical Oncology. In June 2024, the FDA issued a complete response letter (CRL) for the BLA due to findings pertaining to an inspection of a third-party manufacturing facility. The CRL did not identify any issues with the efficacy or safety data submitted. Patritumab deruxtecan (HER3-DXd) was discovered by Daiichi Sankyo and is being jointly developed by Daiichi Sankyo and Merck. Merck is working with Daiichi Sankyo to address FDA feedback. MK-3475A, pembrolizumab with berahyaluronidase alfa (MK-5180) for subcutaneous administration (subcutaneous pembrolizumab), is being evaluated for noninferiority with respect to pharmacokinetics to intravenous Keytruda in metastatic NSCLC. The FDA accepted for review a BLA seeking approval of MK-3475A across all previously approved solid tumor indications for Keytruda and set a Prescription Drug User Fee Act (PDUFA), or target action, date of September 23, 2025. The application is supported by data from the pivotal 3475A-D77 Phase 3 trial. Additionally, the European Medicines Agency (EMA) has validated an extension application to introduce a new pharmaceutical form and new route of administration for Keytruda . MK-6482, Welireg , is under review in Japan both for the treatment of adults with VHL disease based on the LITESPARK-004 clinical trial and for the treatment of certain adults with previously treated advanced RCC based on the LITESPARK-005 clinical trial. Additionally, in January 2025, the FDA accepted for priority review a supplemental New Drug Application seeking approval of Welireg for the treatment of adult and pediatric patients (12 years and older) with advanced, unresectable, or metastatic pheochromocytoma and paraganglioma, based on the LITESPARK-015 trial. The FDA set a PDUFA date of May 26, 2025. V116, Capvaxive , a 21-valent pneumococcal conjugate vaccine designed to help prevent invasive pneumococcal disease and pneumococcal pneumonia caused by certain serotypes in adults, is under review in Japan. The application is supported by results from the STRIDE clinical program, which evaluated V116 in both vaccine-naïve and vaccine-experienced adult patient populations. MK-7962, Winrevair , Merck’s novel activin signaling inhibitor, is under review in Japan for the treatment of adult patients with PAH based on the Phase 3 STELLAR trial. MK-1654, clesrovimab, is an investigational prophylactic long-acting monoclonal antibody designed to protect infants from respiratory syncytial virus (RSV) disease during their first RSV season. In December 2024, the FDA accepted the BLA for clesrovimab and set a PDUFA date of June 10, 2025. Clesrovimab is also under review in the EU. - 36 - MK-3475, Keytruda , is an anti-PD-1 therapy approved for the treatment of many cancers that is in clinical development for expanded indications. These studies encompass more than 30 cancer types including: biliary, estrogen receptor positive breast, triple-negative breast, cervical, colorectal, endometrial, esophageal, gastric, glioblastoma, head and neck, hepatocellular, Hodgkin lymphoma, non-Hodgkin lymphoma, non-small-cell lung, small-cell lung, melanoma, malignant pleural mesothelioma, ovarian, prostate, renal, and urothelial, several of which are currently in Phase 3 clinical development. Keytruda is under priority review by the FDA and also under review in Japan for the treatment of patients with resectable locally advanced head and neck squamous cell carcinoma as neoadjuvant treatment, then continued as adjuvant treatment in combination with standard of care radiotherapy with or without cisplatin and then as a single agent. The FDA set a PDUFA date of June 23, 2025. The supplemental BLA is based on data from the Phase 3 KEYNOTE-689 trial. Keytruda is under review in Japan for the first-line treatment of adult patients with unresectable advanced or metastatic malignant pleural mesothelioma, based on the Phase 2/3 IND.227/KEYNOTE-483 trial. The chart below reflects the Company’s research pipeline as of April 30, 2025. Candidates shown in Phase 3 include the date such candidate entered into Phase 3 development. Candidates shown in Phase 2 include the most advanced compound with a specific mechanism or, if listed compounds have the same mechanism, they are each currently intended for commercialization in a given therapeutic area. Small molecules and biologics are given MK-number designations and vaccine candidates are given V-number designations. Except as otherwise noted, candidates in Phase 1, additional indications in the same therapeutic area (other than with respect to cancer and immunology) and