UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) February 5, 2020

Merck & Co., Inc.

(Exact name of registrant as specified in its charter)

New Jersey<br> <br>(State or other jurisdiction<br> <br>of incorporation)	1-6571<br> <br>(Commission<br> <br>File Number)	22-1918501<br> <br>(IRS Employer<br> <br>Identification No.)

2000 Galloping Hill Road, Kenilworth, NJ<br> <br>(Address of principal executive offices)	07033<br> <br>(Zip Code)

Registrant’s telephone number, including area code

(908) 740-4000

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common<br> Stock ($0.50 par value)	MRK	New York Stock Exchange
1.125% Notes due 2021	MRK/21	New York Stock Exchange
0.500% Notes due 2024	MRK 24	New York Stock Exchange
1.875% Notes due 2026	MRK/26	New York Stock Exchange
2.500% Notes due 2034	MRK/34	New York Stock Exchange
1.375% Notes due 2036	MRK 36A	New York Stock Exchange

Item 2.02. Results of Operations and Financial Condition.

The following information, including the exhibits hereto, is being furnished pursuant to this Item 2.02.

Incorporated by reference is a press release issued by Merck & Co., Inc. (the “Company”) on February 5, 2020, regarding earnings for the fourth quarter and year end of 2019, attached as Exhibit 99.1. Also incorporated by reference is certain supplemental information not included in the press release, attached as Exhibit 99.2.

This information shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and is not incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

Item 8.01. Other Events.

Incorporated by reference is a press release issued by the Company on February 5, 2020, regarding the spin-off of certain products into a new, independent, publicly-traded company.

Item 9.01. Financial Statements and

Exhibits.

(d) Exhibits

Exhibit 99.1	Press release issued February 5, 2020, regarding earnings for the fourth quarter and year end of 2019
Exhibit 99.2	Certain supplemental information not included in the press release
Exhibit 99.3	Press release issued February 5, 2020, regarding the spin-off of certain products into a new, independent, publicly-traded company
Exhibit 104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Merck & Co., Inc.
Date: February 5, 2020	By:	/s/ Faye C. Brown
		FAYE C. BROWN
		Senior Assistant Secretary

Exhibit 99.1

News Release

FOR IMMEDIATE RELEASE

Media Contacts:	Jennifer Mauer	Investor Contacts:	Peter Dannenbaum
	(908) 740-1801		(908) 740-1037
	Pamela Eisele		Michael DeCarbo
	(267) 305-3558		(908) 740-1807

Merck Announces Fourth-Quarter and Full-Year2019 Financial Results

·	Fourth-Quarter 2019 Worldwide Sales Were $11.9 Billion, an Increase<br>of 8%; Excluding the Impact from Foreign Exchange, Sales Grew 9%
·	Fourth-Quarter 2019 GAAP EPS Was $0.92; Fourth-Quarter Non-GAAP EPS<br>Was $1.16
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·	Full-Year 2019 Worldwide Sales Were $46.8 Billion, an Increase of<br>11%; Excluding the Impact from Foreign Exchange, Sales Grew 13%
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o	KEYTRUDA 2019 Worldwide Sales Grew 55% to $11.1 Billion; Excluding the Impact from Foreign Exchange, Sales Grew 58%
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o	Human Health Vaccines 2019 Worldwide Sales Grew 15% to $8.4 Billion; Excluding the Impact from Foreign Exchange, Sales Grew<br>17%
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o	BRIDION 2019 Worldwide Sales Grew 23% to $1.1 Billion; Excluding the Impact from Foreign Exchange, Sales Grew 26%
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o	Animal Health 2019 Worldwide Sales Grew 4% to $4.4 Billion; Excluding the Impact from Foreign Exchange, Sales Grew 9%
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·	Full-Year 2019 GAAP EPS Was $3.81; Full-Year Non-GAAP EPS Was $5.19
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·	2020 Financial Outlook
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o	Anticipates Full-Year 2020 Worldwide Sales to Be Between $48.8 Billion and $50.3 Billion, Including a Negative Impact from<br>Foreign Exchange of Less Than 1%
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o	Expects Full-Year 2020 GAAP EPS to Be Between $4.57 and $4.72; Expects Non-GAAP EPS to Be Between $5.62 and $5.77, Including<br>a Negative Impact from Foreign Exchange of Approximately 1.5%
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·	In Conjunction with Fourth-Quarter Results, Merck Announces its Intention<br>to Focus on Key Growth Pillars Through Spinoff of Women’s Health, Trusted Legacy Brands and Biosimilar Products into NewCo
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KENILWORTH, N.J., Feb. 5, 2020 – Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced financial results for the fourth quarter and full year of 2019.

“As evidenced by our results and our 2020 guidance, Merck had an extraordinary year and is in a position of operational and financial strength,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “It is this position of strength, born of our focused execution, that gives us the confidence to spin off our Women’s Health, trusted Legacy Brands and Biosimilar products into a new company, which will position us to deliver even greater value to patients and shareholders.”

Financial Summary

	Fourth<br> Quarter										Year<br> Ended
$<br> in millions, except EPS amounts	2019		2018		Change			Change<br> <br><br> Ex-Exchange			Dec.<br> 31, <br><br> 2019		Dec.<br> 31, <br><br> 2018		Change			Change<br> <br><br> Ex-Exchange
Sales	$	11,868	$	10,998		8	%		9	%	$	46,840	$	42,294		11	%		13	%
GAAP<br> net income^1^		2,357		1,827		29	%		29	%		9,843		6,220		58	%		61	%
Non-GAAP<br> net income that excludes certain items^1,2*^		2,978		2,745		8	%		8	%		13,382		11,621		15	%		16	%
GAAP<br> EPS		0.92		0.69		33	%		32	%		3.81		2.32		64	%		67	%
Non-GAAP<br> EPS that excludes certain items^2*^		1.16		1.04		12	%		12	%		5.19		4.34		20	%		21	%

*Refer to table on page 10.

GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) was $0.92 for the fourth quarter and $3.81 for the full year of 2019. GAAP EPS for the full year of 2019 reflects a $993 million charge for the acquisition of Peloton Therapeutics, Inc. (Peloton) and a $612 million pretax intangible asset impairment charge related to SIVEXTRO (tedizolid phosphate). Non-GAAP EPS of $1.16 for the fourth quarter and $5.19 for the full year of 2019 excludes acquisition- and divestiture-related costs, restructuring costs and certain other items. Non-GAAP EPS for the full year of 2019 also excludes the charge for the acquisition of Peloton and the SIVEXTRO impairment charge.

Oncology Pipeline Highlights

Merck continued to advance the development programs for KEYTRUDA (pembrolizumab), the company’s anti-PD-1 therapy; Lynparza (olaparib), a PARP inhibitor being co-developed and co-commercialized with AstraZeneca; and Lenvima (lenvatinib mesylate), an orally available tyrosine kinase inhibitor being co-developed and co-commercialized with Eisai Co., Ltd. (Eisai).

·	Merck announced the following regulatory milestones for KEYTRUDA:
o	Approval in the United States by the Food and Drug Administration (FDA) as monotherapy for the treatment of certain patients<br>with high-risk, non-muscle invasive bladder cancer (NMIBC) based on the KEYNOTE-057 trial;
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o	Approval in Japan for three new first-line indications across advanced renal cell carcinoma (RCC) based on the KEYNOTE-426<br>trial and recurrent or distant metastatic head and neck cancer based on the KEYNOTE-048 trial;
o	Approval in China for first-line treatment of metastatic squamous non-small cell lung cancer (NSCLC) in combination with<br>chemotherapy based on the KEYNOTE-407 trial; and

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

^2^ Merck is providing certain 2019 and 2018 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 and permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. 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 items, see Tables 2a and 2b attached to this release.

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o	Approval in Europe for two new regimens of KEYTRUDA,<br> as monotherapy or in combination with chemotherapy, for the first-line treatment of metastatic<br> or unresectable recurrent head and neck squamous cell carcinoma (HNSCC) in adults whose<br> tumors express PD-L1 with a Combined Positive Score (CPS) >1 based on the KEYNOTE-048<br> trial.
·	Merck<br> presented results from an exploratory analysis of the pivotal Phase 3 KEYNOTE-042 trial<br> that showed KEYTRUDA improved overall survival as monotherapy for the first-line treatment<br> of metastatic NSCLC regardless of KRAS mutational status.
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·	Merck<br> announced that the Phase 3 KEYNOTE-604 trial investigating KEYTRUDA in combination with<br> chemotherapy significantly improved progression-free survival (PFS) compared to chemotherapy<br> alone in the first-line treatment of patients with extensive-stage small cell lung cancer<br> (ES-SCLC) but did not meet the other dual primary endpoint of overall survival.
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·	Merck<br> and AstraZeneca announced the following regulatory milestones for Lynparza:
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o	Approval in the United States by the FDA as first-line<br> maintenance treatment of germline BRCA-mutated (BRCAm) metastatic pancreatic<br> cancer in patients whose disease had not progressed on at least 16 weeks of a first-line<br> platinum-based chemotherapy regimen based on the Phase 3 POLO trial;
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o	Approval in China as a first-line maintenance therapy<br> in BRCAm advanced ovarian cancer following response to platinum-based chemotherapy<br> based on the Phase 3 SOLO-1 trial;
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o	Filing acceptance for priority review by the FDA for<br> a supplemental New Drug Application (sNDA) seeking approval of Lynparza in combination<br> with bevacizumab for the maintenance treatment of women with advanced ovarian cancer<br> whose disease showed a complete or partial response to first-line treatment with platinum-based<br> chemotherapy and bevacizumab based on results from the Phase 3 PAOLA-1 trial. A Prescription<br> Drug User Fee Act (PDUFA) date is set for the second quarter of 2020; and
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o	Filing acceptance for priority review by the FDA for<br> a sNDA for the treatment of patients with metastatic castration-resistant prostate cancer<br> (mCRPC) and deleterious or suspected deleterious germline or somatic homologous recombination<br> repair (HRR) gene mutations, who have progressed following prior treatment with a new<br> hormonal agent based on results from the Phase 3 PROfound trial. A PDUFA date is set<br> for the second quarter of 2020.
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·	Merck<br> and AstraZeneca announced filing acceptance for priority review by the FDA of a New Drug<br> Application (NDA) for selumetinib, an oral MEK 1/2 inhibitor, for the treatment of certain<br> pediatric patients with neurofibromatosis Type 1 (NF1) based on the results from the<br> National Cancer Institute (NCI) Cancer Therapy Evaluation Program (CTEP)-sponsored SPRINT<br> Phase 2 Stratum 1 trial. A PDUFA date is set for the second quarter of 2020.
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Other Pipeline Highlights

