Segment Reporting

12 Months Ended

Dec. 31, 2022

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company’s operations are principally managed on a product basis and include two operating segments, Pharmaceutical and Animal Health, both of which are reportable segments.

The Pharmaceutical segment includes human health pharmaceutical and vaccine products. Human health pharmaceutical products consist of therapeutic and preventive agents, generally sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Human health vaccine products consist of preventive pediatric, adolescent and adult vaccines. The Company sells these human health vaccines primarily to physicians, wholesalers, physician distributors and government entities. A large component of pediatric and adolescent vaccine sales are made to the U.S. Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the U.S. government. Additionally, the Company sells vaccines to the Federal government for placement into vaccine stockpiles.

The Animal Health segment discovers, develops, manufactures and markets a wide range of veterinary pharmaceutical and vaccine products, as well as health management solutions and services, for the prevention, treatment and control of disease in all major livestock and companion animal species. The Company also offers an extensive suite of digitally connected identification, traceability and monitoring products. The Company sells its products to veterinarians, distributors, animal producers, farmers and pet owners.

The Company previously had a Healthcare Services segment that provided services and solutions focused on engagement, health analytics and clinical services to improve the value of care delivered to patients. The Company divested the remaining businesses in this segment during the first quarter of 2020.

Sales of the Company’s products were as follows:

Years Ended December 31	2022						2021						2020
	U.S.		Int’l		Total		U.S.		Int’l		Total		U.S.		Int’l		Total
Pharmaceutical:
Oncology
Keytruda	$	12,686	$	8,251	$	20,937	$	9,765	$	7,421	$	17,186	$	8,352	$	6,028	$	14,380
Alliance revenue - Lynparza (1)	584		532		1,116		515		473		989		417		308		725
Alliance revenue - Lenvima (1)	579		297		876		417		287		704		359		220		580
Alliance revenue - Reblozyl (2)	123		43		166		—		17		17		—		—		—
Vaccines
Gardasil/Gardasil 9	2,065		4,832		6,897		1,881		3,792		5,673		1,755		2,184		3,938
ProQuad/M-M-R II/Varivax	1,724		518		2,241		1,629		506		2,135		1,378		500		1,878
RotaTeq	508		275		783		473		334		807		486		311		797
Pneumovax 23	346		256		602		547		346		893		727		359		1,087
Vaqta	95		78		173		100		79		179		103		67		170
Hospital Acute Care
Bridion	922		762		1,685		762		770		1,532		583		615		1,198
Prevymis	188		240		428		153		218		370		119		162		281
Dificid	241		22		263		166		10		175		102		7		110
Primaxin	1		238		239		2		258		259		2		248		251
Noxafil	51		187		238		60		199		259		42		287		329
Invanz	4		185		189		(5)		207		202		9		202		211
Cancidas	6		168		174		4		208		212		7		207		213
Zerbaxa	89		79		169		4		(5)		(1)		74		56		130
Cardiovascular
Alliance revenue - Adempas/Verquvo (3)	329		12		341		312		30		342		259		22		281
Adempas	—		238		238		—		252		252		—		220		220
Virology
Lagevrio	1,523		4,161		5,684		632		320		952		—		—		—
Isentress/Isentress HD	274		359		633		294		474		769		326		531		857
Neuroscience
Belsomra	79		179		258		78		241		318		81		247		327
Immunology
Simponi	—		706		706		—		825		825		—		838		838
Remicade	—		207		207		—		299		299		—		330		330
Diabetes
Januvia	1,248		1,565		2,813		1,404		1,920		3,324		1,470		1,836		3,306
Janumet	355		1,344		1,700		367		1,597		1,964		477		1,494		1,971
Other pharmaceutical (4)	969		1,282		2,249		841		1,275		2,118		882		1,321		2,202
Total Pharmaceutical segment sales	24,989		27,016		52,005		20,401		22,353		42,754		18,010		18,600		36,610
Animal Health:
Livestock	710		2,590		3,300		667		2,628		3,295		612		2,327		2,939
Companion Animals	1,112		1,138		2,250		1,091		1,182		2,273		872		892		1,764
Total Animal Health segment sales	1,822		3,728		5,550		1,758		3,810		5,568		1,484		3,219		4,703
Other segment sales (5)	—		—		—		—		—		—		23		—		23
Total segment sales	26,811		30,744		57,555		22,159		26,163		48,322		19,517		21,819		41,336
Other (6)	395		1,333		1,728		266		116		382		71		111		182
	$	27,206	$	32,077	$	59,283	$	22,425	$	26,279	$	48,704	$	19,588	$	21,930	$	41,518

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

(1)    Alliance revenue for Lynparza and Lenvima represents Merck’s share of profits, which are product sales net of cost of sales and commercialization costs (see Note 5).

