EX-99.1 2 tm2328962d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

	News Release

Merck Announces Third-Quarter 2023 Financial Results

Sales Reflect Sustained Growth, Particularly in Oncology and Vaccines

Total Worldwide Sales Were $16.0 Billion, an Increase of 7% From Third Quarter 2022;

Excluding LAGEVRIO, Growth Was 6%; Excluding LAGEVRIO and the Impact of Foreign Exchange, Growth Was 8%

KEYTRUDA Sales Grew 17% to $6.3 Billion; Excluding the Impact of Foreign Exchange, Sales Also Grew 17%

GARDASIL/GARDASIL 9 Sales Grew 13% to $2.6 Billion; Excluding the Impact of Foreign Exchange, Sales Grew 16%

LAGEVRIO Sales Grew 47% to $640 Million; Excluding the Impact of Foreign Exchange, Sales Grew 51%

GAAP EPS Was $1.86; Non-GAAP EPS Was $2.13

Announced Collaboration Agreement With Daiichi Sankyo for Three Clinical-Stage ADC Candidates

Received FDA Approval of KEYTRUDA for Perioperative Treatment of Certain Patients With NSCLC in Combination With Chemotherapy, Based on KEYNOTE-671 Trial

Obtained FDA Priority Review of Biologics License Application for Sotatercept

Presented Compelling Data at ESMO 2023 Congress, Including:

Phase 3 KEYNOTE-671 Trial

Phase 3 KEYNOTE-A39/EV-302 Trial Conducted in Collaboration With Seagen and Astellas

Initiating Phase 3 Trials in 2023 Across Multiple Therapeutic Areas, Including Oncology, Cardiometabolic and Immunology

Full-Year 2023 Financial Outlook:

Raises and Narrows Expected Worldwide Sales Range To Be Between $59.7 Billion and $60.2 Billion, Including Negative Impact of Foreign Exchange of Approximately 2 Percentage Points; Outlook Includes Approximately $1.3 Billion of LAGEVRIO Sales

Now Expects Non-GAAP EPS To Be Between $1.33 and $1.38, Including the Negative Impact of Foreign Exchange of Approximately 6 Percentage Points; Outlook Reflects Negative Impact From Upfront Charge of $5.5 Billion, or $1.70 per Share, Related to the Collaboration Agreement With Daiichi Sankyo

RAHWAY, N.J., Oct. 26, 2023 – Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the third quarter of 2023.

“Our strong results this quarter reflect our talented team’s commitment to bringing forward important innovation and pursuing breakthroughs for all those who count on us,” said Robert M. Davis, chairman and chief executive officer, Merck. “We continue to push the boundaries of science, making disciplined investments to augment our diverse pipeline and applying our expertise to accelerate potentially transformative treatments to address patient needs – including through our recently announced collaboration with Daiichi Sankyo. I am proud of our progress as we continue to execute at the highest level and work to generate strong and sustainable value, today and well into the future.”

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Financial Summary

	Third Quarter
$ in millions, except EPS amounts	2023		2022		Change			Change Ex- Exchange
Sales	$	15,962	$	14,959		7	%		9	%
GAAP net income¹		4,745		3,248		46	%		56	%
Non-GAAP net income that excludes certain items^1,2*		5,427		4,703		15	%		22	%
GAAP EPS		1.86		1.28		45	%		55	%
Non-GAAP EPS that excludes certain items^2*		2.13		1.85		15	%		22	%

*Refer to table on page 6.

Generally Accepted Accounting Principles (GAAP) earnings per share (EPS) assuming dilution was $1.86 for the third quarter of 2023. Non-GAAP EPS was $2.13 for the third quarter of 2023. The increases in GAAP and non-GAAP EPS in the third quarter versus the prior year were primarily due to operational strength in the business, as well as $0.22 of charges recorded in 2022 related to collaboration and licensing agreements with Moderna, Inc. (Moderna), Orna Therapeutics (Orna) and Orion Corporation (Orion). The increase in GAAP EPS in the third quarter of 2023 was also driven by the impacts of intangible asset impairment charges recorded in 2022, compared with no such charges recorded in 2023, and lower losses from investments in equity securities in 2023. The increases in both GAAP and non-GAAP EPS in the third quarter were partially offset by the unfavorable impact of foreign exchange.

Non-GAAP EPS excludes acquisition- and divestiture-related costs, costs related to restructuring programs, as well as income and losses from investments in equity securities.

Year-to-date results can be found in the attached tables.

¹ Net income attributable to Merck & Co., Inc.

² Merck is providing certain 2023 and 2022 non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing this information enhances investors’ understanding of the company’s results because management uses non-GAAP results to assess performance. 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. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP. For a description of the non-GAAP adjustments, see Table 2a attached to this release.