additional claims, line extensions or formulations for in-line products are not shown. Phase 2 Alzheimer’s MK-1167 Cancer MK-1022 (patritumab deruxtecan) (1)(3) Biliary Bladder Breast Cervical Colorectal Endometrial Esophageal Gastric Head and Neck Hepatocellular Melanoma Ovarian Pancreatic Prostate MK-1308 (quavonlimab) (2) Non-Small-Cell Lung MK-2400 (ifinatamab deruxtecan) (1) Biliary Bladder Breast Cervical Colorectal Endometrial Head and Neck Hepatocellular Melanoma Ovarian Pancreatic Cancer MK-2870 (sacituzumab tirumotecan) (1)(3) Biliary Bladder Colorectal Neoplasm Malignant Pancreatic MK-3475 Keytruda Advanced Solid Tumors Prostate MK-3475A (subcutaneous pembrolizumab) Cutaneous Squamous Cell Hematological Malignancies MK-5909 (raludotatug deruxtecan) (1) Biliary Bladder Cervical Colorectal Endometrial Gastric Ovarian Pancreatic Renal Cell Small-Cell Lung V940 (intismeran autogene) (1)(2) Bladder Renal Cell Dengue Fever Virus Vaccine V181 HIV-1 Infection MK-8591B (islatravir+MK-8507) HIV-1 Pre-Exposure Prophylaxis MK-8527 Immunology MK-6194 Lupus Vitiligo MK-7240 (tulisokibart) Systemic Sclerosis Metabolic Dysfunction-Associated Steatohepatitis (MASH) MK-6024 (efinopegdutide) Pulmonary Hypertension-Chronic Obstructive Pulmonary Disease MK-5475 Pulmonary Hypertension Due To Left Heart Disease MK-7962 Winrevair - 37 - Phase 3 (Phase 3 entry date) Under Review Antiviral COVID-19 MK-4482 Lagevrio (U.S.) (May 2021) (1)(4) Cancer MK-1022 (patritumab deruxtecan) (1) Non-Small-Cell Lung (May 2022) (EU) MK-1026 (nemtabrutinib) Hematological Malignancies (March 2023) MK-1084 (2) Non-Small-Cell Lung (May 2024) MK-1308A (quavonlimab+pembrolizumab) Renal Cell (April 2021) MK-2140 (zilovertamab vedotin) Hematological Malignancies (September 2024) MK-2400 (ifinatamab deruxtecan) (1) Esophageal (March 2025) Small-Cell Lung (July 2024) MK-2870 (sacituzumab tirumotecan) (1)(3) Breast (April 2024) Cervical (July 2024) Endometrial (December 2023) Gastric (May 2024) Non-Small-Cell Lung (November 2023) Ovarian (April 2025) MK-3475 Keytruda Hepatocellular (May 2016) (EU) Ovarian (December 2018) Small-Cell Lung (May 2017) MK-3543 (bomedemstat) Myeloproliferative Disorders (December 2023) MK-5684 (opevesostat) Prostate (December 2023) MK-7339 Lynparza (1)(2) Non-Small-Cell Lung (June 2019) Small-Cell Lung (December 2020) MK-7902 Lenvima (1)(2) Esophageal (July 2021) V940 (intismeran autogene) (1)(2) Melanoma (July 2023) Non-Small-Cell Lung (December 2023) Diabetic Macular Edema MK-3000 (5) HIV-1 Infection MK-8591A (doravirine+islatravir) (February 2020) (6) MK-8591D (islatravir+lenacapavir) (October 2024) (1)(6) Hypercholesterolemia MK-0616 (enlicitide decanoate) (August 2023) Immunology MK-7240 (tulisokibart) Crohn’s Disease (June 2024) Ulcerative Colitis (October 2023) New Molecular Entities Ca ncer MK-1022 (patritumab deruxtecan) (1)(7) Non-Small-Cell Lung (U.S.) MK-3475A ( subcutaneous pembrolizumab ) Previously Approved Solid Tumors (U.S.) Previously Approved Tumors (EU) MK-6482 Welireg Renal Cell (JPN) Von Hippel-Lindau (VHL) Disease (JPN) Pneumococcal Vaccine Adult V116 Capvaxive (JPN) Pulmonary Arterial Hypertension MK-7962 Winrevair (JPN) Respiratory Syncytial Virus MK-1654 (clesrovimab) (U.S.) (EU) Certain Supplemental Filings Cancer MK-3475 Keytruda • Resectable Locally Advanced Head and Neck Squamous Cell Carcinoma (KEYNOTE-689) (U.S.) (JPN) • First-Line Unresectable Advanced or Metastatic Malignant Pleural Mesothelioma (KEYNOTE-483) (JPN) MK-6482 Welireg • Advanced, Unresectable, or Metastatic Pheochromocytoma and Paraganglioma (LITESPARK-015) (U.S.) Footnotes: (1) Being developed in a collaboration. (2) Being developed in combination with Keytruda . (3) Being developed as monotherapy and/or in combination with Keytruda. (4) Available in the U.S. under Emergency Use Authorization. (5) Program is in a Phase 2/3 study that commenced in August 2024. (6) On FDA partial clinical hold for higher doses of islatravir than those used in current clinical trials. (7) In June 2024, the FDA issued a CRL for the BLA for patritumab deruxtecan. Merck is working with Daiichi Sankyo to address FDA feedback . Analysis of Liquidity and Capital Resources ($ in millions) March 31, 2025 December 31, 2024 Cash and investments $ 9,844 $ 14,152 Working capital 10,329 10,362 Total debt to total liabilities and equity 30.3 % 31.7 % Cash provided by operating activities was $2.5 billion in the first three months of 2025 compared with $3.1 billion in the first three months of 2024. Cash provided by operating activities was reduced by milestone payments