Log in
Log in
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     
Sign up
Or log in with
GoogleGoogle
Twitter Twitter
Facebook Facebook
Apple Apple     

MERCK & CO., INC.

(MRK)
  Report
Delayed Nyse  -  04:03:16 2023-03-30 pm EDT
105.92 USD   +0.95%
03/30PDS Biotechnology Plans Late-Stage Combo Trial in Head, Neck Cancer in Q4
MT
03/30Merck - FDA Converts to Full Approval Indication for KEYTRUDA for Certain Adult and Pediatric Patients with Advanced Microsatellite Instability-High or Mismatch Repair Deficient Solid Tumors
AQ
03/30Merck to Hold First-Quarter 2023 Sales and Earnings Conference Call on April 27
BU
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisionsFunds 
SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

MERCK & CO., INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/03/2022 | 03:38pm EDT

Management

In October 2022, Merck announced that its board of directors unanimously elected
Robert M. Davis, currently Chief Executive Officer and President, to serve as
chairman of the board, effective December 1, 2022. He will succeed Kenneth C.
Frazier, who will retire on November 30, 2022.

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 September 2022, Merck exercised its option to jointly develop and
commercialize personalized cancer vaccine mRNA-4157/V940 pursuant to the terms
of an existing collaboration and license agreement with Moderna, Inc. (Moderna),
which resulted in a $250 million charge in Research and development expenses in
the third quarter and first nine months of 2022. The payment to Moderna was made
in the fourth quarter of 2022. mRNA-4157/V940 is currently being evaluated in
combination with Keytruda (pembrolizumab), Merck's anti-PD-1 therapy, as
adjuvant treatment for patients with high-risk melanoma in a Phase 2 clinical
trial being conducted by Moderna. Under the 2016 agreement, as amended in 2018,
Merck and Moderna will collaborate on development and commercialization and will
share costs and any profits equally under this worldwide collaboration.

In August 2022, Merck and Orna Therapeutics (Orna), a biotechnology company
pioneering a new investigational class of engineered circular RNA (oRNA)
therapies, entered into a collaboration agreement to discover, develop, and
commercialize multiple programs, including vaccines and therapeutics in the
areas of infectious disease and oncology. Under the terms of the agreement,
Merck made an upfront payment to Orna of $150 million, which was recorded in
Research and development expenses in the third quarter and first nine months of
2022. In addition, Orna is eligible to receive future contingent
development-related payments, as well as regulatory and sales-based milestone
payments contingent upon the progress of the multiple vaccine and therapeutic
programs, as well as royalties on any approved products derived from the
collaboration. Merck also invested $100 million in Orna's Series B preferred
shares in the fourth quarter of 2022.

In July 2022, Merck and Orion Corporation (Orion) announced a global
co-development and co-commercialization agreement for Orion's investigational
candidate ODM-208 (MK-5684) and other drugs targeting cytochrome P450 11A1
(CYP11A1), an enzyme important in steroid production. 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 was recorded in Research and development expenses in the
third quarter and first nine months 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 made an upfront payment of $35 million, which was
recorded in Research and development expenses in the third quarter and first
nine months of 2022. Kelun-Biotech is also eligible to receive future contingent
developmental, regulatory and sales-based milestone payments, as well as 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 for advanced solid tumors. Upon option exercise, Merck
made a payment of $30 million, which was recorded in Research and development
expenses in the first nine months 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
developmental and sales-based 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
                                     - 33 -

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

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

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 is donating 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 third quarter and first nine
months of 2022. Combined sales to Russia and Ukraine were approximately 1% of
total Merck consolidated sales for the full year of 2021.

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 war either directly
or indirectly on the Company's business.

COVID-19


Although COVID-19-related disruptions had some negative effects on sales for the
third quarter and first nine 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 $436 million and $4.9 billion in the
third quarter and first nine months of 2022, respectively. In the third quarter
and first nine months of 2021, COVID-19-related disruptions resulted in an
estimated negative impact to Pharmaceutical segment sales of approximately $350
million and $1.3 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
$207 million to Cost of sales in the first nine months of 2021.

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 was recognized as a reduction to Cost of sales over the production
period through September 30, 2022, offsetting the depreciation expense related
to the amounts that were capitalized in connection with the modification of the
manufacturing facilities. Merck and Johnson & Johnson have commenced an
arbitration regarding a dispute concerning two agreements pursuant to which
Merck was supporting the manufacturing and supply of Johnson & Johnson's
SARS-CoV-2/COVID 19 vaccine and vaccine drug product. The amounts included in
the condensed consolidated financial statements for these agreements were
immaterial for the third quarter and first nine months of 2022. Merck does not
believe the outcome of the arbitration will have a material impact on the
Company's financial results.

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 nine 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., Congress recently passed the Inflation
Reduction Act, which makes significant changes to how drugs are covered and paid
for under the Medicare
                                     - 34 -
--------------------------------------------------------------------------------

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, and government price-setting for certain Medicare Part D drugs,
starting in 2026, and Medicare Part B drugs starting in 2028. The Company
anticipates all of these actions and additional actions in the future will
negatively affect sales and profits.

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                Nine Months Ended                                      Excluding
                                        September 30,                                         Foreign                   September 30,                                         Foreign
($ in millions)                    2022               2021              % Change             Exchange               2022              2021              % Change             Exchange
United States                  $    7,322          $  6,276                   17  %                 17  %       $  20,927          $ 16,166                   29  %                 29  %
International                       7,637             6,878                   11  %                 19  %          24,526            19,017                   29  %                 35  %
Total                          $   14,959          $ 13,154                   14  %                 18  %       $  45,453          $ 35,183                   29  %                 32  %

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


Worldwide sales grew 14% to $15.0 billion in the third quarter of 2022 primarily
due to higher sales in the oncology franchise, largely driven by strong growth
of Keytruda (pembrolizumab) and increased alliance revenue from Reblozyl
(luspatercept-aamt) and Lynparza (olaparib), as well as higher sales in the
virology franchise driven by Lagevrio (molnupiravir). Also contributing to
revenue growth in the third quarter of 2022 were 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), as well as higher sales of
hospital acute care products, including Bridion (sugammadex) Injection and
Zerbaxa (ceftolozane and tazobactam). Higher revenue related to third-party
manufacturing arrangements also contributed to revenue growth in the third
quarter of 2022.