·	Merck<br> announced conditional approval in Europe as well as U.S. approval for ERVEBO (Ebola Zaire<br> Vaccine, Live) for the prevention of disease caused by Zaire ebolavirus in individuals<br> 18 years of age and older.
·	Merck<br> announced FDA approval of DIFICID (fidaxomicin) tablets and oral suspension for the treatment<br> of Clostridioides difficile-associated diarrhea (CDAD) in children aged six months<br> and older.
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·	Merck<br> announced the adoption of a positive opinion by the Committee for Medicinal Products<br> for Human Use (CHMP) of the European Medicines Agency (EMA) for RECARBRIO (imipenem,<br> cilastatin, and relebactam) for the treatment of infections due to aerobic gram-negative<br> organisms in adults with limited treatment options.
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·	Merck<br> announced filing acceptance for priority review by the FDA for a sNDA seeking approval<br> of RECARBRIO to treat adult patients with hospital-acquired bacterial pneumonia and ventilator-associated<br> bacterial pneumonia (HABP/VABP) caused by certain susceptible Gram-negative microorganisms.<br> The PDUFA date is June 4, 2020.
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·	Merck<br> announced that the Phase 3 VICTORIA study evaluating vericiguat, a soluble guanylate<br> cyclase (sGC) stimulator being jointly developed with Bayer AG, met its primary composite<br> endpoint in reducing the risk of heart failure hospitalization or cardiovascular death<br> in patients with worsening chronic heart failure with reduced ejection fraction (HFrEF)<br> compared to placebo when given in combination with available heart failure therapies.
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Business Development

·	Merck<br> acquired ArQule, Inc., diversifying its oncology portfolio with the expansion into targeted<br> therapies that treat hematological malignancies with the addition of ARQ 531, a novel,<br> oral Bruton’s tyrosine kinase (BTK) inhibitor currently in a Phase 2 development,<br> among other candidates. The acquisition closed in January 2020.
·	Merck<br> entered into a strategic oncology collaboration with Taiho Pharmaceutical Co., Ltd.,<br> and Astex Pharmaceuticals focused on the development of small molecule inhibitors against<br> several drug targets, including the KRAS oncogene, which are currently being investigated<br> for the treatment of cancer.
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·	Merck<br> Animal Health acquired Vaki, a leader in fish farming monitoring equipment and real-time<br> video monitoring technology to advance fish health and welfare. The acquisition closed<br> in December.
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Fourth-Quarter and Full-Year RevenuePerformance

The following table reflects sales of the company’s top pharmaceutical products, as well as sales of animal health products.

	Fourth Quarter									****	Year Ended									****
$<br> in millions	2019		2018		Change		****	Change Ex-Exchange		****	Dec. 31,<br> <br>2019		Dec. 31,<br> <br>2018		Change		****	Change Ex-Exchange		****
Total<br> Sales	$	11,868	$	10,998		8	%		9	%	$	46,840	$	42,294		11	%		13	%
Pharmaceutical		10,533		9,830		7	%		8	%		41,751		37,689		11	%		14	%
KEYTRUDA		3,111		2,151		45	%		46	%		11,084		7,171		55	%		58	%
JANUVIA<br> / JANUMET		1,418		1,465		-3	%		-2	%		5,524		5,914		-7	%		-4	%
GARDASIL<br> / GARDASIL 9		693		835		-17	%		-16	%		3,737		3,151		19	%		21	%
PROQUAD,<br> M-M-R II and VARIVAX		481		455		6	%		7	%		2,275		1,798		27	%		28	%
PNEUMOVAX<br> 23		334		322		4	%		4	%		926		907		2	%		3	%
BRIDION		313		256		22	%		24	%		1,131		917		23	%		26	%
ROTATEQ		227		188		21	%		21	%		791		728		9	%		10	%
ISENTRESS<br> / ISENTRESS HD		223		280		-20	%		-18	%		975		1,140		-15	%		-10	%
IMPLANON<br> / NEXPLANON		206		169		22	%		23	%		787		703		12	%		14	%
SIMPONI		205		220		-7	%		-3	%		830		893		-7	%		-2	%
Animal<br> Health		1,122		1,036		8	%		10	%		4,393		4,212		4	%		9	%
Livestock		777		684		14	%		16	%		2,784		2,630		6	%		11	%
Companion<br> Animals		345		352		-2	%		0	%		1,609		1,582		2	%		5	%
Other<br> Revenues		213		132		61	%		30	%		696		393		77	%		-26	%

Pharmaceutical Revenue

Fourth-quarter pharmaceutical sales increased 7% to $10.5 billion, excluding the unfavorable effect from foreign exchange, sales grew 8%. The increase was driven primarily by growth in oncology, partially offset by the ongoing impacts of the loss of market exclusivity for several products. Additionally, fourth quarter 2019 sales were reduced by $120 million due to a previously disclosed borrowing of doses of GARDASIL 9 (Human Papillomavirus 9-valent Vaccine, Recombinant) from the U.S. Centers for Disease Control and Prevention’s (CDC) Pediatric Vaccine Stockpile. Sales in the fourth quarter of 2018 were increased by $125 million due to the replenishment of previously borrowed doses of GARDASIL 9.

Growth in oncology was largely driven by sales of KEYTRUDA, which were $3.1 billion for the quarter, reflecting strong momentum from the NSCLC indications as well as continued uptake in other indications, including the recently launched RCC and adjuvant melanoma indications. Additionally, oncology sales reflect alliance revenue of $132 million related to Lynparza and $124 million related to Lenvima, representing Merck’s share of profits, which are product sales net of cost of sales and commercialization costs.

Performance in vaccines for the fourth quarter reflects the negative impact of borrowing doses of GARDASIL 9 from the CDC Pediatric Vaccine Stockpile as discussed above, partially offset by higher demand in Europe and China, as well as higher demand and pricing in the United States. Excluding the borrowing-related activity in both periods, GARDASIL [Human Papillomavirus Quadrivalent (Types 6, 11, 16 and 18) Vaccine, Recombinant] and GARDASIL 9 sales grew 15% in the quarter, including a 1% negative impact from foreign exchange.

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Performance in hospital acute care reflects higher demand globally, particularly in the United States, for BRIDION (sugammadex) Injection 100 mg/mL, a medicine for the reversal of neuromuscular blockade induced by rocuronium bromide or vecuronium bromide in adults undergoing surgery; and the ongoing launch of PREVYMIS (letermovir), a medicine for prophylaxis (prevention) of cytomegalovirus (CMV) infection and disease in adult CMV-seropositive recipients of an allogeneic hematopoietic stem cell transplant.

Pharmaceutical sales growth for the quarter was partially offset by the ongoing impacts from the loss of market exclusivity, including for NOXAFIL (posaconazole), EMEND (aprepitant), ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), CUBICIN (daptomycin) and REMICADE (infliximab). A generic entrant of NUVARING (etonogestrel/ethinyl estradiol vaginal ring) in the U.S. also negatively affected sales for the quarter and will continue to negatively affect sales in the future. In addition, the decline in sales of JANUVIA (sitagliptin) and JANUMET (sitagliptin and metformin HCI) reflects continued pricing pressure in the United States, which more than offset higher demand globally.

Full-year 2019 pharmaceutical sales increased 11% to $41.8 billion; excluding the unfavorable effect from foreign exchange, sales grew 14%, primarily reflecting growth in oncology and vaccines, partially offset by the ongoing effects from the loss of market exclusivity for several products and continued pricing pressure in diabetes.

Animal Health Revenue

Animal Health sales totaled $1.1 billion for the fourth quarter of 2019, an increase of 8% compared with the fourth quarter of 2018; excluding the unfavorable effect from foreign exchange, Animal Health sales grew 10%. Growth for the quarter was mainly driven by livestock products due to the Antelliq acquisition.

Worldwide sales for the full year of 2019 were $4.4 billion, an increase of 4%; excluding the unfavorable effect from foreign exchange, sales grew 9%. Full-year sales growth was mainly driven by livestock products due to the Antelliq acquisition, along with higher sales of companion animal products, primarily the BRAVECTO (fluralaner) line of products for parasitic control.

