Business Developments

Below is a summary of significant business development activity thus far in 2022. See Note 3 to the condensed consolidated financial statements for additional information.



In July 2022, Merck and Orion Corporation (Orion) announced a global
co-development and co-commercialization agreement for Orion's investigational
candidate ODM-208 (MK-5684) and other drugs targeting cytochrome P450 11A1
(CYP11A1), an enzyme important in steroid production. ODM-208 is an oral,
non-steroidal inhibitor of CYP11A1 currently being evaluated in a Phase 2
clinical trial for the treatment of patients with metastatic
castration-resistant prostate cancer. Merck made an upfront payment to Orion of
$290 million, which will be recorded in Research and development expenses in the
third quarter of 2022.

Also in July 2022, Merck and Sichuan Kelun-Biotech Biopharmaceutical Co., Ltd.
(Kelun-Biotech) closed a license and collaboration agreement in which Merck
gained exclusive worldwide rights for the development, manufacture and
commercialization of an investigational antibody drug conjugate (ADC) (MK-1200)
for the treatment of solid tumors. Under the terms of the agreement, Merck and
Kelun-Biotech will collaborate on the early clinical development of the
investigational ADC. Merck will make an upfront payment of $35 million, which
will be recorded in Research and development expenses in the third quarter of
2022. Kelun-Biotech is also eligible to receive future contingent milestone
payments and tiered royalties on future net sales.

In May 2022, in connection with an existing arrangement, Merck exercised its
option to obtain an exclusive license outside of China for the development,
manufacture and commercialization of Kelun-Biotech's trophoblast antigen 2
(TROP2)-targeting ADC programs, including its lead compound, SKB-264 (MK-2870).
SKB-264 is currently being evaluated in Phase 2 trials for non-small-cell lung
cancer (NSCLC) and advanced solid tumors. Under the terms of the agreement,
Merck and Kelun-Biotech will collaborate on certain early clinical development
plans, including evaluating the potential of SKB-264 as a monotherapy and in
combination with Keytruda (pembrolizumab) for advanced solid tumors. Upon option
exercise, Merck made a payment of $30 million, which was recorded in Research
and development expenses in the second quarter of 2022, and agreed to make
additional payments upon completion of specified project activities, technology
transfer, as well as payments to fund Kelun-Biotech's ongoing research and
development activities. In addition, Kelun-Biotech is eligible to receive future
contingent milestone payments and royalties on future net sales.

Spin-Off of Organon & Co.



On June 2, 2021, Merck completed the spin-off of products from its women's
health, biosimilars and established brands businesses into a new, independent,
publicly traded company named Organon & Co. (Organon) through a distribution of
Organon's publicly traded stock to Company shareholders. The distribution is
expected to qualify and has been treated as tax-free to the Company and its
shareholders for U.S. federal income tax purposes. The established brands
included in the transaction consisted of dermatology, non-opioid pain
management, respiratory, select cardiovascular products, as well as the rest of
Merck's diversified brands franchise. Merck's existing research pipeline
programs continue to be owned and developed within Merck as planned. The
historical results of the businesses that were contributed to Organon in the
spin-off have been reflected as discontinued operations in the Company's
consolidated financial statements through the date of the spin-off (see Note 2
to the condensed consolidated financial statements).

Other Developments

War in Ukraine



In February 2022, Russia invaded Ukraine. The Company's primary concerns are the
safety and well-being of its employees and ensuring patients and customers have
continued access to medicines and vaccines needed for patient and public health.
The Company is working cross-functionally across the globe to monitor and
mitigate interruptions to business continuity resulting from the war, including
its impact on Merck's supply chain, operations and clinical trials. For
humanitarian reasons, the Company is continuing to supply essential medicines
and vaccines in Russia while working to maintain compliance with evolving
international sanctions. Merck plans to donate profits resulting from its
operations in Russia to humanitarian causes. The Company does not have research
or manufacturing facilities in Russia, currently does not plan to make further
investments in Russia, and has suspended screening and enrollment in ongoing
clinical trials as well as planning for new studies in Russia, although the
Company continues to treat patients already enrolled in existing clinical trials
and collect data from these studies. The Company is also using its resources to
help alleviate the humanitarian crisis in Ukraine, including through donations
of funds and products. The financial impacts of the war were immaterial to the
Company's consolidated financial statements for the second quarter and first six
months of 2022. Combined sales to Russia and Ukraine were approximately 1% of
total Merck consolidated sales for the full year of 2021.
                                     - 34 -
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The combination of Russia's invasion of Ukraine, as well as the resultant economic sanctions imposed by the U.S., the European Union (EU) and other governments are having pervasive effects in markets worldwide. The Company is unable to determine at this time the future impacts of this conflict either directly or indirectly on the Company's business.

COVID-19



Although COVID-19-related disruptions had some negative effects on sales for the
second quarter and first six months of 2022, Merck continues to believe that
global health systems and patients have largely adapted to the impacts of the
COVID-19 pandemic. Merck's sales of Lagevrio (molnupiravir), an investigational
oral antiviral COVID-19 medicine, were $1.2 billion and $4.4 billion in the
second quarter and first six months of 2022, respectively. In the second quarter
and first six months of 2021, COVID-19-related disruptions resulted in an
estimated negative impact to Pharmaceutical segment sales of approximately $400
million and $1.0 billion, respectively, because a substantial portion of Merck's
Pharmaceutical segment revenue is comprised of physician-administered products,
which were unfavorably affected by social distancing measures and fewer well
visits.

In April 2021, Merck announced it was discontinuing the development of MK-7110
for the treatment of hospitalized patients with COVID-19, which was obtained as
part of Merck's acquisition of OncoImmune (see Note 3 to the condensed
consolidated financial statements). This decision resulted in charges of
$37 million and $207 million to Cost of sales in the second quarter and first
six months of 2021, respectively.

In March 2021, Merck announced it had entered into multiple agreements to
support efforts to expand manufacturing capacity and supply of
SARS-CoV-2/COVID-19 medicines and vaccines. The Biomedical Advanced Research and
Development Authority (BARDA), a division of the Office of the Assistant
Secretary for Preparedness and Response within the U.S. Department of Health and
Human Services, provided Merck with $102 million of funding in the first quarter
of 2022 to adapt and make available a number of existing manufacturing
facilities for the production of SARS-CoV-2/COVID-19 vaccines and medicines. The
funding is being recognized as a reduction to Cost of sales over the production
period, offsetting the depreciation expense related to the amounts that were
capitalized in connection with the modification of the manufacturing facilities.
In May 2022, Johnson & Johnson terminated a previously executed agreement with
Merck supporting the manufacturing and supply of Johnson & Johnson's
SARS-CoV-2/COVID-19 vaccine. Merck continues to use one of its facilities in the
U.S. to produce drug substance for Johnson & Johnson's vaccine under a separate
agreement.

Pricing

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 enacted in prior years 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 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 six months of 2022 was negatively affected by
other cost-reduction measures taken by governments and other third parties to
lower health care costs. In the U.S., the Biden Administration and Congress
continue to discuss legislation designed to control health care costs, including
the cost of drugs. The Company anticipates all of these actions and additional
actions in the future will continue to negatively affect sales performance.

Supply Chain



As a result of global macroeconomic conditions, the Company is experiencing some
disruption and volatility in its global supply chain network, and the Company
may in the future experience disruptions in availability and delays in shipments
of raw materials and packaging, as well as related cost inflation.