Worldwide sales rose 29% to $45.5 billion in the first nine months of 2022.
Revenue growth was attributable in part to higher sales in the virology
franchise driven by Lagevrio. Also contributing to revenue growth in the first
nine months of 2022 were higher sales in the oncology franchise largely driven
by strong growth of Keytruda and increased alliance revenue from Lenvima
(lenvatinib), Reblozyl and Lynparza, as well as higher sales in the vaccines
franchise, primarily attributable to growth of Gardasil and Gardasil 9. Higher
sales of hospital acute care products, including Bridion and Zerbaxa, as well as
higher revenue related to third-party manufacturing arrangements also drove
revenue growth in the first nine months of 2022.

As discussed above, COVID-19-related disruptions had some negative effects on
sales in the third quarter and first nine months of 2022, but to a lesser extent
than in the same periods of 2021 which benefited year-over-year sales growth in
both periods.

Revenue growth in the third quarter and first nine months of 2022 was partially
offset by lower combined sales of diabetes products Januvia (sitagliptin) and
Janumet (sitagliptin and metformin HCl), lower sales of Pneumovax 23
(pneumococcal vaccine polyvalent) and lower sales of virology products
Isentress/Isentress HD (raltegravir). Lower revenue from the receipt of upfront
and milestone payments for out-licensing arrangements also partially offset
sales growth in the third quarter and first nine months of 2022.

See Note 16 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.


                                     - 35 -
--------------------------------------------------------------------------------
Pharmaceutical Segment

Oncology

                                                                                           % Change                                                                        % Change
                                  Three Months Ended                                       Excluding                Nine Months Ended                                      Excluding
                                     September 30,                                          Foreign                   September 30,                                         Foreign
($ in millions)                  2022                2021             % Change             Exchange               2022              2021              % Change             Exchange
Keytruda                   $    5,426             $ 4,534                   20  %                 26  %       $  15,487          $ 12,609                   23  %                 28  %
Alliance Revenue -
Lynparza (1)                      284                 246                   16  %                 23  %             825               721                   14  %                 20  %
Alliance Revenue - Lenvima
(1)                               202                 188                    7  %                 11  %             660               498                   33  %                 36  %
Alliance Revenue -
Reblozyl                           39                   -                       -                     -             124                 -                       -                     -

(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 triple-negative breast cancer (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 metastatic
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 20% and 23% in the third quarter and first nine
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 launches in earlier-stage indications including
in high-risk, early stage 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.

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 (MHLW) 

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

March 2022 who 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 the KEYNOTE-164 and KEYNOTE-158 trials.


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

                   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.

                   Japan MHLW approval in combination with chemotherapy as 

neoadjuvant treatment, and

September 2022 then continued as monotherapy as adjuvant treatment after surgery for patients with

                   hormone receptor-negative and HER2-negative breast 

cancer at high risk of

                   recurrence, based on the KEYNOTE-522 trial.
                   Japan MHLW approval as monotherapy for the adjuvant 

treatment of certain patients

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

                   nephrectomy and resection of metastatic lesions, based 

on the KEYNOTE-564 trial.

                   Japan MHLW approval in combination with chemotherapy, 

with or without bevacizumab,

September 2022 for the treatment of patients with advanced or recurrent cervical cancer with no

                   prior chemotherapy who are not amenable to curative 

treatment, based on the

                   KEYNOTE-826 trial.

September 2022 Japan MHLW approval as monotherapy for the adjuvant treatment of patients with

                   stage IIB or IIC melanoma after complete resection, 

based on the KEYNOTE-716 trial.



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 ovarian, breast, pancreatic and prostate
cancers. Alliance revenue related to Lynparza increased 16% and 14% in the third
quarter and first nine 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, HER2-negative
high-risk early breast cancer who have been treated with neoadjuvant or adjuvant
chemotherapy, followed by approvals in the EU and Japan in August 2022, based on
the OlympiA trial. In September 2022, Lynparza was approved in China as
first-line maintenance treatment for adult patients with advanced epithelial
ovarian, fallopian tube or primary peritoneal cancer who are in complete or
partial response to first-line platinum-based chemotherapy in combination with
bevacizumab and whose cancer is associated with homologous recombination
deficiency-positive status. This approval was based on the PAOLA-1 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 7% and 33% in the
third quarter and first nine months of 2022, respectively, reflecting uptake in
the advanced RCC and advanced endometrial carcinoma indications, particularly in
the U.S. Growth in the third quarter was partially offset by the timing of
shipments in China.

Reblozyl is a first-in-class erythroid maturation recombinant fusion protein
obtained as part of Merck's November 2021 acquisition of Acceleron Pharma Inc.
that is being developed and commercialized through a global collaboration with
Bristol Myers Squibb (see Note 4 to the condensed consolidated financial
statements). Reblozyl is approved for the treatment of certain types of anemia.
Merck recorded alliance revenue of $39 million (consisting of royalties) in the
third quarter of 2022 related to this collaboration. Merck recorded alliance
revenue of $124 million in the first nine months of 2022, which includes
royalties of $104 million, as well as the receipt of a regulatory approval
milestone payment of $20 million.