Animal Health segment profits were $366 million in the fourth quarter of 2019, a decrease of 5% compared with $387 million in the fourth quarter of 2018, primarily driven by unfavorable product mix and higher investments in selling and product development, partially offset by higher sales. Segment profits were $1.6 billion for the full year of 2019, a decrease of 3% compared with $1.7 billion in 2018, primarily driven by the unfavorable effects of foreign exchange.^3^

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Fourth-Quarter and Full-Year Expense, EPS and Related Information

The tables below present selected expense information.

$<br>in millions	GAAP			Acquisition- and Divestiture- Related Costs^4^			Restructuring Costs		Certain Other Items			Non-GAAP^2^
Fourth-Quarter 2019
Cost of sales	$	3,669		$	325		$	90	$	-		$	3,254
Selling, general and administrative		2,888			44			1		-			2,843
Research and development		2,548			166			-		11			2,371
Restructuring costs		194			-			194		-			-
Other (income) expense,<br> net		(223	)		(37	)		-		7			(193	)
Fourth-Quarter 2018
Cost of sales	$	3,289		$	525		$	10	$	3		$	2,751
Selling, general and administrative		2,643			6			1		-			2,636
Research and development		2,214			91			1		-			2,122
Restructuring costs		138			-			138		-			-
Other (income) expense,<br> net		110			179			–		(3	)		(66	)
$ in millions ****	GAAP			Acquisition- and Divestiture- Related Costs^4^		Restructuring<br><br> Costs		Certain<br> Other<br><br> Items			Non-GAAP^2^
---	---	---	---	---	---	---	---	---	---	---	---	---	---
Year Ended Dec. 31, 2019
Cost of sales	$	14,112		$	2,126	$	251	$	-		$	11,735
Selling, general and administrative		10,615			126		34		-			10,455
Research and development		9,872			145		4		993			8,730
Restructuring costs		638			-		638		-			-
Other (income) expense,<br> net		139			284		-		55			(200	)
Year Ended Dec. 31, 2018
Cost of sales	$	13,509		$	2,672	$	21	$	423		$	10,393
Selling, general and administrative		10,102			32		3		-			10,067
Research and development		9,752			98		2		1,744			7,908
Restructuring costs		632			-		632		-			-
Other (income) expense,<br> net		(402	)		264		-		(57	)		(609	)

GAAP Expense, EPS and Related Information

Gross margin was 69.1% for the fourth quarter of 2019 compared to 70.1% for the fourth quarter of 2018. The decrease reflects unfavorable manufacturing variances, inventory write-offs, higher amortization of intangible assets related to collaborations, the unfavorable effects of pricing pressure and restructuring costs, partially offset by favorable product mix and lower acquisition- and divestiture-related costs.

^3^ 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, Merck does not allocate general and administrative expenses not directly incurred by the segment, 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.

^4^ Includes expenses for the amortization of intangible assets and purchase accounting adjustments to inventories recognized as a result of acquisitions, intangible asset impairment charges, and expense or income related to changes in the estimated fair value measurement of liabilities for contingent consideration. Also includes integration, transaction and certain other costs related to business acquisitions and divestitures.

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Gross margin was 69.9% for the full year of 2019 compared to 68.1% for the full year of 2018. The increase in gross margin for the full year of 2019 reflects a charge in 2018 related to the termination of a collaboration agreement with Samsung Bioepis Co., Ltd., favorable product mix and lower acquisition- and divestiture-related costs, partially offset by unfavorable manufacturing variances, inventory write-offs, the unfavorable effects of pricing pressure, higher amortization of intangible assets related to collaborations and higher restructuring costs.

Selling, general and administrative expenses were $2.9 billion in the fourth quarter of 2019, an increase of 9% compared to the fourth quarter of 2018. Full-year 2019 selling, general and administrative expenses were $10.6 billion, an increase of 5% compared to the full year of 2018. The increase in both periods reflects higher administrative costs, acquisition- and divestiture-related costs, and promotion costs primarily in support of strategic brands, partially offset by the favorable effects of foreign exchange.

Research and development (R&D) expenses were $2.5 billion in the fourth quarter of 2019, an increase of 15% compared with the fourth quarter of 2018. R&D expenses were $9.9 billion for the full year of 2019, a 1% increase compared to the full year of 2018. The increase in both periods primarily reflects higher expenses related to clinical development and increased investment in discovery research and early drug development. In addition, the increase for the full year of 2019 was driven by a $993 million charge for the acquisition of Peloton. The increase in R&D expenses for the full year of 2019 was partially offset by charges in 2018 including $1.4 billion related to the formation of an oncology collaboration with Eisai and $344 million related to the Viralytics Limited acquisition.

Other (income) expense, net, was $223 million of income in the fourth quarter of 2019 compared to $110 million of expense in the fourth quarter of 2018 primarily reflecting income from investments in equity securities in 2019 compared with losses in 2018. In addition, the fourth quarter of 2018 included goodwill impairment charges. Other (income) expense, net, was $139 million of expense for the full year of 2019 compared to $402 million of income for the full year of 2018 driven by lower income from investments in equity securities and higher net interest expense.

The effective income tax rates were 15.3% for the fourth quarter and 14.7% for full year of 2019. The effective income tax rate for the full year of 2019 reflects a net tax benefit of $364 million related to the settlement of certain federal income tax matters, partially offset by the unfavorable impact of the charge for the acquisition of Peloton for which no tax benefit was recognized.

GAAP EPS was $0.92 for the fourth quarter of 2019 compared with $0.69 for the fourth quarter of 2018. GAAP EPS was $3.81 for the full year of 2019 compared with $2.32 for the full year of 2018.

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Non-GAAP Expense, EPS and Related Information

Non-GAAP gross margin was 72.6% for the fourth quarter of 2019 compared to 75.0% for the fourth quarter of 2018. Non-GAAP gross margin was 74.9% for the full year of 2019 compared to 75.4% for the full year of 2018. The decrease in both periods reflects unfavorable manufacturing variances, inventory write-offs, the unfavorable effects of pricing pressure and higher amortization of intangible assets related to collaborations, partially offset by favorable product mix.

Non-GAAP selling, general and administrative expenses were $2.8 billion in the fourth quarter of 2019, an increase of 8% compared to the fourth quarter of 2018. Full-year 2019 non-GAAP selling, general and administrative expenses were $10.5 billion, an increase of 4% compared to the full year of 2018. The increase in both periods primarily reflects higher administrative costs and higher promotion costs primarily in support of strategic brands, partially offset by the favorable effects of foreign exchange.

Non-GAAP R&D expenses were $2.4 billion in the fourth quarter of 2019, a 12% increase compared to the fourth quarter of 2018. Non-GAAP R&D expenses were $8.7 billion for the full year of 2019, a 10% increase compared to the full year of 2018. The increases in both periods primarily reflect higher expenses related to clinical development and increased investment in discovery research and early drug development.

Non-GAAP other (income) expense, net, was $193 million of income in the fourth quarter of 2019 compared to $66 million of income in the fourth quarter of 2018, primarily reflecting income from investments in equity securities in 2019 compared with losses in 2018, partially offset by higher net interest expense. Non-GAAP other (income) expense, net, for the full year of 2019 was $200 million of income compared to $609 million of income for the full year of 2018, primarily driven by lower income from investments in equity securities and higher net interest expense.

The non-GAAP effective income tax rates were 16.9% for the fourth quarter of 2019 and 16.8% for the full year of 2019.

Non-GAAP EPS was $1.16 for the fourth quarter of 2019 compared with $1.04 for the fourth quarter of 2018. Non-GAAP EPS was $5.19 for the full year of 2019 compared with $4.34 for the full year of 2018.

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

Page 9

	Fourth Quarter						Year Ended
$ in millions, except EPS amounts	2019			2018			Dec. 31, 2019			Dec. 31, 2018
EPS
GAAP EPS	$	0.92		$	0.69		$	3.81		$	2.32
Difference^5^		0.24			0.35			1.38			2.02
Non-GAAP EPS that excludes items listed below^2^	$	1.16		$	1.04		$	5.19		$	4.34
Net Income
GAAP net income^1^	$	2,357		$	1,827		$	9,843		$	6,220
Difference		621			918			3,539			5,401
Non-GAAP net income that excludes items listed below^1,2^	$	2,978		$	2,745		$	13,382		$	11,621
Decrease (Increase) in Net Income Due to Excluded Items:
Acquisition- and divestiture-related costs^4^	$	498		$	801		$	2,681		$	3,066
Restructuring costs		285			150			927			658
Charge for the acquisition of Peloton		11			-			993			-
Charge related to termination of a collaboration agreement with Samsung		-			3			-			423
Charge related to formation of a collaboration with Eisai		-			-			-			1,400
Charge for the acquisition of Viralytics		-			-			-			344
Other		7			(3	)		55			(57	)
Net decrease (increase) in income before taxes		801			951			4,656			5,834
Income tax (benefit) expense^6^		(180	)		25			(1,028	)		(375	)
Acquisition- and divestiture-related costs attributable to non-controlling interests		-			(58	)		(89	)		(58	)
Decrease (increase) in net income	$	621		$	918		$	3,539		$	5,401

Financial Outlook

At mid-January 2020 exchange rates, Merck anticipates full-year 2020 revenue to be between $48.8 billion and $50.3 billion, including a negative impact from foreign exchange of less than 1%.