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Third-Quarter Sales Performance

The following table reflects sales of the company’s top products and significant performance drivers.

	Third Quarter
$ in millions	2023		2022		Change			Change Ex- Exchange			Commentary
Total Sales	$	15,962	$	14,959		7	%		9	%
Pharmaceutical		14,263		12,963		10	%		11	%	Increase driven by growth in oncology, vaccines, and virology due to sales of LAGEVRIO, partially offset by diabetes. Excluding LAGEVRIO, growth of 9%. Excluding LAGEVRIO and unfavorable impact of foreign exchange, growth of 10%.
KEYTRUDA		6,338		5,426		17	%		17	%	Growth driven by increased global uptake in earlier-stage indications, including triple-negative breast cancer (TNBC) and renal cell carcinoma (RCC), and continued strong global demand from metastatic indications.
GARDASIL / GARDASIL 9		2,585		2,294		13	%		16	%	Growth due to strong demand, particularly in China, and higher pricing in the U.S., partially offset by public-sector buying patterns in the U.S.
JANUVIA / JANUMET		835		1,133		-26	%		-25	%	Decline primarily due to generic competition in several international markets, particularly in Europe, and lower demand in the U.S.
PROQUAD, M-M-R II and VARIVAX		713		668		7	%		6	%	Growth largely due to higher pricing in the U.S.
LAGEVRIO		640		436		47	%		51	%	Growth largely attributable to higher demand in Japan, partially offset by lower demand in Australia and nonrecurrence of sales in the U.K.
BRIDION		424		423		0	%		0	%	Relatively flat compared with prior year due to higher demand in the U.S., offset by generic competition primarily in Europe.
Lynparza*		299		284		5	%		6	%	Growth driven primarily by higher pricing in the U.S. and increased demand in Latin America.
Lenvima*		260		202		29	%		30	%	Growth primarily due to higher demand in the U.S. and certain international markets, and timing of shipments in China.
VAXNEUVANCE		214		16		***N/M			N/M		Growth driven largely by continued uptake in pediatric indication in the U.S. and launches in Europe.
Animal Health		1,400		1,371		2	%		2	%	Growth primarily driven by higher pricing in both Livestock and Companion Animal product portfolios.
Livestock		874		829		5	%		7	%	Growth primarily due to higher pricing across product portfolio, as well as higher demand for ruminant, poultry and swine products.
Companion Animal		526		542		-3	%		-4	%	Decline primarily due to lower vet visits in the U.S., partially offset by higher pricing. Sales of BRAVECTO were $235 million and $241 million in the current and prior-year quarters, respectively, which represented a decline of 3%.
Other Revenues**		299		625		-52	%		-18	%	Decline primarily due to impact of revenue hedging. Excluding unfavorable impact of foreign exchange, decline due to lower revenue from third-party manufacturing arrangements.

*Alliance revenue for this product represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

**Other revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities.

***Not meaningful

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Third-Quarter Expense, EPS and Related Information

The table below presents selected expense information.

$ in millions	GAAP		Acquisition- and Divestiture- Related Costs³			Restructuring Costs		(Income) Loss From Investments in Equity Securities		Non- GAAP²
Third Quarter 2023
Cost of sales	$	4,264	$	552		$	33	$	-	$	3,679
Selling, general and administrative		2,519		17			40		-		2,462
Research and development		3,307		10			-		-		3,297
Restructuring costs		126		-			126		-		-
Other (income) expense, net		126		(24	)		-		17		133

Third Quarter 2022
Cost of sales	$	3,934	$	446		$	54	$	-	$	3,434
Selling, general and administrative		2,520		22			26		-		2,472
Research and development		4,399		902			1		-		3,496
Restructuring costs		94		-			94		-		-
Other (income) expense, net		429		(26	)		-		350		105

GAAP Expense, EPS and Related Information

Gross margin was 73.3% for the third quarter of 2023 compared with 73.7% for the third quarter of 2022. The decrease was primarily due to the unfavorable impact of foreign exchange, higher LAGEVRIO sales, which have a low gross margin, and higher acquisition- and divestiture-related costs. The gross margin decline was partially offset by lower revenue from third-party manufacturing arrangements, lower manufacturing-related costs and the favorable impact of product mix.

Selling, general and administrative (SG&A) expenses were $2.5 billion in both the third quarters of 2023 and 2022, primarily reflecting increased promotional spending, offset by lower administrative costs.

³ Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions of businesses, intangible asset impairment charges and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. R&D expenses in the third quarter of 2022 include intangible asset impairment charges of $887 million largely related to nemtabrutinib. Also includes integration, transaction and certain other costs associated with acquisitions and divestitures, as well as amortization of intangible assets related to collaborations and licensing arrangements.