(2)    Alliance revenue for Reblozyl represents royalties and, for 2022, also includes a payment received related to the achievement of a regulatory approval milestone (see Note 5).

(3)    Alliance revenue for Adempas/Verquvo represents Merck’s share of profits from sales in Bayer’s marketing territories, which are product sales net of cost of sales and commercialization costs (see Note 5).

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

(5)    Represents sales for the Healthcare Services segment. All the businesses in the Healthcare Services segment were fully divested by the first quarter of 2020.

(6)    Other is primarily comprised of miscellaneous corporate revenue, including revenue hedging activities which increased (decreased) sales by $810 million, $(203) million and $(19) million in 2022, 2021 and 2020, respectively, as well as revenue from third-party manufacturing arrangements (including sales to Organon). Other for 2022, 2021 and 2020 also includes $165 million, $218 million and $54 million, respectively, related to upfront and milestone payments received by Merck for out-licensing arrangements.

Consolidated sales by geographic area where derived are as follows:

Years Ended December 31	2022		2021		2020
United States	$	27,206	$	22,425	$	19,588
Europe, Middle East and Africa	14,493		13,341		11,547
China	5,191		4,378		2,751
Japan	3,629		2,726		2,602
Asia Pacific (other than China and Japan)	3,614		2,407		2,113
Latin America	2,582		2,206		1,890
Other	2,568		1,221		1,027
	$	59,283	$	48,704	$	41,518

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

Years Ended December 31	2022		2021		2020
Segment profits:
Pharmaceutical segment	$	36,852	$	30,977	$	26,106
Animal Health segment	1,963		1,950		1,669
Other segments	—		—		1
Total segment profits	38,815		32,927		27,776
Other profits	1,160		156		75
Unallocated:
Interest income	157		36		59
Interest expense	(962)		(806)		(831)
Amortization	(2,085)		(1,636)		(1,817)
Depreciation	(1,642)		(1,414)		(1,519)
Research and development	(13,011)		(11,692)		(12,911)
Restructuring costs	(337)		(661)		(575)
Other unallocated, net	(5,651)		(3,031)		(4,394)
	$	16,444	$	13,879	$	5,863

Pharmaceutical segment profits are comprised of segment sales less standard costs, as well as selling, general and administrative expenses directly incurred by the segment. Animal Health segment profits are comprised of segment sales, less all cost of sales, as well as selling, general and administrative expenses and research and development costs directly incurred by the segment. For internal management reporting presented to the chief operating decision maker, Merck does not allocate the remaining cost of sales not included in segment profits as described above, research and development expenses incurred in Merck Research Laboratories, the Company’s research and development division that focuses on human health-related activities, 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. In addition, costs related to restructuring activities, as well as the amortization of intangible assets and purchase accounting adjustments are not allocated to segments.

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

Other unallocated, net, includes expenses from corporate and manufacturing cost centers, goodwill and other intangible asset impairment charges, gains or losses on sales of businesses, expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration, and other miscellaneous income or expense items.

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

	Pharmaceutical		Animal Health		All Other		Total
Year Ended December 31, 2022
Included in segment profits:
Equity income from affiliates	$	39	$	—	$	—	$	39
Depreciation	5		177		—		182
Year Ended December 31, 2021
Included in segment profits:
Equity income from affiliates	$	11	$	—	$	—	$	11
Depreciation	6		158		—		164
Year Ended December 31, 2020
Included in segment profits:
Equity loss from affiliates	$	6	$	—	$	—	$	6
Depreciation	6		143		1		150

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

December 31	2022		2021		2020
United States	$	12,891	$	11,759	$	10,394
Europe, Middle East and Africa	6,993		6,081		5,314
Asia Pacific (other than China and Japan)	966		857		737
Latin America	225		199		169
China	207		220		216
Japan	135		159		166
Other	5		4		4
	$	21,422	$	19,279	$	17,000

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