Vaccines

                                                                                                  % Change                                                                        % Change
                                         Three Months Ended                                       Excluding                Nine Months Ended                                      Excluding
                                            September 30,                                          Foreign                   September 30,                                         Foreign
($ in millions)                         2022                2021             % Change             Exchange               2022               2021             % Change             Exchange
Gardasil/Gardasil 9               $    2,294             $ 1,993                   15  %                 20  %       $    5,428          $ 4,144                   31  %                 35  %
ProQuad                                  264                 244                    8  %                 10  %              640              598                    7  %                  9  %
M-M-R II                                 124                 127                   (2) %                 (1) %              330              295                   12  %                 14  %
Varivax                                  280                 290                   (3) %                 (2) %              746              733                    2  %                  3  %
RotaTeq                                  256                 227                   12  %                 16  %              644              593                    9  %                 11  %
Pneumovax 23                             131                 277                  (53) %                (50) %              457              600                  (24) %                (21) %


                                     - 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 15% and 31% in the third quarter and first nine
months of 2022, respectively, driven primarily by strong demand outside of the
U.S., particularly in China, which also benefited from increased supply. Sales
of Gardasil 9 in the U.S. increased in the third quarter and first nine months
of 2022 due to public sector buying patterns.

China's National Medical Products Administration expanded the use of Gardasil 9
for use in girls and women ages 9 to 45. The vaccine was previously approved for
use in girls and women ages 16 to 26.

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 8% and 7% in the third quarter and first nine
months of 2022, respectively, primarily reflecting higher demand in Europe and
higher pricing 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 12% in the first nine months of 2022 primarily due to higher pricing and demand in the U.S., as well as higher tenders in Latin America.

Global sales of Varivax (Varicella Virus Vaccine Live), a vaccine to help prevent chickenpox (varicella), grew 2% in the first nine months of 2022 primarily attributable to higher pricing in the U.S., partially offset by lower tenders in Latin America.


Global sales of RotaTeq (Rotavirus Vaccine, Live Oral, Pentavalent), a vaccine
to help protect against rotavirus gastroenteritis in infants and children, grew
12% and 9% in the third quarter and first nine months of 2022, respectively,
primarily due to public sector buying patterns and higher pricing in the U.S.
Higher volumes in China also contributed to RotaTeq sales growth in the third
quarter of 2022.

Worldwide sales of Pneumovax 23, a vaccine to help prevent pneumococcal disease,
declined 53% and 24% in the third quarter and first nine months of 2022,
respectively, primarily reflecting lower demand in the U.S. as the market
continues to shift toward newer adult pneumococcal conjugate vaccines following
changes in the recommendations of the U.S. Centers for Disease Control and
Prevention's (CDC's) Advisory Committee on Immunization Practices (ACIP) in
2021. The Company expects the decline in U.S. sales of Pneumovax 23 will
continue. Lower demand in Europe also contributed to the Pneumovax 23 sales
declines in the third quarter and first nine months of 2022.

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 CDC's 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.
These recommendations subsequently were adopted by the director of the CDC and
the U.S. Department of Health and Human Services, and 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. In October 2022, the
EC approved an expanded indication for Vaxneuvance to include active
immunization for the prevention of invasive disease, pneumonia and acute otitis
media caused by Streptococcus pneumoniae (S. pneumoniae) in infants, children
and adolescents from 6 weeks to less than 18 years of age. Vaxneuvance was
previously approved for use in the EU for individuals 18 years of age and older.
In September 2022, Vaxneuvance was approved in Japan for use in adult patients.
Vaxneuvance remains under review in Japan for use in pediatric patients.

Hospital Acute Care

                                                                                          % Change                                                                        % Change
                                    Three Months Ended                                    Excluding                Nine Months Ended                                      Excluding
                                      September 30,                                        Foreign                   September 30,                                         Foreign
($ in millions)                    2022              2021            % Change             Exchange               2022               2021          
  % Change             Exchange
Bridion                        $      423          $ 369                   15  %                 22  %       $    1,244          $ 1,096                   13  %                 19  %
Zerbaxa                                43             (2)                      *                     *              120              (11)                      *                     *

*Calculation not meaningful.


Worldwide sales of Bridion, for the reversal of two types of neuromuscular
blocking agents used during surgery, grew 15% and 13% in the third quarter and
first nine months of 2022, respectively, due to higher demand globally,
particularly in the U.S., largely attributable to Bridion's growing share among
neuromuscular blockade reversal agents and an increase in surgical procedures.
                                     - 38 -
--------------------------------------------------------------------------------

In December 2020, the Company temporarily suspended sales of Zerbaxa, 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. The phased resupply
for Zerbaxa that was initiated in the fourth quarter of 2021 has been completed
during 2022.

Cardiovascular

                                                                                        % Change                                                                     % Change
                                   Three Months Ended                                   Excluding               Nine Months Ended                                    Excluding
                                     September 30,                                       Foreign                  September 30,                                       Foreign
($ in millions)                   2022             2021            % Change             Exchange               2022             2021            % Change             Exchange
Alliance Revenue -
Adempas/Verquvo (1)            $     88          $ 100                  (12) %                 12  %       $     258          $ 248                    4  %                  4  %
Adempas                              57             59                   (5) %                 12  %             181            188                   (4) %                  8  %

(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 declined 12% and grew 4% in the
third quarter and first nine months of 2022, respectively. Revenue also includes
sales of Adempas and Verquvo in Merck's marketing territories.