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Research and development (R&D) expenses were $3.3 billion in the third quarter of 2023 compared with $4.4 billion in the third quarter of 2022. The decrease was primarily due to charges recorded in 2022 of $887 million for intangible asset impairments, largely related to nemtabrutinib, and $690 million for collaboration and licensing agreements with Moderna, Orna and Orion. The decrease in R&D expenses was partially offset by higher compensation and benefit costs in 2023, reflecting in part increased headcount, higher investments in discovery research and early drug development and higher clinical development spending.

Other (income) expense, net, was $126 million of expense in the third quarter of 2023 compared with $429 million of expense in the third quarter of 2022, primarily due to lower net losses from investments in equity securities.

The effective tax rate was 15.5% for the third quarter of 2023 compared with 9.2% in the third quarter of 2022.

GAAP EPS was $1.86 for the third quarter of 2023 compared with $1.28 for the third quarter of 2022.

Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 77.0% for both the third quarters of 2023 and 2022, due to the unfavorable impact of foreign exchange, and higher LAGEVRIO sales, which have a low gross margin, offset by lower revenue from third-party manufacturing arrangements, lower manufacturing-related costs and the favorable impact of product mix.

Non-GAAP SG&A expenses were $2.5 billion in both the third quarters of 2023 and 2022, primarily reflecting increased promotional spending, offset by lower administrative costs.

Non-GAAP R&D expenses were $3.3 billion in the third quarter of 2023 compared with $3.5 billion in the third quarter of 2022. The decrease was primarily due to charges of $690 million in 2022 related to collaboration and licensing agreements with Moderna, Orna and Orion. The decrease in R&D expenses was partially offset by higher compensation and benefit costs in 2023, reflecting in part increased headcount, higher investments in discovery research and early drug development and higher clinical development spending.

Non-GAAP other (income) expense, net, was $133 million of expense in the third quarter of 2023 compared with $105 million of expense in the third quarter of 2022.

The non-GAAP effective tax rate was 15.0% for the third quarter of 2023 compared with 13.6% in the third quarter of 2022.

Non-GAAP EPS was $2.13 for the third quarter of 2023 compared with $1.85 for the third quarter of 2022.

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A reconciliation of GAAP to non-GAAP net income and EPS is provided in the table that follows.

	Third Quarter
$ in millions, except EPS amounts	2023			2022
EPS
GAAP EPS	$	1.86		$	1.28
Difference		0.27			0.57
Non-GAAP EPS that excludes items listed below²	$	2.13		$	1.85

Net Income
GAAP net income¹	$	4,745		$	3,248
Difference		682			1,455
Non-GAAP net income that excludes items listed below^1,2	$	5,427		$	4,703

Excluded Items:
Acquisition- and divestiture-related costs³	$	555		$	1,344
Restructuring costs		199			175
Loss from investments in equity securities		17			350
Net decrease (increase) in income before taxes		771			1,869
Estimated income tax (benefit) expense		(89	)		(414	)
Decrease (increase) in net income	$	682		$	1,455

Pipeline and Portfolio Highlights

Merck continued to achieve regulatory and clinical milestones across its expansive pipeline and portfolio. The company is initiating Phase 3 trials in 2023 in multiple therapeutic areas, including oncology, cardiometabolic and immunology, and in new modalities. These include investigational individualized neoantigen therapy V940 in combination with KEYTRUDA, antibody-drug conjugate (ADC) MK-2870 and lysine-specific demethylase-1 inhibitor MK-3543 in oncology, oral PCSK9 inhibitor candidate MK-0616 in cardiovascular, and humanized monoclonal antibody MK-7240 in immunology.

In oncology, the company received U.S. Food and Drug Administration (FDA) approval of KEYTRUDA for the treatment of certain patients with resectable non-small cell lung cancer (NSCLC) as a neoadjuvant/adjuvant treatment, the company’s eighth approval of KEYTRUDA in earlier-stage cancer. The FDA also granted priority review to two supplemental New Drug Applications (sNDAs): for WELIREG in certain previously treated patients with advanced RCC, and for KEYTRUDA in cervical cancer. Notably, Merck presented compelling new data at the European Society for Medical Oncology (ESMO) Congress 2023 that showcased the company’s progress in earlier stages of cancers, its foundational position in metastatic disease and continued momentum in its diverse oncology pipeline.

In cardiovascular disease, Merck received priority review from the FDA for a new Biologics License Application (BLA) for sotatercept, the company’s novel investigational activin signaling inhibitor for the treatment of adults with pulmonary arterial hypertension (PAH) (World Health Organization Group 1), based on clinically meaningful results from the Phase 3 STELLAR trial. The FDA set a Prescription Drug User Fee Act (PDUFA), or target action, date of March 26, 2024. If approved, sotatercept would be the first in its class, bringing a novel approach to address a rare and progressive disease of the pulmonary arteries. Merck’s submission for sotatercept to the Committee for Medicinal Products for Human Use (CHMP) in the European Union (EU) has also been completed.