Merck expects full-year 2020 GAAP EPS to be between $4.57 and $4.72. Merck expects full-year 2020 non-GAAP EPS to be between $5.62 and $5.77, including an approximately 1.5% negative impact from foreign exchange. The non-GAAP range excludes acquisition- and divestiture-related costs and costs related to restructuring programs.

The following table summarizes the company’s full-year 2020 financial guidance.

	GAAP	Non-GAAP^2^
Revenue	$48.8 to $50.3 billion	$48.8 to $50.3 billion*
Operating expenses	Slightly lower than 2019	Higher than 2019 by a low-single-digit rate
Effective tax rate	17% to 18%	17.5% to 18.5%
EPS**	$4.57 to $4.72	$5.62 to $5.77

*The company does not have any non-GAAP adjustments to revenue.

**EPS guidance for 2020 assumes a share count (assuming dilution) of approximately 2.54 billion shares.

^5^ Represents the difference between calculated GAAP EPS and calculated non-GAAP EPS, which may be different than the amount calculated by dividing the impact of the excluded items by the weighted-average shares for the period.

^6^ Includes the estimated tax impact on the reconciling items. Amounts for full-year 2019 include a $364 million net tax benefit related to the settlement of certain federal income tax matters, an $86 million tax benefit related to the reversal of tax reserves established in conjunction with the divestiture of Merck’s Consumer Care business in 2014 as a result of the lapse in the statute of limitations, and a $117 million tax charge related to the finalization of treasury regulations associated with the 2017 enactment of U.S. tax legislation. Amounts for fourth-quarter and full-year 2018 include adjustments to the provisional amounts recorded in 2017 related to the enactment of the U.S. tax legislation.

Page 10

A reconciliation of anticipated 2020 GAAP EPS to non-GAAP EPS and the items excluded from non-GAAP EPS are provided in the table below.

$ in millions, except EPS amounts	Full-Year 2020
GAAP EPS		4.57 to 4.72
Difference^5^		1.05
Non-GAAP EPS that excludes items listed below^2^		5.62 to 5.77
Acquisition- and divestiture-related costs	$	2,500
Restructuring costs		800
Net decrease (increase) in income before taxes		3,300
Estimated income tax (benefit) expense		(640
Decrease (increase) in net income	$	2,660

All values are in US Dollars.

Earnings Conference Call

Investors, journalists and the general public may access a live audio webcast of the call today at 8:00 a.m. EST on Merck’s website at https://investors.merck.com/events-and-presentations/default.aspx. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 8583879. Members of the media are invited to monitor the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 8583879. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

About Merck

For more than 125 years, Merck, known as MSD outside of the United States and Canada, has been inventing for life, bringing forward medicines and vaccines for many of the world’s most challenging diseases in pursuit of our mission to save and improve lives. We demonstrate our commitment to patients and population health by increasing access to health care through far-reaching policies, programs and partnerships. Today, Merck continues to be at the forefront of research to prevent and treat diseases that threaten people and animals – including cancer, infectious diseases such as HIV and Ebola, and emerging animal diseases – as we aspire to be the premier research-intensive biopharmaceutical company in the world. For more information, visit www.merck.com and connect with us on Twitter, Facebook, Instagram, YouTube and LinkedIn.

Page 11

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

This news release of Merck & Co., Inc., Kenilworth, 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. Examples of forward-looking statements include statements with respect to the company’s plans to spin-off certain of its businesses into an independent company, the timing and structure of such spin-off, the characteristics of the business to be separated, the expected benefits of the spin-off to the company and the expected effect on the company’s dividends. 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 whether the proposed spin-off will be completed on the proposed timetable or at all. 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, uncertainties as to the timing of the proposed spin-off; uncertainties as to the status of any required regulatory approvals; the possibility that various conditions to the consummation of the spin-off may not be satisfied; the effects of disruption from the transactions contemplated in connection with the spin-off; general industry conditions and competition; general economic factors, including interest rate and currency exchange rate fluctuations; 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 2018 Annual Report on Form 10-K and the company’s other filings with the Securities and Exchange Commission (SEC) available at the SEC’s Internet site (www.sec.gov).

#

Page 12

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1

****	GAAP						****		****	GAAP						****		****
****	4Q19		****	4Q18		****	% Change		****	Full Year 2019		****	Full Year 2018		****	% Change		****
Sales	$	11,868		$	10,998			8	%	$	46,840		$	42,294			11	%
Costs, Expenses and Other
Cost of sales ^(1)^		3,669			3,289			12	%		14,112			13,509			4	%
Selling, general and administrative ^(1)^		2,888			2,643			9	%		10,615			10,102			5	%
Research and development ^(1)(2)^		2,548			2,214			15	%		9,872			9,752			1	%
Restructuring costs ^(3)^		194			138			41	%		638			632			1	%
Other (income) expense, net ^(1)^		(223	)		110			*			139			(402	)		*
Income Before Taxes		2,792			2,604			7	%		11,464			8,701			32	%
Taxes on Income ^(1)^		428			826						1,687			2,508
Net Income		2,364			1,778			33	%		9,777			6,193			58	%
Less: Net Income (Loss) Attributable to Noncontrolling Interests ^(1)^		7			(49	)					(66	)		(27	)
Net Income Attributable to Merck & Co., Inc.	$	2,357		$	1,827			29	%	$	9,843		$	6,220			58	%
Earnings per Common Share Assuming Dilution	$	0.92		$	0.69			33	%	$	3.81		$	2.32			64	%
Average Shares Outstanding Assuming Dilution		2,559			2,634						2,580			2,679
Tax Rate ^(4)^		15.3	%		31.7	%					14.7	%		28.8	%

* 100% or greater

^(1)^Amounts include the impact of acquisition and divestiture-related costs, restructuring costs and certain other items. See accompanying tables for details.

^(2)^Research and development expenses for the full year of 2019 include a $993 million charge for the acquisition of Peloton Therapeutics (Peloton). Research and development expenses for the full year of 2018 include a $1.4 billion charge related to the formation of a collaboration with Eisai Co., Ltd. (Eisai), as well as a $344 million charge for the acquisition of Viralytics Limited.

^(3)^Represents separation and other related costs associated with restructuring activities under the company's formal restructuring programs.

^(4)^The effective income tax rates for the fourth quarter and the full year of 2019 include the unfavorable impact of a charge for the acquisition of Peloton for which no tax benefit was recognized and the favorable impact of product mix. The effective income tax rate for the full year of 2019 also reflects a net tax benefit of $364 million related to the settlement of certain federal income tax matters.

The effective income tax rates for the fourth quarter and full year of 2018 include the unfavorable impact of adjustments to the provisional amounts recorded in the prior year associated with the enactment of U.S. tax legislation, including $124 million related to the transition tax. The effective income tax rate for the full year of 2018 also includes the unfavorable impacts of a charge related to the formation of a collaboration with Eisai and a charge related to the termination of a collaboration agreement with Samsung for which no tax benefits were recognized.

MERCK & CO., INC.

GAAPTO NON-GAAP RECONCILIATION

FOURTHQUARTER 2019

(AMOUNTSIN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table2a

	GAAP											Non-GAAP
Cost of sales	$	3,669		325		90				415		$	3,254
Selling, general and administrative		2,888		44		1				45			2,843
Research and development		2,548		166				11		177			2,371
Restructuring costs		194				194				194			-
Other (income) expense, net		(223	)	(37	)			7		(30	)		(193	)
Income Before Taxes		2,792		(498	)	(285	)	(18	)	(801	)		3,593
Income Tax Provision (Benefit)		428		(55	)^(3)^	(49	)^(3)^	(76	)^(4)^	(180	)		608
Net Income		2,364		(443	)	(236	)	58		(621	)		2,985
Net Income Attributable to Merck & Co., Inc.		2,357		(443	)	(236	)	58		(621	)		2,978
Earnings per Common Share Assuming Dilution	$	0.92		(0.17	)	(0.09	)	0.02		(0.24	)	$	1.16
Tax Rate		15.3	%										16.9	%

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 this information enhances investors’ understanding of the company’s results as it permits investors to understand how management assesses performance. Management uses these measures internally for planning and forecasting purposes and to measure the performance of the company along with other metrics. Senior management’s annual compensation is derived in part using non-GAAP income and non-GAAP EPS. This information should be considered in addition to, but not as a substitute for or superior to, information prepared in accordance with GAAP.

^(1)^Amount included in cost of sales primarily reflects $306 million of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as $12 million of intangible asset impairment charges. Amount included in selling, general and administrative expenses primarily reflects integration, transaction and certain other costs related to business acquisitions and divestitures. Amount included in research and development expenses primarily reflects $164 million of in-process research and development (IPR&D) impairment charges.

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

^(4)^ Primarily reflects an $86 million tax benefit related to the reversal of tax reserves established in conjunction with the divestiture of Merck's Consumer Care business in 2014 as a result of the lapse in the statute of limitations.