Virology

                                                                                                   % Change                                                                          % Change
                                           Three Months Ended                                      Excluding                 Nine Months Ended                                       Excluding
                                              September 30,                                         Foreign                    September 30,                                          Foreign
($ in millions)                           2022               2021             % Change             Exchange                 2022               2021             % Change             Exchange
Lagevrio                             $        436          $    -                       -                     -       $       4,859          $    -                       -                     -
Isentress/Isentress HD                        161             189                  (15) %                (11) %                 466             590                  (21) %                (17) %


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 $436 million in the third quarter of
2022 primarily consisting of sales in Australia, South Korea, 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 or third quarters of 2022. Sales of Lagevrio
were $4.9 billion in the first nine 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 more than 40 markets. The Company
expects full-year 2022 Lagevrio sales to be between $5.2 billion and $5.4
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 15% and 21% in the third quarter and first nine months of
2022, respectively, primarily 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                Nine Months Ended                                      Excluding
                                         September 30,                                          Foreign                   September 30,                                         Foreign
($ in millions)                      2022                2021             % Change             Exchange               2022               2021             % Change             Exchange
Januvia/Janumet                $    1,133             $ 1,339                  (15) %                 (9) %       $    3,599          $ 3,895                   (8) %                 (2) %


Worldwide combined sales of Januvia and Janumet, medicines that help lower blood
sugar levels in adults with type 2 diabetes, declined 15% and 8% in the third
quarter and first nine months of 2022, respectively, primarily reflecting the
loss of exclusivity in several markets in Europe and the Asia Pacific region, as
well as lower demand in the U.S. The sales decline in the first nine months of
2022 was partially offset by higher demand in China, increased demand in Latin
America reflecting in part higher government tenders, 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 patent exclusivity with
respect to the sitagliptin compound patent in China in July 2022, although not
with respect to the patent claiming the specific sitagliptin salt form, which
expires in June 2024. In addition, the Company lost market
                                     - 39 -
--------------------------------------------------------------------------------

exclusivity with respect to Januvia in the EU in September 2022, and additional
exclusivity afforded Janumet that expires in April 2023 is being challenged. The
Company anticipates sales of Januvia and Janumet in these markets will decline
substantially in future periods following the loss of exclusivity.

The Company will lose sitagliptin compound patent protection for Januvia and
Janumet in the U.S. in January 2023. However, in September 2022, the U.S. Court
of Appeals for the Federal Circuit ruled in favor of Merck in a patent challenge
related to the specific sitagliptin salt form that is the active ingredient in
Januvia and Janumet, affirming the May 2021 decision in Merck's favor by the
U.S. Patent Office in an inter partes review. Also in September 2022, the U.S.
District Court for the Northern District of West Virginia ruled in favor of the
Company in an infringement suit related to the same sitagliptin salt patent, as
well as a Janumet formulation patent, finding both Merck patents valid and
infringed. The rulings from the U.S. Court of Appeals and the U.S District Court
in West Virginia provide Januvia and Janumet patent protection through May 2027;
although Merck has settled with multiple generic companies, providing that these
generic companies can bring their products to the market in May 2026 or earlier
under certain circumstances. The decision from the U.S. District Court in West
Virginia is under appeal to the U.S. Court of Appeals for the Federal Circuit.
(See Note 9 to the condensed consolidated financial statements.)

Combined sales of Januvia and Janumet in China, Europe and the U.S. represented
10%, 21% and 34%, respectively, of total combined Januvia and Janumet sales for
the first nine months of 2022.

In response to a request from a regulatory authority, Merck evaluated its
sitagliptin-containing products for the presence of nitrosamines. Nitrosamines
are organic compounds found at trace levels in water and food. Nitrosamines can
also result from chemical reactions and can form in drugs either due to the
drug's manufacturing process, chemical structure, or the conditions in which the
drugs are stored or packaged. The Company detected a nitrosamine identified as
Nitroso-STG-19 (NTTP) in some batches of its sitagliptin-containing medicines.
The Company has engaged with major health authorities around the world and has
implemented additional quality controls to ensure its portfolio of
sitagliptin-containing products meet health authorities' interim acceptable NTTP
limits for continuing distribution of product to the market. The Company does
not anticipate any significant impact on supply of these medicines.

Animal Health Segment

                                                                                           % Change                                                                        % Change
                                     Three Months Ended                                    Excluding                Nine Months Ended                                      Excluding
                                       September 30,                                        Foreign                   September 30,                                         Foreign
($ in millions)                     2022              2021            % Change             Exchange               2022               2021          
  % Change             Exchange
Livestock                       $      829          $ 864                   (4) %                  4  %       $    2,486          $ 2,503                   (1) %                  6  %
Companion Animal                       542            553                   (2) %                  4  %            1,834            1,804                    2  %                  6  %


Sales of livestock products declined 4% and 1% in the third quarter and first
nine months of 2022, respectively. Excluding the unfavorable effect of foreign
exchange in both periods, livestock sales performance primarily reflects higher
pricing, as well as increased demand for poultry and ruminant products. Sales of
companion animal products declined 2% in the third quarter of 2022 and grew 2%
in first nine months of 2022. Excluding the unfavorable effect of foreign
exchange in both periods, sales performance primarily reflects higher pricing
and demand in the companion animal portfolio, led by the Bravecto (fluralaner)
line of products, partially offset by lower sales of vaccines due to supply
constraints. Sales of the Bravecto line of products represented approximately
20% of animal health sales in the first nine months of 2022.

Costs, Expenses and Other

                                                  Three Months Ended                                         Nine Months Ended
                                                     September 30,                                             September 30,
($ in millions)                                  2022               2021             % Change              2022              2021              % Change
Cost of sales                               $     3,934          $ 3,450                   14  %       $  13,530          $  9,752                   39  %
Selling, general and administrative               2,520            2,336                    8  %           7,355             6,804                    8  %
Research and development                          4,399            2,445                   80  %           9,773             9,177                    6  %
Restructuring costs                                  94              107                  (12) %             288               487                  (41) %
Other (income) expense, net                         429             (450)                      *           1,576            (1,007)                      *
                                            $    11,376          $ 7,888                   44  %       $  32,522          $ 25,213                   29  %


*Calculation not meaningful.