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Additionally, Merck entered into a collaboration agreement with Daiichi Sankyo for three potentially first-in-class clinical-stage DXd ADCs for the treatment of multiple solid tumors, both as monotherapy and/or in combination with other treatments. This collaboration with Daiichi Sankyo will further augment and diversify Merck’s oncology pipeline.

Notable recent news releases on Merck’s pipeline and portfolio are provided in the table that follows.

Oncology	FDA Approved KEYTRUDA for Treatment of Patients With Resectable (T≥4 cm or N+) NSCLC in Combination With Chemotherapy as Neoadjuvant Treatment, Then Continued as Single Agent as Adjuvant Treatment After Surgery, Based on Results From Phase 3 KEYNOTE-671 Trial	(Read Announcement)
	FDA Granted Priority Review to Merck’s Application for KEYTRUDA Plus Concurrent Chemoradiotherapy as Treatment for Patients With Newly Diagnosed High-Risk Locally Advanced Cervical Cancer, Based on Results From Phase 3 KEYNOTE-A18 Trial; FDA Set PDUFA Date of Jan. 20, 2024	(Read Announcement)
	FDA Accepted for Priority Review Merck’s sNDA for WELIREG in Certain Previously Treated Patients With Advanced RCC, Based on Results From Phase 3 LITESPARK-005 Trial; FDA Set PDUFA Date of Jan. 17, 2024	(Read Announcement)
	European Commission (EC) Approved KEYTRUDA as Adjuvant Treatment for Adults With NSCLC at High Risk of Recurrence Following Complete Resection and Platinum-Based Chemotherapy, Based on Results From Phase 3 KEYNOTE-091 Trial	(Read Announcement)
	EC Approved KEYTRUDA Plus Trastuzumab and Chemotherapy as First-Line Treatment for HER2-Positive Advanced Gastric or Gastroesophageal Junction (GEJ) Adenocarcinoma Expressing PD-L1 (CPS ≥1), Based on Results From Phase 3 KEYNOTE-811 Trial	(Read Announcement)
	EU Granted Positive CHMP Opinion for KEYTRUDA Plus Chemotherapy as First-Line Treatment for HER2-Negative Advanced Gastric or GEJ Adenocarcinoma Expressing PD-L1 (CPS ≥1), Based on Results From Phase 3 KEYNOTE-859 Trial	(Read Announcement)
	Japan Ministry of Health, Labor and Welfare Approved Lynparza Plus Abiraterone and Prednisolone for Treatment of BRCA-Mutated Metastatic Castration-Resistant Prostate Cancer, Based on Results From Phase 3 PROpel Trial	(Read Announcement)
	KEYTRUDA Plus Chemotherapy Before Surgery and Continued as Single Agent After Surgery Reduced Risk of Death by 28% Versus Pre-Operative Chemotherapy in Resectable Stage II, IIIA or IIIB NSCLC, Based on Results From Phase 3 KEYNOTE-671 Trial	(Read Announcement)
	KEYTRUDA Plus Padcev Reduced Risk of Death by More Than Half Versus Chemotherapy in Patients With Previously Untreated Locally Advanced or Metastatic Urothelial Cancer, Based on Results From Phase 3 KEYNOTE-A39/EV-302 Trial	(Read Announcement)
	KEYTRUDA Plus Concurrent Chemoradiotherapy Significantly Improved Progression-Free Survival (PFS) Versus Concurrent Chemoradiotherapy Alone in Newly Diagnosed, High-Risk Locally Advanced Cervical Cancer, Based on Results From Phase 3 KEYNOTE-A18 Trial	(Read Announcement)
	WELIREG Significantly Improved PFS and Objective Response Rates Versus Everolimus in Certain Previously Treated Patients With Advanced RCC, Based on Results From Phase 3 LITESPARK-005 Trial	(Read Announcement)
	KEYTRUDA Plus Chemotherapy Showed Statistically Significant Improvement in Pathological Complete Response Rate as Neoadjuvant Therapy Versus Chemotherapy in High-Risk, Early-Stage ER+/HER2- Breast Cancer, Based on Results From Phase 3 KEYNOTE-756 Trial	(Read Announcement)
	KEYTRUDA Plus Trastuzumab and Chemotherapy Significantly Improved PFS Versus Trastuzumab and Chemotherapy in First-Line HER2-Positive Advanced Gastric or GEJ Adenocarcinoma, Based on Results From Phase 3 KEYNOTE-811 Trial	(Read Announcement)
	KEYTRUDA Significantly Improved Disease-Free Survival in Certain Patients With Muscle-Invasive Urothelial Carcinoma After Surgery, Based on Results From Phase 3 KEYNOTE-123 Trial	(Read Announcement)