Operating Results

Sales

                                                                                             % Change                                                                       % Change
                                     Three Months Ended                                      Excluding                Six Months Ended                                      Excluding
                                          June 30,                                            Foreign                     June 30,                                           Foreign
($ in millions)                    2022               2021              % Change             Exchange              2022              2021              % Change             Exchange
United States                  $    6,238          $  5,100                   22  %                 22  %       $ 13,577          $  9,890                   37  %                 37  %
International                       8,355             6,301                   33  %                 38  %         16,917            12,139                   39  %                 45  %
Total                          $   14,593          $ 11,402                   28  %                 31  %       $ 30,494          $ 22,029                   38  %                 41  %

U.S. plus international may not equal total due to rounding.



Worldwide sales grew 28% to $14.6 billion in the second quarter of 2022 and rose
38% to $30.5 billion in the first six months of 2022. Revenue performance in
both periods was attributable in part to higher sales in the virology franchise
driven by Lagevrio (molnupiravir) sales of $1.2 billion and $4.4 billion in the
second quarter and first six months of 2022,
                                     - 35 -
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respectively. Also contributing to revenue growth in both periods were higher
sales in the oncology franchise largely driven by strong growth of Keytruda
(pembrolizumab) and increased alliance revenue from Lenvima (lenvatinib) and
Lynparza (olaparib), as well as higher sales in the vaccines franchise,
primarily attributable to growth of Gardasil (Human Papillomavirus Quadrivalent
[Types 6, 11, 16 and 18] Vaccine, Recombinant) and Gardasil 9 (Human
Papillomavirus 9-valent Vaccine, Recombinant). Higher sales of hospital acute
care products, including Bridion (sugammadex) Injection, and higher third-party
manufacturing sales also drove revenue growth in the second quarter and first
six months of 2022. Revenue growth in the year-to-date period also reflects
higher sales of Animal Health products. As discussed above, COVID-19-related
disruptions had some negative effects on sales in the second quarter and first
six months of 2022, but to a lesser extent than in the same periods of 2021
which benefited year-over-year sales growth.

Revenue growth in the second quarter and first six months of 2022 was partially
offset by lower sales of virology products Isentress/Isentress HD (raltegravir)
and lower combined sales of diabetes products Januvia (sitagliptin) and Janumet
(sitagliptin and metformin HCl).

See Note 15 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.

Pharmaceutical Segment

Oncology

                                                                                           % Change                                                                       % Change
                                  Three Months Ended                                       Excluding                Six Months Ended                                      Excluding
                                       June 30,                                             Foreign                     June 30,                                           Foreign
($ in millions)                  2022                2021             % Change             Exchange               2022              2021           

 % Change             Exchange
Keytruda                   $    5,252             $ 4,176                   26  %                 30  %       $  10,061          $ 8,076                   25  %                 29  %
Alliance Revenue -
Lynparza (1)                      275                 248                   11  %                 17  %             541              475                   14  %                 18  %
Alliance Revenue - Lenvima
(1)                               231                 181                   28  %                 33  %             459              310                   48  %                 51  %

(1) Alliance revenue represents Merck's share of profits, which are product sales net of cost of sales and commercialization costs (see Note 4 to the condensed consolidated financial statements).



Keytruda is an anti-PD-1 (programmed death receptor-1) therapy that has been
approved as monotherapy for the treatment of certain patients with cervical
cancer, classical Hodgkin lymphoma, cutaneous squamous cell carcinoma,
endometrial carcinoma, esophageal or gastroesophageal junction (GEJ) carcinoma,
head and neck squamous cell carcinoma (HNSCC), hepatocellular carcinoma (HCC),
NSCLC, melanoma, Merkel cell carcinoma, microsatellite instability-high (MSI-H)
or mismatch repair deficient (dMMR) cancer (solid tumors) including MSI-H/dMMR
colorectal cancer, primary mediastinal large B-cell lymphoma, tumor mutational
burden-high (TMB-H) cancer (solid tumors), and urothelial carcinoma including
non-muscle invasive bladder cancer. Additionally, Keytruda is approved as
monotherapy for the adjuvant treatment of certain patients with renal cell
carcinoma (RCC) or stage IIB, IIC or III melanoma. Keytruda is also approved for
certain patients with high-risk early-stage TNBC in combination with
chemotherapy as neoadjuvant treatment, and then continued as a single agent as
adjuvant treatment after surgery. In addition, Keytruda is approved for the
treatment of certain patients in combination with chemotherapy for metastatic
squamous and nonsquamous NSCLC, in combination with chemotherapy, with or
without bevacizumab for cervical cancer, in combination with chemotherapy for
esophageal cancer, in combination with trastuzumab, fluoropyrimidine- and
platinum-containing chemotherapy for human epidermal growth factor 2
(HER-2)-positive gastric or GEJ adenocarcinoma, in combination with chemotherapy
for HNSCC, in combination with chemotherapy for TNBC, in combination with
axitinib for advanced RCC, and in combination with Lenvima for both endometrial
carcinoma and RCC. 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 26% and 25% in the second quarter and first six
months of 2022, respectively. Sales growth was primarily driven by higher demand
as the Company continues to launch Keytruda with multiple new indications
globally. Sales in the U.S. continue to build across the multiple approved
metastatic indications, in particular for the treatment of certain types of RCC,
HNSCC, and MSI-H cancers. Keytruda sales growth in the U.S. also benefited from
increased uptake across recent earlier-stage launches including certain types of
neoadjuvant/adjuvant TNBC, as well as certain types of RCC and melanoma.
Keytruda sales growth in international markets reflects continued uptake
predominately for the NSCLC, HNSCC and RCC indications, particularly in Europe.


                                     - 36 -
--------------------------------------------------------------------------------

Keytruda received the following regulatory approvals thus far in 2022.



      Date                                            Approval
                 European Commission (EC) approval as monotherapy for the 

adjuvant treatment of

January 2022 adults with RCC at increased risk of recurrence following nephrectomy, or following


                 nephrectomy and resection of metastatic lesions based on 

the KEYNOTE-564 trial.

Japan Ministry of Health, Labour and Welfare approval of 

the combination of

February 2022 Keytruda plus Lenvima for radically unresectable or metastatic RCC based on the


                 CLEAR (Study 307)/KEYNOTE-581 trial.
                 Japan Pharmaceuticals and Medical Devices Agency approval 

for the treatment of

February 2022 adult patients with advanced or recurrent TMB-H solid tumors that have progressed


                 after chemotherapy (limited to use when difficult to treat 

with standard of care)


                 based on the KEYNOTE-158 trial.
                 U.S. Food and Drug Administration (FDA) approval as a 

single agent for the


                 treatment of patients with advanced endometrial carcinoma 

that is MSI-H or dMMR who

March 2022 have disease progression following prior systemic therapy in any setting and are


                 not candidates for curative surgery or radiation based on 

the KEYNOTE-158 trial


                 (Cohorts D & K).
                 EC approval in combination with chemotherapy, with or 

without bevacizumab, for the

April 2022 treatment of persistent, recurrent or metastatic cervical cancer in certain adults


                 whose tumors express PD-L1 based on the KEYNOTE-826 trial.
                 EC approval as monotherapy for the treatment of certain 

adult patients with

April 2022 unresectable or metastatic MSI-H/dMMR colorectal, gastric, small intestine or


                 biliary cancer, as well as advanced or recurrent 

MSI-H/dMMR endometrial cancer


                 based on data from the KEYNOTE-164 and KEYNOTE-158 trials.
                 EC approval in combination with chemotherapy as

neoadjuvant treatment, and then

May 2022 continued as monotherapy as adjuvant treatment after surgery for adults with


                 locally advanced or early-stage TNBC at high risk of 

recurrence based on the


                 KEYNOTE-522 trial.
                 EC approval as monotherapy for the adjuvant treatment of 

adults and adolescents


                 aged 12 years and older with stage IIB or IIC melanoma and 

who have undergone

June 2022 complete resection based on the KEYNOTE-716 trial. Additionally, EC approval


                 expanding the indications in advanced (unresectable or 

metastatic) melanoma and


                 stage III melanoma with lymph node involvement (as 

adjuvant treatment following


                 complete resection) to include adolescent patients aged 12 

years and older.