Cost of Sales
Cost of sales increased 14% and 39% in the third quarter and first nine months
of 2022, respectively. Cost of sales includes $234 million and $2.6 billion in
the third quarter and first nine months of 2022, respectively, related to the
collaboration with Ridgeback for Lagevrio (see Note 4 to the condensed
consolidated financial statements). Cost of sales also
                                     - 40 -
--------------------------------------------------------------------------------

includes the amortization of intangible assets recorded in connection with
acquisitions, collaborations and licensing arrangements, which totaled $445
million and $346 million in the third quarter of 2022 and 2021, respectively,
and $1.6 billion and $1.2 billion in the first nine months of 2022 and 2021,
respectively. Amortization expense in the first nine 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 first nine months of 2021 include charges of $225
million related to the discontinuation of COVID-19 development programs. Also
included in cost of sales are expenses associated with restructuring activities
which amounted to $54 million and $48 million in the third quarter of 2022 and
2021, respectively, and $167 million and $113 million in the first nine 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 73.7% in the third quarter of 2022 compared with 73.8% in the
third quarter of 2021. Gross margin was 70.2% in the first nine months of 2022
compared with 72.3% in the first nine months of 2021. The gross margin declines
primarily reflect the impacts of higher revenue from third-party manufacturing
arrangements and sales of Lagevrio, both of which have lower gross margins, as
well as higher amortization of intangible assets (noted above). The gross margin
declines were partially offset by the favorable effects of product mix and
foreign exchange. The gross margin decline in the first nine months of 2022 was
also partially offset by charges in 2021 related to the discontinuation of
COVID-19 development programs.

Selling, General and Administrative


Selling, general and administrative (SG&A) expenses increased 8% in both the
third quarter and first nine months of 2022 primarily due to higher
administrative costs, including compensation and benefits, as well as higher
promotional spending and restructuring costs, partially offset by the favorable
effect of foreign exchange.

Research and Development

Research and development (R&D) expenses increased to $4.4 billion and $9.8
billion in the third quarter and first nine months of 2022, respectively, from
$2.4 billion and $9.2 billion in the third quarter and first nine months of
2021, respectively. The increase in both periods was primarily due to $887
million of intangible asset impairment charges related to ArQule, Inc. (see
Note 8 to the condensed consolidated financial statements), higher charges
related to collaborations and licensing arrangements, increased clinical
development spending, increased investments in technology in support of the
digital enablement of Merck's research operations, as well as higher
compensation and benefit costs, partially offset by the favorable effect of
foreign exchange. In addition, the increase in R&D expenses in the first nine
months of 2022 was partially offset by a $1.7 billion charge in the prior year
period related to the acquisition of Pandion Therapeutics, Inc. (Pandion).

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 $2.0 billion and $1.8 billion for
the third quarter of 2022 and 2021, respectively, and were $5.6 billion and $5.3
billion for the first nine 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 $1.5 billion and $710 million for the third quarter of 2022
and 2021, respectively, and $3.2 billion and $2.1 billion for the first nine
months of 2022 and 2021, respectively. The increase in these expenses in the
third quarter and first nine months of 2022 compared with the same periods of
2021 largely reflects $690 million of upfront and option payments in the
aggregate for collaborations and licensing agreements with Orion, Moderna and
Orna. Additionally, R&D expenses in the first nine months of 2022 include $887
million of intangible assets impairment charges and in the first nine months of
2021 include a $1.7 billion charge for the acquisition of Pandion as noted
above. See Note 3 for additional information related to business development
activity in the current and prior year.

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 $600 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.
                                     - 41 -
--------------------------------------------------------------------------------

Restructuring costs, primarily representing separation and other related costs
associated with these restructuring activities, were $94 million and $107
million for the third quarter of 2022 and 2021, respectively, and $288 million
and $487 million for the first nine 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
$175 million and $168 million in the third quarter of 2022 and 2021,
respectively, and $559 million and $630 million for the first nine 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 $429 million of expense in the third quarter of
2022 compared with $450 million of income in the third quarter of 2021. Other
(income) expense, net, was $1.6 billion of expense for the first nine months of
2022 compared with $1.0 billion of income for the first nine months of 2021. The
change in both periods is primarily due to net unrealized losses from
investments in equity securities recorded in the third quarter and first nine
months of 2022 compared with net realized and unrealized gains from investments
in equity securities recorded in the third quarter and first nine months of
2021. The unfavorability in both periods was partially offset by lower pension
costs.

For details on the components of Other (income) expense, net, see Note 12 to the condensed consolidated financial statements.

Segment Profits
                                                             Three Months Ended                     Nine Months Ended
                                                                September 30,                         September 30,
($ in millions)                                             2022                2021              2022              2021
Pharmaceutical segment profits                        $    9,590             $ 8,606          $  28,263          $ 22,450
Animal Health segment profits                                515                 505              1,672             1,629
Other                                                     (6,522)             (3,845)           (17,004)          (14,109)
Income from Continuing Operations Before Taxes        $    3,583            

$ 5,266 $ 12,931 $ 9,970



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 arrangements.

Pharmaceutical segment profits increased 11% and 26% in the third quarter and
first nine months of 2022, respectively, reflecting higher sales, partially
offset by higher administrative and promotional costs, as well as the
unfavorable effect of foreign exchange. Animal Health segment profits grew 2% in
the third quarter of 2022 reflecting favorable product mix, partially offset by
the unfavorable effect of foreign exchange. Animal Health segment profits grew
3% in the first nine months of 2022 reflecting higher sales, partially offset by
higher selling and administrative costs and the unfavorable effect of foreign
exchange.