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Cardiovascular	FDA Accepted for Priority Review a New BLA for Sotatercept, an Activin Signaling Inhibitor to Treat Adults With PAH, Based on Results From Phase 3 STELLAR Trial; FDA Set PDUFA Date of March 26, 2024	(Read Announcement)
	Merck Presented New Analyses Supporting the Promising Potential of Sotatercept, Its Investigational Medicine for Adults With PAH, Based on Results From Phase 3 STELLAR and SOTERIA Trials	(Read Announcement)
	Merck Initiated Phase 3 Clinical Program for Oral PCSK9 Inhibitor Candidate MK-0616	(Read Announcement)
Vaccines	Long-Term Follow-up Data on Sustained Immunogenicity and Safety for GARDASIL Published in Pediatrics	(Read Announcement)
Hospital Acute Care	Merck Received Positive EU CHMP Opinion for PREVYMIS for Prevention of CMV Disease in High-Risk Adult Kidney Transplant Recipients and Extended 200-Day Dosing in Adult Hematopoietic Stem Cell Transplant Recipients at Risk for Late CMV Infection and Disease, Based on Results From Phase 3 P002 and P040 Trials	(Read Announcement)

Sustainability Highlights

Merck issued its 2022/2023 Impact Report highlighting the company’s performance across its sustainability efforts, reflecting strong progress toward its commitments to advance access to health and operate responsibly. The report noted how the company reached more than 500 million people around the world with its innovations in 2022 and expanded two of its 2025 Access to Health goals.

Full-Year 2023 Financial Outlook

The following table summarizes the company’s full-year financial outlook.

	Full Year 2023
	Updated	Prior
Sales^*	$59.7 to $60.2 billion	$58.6 to $59.6 billion
Non-GAAP Gross margin²	Approximately 77%	Approximately 77%
Non-GAAP Operating expenses^2**	$39.8 to $40.4 billion	$34.0 to $34.6 billion
Non-GAAP Other (income) expense, net²	Approximately $200 million	Approximately $100 million
Non-GAAP Effective tax rate^2***	39.0% to 40.0%	30.5% to 31.5%
Non-GAAP EPS^2****	$1.33 to $1.38	$2.95 to $3.05
Share count (assuming dilution)	2.55 billion	2.55 billion

*Includes approximately $1.3 billion of LAGEVRIO sales. The company does not have any non-GAAP adjustments to sales.

**Includes an aggregate $17.1 billion of R&D expenses related to the Prometheus Biosciences, Inc. (Prometheus) and Imago BioSciences, Inc. (Imago) acquisitions, and upfront payments for the license and collaboration agreement with Kelun-Biotech (a holding subsidiary of Sichuan Kelun Pharmaceutical Co., Ltd) and collaboration agreement with Daiichi Sankyo. Outlook does not assume any additional significant potential business development transactions.

***Includes an approximate 24.5 percentage point negative impact related to business development (Imago, Prometheus and Daiichi Sankyo).

****Includes $6.22 of one-time charges related to the Prometheus and Imago acquisitions and upfront payments to Kelun-Biotech and Daiichi Sankyo.

Merck has not provided a reconciliation of forward-looking non-GAAP gross margin, non-GAAP operating expenses, non-GAAP other (income) expense, net, non-GAAP effective tax rate and non-GAAP EPS to the most directly comparable GAAP measures, given it cannot predict with reasonable certainty the amounts necessary for such a reconciliation, including intangible asset impairment charges, legal settlements, and income and losses from investments in equity securities either owned directly or through ownership interests in investment funds, without unreasonable effort. These items are inherently difficult to forecast and could have a significant impact on the company’s future GAAP results.

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Merck continues to experience strong sustained demand for key growth products, particularly in oncology and vaccines. As a result, Merck is raising and narrowing its full-year sales outlook. Merck now expects full-year sales to be between $59.7 billion and $60.2 billion, including a negative impact of foreign exchange of approximately 2 percentage points, at mid-October 2023 exchange rates. This full-year outlook includes approximately $1.3 billion of LAGEVRIO sales.

Merck’s full-year non-GAAP effective income tax rate is expected to be between 39.0% and 40.0%, which includes an approximate 24.5 percentage point negative impact related to business development activity.

Merck now expects its full-year non-GAAP EPS to be between $1.33 and $1.38, including a negative impact of foreign exchange of approximately 6 percentage points, at mid-October 2023 exchange rates. This revised non-GAAP EPS range reflects the following, which were not previously included in the outlook:

Additional strength in the business of approximately $0.15 per share.