Lynparza is an oral poly (ADP-ribose) polymerase (PARP) inhibitor being
developed as part of a collaboration with AstraZeneca PLC (AstraZeneca) (see
Note 4 to the condensed consolidated financial statements). Lynparza is approved
for the treatment of certain types of advanced ovarian, breast, pancreatic and
prostate cancers. Alliance revenue related to Lynparza increased 11% and 14% in
the second quarter and first six months of 2022, respectively, largely driven by
higher demand globally across the multiple approved indications, particularly in
the U.S. largely attributable to uptake in the earlier-stage breast cancer
indication following recent approval by the FDA. In March 2022, Lynparza was
approved by the FDA for the adjuvant treatment of adult patients with
deleterious or suspected deleterious germline BRCA-mutated (gBRCAm),
HER2-negative high-risk early breast cancer who have been treated with
neoadjuvant or adjuvant chemotherapy based on the OlympiA trial. In August 2022,
the EC approved Lynparza as monotherapy or in combination with endocrine therapy
for the adjuvant treatment of adult patients with gBRCAm who have HER2-negative
high-risk early breast cancer previously treated with neoadjuvant or adjuvant
chemotherapy based on the OlympiA trial.

Lenvima is an oral receptor tyrosine kinase inhibitor being developed as part of
a collaboration with Eisai Co., Ltd. (Eisai) (see Note 4 to the condensed
consolidated financial statements). Lenvima is approved for the treatment of
certain types of thyroid cancer, RCC, HCC, in combination with everolimus for
certain patients with RCC, and in combination with Keytruda for both endometrial
carcinoma and RCC. Alliance revenue related to Lenvima grew 28% and 48% in the
second quarter and first six months of 2022, respectively, reflecting uptake in
the advanced RCC and advanced endometrial cancer indications, particularly in
the U.S.

Vaccines

                                                                                                  % Change                                                                       % Change
                                         Three Months Ended                                       Excluding                Six Months Ended                                      Excluding
                                              June 30,                                             Foreign                     June 30,                                           Foreign
($ in millions)                         2022                2021             % Change             Exchange               2022              2021             % Change             Exchange
Gardasil/Gardasil 9               $    1,674             $ 1,234                   36  %                 40  %       $   3,133          $ 2,151                   46  %                 48  %
ProQuad                                  214                 189                   13  %                 15  %             376              354                    6  %                  8  %
M-M-R II                                 103                  87                   17  %                 19  %             206              167                   23  %                 25  %
Varivax                                  261                 240                    9  %                 10  %             465              444                    5  %                  6  %
RotaTeq                                  173                 208                  (17) %                (14) %             389              366                    6  %                  8  %
Pneumovax 23                             153                 152                    1  %                  4  %             325              323                    1  %                  3  %


                                     - 37 -

--------------------------------------------------------------------------------

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), grew 36% and 46% in the second quarter and first six
months of 2022, respectively, driven primarily by strong demand outside of the
U.S., particularly in China, which also benefited from increased supply.
Combined sales of Gardasil and Gardasil 9 in the U.S. declined in the second
quarter of 2022 and increased for the first six months of 2022 due to public
sector buying patterns.

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, increased 13% and 6% in the second quarter and first six
months of 2022, respectively, largely due to higher pricing and demand in the
U.S.

Worldwide sales of M­M­R II (Measles, Mumps and Rubella Virus Vaccine Live), a
vaccine to help protect against measles, mumps and rubella, grew 17% and 23% in
the second quarter and first six months of 2022, respectively, primarily due to
higher demand and pricing in the U.S., as well as higher demand in Latin
America.

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help
prevent chickenpox (varicella), grew 9% and 5% in the second quarter and first
six months of 2022, respectively, primarily attributable to higher pricing and
demand in the U.S.

Global sales of RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine
to help protect against rotavirus gastroenteritis in infants and children,
declined 17% in the second quarter of 2022 primarily due to lower demand in
China and public sector buying patterns in the U.S. Global sales of RotaTeq grew
6% in the first six months of 2022 due to public sector buying patterns in the
U.S., partially offset by lower demand in China.

Worldwide sales of Pneumovax 23 (pneumococcal vaccine polyvalent), a vaccine to help prevent pneumococcal disease, grew 1% in the first six months of 2022 primarily reflecting higher demand in the U.S. and Latin America that was largely offset by lower demand in Europe.



In June 2022, the FDA approved an expanded indication for Vaxneuvance
(Pneumococcal 15-valent Conjugate Vaccine) to include use in infants and
children. Vaxneuvance is now indicated for the prevention of invasive disease
caused by Streptococcus pneumoniae serotypes 1, 3, 4, 5, 6A, 6B, 7F, 9V, 14,
18C, 19A, 19F, 22F, 23F and 33F in individuals 6 weeks of age and older. The
FDA's approval was based on data from seven randomized, double-blind clinical
studies assessing safety, tolerability and immunogenicity of Vaxneuvance in
infants and children. Vaxneuvance was previously approved by the FDA in 2021 for
use in adults 18 years of age and older. Also in June 2022, the U.S. Centers for
Disease Control and Prevention's (CDC's) Advisory Committee on Immunization
Practices (ACIP) unanimously voted to include Vaxneuvance as a recommended
option for vaccination in infants and children, including routine use in
children under 2 years of age. This provisional recommendation will be reviewed
by the director of the CDC and the Department of Health and Human Services, and
final recommendations will become official when published in the CDC's Morbidity
and Mortality Weekly Report (MMWR). The ACIP also unanimously voted to include
Vaxneuvance in the Vaccines for Children program.

Hospital Acute Care

                                                                                          % Change                                                                          % Change
                                    Three Months Ended                                    Excluding                  Six Months Ended                                       Excluding
                                         June 30,                                          Foreign                       June 30,                                            Foreign
($ in millions)                    2022              2021            % Change             Exchange                 2022                2021       

    % Change             Exchange
Bridion                        $      426          $ 387                   10  %                 15  %       $     821               $ 727                   13  %                 17  %
Zerbaxa                                46             (1)                      *                     *              76                  (9)                      *                     *


*Calculation not meaningful.

Worldwide sales of Bridion, for the reversal of two types of neuromuscular
blocking agents used during surgery, grew 10% and 13% in the second quarter and
first six months of 2022, respectively, due to higher demand globally,
particularly in the U.S. and Europe, largely attributable to Bridion's growing
share among neuromuscular blockade reversal agents and an increase in surgical
procedures.

In December 2020, the Company temporarily suspended sales of Zerbaxa
(ceftolozane and tazobactam), a combination antibacterial and beta-lactamase
inhibitor for the treatment of certain bacterial infections, and subsequently
issued a product recall, following the identification of product sterility
issues. A phased resupply for Zerbaxa was initiated in the fourth quarter of
2021 and is being expanded to additional markets during 2022.


                                     - 38 -
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Cardiovascular

                                                                                          % Change                                                                          % Change
                                    Three Months Ended                                    Excluding                  Six Months Ended                                       Excluding
                                         June 30,                                          Foreign                       June 30,                                            Foreign
($ in millions)                    2022              2021            % Change             Exchange                 2022                2021            % Change             Exchange
Alliance Revenue -
Adempas/Verquvo (1)            $       98          $  74                   33  %                 33  %       $     170               $ 149                   14  %                 15  %
Adempas                                63             74                  (14) %                 (5) %             124                 129                   (4) %                  6  %

(1) Alliance revenue 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 4 to the condensed consolidated financial statements).