related to certain collaborations of $700 million and $245 million in the first three months of 2025 and 2024, respectively. Cash provided by operating activities continues to be the Company’s primary source of funds to finance operating needs, with excess cash serving as the primary source of funds to finance business development transactions, capital expenditures, dividends paid to shareholders and treasury stock purchases. Cash used in investing activities was $1.5 billion in the first three months of 2025 compared with $1.4 billion in the first three months of 2024. The higher use of cash in investing activities was primarily due to higher purchases of securities and other investments, and higher capital expenditures (including the acquisition of a facility from WuXi Vaccines discussed in Note 2 to the condensed consolidated financial statements), partially offset by lower cash used for acquisitions and higher proceeds from sales of securities and other investments. Cash used in financing activities was $5.8 billion in the first three months of 2025 compared with $2.8 billion in the first three months of 2024. The higher use of cash in financing activities was primarily due to higher payments on long-term debt, higher purchases of treasury stock, higher dividends paid to shareholders and lower proceeds from the exercise of stock options. The Company has accounts receivable factoring agreements with financial institutions in certain countries to sell accounts receivable. The Company factored $1.7 billion and $2.1 billion of accounts receivable at March 31, 2025 and - 38 - 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. The net cash flows relating to these collections are reported as financing activities in the Condensed Consolidated Statement of Cash Flows. In February 2025, the Company’s $2.5 billion, 2.75% notes matured in accordance with their terms and were repaid. In March 2024, the Company’s $750 million, 2.90% notes matured in accordance with their terms and were repaid. Dividends paid to stockholders were $2.1 billion and $2.0 billion for the first three months of 2025 and 2024, respectively. In November 2024, Merck’s Board of Directors declared a quarterly dividend of $0.81 per share on the Company’s outstanding common stock for the first quarter that was paid in January 2025. In January 2025, Merck’s Board of Directors declared a quarterly dividend of $0.81 per share on the Company’s outstanding common stock for the second quarter that was paid in April 2025. In 2018, Merck’s Board of Directors authorized purchases of up to $10 billion of Merck’s common stock for its treasury. The treasury stock purchase authorization has no time limit and will be made over time in open-market transactions, block transactions on or off an exchange, or in privately negotiated transactions. During the first three months of 2025, the Company purchased $1.2 billion (13 million shares) of its common stock for its treasury under this program. The Company expects the pace of share repurchases to continue at this level for the remainder of 2025. In January 2025, Merck’s Board of Directors authorized purchases of up to an additional $10 billion of Merck’s common stock for its treasury. As of March 31, 2025, the Company’s remaining share repurchase authorization was $11.2 billion. The Company has a $6.0 billion credit facility that matures in May 2028. The facility provides backup liquidity for the Company’s commercial paper borrowing facility and is to be used for general corporate purposes. The Company has not drawn funding from this facility. Critical Accounting Estimates The Company’s significant accounting policies, which include management’s best estimates and judgments, are included in Note 2 to the consolidated financial statements for the year ended December 31, 2024 included in Merck’s Form 10‑K filed on February 25, 2025. A discussion of accounting estimates considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates is included in the Critical Accounting Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Merck’s Form 10-K. There have been no significant changes in the Company’s critical accounting estimates since December 31, 2024. Recently Issued Accounting Standards For a discussion of recently issued accounting standards, see Note 1 to the condensed consolidated financial statements. Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in market risk exposures that affect the disclosures presented in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in the Company’s 2024 Form 10-K filed on February 25, 2025.