A pretax charge of $5.5 billion, or $1.70 per share, for the collaboration agreement with Daiichi Sankyo.

Estimated expense in the fourth quarter of 2023 of approximately $0.04 per share to advance the ADC assets and finance the transaction with Daiichi Sankyo.

A 1%, or approximately $0.05 per share, incremental negative impact of foreign exchange.

The non-GAAP EPS range excludes acquisition- and divestiture-related costs, costs related to restructuring programs, income and losses from investments in equity securities, and a previously disclosed charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the earnings conference call on Thursday, Oct. 26, at 9 a.m. ET via this weblink. A replay of the webcast, along with the sales and earnings news release, supplemental financial disclosures, prepared remarks and slides highlighting the results, will be available at www.merck.com.

All participants may join the call by dialing (888) 769-8514 (U.S. and Canada Toll-Free) or (517) 308-9208 and using the access code 8206435.

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About Merck

At Merck, known as MSD outside of the United States and Canada, we are unified around our purpose: We use the power of leading-edge science to save and improve lives around the world. For more than 130 years, we have brought hope to humanity through the development of important medicines and vaccines. We aspire to be the premier research-intensive biopharmaceutical company in the world – and today, we are at the forefront of research to deliver innovative health solutions that advance the prevention and treatment of diseases in people and animals. We foster a diverse and inclusive global workforce and operate responsibly every day to enable a safe, sustainable and healthy future for all people and communities. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.

Forward-Looking Statement of Merck & Co., Inc., Rahway, N.J., USA

This news release of Merck & Co., Inc., Rahway, N.J., USA (the “company”) includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. There can be no guarantees with respect to pipeline candidates that the candidates will receive the necessary regulatory approvals or that they will prove to be commercially successful. If underlying assumptions prove inaccurate or risks or uncertainties materialize, actual results may differ materially from those set forth in the forward-looking statements.

Risks and uncertainties include but are not limited to, general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; the impact of the global outbreak of novel coronavirus disease (COVID-19); the impact of pharmaceutical industry regulation and health care legislation in the United States and internationally; global trends toward health care cost containment; technological advances, new products and patents attained by competitors; challenges inherent in new product development, including obtaining regulatory approval; the company’s ability to accurately predict future market conditions; manufacturing difficulties or delays; financial instability of international economies and sovereign risk; dependence on the effectiveness of the company’s patents and other protections for innovative products; and the exposure to litigation, including patent litigation, and/or regulatory actions.

The company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2022, and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

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Appendix

Generic product names are provided below.

Pharmaceutical

BRIDION (sugammadex)

GARDASIL (Human Papillomavirus Quadrivalent [Types 6, 11, 16 and 18] Vaccine, Recombinant)

GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant)

JANUMET (sitagliptin and metformin HCl)

JANUVIA (sitagliptin)

KEYTRUDA (pembrolizumab)

LAGEVRIO (molnupiravir)

Lenvima (lenvatinib)

Lynparza (olaparib)

M-M-R II (Measles, Mumps and Rubella Virus Vaccine Live)

PREVYMIS (letermovir)

PROQUAD (Measles, Mumps, Rubella and Varicella Virus Vaccine Live)

VARIVAX (Varicella Virus Vaccine Live)

VAXNEUVANCE (Pneumococcal 15-valent Conjugate Vaccine)

WELIREG (belzutifan)

Animal Health

BRAVECTO (fluralaner)

###

Media Contacts:

Investor Contacts:

Robert Josephson

(203) 914-2372

robert.josephson@merck.com

Michael Levey

(215) 872-1462

michael.levey@merck.com

Peter Dannenbaum

(732) 594-1579

peter.dannenbaum@merck.com

Steven Graziano

(732) 594-1583

steven.graziano@merck.com

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1

	GAAP									GAAP
	3Q23			3Q22			% Change			Sep YTD 2023			Sep YTD 2022			% Change
Sales	$	15,962		$	14,959			7	%	$	45,485		$	45,453			–

Costs, Expenses and Other
Cost of sales		4,264			3,934			8	%		12,214			13,530			-10	%
Selling, general and administrative		2,519			2,520			–			7,700			7,355			5	%
Research and development		3,307			4,399			-25	%		20,904			9,773			*
Restructuring costs		126			94			34	%		344			288			19	%
Other (income) expense, net		126			429			-71	%		388			1,576			-75	%
Income Before Taxes		5,620			3,583			57	%		3,935			12,931			-70	%
Taxes on Income		870			330						2,332			1,423
Net Income		4,750			3,253			46	%		1,603			11,508			-86	%
Less: Net Income Attributable to Noncontrolling Interests		5			5						12			6
Net Income Attributable to Merck & Co., Inc.	$	4,745		$	3,248			46	%	$	1,591		$	11,502			-86	%

Earnings per Common Share Assuming Dilution	$	1.86		$	1.28			45	%	$	0.62		$	4.53			-86	%

Average Shares Outstanding Assuming Dilution		2,546			2,542						2,549			2,540
Tax Rate		15.5	%		9.2	%					59.3	%		11.0	%

* 100% or greater

MERCK & CO., INC.