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 4 to the condensed consolidated financial
statements). Adempas is approved for the treatment of certain types of pulmonary
arterial hypertension. Verquvo was approved in the U.S. in January 2021 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. Verquvo was also approved in Japan in June 2021 and in the EU in July
2021. Alliance revenue from the collaboration grew 33% and 14% in the second
quarter and first six months of 2022, respectively. Revenue also includes sales
of Adempas and Verquvo in Merck's marketing territories.

Virology

                                                                                                    % Change                                                                              % Change
                                            Three Months Ended                                      Excluding                    Six Months Ended                                         Excluding
                                                 June 30,                                            Foreign                         June 30,                                              Foreign
($ in millions)                            2022               2021             % Change             Exchange                   2022                 2021             % Change             Exchange
Lagevrio                             $       1,177          $    -                       -                     -       $      4,424               $    -                       -                     -
Isentress/Isentress HD                         147             192                  (24) %                (19) %                305                  401                  (24) %                (20) %


Lagevrio is an investigational oral antiviral COVID-19 medicine being developed
in a collaboration with Ridgeback (see Note 4 to the condensed consolidated
financial statements). Lagevrio has received multiple authorizations or
approvals worldwide. Sales of Lagevrio were $1.2 billion in the second quarter
of 2022 primarily consisting of sales in Japan and the United Kingdom (UK).
Merck's initial supply commitment of Lagevrio to the U.S. was fulfilled in the
first quarter of 2022; therefore, there were no sales of Lagevrio in the U.S. in
the second quarter of 2022. Sales of Lagevrio were $4.4 billion in the first six
months of 2022 primarily consisting of sales in the U.S., the UK, Japan and
Australia. Merck has entered into advance purchase and supply agreements for
Lagevrio in nearly 40 markets. The Company expects full-year 2022 Lagevrio sales
to be between $5.0 billion to $5.5 billion.

Global combined sales of Isentress/Isentress HD, an HIV integrase inhibitor for
use in combination with other antiretroviral agents for the treatment of HIV-1
infection, declined 24% in both the second quarter and first six months of 2022
due to lower global demand, reflecting in part competitive pressure in Europe
and the U.S. The Company expects competitive pressure for Isentress/Isentress HD
to continue.

Diabetes

                                                                                               % Change                                                                       % Change
                                      Three Months Ended                                       Excluding                Six Months Ended                                      Excluding
                                           June 30,                                             Foreign                     June 30,                                           Foreign
($ in millions)                      2022                2021             % Change             Exchange               2022              2021             % Change             Exchange
Januvia/Janumet                $    1,233             $ 1,261                   (2) %                  3  %       $   2,466          $ 2,556                   (4) %                  1  %


Worldwide combined sales of Januvia and Janumet, medicines that help lower blood
sugar levels in adults with type 2 diabetes, declined 2% and 4% in the second
quarter and first six months of 2022, respectively, primarily reflecting the
unfavorable effect of foreign exchange, lower demand in the U.S. and lower
pricing in certain international markets. The declines were partially offset by
higher demand in China and Latin America, as well as the impact of a prior year
unfavorable adjustment to rebate reserves in the U.S. The Company anticipates
U.S. pricing pressure will unfavorably affect sales of Januvia and Janumet in
future periods. Januvia and Janumet lost market exclusivity with respect to the
compound patent in China in July 2022, although not with respect to the salt
formulation patent, which extends until June 2024. In addition, the Company will
lose market exclusivity in the EU in September 2022 and in the U.S. in January
2023. The Company anticipates sales of Januvia and Janumet in these markets will
decline substantially following the loss of exclusivity. Combined sales of
Januvia and Janumet in China, Europe and the U.S. represented 10%, 22% and 32%,
respectively, of total combined Januvia and Janumet sales for the first six
months of 2022.


                                     - 39 -
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Animal Health Segment

                                                                                           % Change                                                                       % Change
                                     Three Months Ended                                    Excluding                Six Months Ended                                      Excluding
                                          June 30,                                          Foreign                     June 30,                                           Foreign
($ in millions)                     2022              2021            % Change             Exchange               2022              2021           

 % Change             Exchange
Livestock                       $      826          $ 821                    1  %                  6  %       $   1,658          $ 1,640                    1  %                  7  %
Companion Animal                       641            651                   (2) %                  3  %           1,291            1,250                    3  %                  7  %


Sales of livestock products grew 1% in both the second quarter and first six
months of 2022 primarily due to higher demand globally for ruminant and poultry
products. Sales of companion animal products declined 2% in the second quarter
of 2022 and grew 3% in first six months of 2022. Excluding the unfavorable
effect of foreign exchange in both periods, companion animal sales performance
primarily reflects higher demand for the Bravecto (fluralaner) line of products.
Sales of the Bravecto line of products represented approximately 20% of animal
health sales in the first six months of 2022.

Costs, Expenses and Other



                                                  Three Months Ended                                         Six Months Ended
                                                       June 30,                                                  June 30,
($ in millions)                                  2022               2021             % Change             2022              2021              % Change
Cost of sales                               $     4,216          $ 3,104                   36  %       $  9,596          $  6,303                   52  %
Selling, general and administrative               2,512            2,281                   10  %          4,834             4,468                    8  %
Research and development                          2,798            4,321                  (35) %          5,374             6,732                  (20) %
Restructuring costs                                 142               82                   73  %            194               380                  (49) %
Other (income) expense, net                         438             (103)                      *          1,148              (558)                      *
                                            $    10,106          $ 9,685                    4  %       $ 21,146          $ 17,325                   22  %


*Calculation not meaningful.

Cost of Sales
Cost of sales increased 36% and 52% in the second quarter and first six months
of 2022, respectively. Cost of sales includes $622 million and $2.3 billion in
the second quarter and first six months of 2022 related to the collaboration
with Ridgeback for Lagevrio (see Note 4 to the condensed consolidated financial
statements). Cost of sales also includes the amortization of intangible assets
recorded in connection with acquisitions, collaborations and licensing
arrangements, which totaled $447 million and $342 million in the second quarter
of 2022 and 2021, respectively, and $1.1 billion and $837 million in the first
six months of 2022 and 2021, respectively. Amortization expense in the first six
months of 2022 and 2021 includes $250 million and $153 million, respectively, of
cumulative catch-up amortization related to Merck's collaborations with
AstraZeneca and Bayer, respectively, (see Note 4 to the condensed consolidated
financial statements). Additionally, costs in the second quarter and first six
months of 2021 include charges of $37 million and $225 million, respectively,
related to the discontinuation of COVID-19 development programs. Also included
in cost of sales are expenses associated with restructuring activities which
amounted to $67 million and $38 million in the second quarter of 2022 and 2021,
respectively, and $113 million and $65 million in the first six months of 2022
and 2021, respectively, including accelerated depreciation and asset write-offs
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 71.1% in the second quarter of 2022 compared with 72.8% in the
second quarter of 2021. Gross margin was 68.5% in the first six months of 2022
compared with 71.4% in the first six months of 2021. The gross margin declines
reflect the impact of Lagevrio (which has a lower gross margin due to profit
sharing with Ridgeback as discussed in Note 4 to the condensed consolidation
financial statements), as well as higher inventory write-offs, manufacturing
costs and amortization of intangible assets (noted above). The gross margin
declines in 2022 were partially offset by the favorable effects of product mix,
charges in 2021 related to the discontinuation of COVID-19 development programs
and foreign exchange.