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

FULL YEAR 2019

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2b

	GAAP											Non-GAAP
Cost of sales	$	14,112		2,126		251				2,377		$	11,735
Selling, general and administrative		10,615		126		34				160			10,455
Research and development		9,872		145		4		993		1,142			8,730
Restructuring costs		638				638				638			-
Other (income) expense, net		139		284				55		339			(200	)
Income Before Taxes		11,464		(2,681	)	(927	)	(1,048	)	(4,656	)		16,120
Income Tax Provision (Benefit)		1,687		(493	)^(3)^	(155	)^(3)^	(380	)^(5)^	(1,028	)		2,715
Net Income		9,777		(2,188	)	(772	)	(668	)	(3,628	)		13,405
Less: Net (Loss) Income Attributable to Noncontrolling Interests		(66	)	(89	)					(89	)		23
Net Income Attributable to Merck & Co., Inc.		9,843		(2,099	)	(772	)	(668	)	(3,539	)		13,382
Earnings per Common Share Assuming Dilution	$	3.81		(0.82	)	(0.30	)	(0.26	)	(1.38	)	$	5.19
Tax Rate		14.7	%										16.8	%

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

^(1)^Amount included in cost of sales primarily reflects $1.4 billion of expenses for the amortization of intangible assets recognized as a result of business acquisitions, as well as $705 million of intangible asset impairment charges, including $612 million related to SIVEXTRO. Amount included in selling, general and administrative expenses primarily reflects integration, transaction and certain other costs related to business acquisitions and divestitures, including costs related to the acquisition of Antelliq Corporation. Amounts included in research and development expenses primarily reflect $172 million of in-process research and development (IPR&D) impairment charges, partially offset by a reduction in expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration. Amount included in other (income) expense, net primarily reflects goodwill and intangible asset impairment charges related to certain businesses in the Healthcare Services segment and expenses related to an increase in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD joint venture.

^(3)^ Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

^(4)^ Amount included in research and development represents the charge related to the acquisition of Peloton.

^(5)^ Primarily reflects a $364 million net tax benefit related to the settlement of certain federal income tax matters, an $86 million tax benefit related to the reversal of tax reserves established in conjunction with the divestiture of Merck's Consumer Care business in 2014 as a result of the lapse in the statute of limitations, and a $117 million tax charge related to the finalization of treasury regulations associated with the 2017 enactment of U.S. tax legislation.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3

		2019										2018											Full Year
		1Q		2Q		3Q		4Q		Full Year		1Q		2Q		3Q		4Q		Full Year	Nom %	Ex-Exch %	Nom %	Ex-Exch %
TOTAL SALES ^(1)^	$	10,816	$	11,760	$	12,397	$	11,868	$	46,840	$	10,037	$	10,465	$	10,794	$	10,998	$	42,294	8	9	11	13
PHARMACEUTICAL		9,663		10,460		11,095		10,533		41,751		8,919		9,282		9,658		9,830		37,689	7	8	11	14
Oncology
Keytruda		2,269		2,634		3,070		3,111		11,084		1,464		1,667		1,889		2,151		7,171	45	46	55	58
Alliance Revenue – Lynparza ^(2)^		79		111		123		132		444		33		44		49		62		187	111	112	137	141
Alliance Revenue – Lenvima ^(2)^		74		97		109		124		404		0		35		43		71		149	74	73	171	173
Emend		117		121		98		53		388		125		148		123		126		522	-58	-58	-26	-24
Vaccines ^(3)^
Gardasil / Gardasil 9		838		886		1,320		693		3,737		660		608		1,048		835		3,151	-17	-16	19	21
ProQuad / M-M-R II / Varivax		496		675		623		481		2,275		392		426		525		455		1,798	6	7	27	28
Pneumovax 23		185		170		237		334		926		179		193		214		322		907	4	4	2	3
RotaTeq		211		172		180		227		791		193		156		191		188		728	21	21	9	10
Vaqta		47		58		62		71		238		37		65		66		72		239	-2	-1	0	2
Hospital Acute Care
Bridion		255		278		284		313		1,131		204		240		217		256		917	22	24	23	26
Noxafil		190		193		177		103		662		176		188		188		191		742	-46	-44	-11	-7
Primaxin		59		71		77		67		273		72		68		72		53		265	25	27	3	7
Invanz		72		78		57		57		263		151		149		137		59		496	-5	-2	-47	-44
Cubicin		88		67		52		50		257		98		94		95		80		367	-38	-37	-30	-28
Cancidas		61		67		62		58		249		91		87		79		69		326	-17	-15	-24	-20
Immunology
Simponi		208		214		203		205		830		231		233		210		220		893	-7	-3	-7	-2
Remicade		123		98		101		89		411		167		157		135		123		582	-27	-25	-29	-25
Neuroscience
Belsomra		67		76		80		83		306		54		71		66		69		260	19	16	18	17
Virology
Isentress / Isentress HD		255		247		250		223		975		281		305		275		280		1,140	-20	-18	-15	-10
Zepatier		114		108		83		66		370		131		113		104		108		455	-38	-38	-19	-16
Cardiovascular
Zetia		140		156		147		146		590		305		226		165		162		857	-9	-11	-31	-30
Vytorin		97		76		57		54		285		167		155		92		83		497	-35	-33	-43	-40
Atozet		94		92		97		108		391		73		101		84		89		347	22	26	13	18
Adempas		90		104		107		117		419		68		75		94		91		329	28	29	27	30
Diabetes ^(4)^
Januvia		824		908		807		943		3,482		880		949		927		930		3,686	1	2	-6	-4
Janumet		530		533		503		475		2,041		544		585		563		535		2,228	-11	-9	-8	-5
Women's Health
NuvaRing		219		240		241		179		879		216		236		234		216		902	-17	-17	-3	-2
Implanon / Nexplanon		199		183		199		206		787		174		174		186		169		703	22	23	12	14
Diversified Brands
Singulair		191		160		152		195		698		175		185		161		187		708	4	5	-1	1
Cozaar / Hyzaar		103		109		116		113		442		120		125		103		105		453	8	9	-3	2
Nasonex		96		72		58		67		293		122		81		71		102		376	-34	-34	-22	-19
Arcoxia		75		75		72		67		288		83		84		83		86		335	-23	-22	-14	-10
Follistim AQ		57		63		62		58		241		67		70		60		70		268	-16	-15	-10	-7
Other Pharmaceutical ^(5)^		1,140		1,268		1,229		1,265		4,901		1,186		1,189		1,109		1,215		4,705	4	6	4	7
ANIMAL HEALTH		1,025		1,124		1,122		1,122		4,393		1,065		1,090		1,021		1,036		4,212	8	10	4	9
Livestock		611		671		726		777		2,784		652		633		660		684		2,630	14	16	6	11
Companion Animals		414		453		396		345		1,609		413		457		361		352		1,582	-2	0	2	5
Other Revenues ^(6)^		128		176		180		213		696		53		93		115		132		393	61	30	77	-26

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)^Total Vaccines sales were $1,887 million, $2,037 million, $2,517 million and $1,928 million in the first, second, third and fourth quarters of 2019, respectively, and $1,561 million, $1,533 million, $2,159 million and $2,008 million for the first, second, third and fourth quarters of 2018, respectively.

^(4)^Total Diabetes sales were $1,402 million, $1,480 million, $1,360 million and $1,472 million in the first, second, third and fourth quarters of 2019, respectively, and $1,433 million, $1,571 million, $1,506 million and $1,485 million for the first, second, third and fourth quarters of 2018, respectively.

^(5)^Includes Pharmaceutical products not individually shown above.

^(6)^Other Revenues are comprised primarily of Healthcare Services segment revenues, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.

Exhibit 99.2

MERCK & CO., INC.

CONSOLIDATED STATEMENT OF INCOME - GAAP

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 1a

	2019															2018															% Change
	1Q			2Q			3Q			4Q			Full Year			1Q			2Q			3Q			4Q			Full Year			4Q			Full Year
Sales	$	10,816		$	11,760		$	12,397		$	11,868		$	46,840		$	10,037		$	10,465		$	10,794		$	10,998		$	42,294			8	%		11	%
Costs, Expenses and Other																									****	****			****
Cost of<br> sales		3,052			3,401			3,990			3,669			14,112			3,184			3,417			3,619		****	3,289			13,509			12	%		4	%
Selling, general and<br> administrative		2,425			2,712			2,589			2,888			10,615			2,508			2,508			2,443		****	2,643			10,102			9	%		5	%
Research and development		1,931			2,189			3,204			2,548			9,872			3,196			2,274			2,068		****	2,214			9,752			15	%		1	%
Restructuring costs		153			59			232			194			638			95			228			171		****	138			632			41	%		1	%
Other (income) expense,<br> net		188			140			35			(223	)		139			(291	)		(48	)		(172	)	****	110			(402	)		*			*
Income Before Taxes		3,067			3,259			2,347			2,792			11,464			1,345			2,086			2,665		****	2,604			8,701			7	%		32	%
Taxes on Income		205			615			440			428			1,687			604			370			707		****	826			2,508
Net Income		2,862			2,644			1,907			2,364			9,777			741			1,716			1,958		****	1,778			6,193			33	%		58	%
Less: Net (Loss) Income Attributable to Noncontrolling<br> Interests		(53	)		(26	)		6			7			(66	)		5			9			8		****	(49)			(27	)
Net Income Attributable to Merck & Co., Inc.	$	2,915		$	2,670		$	1,901		$	2,357		$	9,843		$	736		$	1,707		$	1,950		$	1,827		$	6,220			29	%		58	%
Earnings per Common Share Assuming Dilution	$	1.12		$	1.03		$	0.74		$	0.92		$	3.81		$	0.27		$	0.63		$	0.73		$	0.69		$	2.32			33	%		64	%
Average Shares Outstanding Assuming Dilution		2,603			2,588			2,572			2,559			2,580			2,710			2,696			2,678		****	2,634			2,679
Tax Rate		6.7	%		18.9	%		18.7	%		15.3	%		14.7	%		44.9	%		17.8	%		26.5	%	****	31.7	%		28.8	%