                                     - 42 -
--------------------------------------------------------------------------------

Taxes on Income


The effective income tax rates from continuing operations were 9.2% and 13.2%
for the third quarter of 2022 and 2021, respectively, and 11.0% and 14.4% for
the first nine months of 2022 and 2021, respectively. The effective income tax
rates from continuing operations reflect the beneficial impact of foreign
earnings. The effective income tax rates from continuing operations in the third
quarter and first nine months of 2022 also include the favorable impact of net
unrealized losses from investments in equity securities and intangible asset
impairment charges, which were taxed at the U.S. tax rate. The effective income
tax rate from continuing operations in the first nine months of 2021 reflects
the unfavorable effect of a charge for the acquisition of Pandion for which no
tax benefit was recognized, as well as 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 nine 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 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 no longer exclude charges related to
these items. Prior periods have been recast to conform to the current
presentation.


                                     - 43 -
--------------------------------------------------------------------------------

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


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

Income from continuing operations before taxes as reported under GAAP

                                                      $    3,583             $ 5,266          $   12,931          $ 9,970
Increase (decrease) for excluded items:
Acquisition and divestiture-related costs                            1,344                 445               2,512            1,445
Restructuring costs                                                    175                 168                 559              630
Loss (income) from investments in equity securities, net               350                (684)              1,268           (1,503)

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

                                                                 -                   -                   -              225
Non-GAAP income from continuing operations before taxes              5,452               5,195              17,270           10,767

Taxes on income from continuing operations as reported under GAAP

                                                                   330                 695               1,423            1,436
Estimated tax benefit (provision) on excluded items (1)                414                 (29)                965               84

Net tax benefit from the settlement of certain federal income tax matters

                                                              -                   -                   -              207
Non-GAAP taxes on income from continuing operations                    744                 666               2,388            1,727
Non-GAAP net income from continuing operations                       4,708               4,529              14,882            9,040

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

                                                      5                   4                   6                9

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

                                               $    4,703             $ 4,525          $   14,876          $ 9,031

EPS assuming dilution from continuing operations as reported under GAAP

                                                      $     1.28             $  1.80          $     4.53          $  3.36
EPS difference                                                        0.57               (0.02)               1.33             0.20

Non-GAAP EPS assuming dilution from continuing operations $ 1.85

            $  1.78          $     5.86          $  3.56


(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.

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 13 to the condensed consolidated financial
statements).


                                     - 44 -
--------------------------------------------------------------------------------

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; last
reissued in October 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 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.

In October 2022, Merck provided an update on new clinical and non-clinical
studies of Lagevrio. A preliminary analysis of the University of Oxford's
PANORAMIC study, conducted in the UK in highly-vaccinated adults mostly over 65
years of age, showed no evidence of a difference between Lagevrio added to usual
care compared to usual care alone for the reduction of hospitalizations and
deaths through Day 28 (primary endpoint was not met); the incidence of
hospitalizations and death through Day 28 was very low overall. The main
secondary endpoint (time to first self-reported recovery) in the PANORAMIC study
was 6 days shorter with the Lagevrio group compared to the usual care group; in
addition, the use of Lagevrio also was associated with earlier recovery across a
wide range of other symptom measures, as compared to the usual care group.
Additionally, an analysis of real-world data from a separate study conducted by
investigators in Israel (known as the Clalit study) showed that in a cohort of
non-hospitalized, high-risk patients, Lagevrio reduced hospitalizations and
mortality due to COVID-19 in patients 65 years and above; no evidence of benefit
was found in younger adults ages 40 to 64 years. Also, Merck reported results
from a separate, non-clinical 6-month carcinogenicity study in transgenic mice,
which demonstrated that Lagevrio was not carcinogenic at any dose tested.

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 (NDA) 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.

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 1,650 clinical trials, including more than 1,200 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.

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 Biologics License Application 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
                                     - 45 -
--------------------------------------------------------------------------------

Drug User Fee Act (PDUFA) 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.

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 were presented at the 2022
European Society for Medical Oncology (ESMO) congress.

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 ovarian, breast, pancreatic and prostate cancers being co-developed for multiple cancer types as part of a collaboration with AstraZeneca.


In August 2022, the FDA granted priority review for a supplemental NDA for
Lynparza in combination with abiraterone and prednisone or prednisolone for the
treatment of adult patients with metastatic castration-resistant prostate
cancer. The supplemental NDA was based on results from the Phase 3 PROpel trial,
which were presented at the 2022 American Society of Clinical Oncology (ASCO)
Genitourinary Cancers Symposium and later published in NEJM Evidence. The FDA
set a PDUFA date in the fourth quarter of 2022. Lynparza is also 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.
Results from the study were presented at the 2022 ESMO 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 were 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; however, these results did not meet statistical
significance per the pre-specified statistical plan. Results were presented at
the 2022 ESMO congress.

In July 2020, Merck and Eisai announced that the FDA issued a CRL regarding
Merck's and Eisai's applications seeking accelerated approval of Keytruda plus
Lenvima for the first-line treatment of patients with uHCC based on data from
the Phase 1b KEYNOTE-524/Study 116 trial. Given the results of the LEAP-002
trial noted above, Merck no longer intends to pursue the application.

In October 2022, Merck announced positive top-line results from the pivotal
Phase 3 STELLAR trial evaluating the safety and efficacy of sotatercept, an
investigational activin receptor type IIA-Fc (ActRIIA-Fc) fusion protein being
evaluated as an add-on to stable background therapy for the treatment of
pulmonary arterial hypertension (PAH) (World Health Organization [WHO] Group 1).
The trial met its primary efficacy outcome measure, demonstrating a
statistically significant and
                                     - 46 -
--------------------------------------------------------------------------------

clinically meaningful improvement in 6-minute walk distance (6MWD, which
measures how far patients can walk in 6 minutes). Eight of nine secondary
efficacy outcome measures achieved statistical significance, including the
outcome measure of proportion of participants achieving multicomponent
improvement (defined as improvement in 6MWD, improvement in N-terminal
pro-B-type natriuretic peptide level, and either improvement in WHO Functional
Class [FC] or maintenance of WHO FC II), and the outcome measure of time to
death or the first occurrence of a clinical worsening event. The
Cognitive/Emotional Impacts domain score of PAH-SYMPACT®, which was assessed as
the ninth and final secondary outcome measure, did not achieve statistical
significance. Results from the study will be presented at an upcoming scientific
congress.