Selling, General and Administrative



Selling, general and administrative (SG&A) expenses increased 10% and 8% in the
second quarter and first six months of 2022, respectively, primarily due to
higher promotional, selling and administrative costs, including compensation and
benefits, as well as higher acquisition-related costs and restructuring costs,
partially offset by the favorable effect of foreign exchange. SG&A expenses in
the second quarter and first six months of 2022 include restructuring costs of
$27 million and $48 million, respectively, related primarily to accelerated
depreciation for facilities to be closed or divested.


                                     - 40 -
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Research and Development



Research and development (R&D) expenses decreased 35% and 20% in the second
quarter and first six months of 2022, respectively, primarily due to a $1.7
billion charge in the prior year periods related to the acquisition of Pandion
Therapeutics, Inc. (Pandion). The declines were partially offset by higher
clinical development spending, higher compensation and benefit costs, as well as
increased investments in technology in support of the digital enablement of
Merck's research operations, partially offset by the favorable effect of foreign
exchange.

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 $1.9 billion and $1.8 billion for
the second quarter of 2022 and 2021, respectively, and were $3.7 billion and
$3.5 billion for the first six months of 2022 and 2021, respectively. Also
included in R&D expenses are Animal Health research costs, licensing costs and
costs incurred by other divisions in support of R&D activities, including
depreciation, production and general and administrative, which in the aggregate
were approximately $880 million and $750 million for the second quarter of 2022
and 2021, respectively, and $1.6 billion and $1.4 billion for the first six
months of 2022 and 2021, respectively. Additionally, R&D expenses in the second
quarter and first six months of 2021 include $1.8 billion of charges for
acquisitions, including $1.7 billion for the acquisition of Pandion as noted
above.

Restructuring Costs

In 2019, Merck approved a global restructuring program (Restructuring Program)
as part of a worldwide initiative focused on further optimizing the Company's
manufacturing and supply network, as well as reducing its global real estate
footprint. This program is a continuation of the Company's plant rationalization
and builds on prior restructuring programs. The actions currently contemplated
under the Restructuring Program are expected to be substantially completed by
the end of 2023, with the cumulative pretax costs to be incurred by the Company
to implement the program estimated to be approximately $3.5 billion. Merck
expects to record charges of approximately $550 million for the full year of
2022 related to the Restructuring Program. The Company anticipates the actions
under the Restructuring Program will result in annual net cost savings of
approximately $900 million by the end of 2023.

Restructuring costs, primarily representing separation and other related costs
associated with these restructuring activities, were $142 million and $82
million for the second quarter of 2022 and 2021, respectively, and $194 million
and $380 million for the first six months of 2022 and 2021, respectively.
Separation costs incurred were associated with actual headcount reductions, as
well as estimated expenses under existing severance programs for headcount
reductions that were probable and could be reasonably estimated. Also included
in restructuring costs are asset abandonment, 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
$258 million and $128 million in the second quarter of 2022 and 2021,
respectively, and $384 million and $462 million for the first six months of 2022
and 2021, respectively, related to restructuring program activities (see Note 5
to the condensed consolidated financial statements).

Other (Income) Expense, Net



Other (income) expense, net, was $438 million of expense in the second quarter
of 2022 compared with $103 million of income in the second quarter of 2021.
Other (income) expense, net, was $1.1 billion of expense for the first six
months of 2022 compared with $558 million of income for the first six months of
2021. The change in both periods is primarily due to net unrealized losses from
investments in equity securities recorded in the second quarter and first six
months of 2022 compared with net unrealized gains from investments in equity
securities recorded in the second quarter and first six months of 2021. Other
(income) expense, net, in the second quarter and first six months of 2022 also
reflect higher pension settlement costs compared with the same periods of 2021.

For details on the components of Other (income) expense, net, see Note 11 to the condensed consolidated financial statements.


                                     - 41 -
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Segment Profits
                                                           Three Months Ended                     Six Months Ended
                                                                June 30,                              June 30,
($ in millions)                                           2022                2021             2022              2021
Pharmaceutical segment profits                      $    9,173             $ 7,257          $ 18,673          $ 13,845
Animal Health segment profits                              571                 552             1,156             1,124
Other                                                   (5,257)             (6,092)          (10,481)          (10,265)
Income from Continuing Operations Before Taxes      $    4,487

$ 1,717 $ 9,348 $ 4,704




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, 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 "Other" in the above table. Also included in "Other" are
miscellaneous corporate profits (losses), as well as operating profits (losses)
related to third-party manufacturing sales.

Pharmaceutical segment profits increased 26% and 35% in the second quarter and
first six months of 2022, respectively, reflecting higher sales, partially
offset by higher promotional and administrative costs and the unfavorable effect
of foreign exchange. Animal Health segment profits grew 3% in the second quarter
of 2022 reflecting favorable product mix and lower R&D costs, partially offset
by higher selling and administrative costs and the unfavorable effect of foreign
exchange. Animal Health segment profits grew 3% in the first six months of 2022
reflecting higher sales, partially offset by higher selling and administrative
costs and the unfavorable effect of foreign exchange.

Taxes on Income



The effective income tax rates from continuing operations were 12.0% and 29.3%
for the second quarter of 2022 and 2021, respectively, and 11.7% and 15.8% for
the first six months of 2022 and 2021, respectively. The effective income tax
rates from continuing operations reflect the beneficial impact of foreign
earnings. Additionally, the effective income tax rates from continuing
operations in the second quarter and first six months of 2021 reflect the
unfavorable effect of a charge for the acquisition of Pandion for which no tax
benefit was recognized. The effective income tax rate from continuing operations
for the first six months of 2021 also reflects a net tax benefit of $207 million
related to the settlement of certain federal income tax matters as discussed
below.

In the first quarter of 2021, the Internal Revenue Service (IRS) concluded its
examinations of Merck's 2015-2016 U.S. federal income tax returns. As a result,
the Company was required to make a payment of $190 million (of which
$172 million related to continuing operations and $18 million related to
discontinued operations). The Company's reserves for unrecognized tax benefits
for the years under examination exceeded the adjustments relating to this
examination period and therefore the Company recorded a $236 million net tax
benefit in the first six months of 2021 (of which $207 million related to
continuing operations and $29 million related to discontinued operations). This
net benefit reflects reductions in reserves for unrecognized tax benefits and
other related liabilities for tax positions relating to the years that were
under examination.

Non-GAAP Income and Non-GAAP EPS from Continuing Operations



Non-GAAP income and non-GAAP 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
                                     - 42 -
--------------------------------------------------------------------------------

and to measure the performance of the Company along with other metrics. In
addition, senior management's annual 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).

In 2022, the Company changed the treatment of certain items for purposes of its
non-GAAP reporting. Historically, Merck's non-GAAP results excluded expenses for
upfront and milestone payments related to collaborations and licensing
agreements, as well as charges related to pre-approval assets obtained in
transactions accounted for as asset acquisitions, to the extent the charges were
considered by the Company to be significant to the results of a particular
period (as well as any related adjustments recorded in a subsequent period).
Beginning in 2022, Merck's non-GAAP results will no longer exclude charges
related to these items. Prior periods have been recast to conform to the current
presentation.