* 100% or greater

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

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

FOURTH QUARTER 2018

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2c

	GAAP											Non-GAAP
Cost of sales	$	3,289		525		10		3		538		$	2,751
Selling, general and administrative		2,643		6		1				7			2,636
Research and development		2,214		91		1				92			2,122
Restructuring costs		138				138				138			-
Other (income) expense, net		110		179				(3	)	176			(66	)
Income Before Taxes		2,604		(801	)	(150	)	-		(951	)		3,555
Income Tax Provision (Benefit)		826		(148	)^(3)^	(13	)^(3)^	186	^(4)^	25			801
Net Income		1,778		(653	)	(137	)	(186	)	(976	)		2,754
Less: Net (Loss) Income Attributable to Noncontrolling Interests		(49	)	(58	)					(58	)		9
Net Income Attributable to Merck & Co., Inc.		1,827		(595	)	(137	)	(186	)	(918	)		2,745
Earnings per Common Share Assuming Dilution	$	0.69		(0.23	)	(0.05	)	(0.07	)	(0.35	)	$	1.04
Tax Rate		31.7	%										22.5	%

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

^(1)^Amounts included in cost of sales reflect expenses for the amortization of intangible assets recognized as a result of business acquisitions. Amounts included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures. Amounts included in research and development expenses reflect $149 million of in-process research and development (IPR&D) impairment charges, partially offset by a reduction of expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration. Amounts included in other (income) expense, net primarily reflect goodwill impairment charges related to certain businesses in the Healthcare Services segment and an increase in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD joint venture.

^(3)^Represents the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments.

^(4)^Includes the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. Also includes adjustments to the provisional amounts recorded in the prior year associated with the enactment of U.S. tax legislation, including $124 million related to the transition tax.

MERCK & CO., INC.

GAAP TO NON-GAAP RECONCILIATION

FULL YEAR 2018

(AMOUNTS IN MILLIONS, EXCEPT PER SHARE FIGURES)

(UNAUDITED)

Table 2d

	GAAP											Non-GAAP
Cost of sales	$	13,509		2,672		21		423		3,116		$	10,393
Selling, general<br> and administrative		10,102		32		3				35			10,067
Research and development		9,752		98		2		1,744		1,844			7,908
Restructuring costs		632				632				632			-
Other (income) expense,<br> net		(402	)	264				(57	)	207			(609	)
Income Before Taxes		8,701		(3,066	)	(658	)	(2,110	)	(5,834	)		14,535
Income Tax Provision (Benefit)		2,508		(378	)^(4)^	(82	)^(4)^	85	^(5)^	(375	)		2,883
Net Income		6,193		(2,688	)	(576	)	(2,195	)	(5,459	)		11,652
Less: Net (Loss) Income<br> Attributable to Noncontrolling Interests		(27	)	(58	)					(58	)		31
Net Income Attributable<br> to Merck & Co., Inc.		6,220		(2,630	)	(576	)	(2,195	)	(5,401	)		11,621
Earnings per Common Share<br> Assuming Dilution	$	2.32		(0.98	)	(0.22	)	(0.82	)	(2.02	)	$	4.34
Tax Rate		28.8	%										19.8	%

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

^(1)^Amounts included in cost of sales reflect expenses for the amortization of intangible assets recognized as a result of business acquisitions. Amounts included in selling, general and administrative expenses reflect integration, transaction and certain other costs related to business acquisitions and divestitures. Amounts included in research and development expenses reflect $152 million of in-process research and development (IPR&D) impairment charges, partially offset by a reduction of expenses related to a decrease in the estimated fair value measurement of liabilities for contingent consideration. Amounts included in other (income) expense, net primarily reflect goodwill impairment charges related to certain businesses in the Healthcare Services segment and an increase in the estimated fair value measurement of liabilities for contingent consideration, partially offset by royalty income related to the termination of the Sanofi-Pasteur MSD joint venture.

^(3)^Amount included in cost of sales represents a charge related to the termination of a collaboration agreement with Samsung Bioepis Co., Ltd. for insulin glargine. Amounts included in research and development expenses represent a $1.4 billion charge related to the formation of a collaboration with Eisai Co., Ltd., as well as a $344 million charge for the acquisition of Viralytics Limited.

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

^(5)^Includes the estimated tax impact on the reconciling items based on applying the statutory rate of the originating territory of the non-GAAP adjustments. Also includes adjustments to the provisional amounts recorded in the prior year associated with the enactment of U.S. tax legislation, including $124 million related to the transition tax.

MERCK & CO., INC.

FRANCHISE / KEY PRODUCT SALES

FOURTH QUARTER 2019

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3a

	Global						U.S.							International
	4Q<br> 2019		4Q<br> 2018		%<br> Change		4Q<br> 2019		4Q<br> 2018			%<br> Change		4Q<br> 2019		4Q<br> 2018		%<br> Change
TOTAL<br> SALES ^(1)^	$	11,868	$	10,998		8	$	5,142	$	4,787			7	$	6,726	$	6,211		8
PHARMACEUTICAL		10,533		9,830		7		4,694		4,402			7		5,839		5,427		8
Oncology
Keytruda		3,111		2,151		45		1,780		1,243			43		1,331		907		47
Alliance<br> Revenue - Lynparza ^(2)^		132		62		111		82		39			113		49		24		107
Alliance<br> Revenue - Lenvima ^(2)^		124		71		74		70		46			53		53		25		111
Emend		53		126		-58		10		73			-86		42		53		-21
Vaccines<br> ^(3)^
Gardasil / Gardasil 9		693		835		-17		252		450			-44		441		384		15
ProQuad / M-M-R II / Varivax		481		455		6		358		333			8		123		122		1
Pneumovax 23		334		322		4		251		232			8		83		89		-7
RotaTeq		227		188		21		146		112			30		81		76		7
Vaqta		71		72		-2		28		32			-13		43		40		8
Hospital Acute Care
Bridion		313		256		22		152		114			33		162		142		14
Noxafil		103		191		-46		14		96			-85		89		95		-7
Primaxin		67		53		25				1			-168		67		52		28
Cancidas		58		69		-17		2		2			-21		56		67		-17
Invanz		57		59		-5				1			-102		57		58		-3
Cubicin		50		80		-38		13		41			-67		36		39		-8
Immunology
Simponi		205		220		-7									205		220		-7
Remicade		89		123		-27									89		123		-27
Neuroscience
Belsomra		83		69		19		24		20			18		59		49		20
Virology
Isentress / Isentress HD		223		280		-20		95		130			-27		128		150		-15
Zepatier		66		108		-38		23					*		44		108		-60
Cardiovascular
Zetia		146		162		-9		3		11			-73		144		151		-5
Vytorin		54		83		-35		4		(1	)		*		49		84		-41
Atozet		108		89		22									108		89		22
Adempas		117		91		28									117		91		28
Diabetes<br> ^(4)^
Januvia		943		930		1		502		503					441		427		3
Janumet		475		535		-11		127		185			-31		348		350		-1
Women's Health
Implanon / Nexplanon		206		169		22		147		120			22		59		48		21
NuvaRing		179		216		-17		150		171			-13		29		45		-35
Diversified Brands
Singulair		195		187		4		5		4			14		190		183		4
Cozaar / Hyzaar		113		105		8		8		4			83		105		101		4
Nasonex		67		102		-34		7		15			-53		60		87		-31
Arcoxia		67		86		-23									67		86		-23
Follistim AQ		58		70		-16		22		33			-32		36		37		-3
Other<br> Pharmaceutical ^(5)^		1,265		1,215		4		419		392			7		848		825		3
ANIMAL HEALTH		1,122		1,036		8		341		314			9		781		722		8
Livestock		777		684		14		177		144			23		600		540		11
Companion Animals		345		352		-2		164		170			-3		181		183		-1
Other<br> Revenues ^(6)^		213		132		61		107		71			51		106		62		72

* 200% or greater

^(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)^Total Vaccines sales were $1,928 million and $2,008 million on a global basis for fourth quarter 2019 and 2018, respectively.

^(4)^Total Diabetes sales were $1,472 million and $1,485 million on a global basis for fourth quarter 2019 and 2018, respectively.

^(5)^Includes Pharmaceutical products not individually shown above.

^(6)^Other Revenues are comprised primarily of Healthcare Services segment revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.

MERCK & CO., INC.