In September 2022, Merck announced it will initiate a new Phase 3 clinical
program with once-daily islatravir for the treatment of people with HIV-1
infection. These new Phase 3 studies will evaluate a once-daily oral combination
of doravirine 100 mg and a lower dose of islatravir (DOR/ISL). One study will
evaluate DOR/ISL in previously untreated adults with HIV-1 infection and two
studies will evaluate DOR/ISL as a switch in antiretroviral therapy in adults
with HIV-1 infection who are virologically suppressed. The investigational new
drug application for the once-daily oral DOR/ISL treatment program remains under
a partial clinical hold for any studies that would use doses higher than the
dose to be studied in the new Phase 3 program. The Phase 2 clinical trial
evaluating an investigational oral once-weekly combination treatment regimen of
islatravir and Gilead Sciences' lenacapavir in adults with HIV-1 infection who
are virologically suppressed will resume under an amended protocol with a lower
dose of islatravir. The investigational new drug application under which the
islatravir + lenacapavir once-weekly treatment regimen is being investigated
remains under a partial clinical hold for any studies that would use weekly oral
islatravir doses higher than the doses considered for the revised clinical
program. Additionally, Merck announced it will discontinue the development of
once-monthly oral islatravir for pre-exposure prophylaxis (PrEP).

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 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 several Phase 3 trials evaluating V116 is
ongoing.

In October 2022, Merck and Royalty Pharma plc (Royalty Pharma) entered into a
funding arrangement under which Royalty Pharma paid Merck $50 million to co-fund
Merck's development costs for a Phase 2b trial of MK-8189, an investigational
oral Phosphodiesterase 10A (PDE10A) inhibitor, which is being evaluated for the
treatment of schizophrenia. Under the agreement, Royalty Pharma has no rights to
MK-8189 and has no decision-making authority over the program. If Merck elects
to advance MK-8189 into a Phase 3 study, Royalty Pharma has the option to
provide additional funding of 50% of the development costs up to $375 million
for the Phase 3 trial. If such additional funding is provided, Royalty Pharma
becomes eligible to receive future regulatory milestone payments contingent upon
certain marketing approvals, as well as royalties.

The charts below reflect the Company's research pipeline as of November 3, 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.
                                     - 47 -
--------------------------------------------------------------------------------
                                                                       Phase 2
Cancer                                            Cancer                                             Cancer
MK-0482(2)                                        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-1308 (quavonlimab)(2)                          Head and Neck                                      Prostate
Non-Small-Cell Lung                               Melanoma                                           Small-Cell Lung
MK-1308A (quavonlimab+pembrolizumab)              Non-Small-Cell Lung                                V940(1)
Colorectal                                        Prostate                                           Melanoma
Hepatocellular                                    Small-Cell Lung                                    Chikungunya Virus Vaccine
Melanoma                                          MK-6482 Welireg(3)                                 V184
Small-Cell Lung                                   Biliary                                            Dengue Fever Virus Vaccine
MK-2140 (zilovertamab vedotin)                    Colorectal                                         V181
Breast                                            Endometrial                                        HIV-1 Infection
Gastric                                           Esophageal                                         MK-8591B (islatravir+MK-8507)(4)
Hematological Malignancies                        Hepatocellular                                     MK-8591D (islatravir+lenacapavir)(1)(5)
Non-Small-Cell Lung                               Pancreatic                                         Hypercholesterolemia
Ovarian                                           Rare cancers                                       MK-0616
Pancreatic                                        Von Hippel-Lindau Disease-Associated Tumors (EU)   Nonalcoholic Steatohepatitis (NASH)
MK-2870(1)(3)                                     MK-7119 Tukysa(1)                                  MK-3655
Neoplasm Malignant                                Advanced Solid Tumors                              MK-6024
MK-3475 Keytruda                                  Biliary                                            Overgrowth Syndrome
Advanced Solid Tumors                             Bladder                                            MK-7075 (miransertib)
MK-4280 (favezelimab)(2)                          Cervical                                           Pulmonary Arterial Hypertension
  Non-Small-Cell Lung                             Endometrial                                        MK-5475
MK-4280A (favezelimab+pembrolizumab)              Gastric                                            Pulmonary Hypertension Due To Left Heart Disease
   Esophageal                                     Non-Small-Cell Lung                                MK-7962 (sotatercept)
   Renal Cell                                     MK-7339 Lynparza(1)(3)                             Schizophrenia
   Small-Cell Lung                                Advanced Solid Tumors                              MK-8189(6)
MK-4830(2)                                        MK-7684 (vibostolimab)(2)                          Thrombosis
    Colorectal                                    Melanoma                                           MK-2060
   Esophageal                                     MK-7684A (vibostolimab+pembrolizumab)              Treatment Resistant Depression
   Melanoma                                       Biliary                                            MK-1942
Non-Small-Cell Lung                               Breast
Ovarian                                           Cervical
Renal Cell                                        Colorectal
   Small-Cell Lung                                Endometrial
MK-5684(1)                                        Esophageal
Prostate                                          Head and Neck
MK-5890 (boserolimab)(2)                          Hematological Malignancies
   Non-Small-Cell Lung                            Hepatocellular
   Small-Cell Lung                                Prostate


                                     - 48 -
--------------------------------------------------------------------------------