A reconciliation between GAAP financial measures and non-GAAP financial measures (from continuing operations) is as follows:



                                                                       Three Months Ended                     Six Months Ended
                                                                            June 30,                              June 30,
($ in millions except per share amounts)                              2022                2021              2022              2021

Income from continuing operations before taxes as reported under GAAP

$    4,487             $ 1,717          $   9,348          $ 4,704
Increase (decrease) for excluded items:
Acquisition and divestiture-related costs                              530                 503              1,168            1,000
Restructuring costs                                                    258                 128                384              462
Loss (income) from investments in equity securities, net               234                (258)               918             (819)

Other items: Charges for the discontinuation of COVID-19 development programs

                                                                 -                  37                  -              225
Non-GAAP income from continuing operations before taxes              5,509               2,127             11,818            5,572

Taxes on income from continuing operations as reported under GAAP

                                                                   538                 503              1,092              741
Estimated tax benefit on excluded items (1)                            223                  65                552              113

Net tax (expense) benefit from the settlement of certain federal income tax matters

                                               -                  (1)                 -              207
Non-GAAP taxes on income from continuing operations                    761                 567              1,644            1,061
Non-GAAP net income from continuing operations                       4,748               1,560             10,174            4,511

Less: Net income attributable to noncontrolling interests as reported under GAAP

                                                      5                   1                  2                5

Non-GAAP net income from continuing operations attributable to Merck & Co., Inc.

$    4,743             $ 1,559          $  10,172          $ 4,506

EPS assuming dilution from continuing operations as reported under GAAP

$     1.55             $  0.48          $    3.25          $  1.56
EPS difference                                                        0.32                0.13               0.76             0.21

Non-GAAP EPS assuming dilution from continuing operations $ 1.87

            $  0.61          $    4.01          $  1.77

(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.

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 and amortization of purchase
accounting adjustments to inventories, 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 of businesses. 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 5 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 abandonment, 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.


                                     - 43 -
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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 consist of items that are
unusual in nature, significant to the results of a particular period or not
indicative of future operating results. Excluded from non-GAAP income and
non-GAAP EPS in 2021 are charges related to the discontinuation of COVID-19
development programs (see Note 3 to the condensed consolidated financial
statements) and a net tax benefit related to the settlement of certain federal
income tax matters (see Note 12 to the condensed consolidated financial
statements).

Research and Development Update

The Company currently has several candidates under regulatory review in the U.S. and internationally.



MK-4482, Lagevrio, is an investigational oral antiviral medicine for the
treatment of mild to moderate COVID-19 in adults who are at risk for progressing
to severe disease. Merck is developing Lagevrio in collaboration with Ridgeback.
The FDA granted Emergency Use Authorization for Lagevrio in December 2021; as
updated in February 2022, to authorize Lagevrio for the treatment of mild to
moderate COVID-19 in adults with positive results of direct SARS-CoV-2 viral
testing, and who are at high risk for progression to severe COVID-19, including
hospitalization or death, and for whom alternative COVID-19 treatment options
approved or authorized by the FDA are not accessible or clinically appropriate.
The authorization is based on the Phase 3 MOVe-OUT trial. Lagevrio is not
approved for any use in the U.S. and is authorized only for the duration of the
declaration that circumstances exist justifying the authorization of its
emergency use under the Food, Drug and Cosmetic Act, unless the authorization is
terminated or revoked sooner. Lagevrio has also received Conditional Marketing
Authorization in the UK and Special Approval for Emergency in Japan. In November
2021, the European Medicines Agency (EMA) issued a positive scientific opinion
for Lagevrio, which is intended to support national decision-making on the
possible use of Lagevrio prior to marketing authorization. In October 2021, the
EMA initiated a rolling review for Lagevrio for the treatment of COVID-19 in
adults. Merck plans to work with the Committee for Medicinal Products for Human
Use (CHMP) of the EMA to complete the rolling review process to facilitate
initiating the formal review of the Marketing Authorization Application.
Applications to other regulatory bodies are underway. Lagevrio is also being
evaluated for post-exposure prophylaxis in the Phase 3 MOVe-AHEAD trial, which
is evaluating the efficacy and safety of Lagevrio for the prevention of COVID-19
in adults who reside with a person with COVID-19.

MK-7264, gefapixant, is an investigational, orally administered, selective P2X3
receptor antagonist, for the treatment of refractory chronic cough or
unexplained chronic cough in adults under review by the FDA and EMA. The
marketing applications for gefapixant are based on results from the COUGH-1 and
COUGH-2 clinical trials. In January 2022, the FDA issued a Complete Response
Letter (CRL) regarding Merck's New Drug Application for gefapixant. In the CRL,
the FDA requested additional information related to the cough counting system
that was used to assess efficacy. The CRL was not related to the safety of
gefapixant. The Company is performing additional analyses and anticipates
submitting this information to the FDA in the first half of 2023 in response to
the CRL. The review period in the EU has been extended pending the receipt of
additional information from the Company. The Company plans to submit the
information to the EMA in the first half of 2023.

V114, (Pneumococcal 15-valent Conjugate Vaccine), is an investigational
15-valent pneumococcal conjugate vaccine under review in Japan for use in both
adults and pediatric patients. V114 is also under review in the EU for pediatric
patients. V114, Vaxneuvance, was approved by the EC in 2021 for use in
individuals 18 years of age and older.

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
approvals were the result of a broad clinical development program that currently
consists of more than 1,750 clinical trials, including more than 1,300 trials
that combine Keytruda with other cancer treatments. These studies encompass more
than 30 cancer types including: biliary, estrogen receptor positive breast
cancer, cervical, colorectal, cutaneous squamous cell, endometrial, esophageal,
gastric, glioblastoma, head and neck, hepatocellular, Hodgkin lymphoma,
non-Hodgkin lymphoma, non-small-cell lung, small-cell lung, melanoma,
mesothelioma, ovarian, prostate, renal, triple-negative breast, and urothelial,
many of which are currently in Phase 3 clinical development. Further trials are
being planned for other cancers.

Keytruda is under review by the FDA for the treatment of patients with
previously treated advanced HCC. This submission is based on data from the Phase
3 KEYNOTE-394 trial along with supportive data from the KEYNOTE-240 and
KEYNOTE-224 trials. Keytruda is approved for this indication in the U.S. under
the FDA's accelerated approval process. This submission is to convert the
accelerated approval to full (regular) approval.
                                     - 44 -
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Keytruda is also under review by the FDA for the adjuvant treatment of patients
with stage IB (?4 centimeters), II or IIIA NSCLC following complete surgical
resection. The supplemental BLA is based on data from the pivotal Phase 3
KEYNOTE-091 trial, also known as EORTC-1416-LCG/ETOP-8-15 - PEARLS. The FDA set
a Prescription Drug User Fee Act date of January 29, 2023, however, further data
may be provided during the review process that may delay this date. Keytruda is
also under review for this indication in the EU.

Keytruda is under review in Japan in combination with chemotherapy as
neoadjuvant treatment, and then continued as monotherapy as adjuvant treatment
after surgery for adults with locally advanced, or early-stage TNBC at high risk
of recurrence based on results from the Phase 3 KEYNOTE-522 trial.

Keytruda is also under review in Japan in combination with chemotherapy, with or
without bevacizumab, for the treatment of persistent, recurrent or metastatic
cervical cancer in adults whose tumors express PD-L1 based on results from the
Phase 3 KEYNOTE-826 trial.

Additionally, Keytruda is under review in Japan for the adjuvant treatment of patients with RCC at intermediate-high or high risk of recurrence following nephrectomy (surgical removal of a kidney) based on data from the Phase 3 KEYNOTE-564 trial.



In July 2022, Merck announced that the Phase 3 KEYNOTE-412 trial evaluating
Keytruda with concurrent chemoradiation therapy (CRT) followed by Keytruda as
maintenance therapy (the Keytruda regimen), did not meet its primary endpoint of
event-free survival for the treatment of patients with unresected locally
advanced HNSCC. At the final analysis of the study, there was an improvement in
event-free survival for patients who received the Keytruda regimen compared to
placebo plus CRT; however, these results did not meet statistical significance
per the pre-specified statistical plan. Results will be presented at an upcoming
medical meeting.