FRANCHISE/ KEY PRODUCT SALES

FULLYEAR 2019

(AMOUNTSIN MILLIONS)

(UNAUDITED)

Table3b

	Global						U.S.						International
	Full Year 2019		Full Year 2018		% Change		Full Year 2019		Full Year 2018		% Change		Full Year 2019		Full Year 2018		% Change
TOTAL SALES ^(1)^	$	46,840	$	42,294		11	$	20,325	$	18,212		12	$	26,515	$	24,083		10
PHARMACEUTICAL		41,751		37,689		11		18,759		16,608		13		22,992		21,081		9
Oncology
Keytruda		11,084		7,171		55		6,305		4,150		52		4,779		3,021		58
Alliance Revenue - Lynparza ^(2)^		444		187		137		269		127		112		176		61		190
Alliance Revenue - Lenvima ^(2)^		404		149		171		239		95		152		165		54		*
Emend		388		522		-26		183		312		-41		205		210		-2
Vaccines ^(3)^
Gardasil / Gardasil 9		3,737		3,151		19		1,831		1,873		-2		1,905		1,279		49
ProQuad / M-M-R II / Varivax		2,275		1,798		27		1,683		1,430		18		592		368		61
Pneumovax 23		926		907		2		679		627		8		247		281		-12
RotaTeq		791		728		9		506		496		2		284		232		22
Vaqta		238		239				130		127		2		108		112		-4
Hospital Acute Care
Bridion		1,131		917		23		533		386		38		598		531		13
Noxafil		662		742		-11		282		353		-20		380		389		-2
Primaxin		273		265		3		2		7		-72		271		258		5
Invanz		263		496		-47		30		253		-88		233		243		-4
Cubicin		257		367		-30		92		191		-52		165		176		-7
Cancidas		249		326		-24		6		12		-46		242		314		-23
Immunology
Simponi		830		893		-7								830		893		-7
Remicade		411		582		-29								411		582		-29
Neuroscience
Belsomra		306		260		18		92		96		-4		214		164		30
Virology
Isentress / Isentress HD		975		1,140		-15		398		513		-22		576		627		-8
Zepatier		370		455		-19		118		8		*		252		447		-44
Cardiovascular
Zetia		590		857		-31		14		45		-69		575		813		-29
Vytorin		285		497		-43		16		10		51		269		487		-45
Atozet		391		347		13								391		347		13
Adempas		419		329		27								419		329		27
Diabetes ^(4)^
Januvia		3,482		3,686		-6		1,724		1,969		-12		1,758		1,718		2
Janumet		2,041		2,228		-8		589		811		-27		1,452		1,417		2
Women's Health
NuvaRing		879		902		-3		742		722		3		136		180		-24
Implanon / Nexplanon		787		703		12		568		495		15		219		208		5
Diversified Brands
Singulair		698		708		-1		29		20		46		669		688		-3
Cozaar / Hyzaar		442		453		-3		24		23		5		418		431		-3
Nasonex		293		376		-22		9		23		-61		284		353		-19
Arcoxia		288		335		-14								288		335		-14
Follistim AQ		241		268		-10		103		115		-11		138		153		-10
Other Pharmaceutical ^(5)^		4,901		4,705		4		1,563		1,319		18		3,343		3,380		-1
ANIMAL HEALTH		4,393		4,212		4		1,306		1,238		6		3,086		2,974		4
Livestock		2,784		2,630		6		582		528		10		2,201		2,102		5
Companion Animals		1,609		1,582		2		724		710		2		885		872		2
Other Revenues ^(6)^		696		393		77		260		366		-29		437		28		*

* 200% or greater

^(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)^Total Vaccines sales were $8,368 million and $7,262 million on a global basis for December YTD 2019 and 2018, respectively.

^(4)^Total Diabetes sales were $5,714 million and $5,994 million on a global basis for December YTD 2019 and 2018, respectively.

^(5)^Includes Pharmaceutical products not individually shown above.

^(6)^Other Revenues are comprised primarily of Healthcare Services segment revenue, third-party manufacturing sales and miscellaneous corporate revenues, including revenue hedging activities.

MERCK & CO., INC.

PHARMACEUTICAL GEOGRAPHIC SALES

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 3c

	2019														****	2018															% Change		% Change
		1Q			2Q			3Q			4Q			Full Year			1Q			2Q			3Q			4Q			Full Year		4Q		Full Year
TOTAL PHARMACEUTICAL	$	9,663		$	10,460		$	11,095		$	10,533		$	41,751		$	8,919		$	9,282		$	9,658		$	9,830		$	37,689			7		11
United States		4,175			4,758			5,132			4,694			18,759			3,716			3,841			4,649			4,402			16,608			7		13
% Pharmaceutical Sales		43.2	%		45.5	%		46.3	%		44.6	%		44.9	%		41.7	%		41.4	%		48.1	%		44.8	%		44.1	%
Europe ^(1)^		2,335			2,301			2,304			2,373			9,314			2,402			2,322			2,114			2,237			9,076			6		3
% Pharmaceutical Sales		24.2	%		22.0	%		20.8	%		22.5	%		22.3	%		26.9	%		25.0	%		21.9	%		22.8	%		24.1	%
Japan		779			900			894			921			3,494			718			834			740			835			3,127			10		12
% Pharmaceutical Sales		8.1	%		8.6	%		8.1	%		8.7	%		8.4	%		8.1	%		9.0	%		7.7	%		8.5	%		8.3	%
China		725			745			898			773			3,141			459			530			488			601			2,077			29		51
% Pharmaceutical Sales		7.5	%		7.1	%		8.1	%		7.3	%		7.5	%		5.1	%		5.7	%		5.1	%		6.1	%		5.5	%
Asia Pacific (other than Japan and China)		642			606			638			614			2,500			653			694			566			598			2,512			3		0
% Pharmaceutical Sales		6.6	%		5.8	%		5.8	%		5.8	%		6.0	%		7.3	%		7.5	%		5.9	%		6.1	%		6.7	%
Latin America		427			523			534			429			1,914			398			459			493			530			1,880			-19		2
% Pharmaceutical Sales		4.4	%		5.0	%		4.8	%		4.1	%		4.6	%		4.5	%		4.9	%		5.1	%		5.4	%		5.0	%
Eastern Europe/Middle East Africa		343			388			423			423			1,577			335			356			347			349			1,388			21		14
% Pharmaceutical Sales		3.6	%		3.7	%		3.8	%		4.0	%		3.8	%		3.8	%		3.8	%		3.6	%		3.6	%		3.7	%
Canada		177			179			211			216			783			196			192			177			211			776			2		1
% Pharmaceutical Sales		1.8	%		1.7	%		1.9	%		2.0	%		1.9	%		2.2	%		2.1	%		1.8	%		2.1	%		2.1	%
Other		60			60			61			90			269			42			54			84			67			245			34		10
% Pharmaceutical Sales		0.6	%		0.6	%		0.5	%		0.9	%		0.6	%		0.5	%		0.6	%		0.9	%		0.7	%		0.7	%

^(1)^Europe primarily represents all European Union countries and the European Union accession markets.

MERCK & CO., INC.

OTHER (INCOME) EXPENSE, NET - GAAP

(AMOUNTS IN MILLIONS)

(UNAUDITED)

Table 4

OTHER (INCOME) EXPENSE, NET

		4Q19			4Q18			Full<br> Year <br><br>2019			Full<br> Year <br><br>2018
Interest income	$	(50	)	$	(86	)	$	(274	)	$	(343	)
Interest expense		220			203			893			772
Exchange losses		21			25			187			145
(Income)<br> loss from investments in equity securities, net ^(1)^		(119	)		52			(170	)		(324	)
Net periodic defined benefit plan (credit) cost other than service cost		(136	)		(128	)		(545	)		(512	)
Other, net		(159	)		44			48			(140	)
Total	$	(223	)	$	110		$	139		$	(402	)

^(1)^Includes net realized and unrealized gains and losses from investments in equity securities either owned directly or through ownership interests in investment funds.

Exhibit 99.3

News Release

FOR IMMEDIATE RELEASE

Media Contacts:	Pamela Eisele<br><br> <br>(267) 305-3558<br><br> <br><br><br> <br>Patrick Ryan<br><br> <br>(908) 740-1038	Investor Contacts:	Peter Dannenbaum<br><br> <br>(908) 740-1037<br><br> <br><br><br> <br>Michael DeCarbo<br><br> <br>(908) 740-1807

Merck to Focus on Key Growth PillarsThrough Spinoff of Women’s Health, Trusted Legacy Brands and Biosimilars Products into New Company (“NewCo”)

NewCo to be a Leading Women’s HealthCompany; Represents Total Revenue of Approximately $6.5 Billion for Merck in 2020

·	Separation to enhance focus of both Merck and NewCo to better meet<br>the needs of their patients and customers and achieve faster growth and greater value for all stakeholders
·	Merck to benefit from strong growth across its current pillars of<br>Oncology, Vaccines, Hospital and Animal Health, while aspiring to be the premier research-intensive biopharmaceutical company
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·	Transaction enables Merck to achieve in excess of $1.5 billion in<br>operating efficiencies by 2024; targeting Non-GAAP operating margin greater than 40%
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·	NewCo will pursue global leadership and sustainable growth in Women’s<br>Health; will realize full potential of its trusted Legacy Brands and rapidly expanding Biosimilars products
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·	Merck to retain its dividend of $2.44 per share post separation and<br>anticipates future increases with the goal of achieving a 47% to 50% payout ratio over time; NewCo expected to pay an incremental<br>dividend
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·	Transaction intended to be completed in the first half of 2021
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KENILWORTH, N.J., Feb. 5, 2020 – Merck (NYSE: MRK), known as MSD outside the United States and Canada, today announced its intention to spin-off products from its Women’s Health, trusted Legacy Brands, and Biosimilars businesses into a new, yet-to-be-named, independent, publicly traded company. The spinoff will allow both management teams to drive increased responsiveness to the particular needs of their patients and customers and achieve faster growth through focused and fit-for-purpose operating models.