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 GAAP TO NON-GAAP RECONCILIATION

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2a

	GAAP			Acquisition and Divestiture-Related Costs ⁽¹⁾			Restructuring Costs ⁽²⁾			(Income) Loss from Investments in Equity Securities			Certain Other Items			Adjustment Subtotal			Non-GAAP
Third Quarter
Cost of sales	$	4,264			552			33									585		$	3,679
Selling, general and administrative		2,519			17			40									57			2,462
Research and development		3,307			10												10			3,297
Restructuring costs		126						126									126			–
Other (income) expense, net		126			(24	)					17						(7	)		133
Income Before Taxes		5,620			(555	)		(199	)		(17	)					(771	)		6,391
Income Tax Provision (Benefit)		870			(53	)⁽⁴⁾		(32	)⁽⁴⁾		(4	)⁽⁴⁾					(89	)		959
Net Income		4,750			(502	)		(167	)		(13	)					(682	)		5,432
Net Income Attributable to Merck & Co., Inc.		4,745			(502	)		(167	)		(13	)					(682	)		5,427
Earnings per Common Share Assuming Dilution	$	1.86			(0.20	)		(0.07	)		–						(0.27	)	$	2.13

Tax Rate		15.5	%																	15.0	%

Sep YTD
Cost of sales	$	12,214			1,564			94									1,658		$	10,556
Selling, general and administrative		7,700			62			93									155			7,545
Research and development		20,904			29			1									30			20,874
Restructuring costs		344						344									344			–
Other (income) expense, net		388			(12	)					(218	)		573	⁽³⁾		343			45
Income Before Taxes		3,935			(1,643	)		(532	)		218			(573	)		(2,530	)		6,465
Income Tax Provision (Benefit)		2,332			(249	)⁽⁴⁾		(88	)⁽⁴⁾		47	⁽⁴⁾		(60	)⁽⁴⁾		(350	)		2,682
Net Income		1,603			(1,394	)		(444	)		171			(513	)		(2,180	)		3,783
Net Income Attributable to Merck & Co., Inc.		1,591			(1,394	)		(444	)		171			(513	)		(2,180	)		3,771
Earnings per Common Share Assuming Dilution	$	0.62			(0.55	)		(0.18	)		0.07			(0.20	)		(0.86	)	$	1.48

Tax Rate		59.3	%																	41.5	%

Only the line items that are affected by non-GAAP adjustments are shown.

Merck is providing certain non-GAAP information that excludes certain items because of the nature of these items and the impact they have on the analysis of underlying business performance and trends. Management believes that providing non-GAAP information enhances investors’ understanding of the company’s results because management uses non-GAAP measures to assess performance. 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. The non-GAAP information presented should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

⁽¹⁾Amounts included in cost of sales primarily reflect expenses for the amortization of intangible assets. Amounts included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to acquisitions and divestitures. Amounts included in research and development expenses primarily reflect expenses for the amortization of intangible assets. Amounts included in other (income) expense, net, primarily reflect royalty income, partially offset by an increase in the estimated fair value measurement of liabilities for contingent consideration related to the prior termination of the Sanofi-Pasteur MSD joint venture. Additionally, the nine-month period includes a $37 million loss on the sale of a business.

⁽²⁾Amounts primarily include employee separation costs and accelerated depreciation associated with facilities to be closed or divested related to activities under the company's formal restructuring programs.

⁽³⁾Reflects a charge related to settlements with certain plaintiffs in the Zetia antitrust litigation.

⁽⁴⁾Represents the estimated tax impacts on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3