In August 2022, Merck announced that the Phase 3 KEYNOTE-921 trial evaluating
Keytruda in combination with chemotherapy (docetaxel) compared to chemotherapy
alone did not meet its dual primary endpoints of overall survival and
radiographic progression-free survival for the treatment of patients with
metastatic castration-resistant prostate cancer. In the study, there were modest
trends toward an improvement in both overall survival and radiographic
progression-free survival for patients who received Keytruda plus chemotherapy
compared with chemotherapy alone; however, these results did not meet
statistical significance per the pre-specified statistical plan. Results will be
presented at an upcoming medical meeting.

MK-7339, Lynparza, is an oral PARP inhibitor currently approved for certain types of advanced ovarian, breast, pancreatic and prostate cancers being co-developed for multiple cancer types as part of a collaboration with AstraZeneca.



Lynparza is under review in Japan for the adjuvant treatment of patients with
gBRCAm, HER2-negative high-risk early breast cancer who have been treated with
neoadjuvant or adjuvant chemotherapy. Additionally, Lynparza is under review in
the EU and Japan for the treatment of certain patients with metastatic
castration-resistant prostate cancer based on the PROpel clinical trial.

In March 2022, Merck announced that it would stop the Phase 3 KEYLYNK-010 trial
investigating Keytruda in combination with Lynparza for the treatment of
patients with metastatic castration-resistant prostate cancer who progressed
after treatment with chemotherapy and either abiraterone acetate or
enzalutamide. Merck has discontinued the study following the recommendation of
an independent Data Monitoring Committee (DMC) after the DMC reviewed data from
a planned interim analysis. At the interim analysis, the combination of Keytruda
and Lynparza did not demonstrate a benefit in overall survival, one of the
study's dual primary endpoints, compared to the control arm of either
abiraterone acetate or enzalutamide. The trial's other dual primary endpoint,
radiographic progression free survival, was evaluated at an earlier interim
analysis and did not demonstrate improvement compared to the control arm. Data
from this study will be presented at an upcoming scientific congress.

In July 2022, Merck announced it will stop the Phase 3 LYNK-003 trial
investigating Lynparza with or without bevacizumab for the treatment of patients
with unresectable or metastatic colorectal cancer who have not progressed
following first-line induction. This action follows the recommendation of an
independent DMC, after the DMC reviewed the data from a planned interim
analysis. At the pre-specified interim analysis for progression-free survival,
the efficacy of Lynparza as a monotherapy and in combination with bevacizumab
relative to control met the criteria for futility by the DMC and accordingly,
both experimental arms will be discontinued. Data from this study will be shared
in a future scientific forum.

MK-7902, Lenvima, is an oral receptor tyrosine kinase inhibitor being developed
as part of a collaboration with Eisai. Merck and Eisai are studying the Keytruda
plus Lenvima combination through the LEAP (LEnvatinib And Pembrolizumab)
clinical program.

In August 2022, Merck and Eisai announced that the Phase 3 LEAP-002 trial
investigating Keytruda plus Lenvima versus Lenvima monotherapy did not meet its
dual primary endpoints of overall survival and progression-free survival as a
first-line treatment for patients with unresectable hepatocellular carcinoma
(uHCC). There were trends toward improvement in overall survival and
progression-free survival for patients who received Keytruda plus Lenvima versus
Lenvima monotherapy;
                                     - 45 -
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however, these results did not meet statistical significance per the
pre-specified statistical plan. The median overall survival of the Lenvima
monotherapy arm in LEAP-002 was longer than that observed in previously reported
clinical trials evaluating Lenvima monotherapy in uHCC. Merck and Eisai plan to
present these data at an upcoming medical conference.

In June 2022, Merck announced the presentation of positive results from a Phase
1/2 study evaluating the safety, tolerability and immunogenicity of V116, the
Company's investigational 21-valent pneumococcal conjugate vaccine (PCV), in
pneumococcal vaccine-naïve adults 18-49 years of age (Phase 1) and 50 years of
age and older (Phase 2). In both populations, V116 met the primary
immunogenicity objectives and was well-tolerated with an overall safety profile
generally comparable to Pneumovax 23 (Pneumococcal Vaccine Polyvalent) across
age groups. In April 2022, Merck announced that V116 received Breakthrough
Therapy Designation from the FDA for the prevention of invasive pneumococcal
disease and pneumococcal pneumonia caused by Streptococcus pneumoniae serotypes
3, 6A/C, 7F, 8, 9N, 10A, 11A, 12F, 15A, 15B/C, 16F, 17F, 19A, 20, 22F, 23A, 23B,
24F, 31, 33F, 35B in adults 18 years of age and older. The Breakthrough Therapy
Designation is an FDA program designed to expedite the development and review of
products intended for serious or life-threatening conditions. To qualify for
this designation, preliminary clinical evidence must indicate that the product
may demonstrate substantial improvement over currently available options on at
least one clinically significant endpoint. Enrollment in the Phase 3 STRIDE-3
trial evaluating V116 in vaccine-naive adults has begun.

The charts below reflect the Company's research pipeline as of August 2, 2022.
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 additional claims, line extensions or formulations for in-line
products are not shown.

                                                                      Phase 2
Cancer                                               Cancer                                            Cancer
MK-0482(3)                                           MK-6440 (ladiratuzumab vedotin)(1)(3)             MK-7902 Lenvima(1)(2)
   Non-Small-Cell Lung                               Breast                                            Biliary
MK-1026 (nemtabrutinib)                              Esophageal                                        Glioblastoma
   Hematological Malignancies                        Gastric                                           Pancreatic
MK-1200                                              Head and Neck                                     Prostate
Neoplasm Malignant                                   Melanoma                                          Small-Cell Lung
MK-1308 (quavonlimab)(2)                             Non-Small-Cell Lung                               V937
Non-Small-Cell Lung                                  Prostate                                          Breast
MK-1308A (quavonlimab+pembrolizumab)                 Small-Cell Lung                                   Cutaneous Squamous Cell
Advanced Solid Tumors                                MK-6482 Welireg(3)                                Head and Neck
Colorectal                                           Biliary                                           Melanoma
Hepatocellular                                       Colorectal                                        Solid Tumors
Melanoma                                             Hepatocellular                                    Cardiovascular
Small-Cell Lung                                      Pancreatic                                        MK-2060
MK-2140 (zilovertamab vedotin)                       Rare cancers                                      Chikungunya Virus Vaccine
Breast                                               Von Hippel-Lindau Disease-Associated Tumors (EU)  V184
Gastric                                              MK-7119 Tukysa(1)                                 HIV-1 Infection
Hematological Malignancies                           Advanced Solid Tumors                             MK-8591B (islatravir+MK-8507)(4)
Non-Small-Cell Lung                                  Biliary                                           MK-8591D (islatravir+lenacapavir)(1)(4)
Ovarian                                              Bladder                                           Hypercholesterolemia
Pancreatic                                           Cervical                                          MK-0616
Solid Tumors                                         Colorectal                                        Nonalcoholic Steatohepatitis (NASH)
MK-2870(1)(3)                                        Endometrial                                       MK-3655
Neoplasm Malignant                                   Gastric                                           MK-6024
MK-3475 Keytruda                                     Non-Small-Cell Lung                               Overgrowth Syndrome
Advanced Solid Tumors                                MK-7339 Lynparza(1)(3)                            MK-7075 (miransertib)
MK-4280 (favezelimab)(2)                             Advanced Solid Tumors                             Pulmonary Arterial Hypertension
   Hematological Malignancies                        MK-7684 (vibostolimab)(2)                         MK-5475
   Non-Small-Cell Lung                               Melanoma                                          Schizophrenia
MK-4280A (favezelimab+pembrolizumab)                 MK-7684A (vibostolimab+pembrolizumab)             MK-8189
   Renal Cell                                        Biliary                                           Treatment Resistant Depression
   Small-Cell Lung                                   Breast                                            MK-1942
MK-4830(2)                                           Cervical
    Colorectal                                       Colorectal
   Melanoma                                          Endometrial
Non-Small-Cell Lung                                  Esophageal
Renal Cell                                           Head and Neck
   Small-Cell Lung                                   Hematological Malignancies
MK-5684(1)                                           Hepatocellular
Neoplasm Malignant                                   Prostate
MK-5890(3)
   Non-Small-Cell Lung
   Small-Cell Lung