          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)(7) 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.)(8)     (KEYNOTE-394) (U.S.)
MK-3475 Keytruda                                  (EU)                               • Adjuvent Non-Small-Cell Lung Cancer
Biliary (September 2019)                                                             (KEYNOTE-091) (U.S.) (EU)
Cutaneous Squamous Cell (August 2019) (EU)
Gastric (May 2015) (EU)                                                              MK-7339 Lynparza(1)
Hepatocellular (May 2016) (EU)                                              

• First-Line Metastatic Prostate Cancer Mesothelioma (May 2018)

                                                              (PROpel) (U.S.) (EU) (JPN)
Ovarian (December 2018)
Prostate (May 2019)
Small-Cell Lung (May 2017)
MK-3475 (pembrolizumab subcutaneous)
Non-Small-Cell Lung (August 2021)
MK-4280A (favezelimab+pembrolizumab)
Colorectal (November 2021)
Hematological Malignancies (October 2022)
MK-6482 Welireg(3)
Renal Cell (February 2020)
MK-7119 Tukysa(1)
Breast (October 2019)
Colorectal (August 2022)
MK-7339 Lynparza(1)(3)
Non-Small-Cell Lung (June 2019)                   Footnotes:
Small-Cell Lung (December 2020)                   (1) Being developed in a 

collaboration.

MK-7684A (vibostolimab+pembrolizumab)             (2) Being developed in combination with Keytruda.
Non-Small-Cell Lung (April 2021)                  (3) Being developed as monotherapy and/or in combination with Keytruda.
Small-Cell Lung (March 2022)                      (4) On FDA clinical hold.
MK-7902 Lenvima(1)(2)                             (5) On FDA partial clinical hold.
Colorectal (April 2021)                           (6) Phase 2b development costs are being co-funded.
Esophageal (July 2021)                            (7) Available in the U.S. under Emergency Use Authorization.
Gastric (December 2020)                           (8) In response to the CRL received from the FDA for this application in
Head and Neck (February 2020)                     January 2022, Merck is performing additional analyses and anticipates
Melanoma (March 2019)                             submitting this information to the FDA in the first half of 2023.
Non-Small-Cell Lung (March 2019)
HIV-1 Infection
   MK-8591A (doravirine+islatravir) (February
2020)(5)
Pneumococcal Vaccine Adult
V116 (July 2022)
Pulmonary Arterial Hypertension
MK-7962 (sotatercept) (January 2021)
Respiratory Syncytial Virus
MK-1654 (clesrovimab) (November 2021)



Liquidity and Capital Resources

($ in millions)                               September 30, 2022      December 31, 2021
Cash and investments                         $         12,232        $          8,466
Working capital                                        10,563                   6,394
Total debt to total liabilities and equity               28.4   %           

31.3 %



Cash provided by operating activities of continuing operations was $14.7 billion
in the first nine months of 2022 compared with $8.0 billion in the first nine
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 nine
months of 2022 was reduced by $1.8 billion of milestone payments related to
collaborations compared with $432 million of milestone and option payments
related to collaborations in the first nine 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, dividends paid to
shareholders and treasury stock purchases. 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
has paid higher taxes in the U.S. in the first nine months of 2022 compared with
the same prior year period.

Cash used in investing activities of continuing operations was $3.2 billion in
the first nine months of 2022 compared with $4.4 billion in the first nine
months of 2021. The lower use of cash in investing activities of continuing
operations was primarily due to lower cash used for acquisitions and higher
proceeds from the sale of securities and other investments, partially offset by
higher purchases of securities and other investments.
                                     - 49 -
--------------------------------------------------------------------------------

Cash used in financing activities of continuing operations was $7.6 billion in
the first nine months of 2022 compared with $2.1 billion in the first nine
months of 2021. The increase in cash used in financing activities of continuing
operations 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 higher payments on long-term
debt and higher dividends paid to shareholders in the current period. The
increase in cash used in financing activities was partially offset by net
repayments of short-term borrowings and treasury stock purchases in the prior
year period that did not occur in the current period.

Capital expenditures totaled $3.2 billion in both the first nine months of 2022 and the first nine months of 2021.


The Company has accounts receivable factoring agreements with financial
institutions in certain countries to sell accounts receivable. The Company
factored $2.3 billion and $2.8 billion of accounts receivable at September 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 $5.3 billion and $5.0 billion for the first
nine 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 was 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 September 2022, the Company's $1.0 billion,
2.40% 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 nine
months of 2022. As of September 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.

© Edgar Online, source Glimpses

All news about MERCK & CO., INC.
03/30PDS Biotechnology Plans Late-Stage Combo Trial in Head, Neck Cancer in Q4
MT
03/30Merck - FDA Converts to Full Approval Indication for KEYTRUDA for Certain Adult and Ped..
AQ
03/30Merck to Hold First-Quarter 2023 Sales and Earnings Conference Call on April 27
BU
03/29Merck & Company Therapy Gets FDA Approval to Treat Solid Tumors
MT
03/29FDA Converts to Full Approval Indication for KEYTRUDA« (pembrolizumab) for Certain Adul..
BU
03/29Merck Announces U.S. Food and Drug Administration Grants Full Approval to KEYTRUDA for ..
CI
03/28Merck - KEYTRUDA plus Chemotherapy Significantly Improved Progression-Free Survival Com..
AQ
03/27KEYTRUDA« (pembrolizumab) Plus Chemotherapy Significantly Improved Progression-Free Sur..
BU
03/27Merck & Co., Inc. Announces Results from the Phase 3 NRG-Gy018 Trial Investigating Keyt..
CI
03/23JACOS Announces Clinical Collaboration with Merck & Co. for the Combination of CD73 Mon..
AQ
More news
Analyst Recommendations on MERCK & CO., INC.
More recommendations
MarketScreener: Created by Investors for Investors!
100% Free Registration
fermer