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Merck will continue to benefit from strong growth across its current key pillars of Oncology, Vaccines, Hospital and Animal Health, while remaining fully committed to investing in research and development in pursuit of breakthrough innovations across all areas of science and to driving value from its deep late-stage pipeline. As a premier research-intensive biopharmaceutical company, Merck will continue its pursuit to advance the prevention and treatment of diseases that threaten people and communities around the world.

“Over the past several years, we have purposefully shifted the focus of our efforts and resources to our best opportunities for growth,” said Kenneth C. Frazier, chairman and chief executive officer, Merck. “This has led to the exceptional results we are reporting today. Given the opportunities now in front of us, we believe we can benefit from even greater focus. At the same time, we believe additional resources and focus will help ensure that our expansive portfolio, including many trusted and medically important products, reach their full potential. We have therefore made the decision to separate into two growth companies: Merck and NewCo. By optimizing our human health portfolio, Merck can move closer to its aspiration of being the premier research-intensive biopharmaceutical company, while also properly prioritizing a set of products at NewCo that are important to public health and the patients who rely on them, and which present real opportunities for growth.”

SPINOFF CREATES TWO INDEPENDENT GROWTH COMPANIES

Compelling Strategic Rationale for Spinoff

Merck believes the spinoff will deliver significant benefits for both Merck and NewCo and create value for Merck shareholders. The transaction is expected to create two companies with:

·	Enhanced strategic and operational focus on key drivers to accelerate<br>growth,
·	Improved agility to anticipate and respond to customer needs and rapidly<br>evolving market dynamics,
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·	Simplified operating models with reduced complexity and improved efficiencies,
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·	Optimized capital structures and resource allocation to pursue their<br>distinct strategic agendas for long-term success and deliver greater returns to shareholders, and
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·	Improved financial profiles making for unique and compelling investment<br>cases.
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Merck to Retain its Portfolio of Key Growth Drivers in Oncology,Vaccines, Hospital and Animal Health

Merck will retain its current growth pillars of Oncology, Vaccines, Hospital and Animal Health and continue to invest in research and development of breakthrough innovations across all areas of science. Led by highly innovative products, including KEYTRUDA (pembrolizumab), Lynparza (olaparib), Lenvima (lenvatinib mesylate), GARDASIL (Human Papillomavirus Vaccine, Recombinant), BRIDION (sugammadex), ZERBAXA (ceftolozane and tazobactam), and BRAVECTO (fluralaner), as well as its leading diabetes business and other key products, Merck will continue to benefit from broad commercial scale and remains committed to ensuring continued access to its innovative medicines across the globe.

The spinoff of NewCo will reduce Merck’s Human Health manufacturing footprint by approximately 25% and the number of Human Health products it manufactures and markets by approximately 50%. This will allow for a more focused operating model in support of its growth products. As a result, Merck expects to optimize its resources, grow faster and achieve meaningful operating margin expansion over time through increased productivity and efficiency.

NewCo to be Comprised of Products from Merck’s Women’sHealth, Trusted and Medically Important Legacy Brands and Biosimilars Businesses

NewCo will pursue global leadership and focused, sustainable growth in Women’s Health led by the growing and patent-protected NEXPLANON (etonogestrel implant) franchise and fueled by its leading contraceptive and fertility businesses. NewCo expects to establish a leading position in Biosimilars along with its partner, Samsung Bioepis Co., Ltd., focusing on its current portfolio including RENFLEXIS (infliximab-abda) and BRENZYS (etanercept) in immunology and ONTRUZANT (trastuzumab-dttb) in oncology, and is well-positioned to be a partner in the commercialization of biosimilars worldwide. NewCo will have a large portfolio of highly profitable and trusted brands consisting of dermatology, pain, respiratory, select cardiovascular products including ZETIA (ezetimibe) and VYTORIN (ezetimibe/simvastatin), as well as the rest of Merck’s Diversified Brands, with strong cash flows that will support investments in future growth opportunities. In addition, NewCo will pursue opportunities to partner with biopharmaceutical innovators looking to commercialize their products by leveraging NewCo’s scale and presence in fast growing international markets.

NewCo will have a global footprint with approximately 75% of sales generated from ex-U.S. markets, significant scale and geographic reach, world-class commercial capabilities, and approximately 10,000 to 11,000 employees. NewCo is expected to be headquartered in New Jersey.

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FINANCIAL OUTLOOK

Merck Targeting 40%+Operating Margins by 2024; Believes Revenue Potential is Underappreciated; Retaining Current Dividend

Merck expects strong revenue growth each year through 2024, which will accelerate as a result of the spinoff.

Merck continues to expect meaningful operating margin expansion over time. The spinoff of NewCo should enable Merck to achieve incremental operating efficiencies in excess of $1.5 billion by 2024, while continuing to increase investment in key growth drivers and pipeline assets. Merck is therefore targeting Non-GAAP operating margins greater than 40% in 2024, higher than what Merck expected to achieve pre-spinoff.

Merck expects to receive $8 billion to $9 billion through a special tax-free dividend from NewCo. Merck expects that these funds will be allocated to business development or share repurchases and will provide more details about the planned usage of these funds closer to the spinoff date.

Merck will retain its current 2020 dividend of $2.44 per share and anticipates future increases with the goal of achieving a 47% to 50% payout ratio over time.

Combined Value Creation

Shareholders holding both Merck and NewCo post spinoff are expected to benefit from increased combined non-GAAP (generally accepted accounting principles) earnings per share assuming dilution (EPS) over time, as well as higher combined dividends. The combined non-GAAP EPS of the two companies is expected to be nominally lower initially than what Merck would have achieved pre-spinoff, reflecting costs necessary to operate NewCo as an independent company. However, as a result of the incremental growth that NewCo is expected to achieve, combined with the benefit of ongoing operating efficiencies at Merck enabled by the spinoff, the company expects Merck and NewCo to realize higher combined non-GAAP EPS within 12 to 24 months post-spinoff.

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NewCo Expects to AchieveStrong Profitability and Low-Single-Digit Revenue Growth from 2021 Base; Expects to Pay Incremental Dividend

The products to be spun off into NewCo are expected to generate 2020 revenue of approximately $6.5 billion within Merck, with a non-GAAP operating margin of approximately 45%. As an independent company from a 2021 base-year of approximately $6.0 billion to $6.5 billion in revenue, NewCo is expected to achieve low-single-digit revenue growth. Inclusive of costs necessary in standing up NewCo as an independent company, non-GAAP operating margins are expected to be in the mid-30% range in the first year post separation and increase over time. NewCo’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margins are expected to be in the low-to-mid 40% range in the first year post separation and increase over time.

NewCo is expected to have $8.5 billion to $9.5 billion in initial debt, with substantial cash flow that will provide ample financial flexibility for potential business development, debt paydown and a meaningful dividend. This expected dividend will be entirely incremental to Merck’s dividend.

LEADERSHIP AND GOVERNANCE

NewCo to be Led byExperienced Pharmaceutical Executives

Kevin Ali, who brings three decades of pharmaceutical commercial experience from within Merck, will be named chief executive officer of NewCo. Ali has led Merck’s enterprise portfolio strategy initiative, reporting to Frazier, for the past year. Prior to this, Ali served in many leadership roles within Merck, including president, MSD International; president, Emerging Markets; senior vice president in charge of the Bone, Respiratory, Immunology and Dermatology franchise; managing director of Germany and managing director of Turkey.

“Built on the foundation of a trusted, high-quality portfolio, NewCo will help people around the world live healthier lives, with a special focus on investing in innovations for the distinct healthcare needs of women,” Ali said. “We are committed to becoming a leader in Women’s Health driven by organic and inorganic opportunities fueled by our portfolio of trusted legacy brands and our commitment to growing our rapidly expanding biosimilars business.”

Carrie Cox will be named NewCo’s Chairman of the Board of Directors. Cox has extensive experience in the pharmaceutical industry and deep expertise in women’s health, formerly serving as chairman of Array BioPharma Inc., CEO and chairman of Humacyte Inc., president of Global Pharmaceuticals at Schering-Plough Corporation (acquired by Merck in 2009), executive vice president of Pharmacia Corporation and vice president of Women’s Health Care at Wyeth-Ayerst Laboratories, Inc.

“I am delighted to be joining the leadership of NewCo and excited by the growth opportunities in its portfolio,” Cox said. “The time has come for a company dedicated to serving the healthcare needs of women, in addition to a broad portfolio that continues to be important for the public health needs of patients around the world.”

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More information about NewCo Board, governance structure and management team will be provided in the future.

Transaction Intendedto be Completed in the First Half of 2021

The transaction is intended to take the form of a tax-free distribution to Merck shareholders of a new publicly traded stock in NewCo. The spinoff is expected to be completed in the first half of 2021, subject to market and certain other conditions.

Conference Call

Merck will discuss this transaction on its previously scheduled earnings conference call today, Feb. 5, at 8:00 a.m. EST, which investors, journalists and the general public may access via a live audio webcast on Merck’s website at https://investors.merck.com/events-and-presentations/default.aspx.. Institutional investors and analysts can participate in the call by dialing (706) 758-9927 or (877) 381-5782 and using ID code number 8583879. Members of the media are invited to listen to the call by dialing (706) 758-9928 or (800) 399-7917 and using ID code number 8583879. Journalists who wish to ask questions are requested to contact a member of Merck’s Media Relations team at the conclusion of the call.

For further information, please visit https://merck.unleashinggrowthpotential.com.

About Merck

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