                                     - 46 -

--------------------------------------------------------------------------------

          Phase 3 (Phase 3 entry date)                                            Under Review
Antiviral COVID-19                                New Molecular 

Entities/Vaccines Certain Supplemental Filings

MK-4482 Lagevrio (U.S.) (May 2021)(1)(5) Antiviral COVID-19

Cancer


Cancer                                            MK-4482 Lagevrio (EU)(1)           MK-3475 Keytruda
MK-1308A (quavonlimab+pembrolizumab)              Cough                              • Second-Line Hepatocellular Cancer
Renal Cell (April 2021)                           MK-7264 (gefapixant) (U.S.)(6)     (KEYNOTE-394) (U.S.)
MK-3475 Keytruda                                  (EU)                               • Adjuvent Non-Small-Cell Lung Cancer
Biliary (September 2019)                          Pneumococcal Vaccine               (KEYNOTE-091) (U.S.) (EU)
Cutaneous Squamous Cell (August 2019) (EU)        Adult/Pediatric           

• High-Risk Early-Stage Triple-Negative Gastric (May 2015) (EU)

                           V114 (JPN)                         Breast Cancer
Hepatocellular (May 2016) (EU)                                                       (KEYNOTE-522) (JPN)
Mesothelioma (May 2018)                                                              • Cervical Cancer (KEYNOTE-826) (JPN)
Ovarian (December 2018)                                                              • Adjuvent Renal Cell Cancer
Prostate (May 2019)                                                                  (KEYNOTE-564) (JPN)
Small-Cell Lung (May 2017)
MK-3475 (pembrolizumab subcutaneous)                                                 MK-7339 Lynparza(1)
Non-Small-Cell Lung (August 2021)                                                    • BRCA-Mutated HER2-Negative Adjuvant
MK-4280A (favezelimab+pembrolizumab)                                        

Breast


Colorectal (November 2021)                                                           Cancer (OlympiA) (JPN)
MK-6482 Welireg(3)                                                          

• First-Line Metastatic Prostate Cancer Renal Cell (February 2020)

                                                           (PROpel) (EU) (JPN)
MK-7119 Tukysa(1)
Breast (October 2019)                                                                MK-7902 Lenvima(1)(2)
MK-7339 Lynparza(1)(3)                                                               • First-Line Metastatic Hepatocellular
Non-Small-Cell Lung (June 2019)                                             

Carcinoma


Small-Cell Lung (December 2020)                                                           (KEYNOTE-524) (U.S.)(7)
MK-7684A (vibostolimab+pembrolizumab)
Non-Small-Cell Lung (April 2021)
Small-Cell Lung (March 2022)
MK-7902 Lenvima(1)(2)
Colorectal (April 2021)
Esophageal (July 2021)
Gastric (December 2020)
Head and Neck (February 2020)
Melanoma (March 2019)                             Footnotes:
Non-Small-Cell Lung (March 2019)                  (1) Being developed in a 

collaboration.


HIV-1 Infection                                   (2) Being developed in 

combination with Keytruda.

MK-8591A (doravirine+islatravir) (February (3) Being developed as monotherapy and/or in combination with Keytruda. 2020)(4)

                                          (4) On FDA clinical hold.
HIV-1 Prevention                                  (5) Available in the U.S. under Emergency Use Authorization.
MK-8591 (islatravir) (February 2021)(4)           (6) In response to the CRL received from the FDA for this application in
Pneumococcal Vaccine Adult                        January 2022, Merck is performing additional analyses and anticipates
V116 (July 2022)                                  submitting this information to the FDA in the first half of 2023.
Pulmonary Arterial Hypertension                   (7) In July 2020, the FDA 

issued a CRL for Merck's and Eisai's applications. MK-7962 (sotatercept) (January 2021)

Merck and Eisai intend to submit additional data when available to the FDA.
Respiratory Syncytial Virus
MK-1654 (clesrovimab) (November 2021)



Liquidity and Capital Resources



($ in millions)                               June 30, 2022       December 31, 2021
Cash and investments                         $      10,366       $          8,466
Working capital                                      8,948                  6,394
Total debt to total liabilities and equity            29.6  %               

31.3 %




Cash provided by operating activities of continuing operations was $9.1 billion
in the first six months of 2022 compared with $3.2 billion in the first six
months of 2021 reflecting stronger operating performance, including the impact
of Lagevrio (see Note 4 to the condensed consolidated financial statements).
Cash provided by operating activities of continuing operations in the first six
months of 2022 was reduced by $1.7 billion of milestone payments related to
collaborations compared with $357 million of milestone and option payments
related to collaborations in the first six months of 2021. Cash provided by
operating activities of continuing operations 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 capital expenditures, treasury stock
purchases and dividends paid to shareholders. As a result of the mandatory
change in R&D capitalization rules that are effective for tax years beginning
after December 31, 2021 (related to the Tax Cuts and Jobs Act of 2017), the
Company expects taxes paid in the U.S. to increase significantly for the full
year of 2022.

Cash used in investing activities of continuing operations was $2.3 billion in
the first six months of 2022 compared with $3.3 billion in the first six months
of 2021. The lower use of cash in investing activities was primarily due to
lower cash used for acquisitions, partially offset by higher purchases of
securities and other investments.
                                     - 47 -
--------------------------------------------------------------------------------

Cash used in financing activities of continuing operations was $4.9 billion in
the first six months of 2022 compared with cash provided by financing activities
of continuing operations of $164 million in the first six months of 2021. The
change was primarily due to the cash distribution in 2021 received from Organon
in connection with the spin-off (see Note 2 to the condensed consolidated
financial statements) coupled with net repayments of short-term borrowings in
the prior year period.

Capital expenditures totaled $2.1 billion in both the first six months of 2022 and the first six months of 2021.



The Company has accounts receivable factoring agreements with financial
institutions in certain countries to sell accounts receivable. The Company
factored $1.9 billion and $2.8 billion of accounts receivable at June 30, 2022
and December 31, 2021, 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.

Dividends paid to stockholders were $3.5 billion and $3.3 billion for the first
six months of 2022 and 2021, respectively. In May 2022, the Board of Directors
declared a quarterly dividend of $0.69 per share on the Company's stock for the
third quarter that was paid in July 2022. In July 2022, the Board of Directors
declared a quarterly dividend of $0.69 per share on the Company's stock for the
fourth quarter that will be paid in October 2022.

In February 2022, the Company's $1.25 billion, 2.35% notes matured in accordance
with their terms and were repaid. In January 2021, the Company's $1.15 billion,
3.875% notes matured in accordance with their terms and were repaid.

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. The
Company did not purchase any shares of its common stock during the first six
months of 2022. As of June 30, 2022, the Company's remaining share repurchase
authorization was $5.0 billion.

The Company has a $6.0 billion credit facility that matures in June 2026. 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, 2021 included in Merck's Form 10­K
filed on February 25, 2022. See Note 1 to the condensed consolidated financial
statements for information on the adoption of new accounting standards during
2022. 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 are disclosed 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, 2021.

Recently Issued Accounting Standards

For a discussion of recently issued accounting standards, see Note 1 to the condensed consolidated financial statements.

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