	2023									2022											3Q			Sep YTD
	1Q		2Q		3Q		Sep YTD		1Q		2Q		3Q		Sep YTD		4Q		Full Year		Nom %	Ex-Exch %		Nom %	Ex-Exch %
TOTAL SALES ⁽¹⁾	$	14,487	$	15,035	$	15,962	$	45,485	$	15,901	$	14,593	$	14,959	$	45,453	$	13,830	$	59,283	7		9	-	3
PHARMACEUTICAL		12,721		13,457		14,263		40,442		14,107		12,756		12,963		39,826		12,180		52,005	10		11	2	4
Oncology
Keytruda		5,795		6,271		6,338		18,403		4,809		5,252		5,426		15,487		5,450		20,937	17		17	19	21
Alliance Revenue – Lynparza ⁽²⁾		275		310		299		884		266		275		284		825		292		1,116	5		6	7	10
Alliance Revenue – Lenvima ⁽²⁾		232		242		260		734		227		231		202		660		216		876	29		30	11	13
Welireg		42		50		54		146		18		27		38		83		40		123	43		43	77	77
Alliance Revenue – Reblozyl ⁽³⁾		43		47		52		142		52		33		39		124		41		166	35		35	14	14
Vaccines ⁽⁴⁾
Gardasil / Gardasil 9		1,972		2,458		2,585		7,015		1,460		1,674		2,294		5,428		1,470		6,897	13		16	29	34
ProQuad / M-M-R II / Varivax		528		582		713		1,823		470		578		668		1,716		526		2,241	7		6	6	6
RotaTeq		297		131		156		584		216		173		256		644		139		783	-39		-39	-9	-8
Vaxneuvance		106		168		214		488		5		12		16		32		138		170	*		*	*	*
Pneumovax 23		96		92		140		327		173		153		131		457		145		602	6		4	-28	-27
Vaqta		40		42		69		151		36		35		64		134		39		173	8		9	12	13
Hospital Acute Care
Bridion		487		502		424		1,413		395		426		423		1,244		441		1,685	-		-	14	15
Prevymis		129		143		157		430		94		103		114		310		118		428	38		38	39	41
Dificid		65		76		74		215		52		66		77		196		67		263	-4		-4	10	10
Primaxin		80		53		41		174		58		64		63		185		54		239	-35		-31	-6	-
Noxafil		60		55		51		167		57		60		62		180		58		238	-18		-12	-7	-1
Zerbaxa		50		54		53		157		30		46		43		120		49		169	23		22	31	33
Cardiovascular
Alliance Revenue - Adempas/Verquvo ⁽⁵⁾		99		68		92		259		72		98		88		258		82		341	5		5	-	-
Adempas ⁽⁶⁾		59		65		65		189		61		63		57		181		57		238	15		11	5	7
Virology
Lagevrio		392		203		640		1,236		3,247		1,177		436		4,859		825		5,684	47		51	-75	-73
Isentress / Isentress HD		123		136		119		377		158		147		161		466		167		633	-27		-27	-19	-17
Neuroscience
Belsomra		56		63		58		176		69		69		62		199		59		258	-6		-4	-11	-6
Immunology
Simponi		180		180		179		539		186		181		173		540		166		706	3		-2	-	-
Remicade		51		48		45		144		61		53		49		163		44		207	-8		-10	-12	-10
Diabetes ⁽⁷⁾
Januvia		551		511		581		1,642		779		756		717		2,252		561		2,813	-19		-17	-27	-24
Janumet		329		354		255		937		454		476		417		1,347		353		1,700	-39		-38	-30	-28
Other Pharmaceutical ⁽⁸⁾		584		553		549		1,690		602		528		603		1,736		583		2,319	-9		-7	-3	-
ANIMAL HEALTH		1,491		1,456		1,400		4,347		1,482		1,467		1,371		4,320		1,230		5,550	2		2	1	3
Livestock		849		807		874		2,530		832		826		829		2,486		814		3,300	5		7	2	6
Companion Animal		642		649		526		1,817		650		641		542		1,834		416		2,250	-3		-4	-1	-
Other Revenues ⁽⁹⁾		275		122		299		696		312		370		625		1,307		420		1,728	-52		-18	-47	-19

*200% or greater

Sum of quarterly amounts may not equal year-to-date amounts due to rounding.

⁽¹⁾Only select products are shown.

⁽²⁾Alliance Revenue represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

⁽³⁾Alliance Revenue represents royalties and a milestone payment of $20 million received in the first quarter of 2022.

⁽⁴⁾Total Vaccines sales were $3,133 million, $3,557 million and $4,002 million in the first, second and third quarter of 2023, respectively, and $2,481 million, $2,709 million and $3,552 million in the first, second and third quarter of 2022, respectively.

⁽⁵⁾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.

⁽⁶⁾Net product sales in Merck's marketing territories.

⁽⁷⁾Total Diabetes sales were $950 million, $951 million and $924 million in the first, second and third quarter of 2023, respectively, and $1,305 million, $1,300 million and $1,231 million in the first, second and third quarter of 2022, respectively.

⁽⁸⁾Includes Pharmaceutical products not individually shown above.

⁽⁹⁾Other Revenues are comprised primarily of revenues from third-party manufacturing arrangements and miscellaneous corporate revenues, including revenue-hedging activities. Other Revenues related to the receipt of upfront and milestone payments for out-licensed products were $51 million, $3 million and $65 million in the first, second and third quarter of 2023, respectively, and $114 million, $32 million and $10 million in the first, second and third quarter of 2022, respectively.